G&J Drivas Pty Ltd v Sydney Metro

[2023] NSWLEC 20

Land and Environment Court

New South Wales

• Amendment notes

Medium Neutral Citation:

G&J Drivas Pty Ltd v Sydney Metro [2023] NSWLEC 20

Hearing dates:

8, 9, 10, 12, 15, 17 and 18 August 2022, further written submissions 27 September 2022

Date of orders:

13 March 2023

Decision date:

13 March 2023

Jurisdiction:

Class 3

Before:

Duggan J

Decision:

See paragraphs 419 to 421

Catchwords:

COMPULSORY ACQUISITION – compensation – construction of s 56(1)(a) of Land Acquisition (Just Terms Compensation) Act 1991 – determination of market value – decrease in land value caused by public purpose – advised of acquisition 12 months prior to acquisition – applicant ceased progress of construction – construction work not undertaken to be disregarded – determination of market value on basis work had continued – valuation methodology

COMPULSORY ACQUISITION – compensation – assessment under s 59 of Land Acquisition (Just Terms Compensation) Act 1991 – disturbance – claim for multiple valuation reports – stamp duty – actual use of land – claim upheld under s 59(1)(f)

Legislation Cited:

Environmental Planning and Assessment Act 1979 (NSW)

Heritage Act 1977 (NSW)

Land Acquisition (Just Terms Compensation) Act 1991 (NSW)

National Parks and Wildlife Act 1974 (NSW)

Transport Administration Act 1988 (NSW)

Interpretation Act 1987 (NSW)

Cases Cited:

Al Amanah College Inc v Minister for Education and Training (No 2) [2011] NSWLEC 254

Alexandria Landfill Pty Ltd v Transport for NSW (2020) 243 LGERA 102

Alliance Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568

Barkat v Roads and Maritime Services [2019] NSWCA 240

Big Country Developments Pty Ltd v Transport for New South Wales [2021] NSWLEC 86

Blacktown City Council v Concato (No 4) (2020) 245 LGERA 14

Blacktown City Council v Fitzpatrick [2001] NSWCA 259

Blacktown City Council v Lasseter [1996] NSWCA 51

Caruana v Port Macquarie-Hastings Council (2007) 210 LGERA 1

Cook, Saad, Raguz & Ors v Roads and Traffic Authority of New South Wales [2007] NSWLEC 136

Dial A Dump Industries Pty Ltd v Roads and Maritime Services (2016) LGERA 285

Dial a Dump Industries Pty Ltd v Roads and Maritime Services(NSW) (2017) 221 LGERA 73

Esso Australia Pty Ltd v Australia Workers’ Union (2017) 263 CLR 551

G Capital Corporation Pty Ltd v Roads and Maritime Services (2019) 100 NSWLR 771

George D Angus Pty Ltd v Health Administration Corporation (2013) 205 LGERA 357

Graham Trilby Pty Ltd v Valuer-General [2008] NSWLEC 217

Griffith City Council v Polegato (1990) 20 NSWLR 696

Halley v Minister Administering the Environmental Planning and Assessment Act 1979 (2010) 178 LGERA 327

Hazcorp Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWLEC 661

Housing Commission of New South Wales v San Sebastian Pty Ltd 140 CLR 196

Leichhardt Council v Roads & Traffic Authority of NSW (2006) 149 LGERA 439

Love v Roads Corporation (2014) 200 LGERA 76

Marcabell Pty Limited v Roads and Traffic Authority [2006] NSWLEC 366

Melino v Roads and Maritime Services (2018) 235 LGERA 63

Moloney v Roads and Maritime Services (2018) 233 LGERA 363

Murlam Pty Ltd v Roads and Traffic Authority of New South Wales [2009] NSWLEC 1365

Niezabitowski v Roads and Traffic Authority (2006) 147 LGERA 417

Overton Investments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (2001) 113 LGERA 439

Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW (1998) 101 LGERA 30

Peter Sleiman Property Investments Pty Ltd v Valuer-General of New South Wales (No 2) [2021] NSWLEC 47

Prasad v The Minister Administering the Environmental Planning and Assessment Act 1979 [2010] NSWLEC 193

Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer Vizagapatam [1939] AC 302

Roads and Maritime Services (NSW) v United Petroleum Pty Ltd (2019) 236 LGERA 389

Roads and Traffic Authority v Mosca (2006) 146 LGERA 335

Roads and Traffic Authority v Perry (2001) 116 LGERA 244

SNS Pty Ltd v Roads and Maritime Services (NSW) (2018) 232 LGERA 224

Sydney Water Corporation v Caruso (2009) 170 LGERA 298

Tolson v Roads and Maritime Services (2014) 201 LGERA 367

Turner v Minister of Public Instruction (1956) 95 CLR 245

Weston Aluminium Pty Ltd v Environment Protection Authority (2022) 253 LGERA 374

Woollams v The Minister (1957) 2 LGRA 338

Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156

Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1990) 70 LGRA 187

Category:

Principal judgment

Parties:

G&J Drivas Pty Ltd (First Applicant)
Telado Pty Ltd (Second Applicant)
Sydney Metro (Respondent)

Representation:

Counsel:
A Galasso SC with L Waterson and A Richards (Applicants)
R Beasley SC with M Astill (Respondent)

Solicitors:
Beatty Hughes & Associates (Applicants)
Clayton Utz (Respondent)

File Number(s):

2021/307473

Publication restriction:

No

Judgment

Nature of proceedings

Facts

Issues for determination

Construction of s 56(1)(a) of the Just Terms Act

Nature of disputed construction

Applicants’ submissions – construction of s 56(1)(a)

Respondent’s submissions – construction of s 56(1)(a)

Findings on construction of s 56(1)(a) of the Just Terms Act

Application of s 56(1)(a) to facts of this case

Decrease in the value of the Acquired Land

Was the decrease caused by the proposal to carry out the Public Purpose?

Evidence relating to causation

Applicants’ submissions on causation

Respondent’s submissions on causation

Findings on causation

Discontinue Decision

What stage would the development have reached as at the Date of Acquisition absent the Discontinue Decision and the Stop Work Decision?

Evidence relating to identification of relevant works

Town planning

Awarding of tender

Demolition

Heritage investigations

Applicants’ submissions

Town planning

Additional 2.5 months for commencement of tender

Heritage/archaeological evidence

Conclusion on timing and works

Respondent’s submissions

Town planning

Awarding of the tender

Heritage experts

Findings on evidence as to timing and stage of works absent proposal to carry out the Public Purpose

Conclusions on what work would have been completed disregarding Discontinue Decision and Stop Work Decision

Which of these factors would have affected value?

Applicants’ submissions

Respondent’s submissions

Findings on factors affecting value

Market value

Issues for determination in connection with market value

Direct comparison

Evidence

Applicants’ submissions

Respondent’s submissions

Findings on valuation methodology

Determination of market value on RLV methodology

Inputs into residual land value (RLV)

Development costs

Timing for completion

Applicants’ submissions

Rental income – retail

Time for completion

Development costs

Capitalisation rate

Internal rate of return/profit and risk

Other inputs

Respondent’s submissions

Rental income – retail

Capitalisation rate

Internal rate of return/profit and risk

Time for completion

Development costs

Findings on inputs into RLV model

Rental income – retail

Time for completion

Development costs

Internal rate of return/profit and risk

Capitalisation rate

Consequential determination of market value

Disturbance

Disputed disturbance claimed

Applicants’ submissions

Valuation fees – s 59(1)(b)

Stamp duty etc – s 59(1)(f)

Respondent’s submissions

Applicants' claim under s 59(1)(b)

Applicants' claim under s 59(1)(a)-(e) (which is subject to claims under this provision in the alternative to claims under s 59(1)(f))

Findings on disturbance

Applicants' claim under s 59(1)(b)

Applicants' claim under s 59(1)(a)-(e) (which is subject to claims under this provision in the alternative to claims under s 59(1)(f))

Conclusion and directions

Judgment

Nature of proceedings

1. By Class 3 Application filed 29 October 2021, G&J Drivas Pty Ltd and Telado Pty Ltd (the Applicants) object to the amount of compensation offered by Sydney Metro (the Respondent) for the compulsory acquisition of its interest in land pursuant to s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act).

2. A Proposed Acquisition Notice was issued to the Applicants on 18 November 2020.

3. The Respondent acquired the land by publication of an acquisition notice in the New South Wales Government Gazette on 19 March 2021 (the Date of Acquisition).

4. The Valuer-General issued its Compensation Notice pursuant to s 42 of the Just Terms Act on 12 October 2021 for the acquisition in the amount of $145,611,457 which consisted of:

1. $145,000,000 in market value pursuant to s 55(a) of the Just Terms Act; and

2. $611,457 in disturbance pursuant to s 55(d) of the Just Terms Act.

5. Immediately prior to the Date of Acquisition, the Applicants held a freehold interest as tenants in common over the following allotments situated within the Parramatta CBD of the City of Parramatta local government area with a total area of 3,673.4m² consisting of:

1. Lot 1 in Deposited Plan 1041242, being known as 220 Church Street, Parramatta 2150 (220 Church Street);

2. Lot 1 in Deposited Plan 720291, being known as 222-230 Church Street, Parramatta 2150 (222-230 Church Street); and

3. Lot B in Deposited Plan 394050, being known as 48 Macquarie Street, Parramatta 2150 (48 Macquarie Street);

(together, the Acquired Land).

Figure 1: aerial view of the Acquired Land outlined in blue.

6. The Acquired Land was acquired pursuant to the Transport Administration Act 1988 (NSW) for the purpose of the Sydney Metro West Project (the Public Purpose).

7. The Applicants claim compensation for the market value of the Acquired Land on the Date of Acquisition pursuant to s 55(a) of the Just Terms Act in the amount of $200,000,000. With the inclusion of legal costs, valuation fees and other financial costs pursuant to s 59 of the Just Terms Act, the total amount claimed by the Applicants is $212,051,025.65.

8. The Respondent contends that the Applicants are, depending on the valuation methodology adopted, entitled to market value in the amount of $119,000,000. With the inclusion of legal costs, valuation fees and other financial costs pursuant to s 59 of the Just Terms Act, the total amount claimed the Applicants are entitled to as compensation is $119,523,613.

Facts

9. As at the Date of Acquisition:

1. The Acquired Land was improved by a two-storey mixed-use office and retail complex known as “Greenway Plaza”; and

2. Parts of the Acquired Land were leased to and occupied by tenants (Former Tenants).

10. As at the Date of Acquisition:

1. The Land was zoned “B4: Mixed Use” under the Parramatta Local Environmental Plan 2011 (the LEP);

2. Development consent DA/828/2017 (Existing Consent) had been granted by the City of Parramatta Council (Council) on 5 December 2018 for, inter alia, the demolition of Greenway Plaza and the erection on the Acquired Land of a building:

1. comprising a 25-storey tower fronting Macquarie Street (Macquarie Street Tower) and a four-storey tower fronting Church Street (Church Street Tower);

2. sharing a common ground floor retail podium and basement (Common Podium); and

3. having a gross floor area of approximately 39,000m² (Approved Original Building);

3. The Applicants had taken steps to seek, but had not been granted, an additional consent to, inter alia, increase the gross floor area (GFA) of the Existing Consent by approximately 7,000m² through an increase to the height of the Church Street Tower (Church Street Extension).

11. In August 2019, the Applicants prepared and submitted a design excellence competition brief for the proposed Church Street Extension to the Council which was endorsed by the Council on 18 October 2019.

12. As at the Date of Acquisition no physical works had been undertaken upon the Acquired Land for the erection of any building. The Applicants contend that as at the Date of Acquisition they had in fact undertaken other non-physical steps to progress the development of the Approved Original Building with the Church Street Extension (Expanded Building) including the preparation of detailed drawings for the Expanded Building. In addition, the Applicants had entered into contracts for:

1. The marketing and future leasing of the Approved Original Building, including:

1. Leasing Agency Agreement between the Applicants and Cushman & Wakefield dated 29 July 2019; and

2. Leasing Agency Agreement between the Applicants and CBRE dated 24 October 2019;

2. The provision of architectural services pursuant to a Consultancy Agreement between the Applicants and Crone Partners Pty Ltd.

13. The Applicants further pleaded the following:

1. As a result of the proposal to carry out and/or the carrying out of the Public Purpose, the Applicants delayed and ultimately abandoned the development of the Expanded Building. In particular, in or around February/March 2019, the Applicants discontinued the preparation of detailed drawings for the Expanded Building, and on or around 21 October 2019, the Applicants ceased all work on the development of the Expanded Building; and

2. But for the proposal to carry out and/or the carrying out of the Public Purpose, the Applicants would have progressed the development of the Expanded Building with the result that the following circumstances would have pertained to the Land on the Date of Acquisition:

1. an additional consent authorising the Church Street Extension, as well as any modifications to the Existing Consent necessary to authorise the integration of the Church Street Extension with the Approved Original Building would have been granted by the Council;

2. each Former Tenant would have been given a notice under the relevant demolition clause and vacated the Land accordingly;

3. a tender for the construction of the Expanded Building would have been let by the Applicants in January or February 2020, resulting in a contract for the construction of the Expanded Building;

4. the erection of the Expanded Building would have commenced in or around July 2020 and by the Date of Acquisition the demolition of Greenway Plaza and the undertaking of required archaeological investigations would have been completed; and

5. the Expanded Building would have been expected to be completed in or around July 2023.

14. The two dates referred to in [13(1)] above relate to the happening of two events:

1. The first date being in or around February/March 2019, is the date it is said that the Applicants discontinued the preparation of detailed drawings for the Expanded Building on the basis that the Applicants had suspicions that the Site (or part of it) would be acquired for the Metro West Project. The risk of such acquisition influenced the Applicants’ decision making in connection with the proposed development to the extent that they determined to discontinue the preparation of plans for the extended building. This decision is referred to in the evidence as the Discontinue Decision; and

2. The second date being on or around 21 October 2019, when the Applicants made a decision to cease all work on the development of the Expanded Building. This decision is referred to in the evidence as the Stop Work Decision. The Stop Work Decision is said to have occurred as a consequence of the receipt on that day of a telephone call from the Respondent by its representative, Mr David Hobart, wherein Mr Hobart advised that the whole of the Site was to be acquired by the Respondent for the Metro West Project.

15. The Respondent disputes that the Applicants are entitled to compensation for work not actually undertaken as at the Date of Acquisition.

16. It is common ground that the highest and best use of the Acquired Land is as a development site for a mixed commercial/retail development.

Issues for determination

17. There are a series of complex issues that arise on the facts of this case, each of which require consideration in order that a determination of amount of compensation for the acquisition of the Land may be made.

18. The first issue is a question of statutory construction relating to whether the claim as formulated by the Applicants is available in so far as the Applicants rely upon the application of the statutory disregard in s 56(1)(a) of the Just Terms Act relating to preparatory work that was not undertaken due to the Discontinue Decision and Stop Work Decision and in so far as that work (if relevant) did not comprise physical work on the Land.

19. The determination of the construction issue will determine the basis upon which the Acquired Land is to be valued to determine compensation.

20. If the Respondent’s construction is correct, the Acquired Land will be valued as a development site with an occupied and tenanted existing building with the benefit of an approved development consent for the Approved Original Building and the reasonably likely potential for an approval for the Church Street Extension.

21. If the Applicants construction is correct the process of determination is more complex: it will be necessary to determine what is required to be disregarded by the application of s 56(1)(a), namely whether the Discontinue Decision and the Stop Work Decision were caused by the proposal to carry out the Public Purpose and whether the effect of those decisions resulted in a decrease in the value of the Acquired Land as at the Date of Acquisition. There was a significant volume of lay and expert evidence relating to the determination of these issues that will require consideration.

22. In either case the market value of the Acquired Land will require determination. There is a dispute between the parties as to the appropriate valuation methodology to be adopted. The Respondent contends that the direct comparison approach is the valuation methodology to be used. The Applicants contend that a residual land value (RLV) approach is appropriate. In each methodology there are disputes between the parties as to the appropriateness of various comparable sales and/or the appropriate inputs to be adopted for the RLV methodology. Again, there was significant expert evidence adduced relating to each of these matters that will require consideration.

23. Finally, there remains a dispute between the parties as to the claims for disturbance pursuant to s 59 of the Just Terms Act relating to the Applicants’ claims for:

1. Fees for two valuers pursuant to s 59(1)(b) of the Just Terms Act; and

2. A claim for stamp duty and other associated costs as a financial cost pursuant to s 59(1)(f) of the Just Terms Act.

Construction of s 56(1)(a) of the Just Terms Act

Nature of disputed construction

24. There is a dispute between the parties as to whether the Applicants’ claim (referred to at [13] above) that the market value of the Acquired Land should be determined taking into account the anticipated progression of the Expanded Development in circumstances where such progression did not in fact occur is available upon a proper construction of the Just Terms Act. The resolution of this dispute involves a determination of the statutory construction of the relevant provisions of the Just Terms Act.

25. As a consequence of the circumstances referred to above, the Applicants contend that they made certain decisions relating to the development of the Land that would not have been taken but for the proposal to carry out the Public Purpose. On that basis, they contend that there was a decrease in the value of the Land. The asserted decrease is to be measured by determination of the value of the Acquired Land on the basis that as at the Date of Acquisition all of the development activities that the Applicants would have carried out to progress the development but for the proposal to carry out the Public Purpose had been carried out as at the Date of Acquisition.

26. The Applicants contend that such an approach is permissible pursuant to the provisions of s 56(1)(a) as the decisions not to progress the development (both individually and collectively) resulted in a 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.

27. The Respondent, whilst not disputing as a matter of fact that certain decisions were made not to progress the development (the particulars of the timing, nature and consequence of those decisions is disputed in some respects), contends that a proper construction of s 56(1)(a) does not permit the impact of such decisions on market value to be taken into account. The Respondent contends that s 56(1)(a) only permits a consideration of the impact on value of physical work actually undertaken as at the Date of Acquisition.

24. The relevant provisions of the of the Just Terms Act to which the parties referred were:

3   Objects of Act

(1)   The objects of this Act are—

(a)   to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and

(b)   to ensure compensation on just terms for the owners of land that is acquired by an authority of the State when the land is not available for public sale, and

(c)   to establish new procedures for the compulsory acquisition of land by authorities of the State to simplify and expedite the acquisition process, and

(d)   to require an authority of the State to acquire land designated for acquisition for a public purpose where hardship is demonstrated, and

(e)   to encourage the acquisition of land by agreement instead of compulsory process.

(2)    Nothing in this section gives rise to, or can be taken into account in, any civil cause of action.

54   Entitlement to just compensation

(1)   The amount of compensation to which a person is entitled under this Part 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,

…

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

…

Applicants’ submissions – construction of s 56(1)(a)

29. The subject matter of s 56(1)(a), which are to be disregarded, comprise of two related elements:

1. Any increase or decrease in the value of the land; and

2. Caused by the carrying out of or the proposal to carry out the public purpose for which the land was acquired.

30. As to the first element, the text of s 56(1)(a) does not specify particular kinds of increases or decreases in value caused by the public purpose. The language used is perfectly general in scope and simply provides that the provision is engaged by any increase or decrease in value so caused. Prima facie, the word “any” is without limitation: see Niezabitowski v Roads and Traffic Authority (2006) 147 LGERA 417 at [35] referring to s 68(1) of the Just Terms Act.

31. The second element requires the increase or decrease in the value of the land to have been “caused by” the carrying out of or the proposal to carry out the public purpose. That element is usually addressed on a “but for” basis: Marcabell Pty Limited v Roads and Traffic Authority [2006] NSWLEC 366 at [26]; Barkat v Roads and Maritime Services [2019] NSWCA 240 at [79].

32. The following matters make it plain that both elements of the provision are engaged in the circumstances of this case.

33. First, the Respondent does not contend that the Applicants acted unreasonably in making the Stop Work Decision in October 2019 upon receipt of confirmation that the Land was to be acquired.

34. Second, but for the Public Purpose, the development would have progressed. This is clear from the evidence.

35. The position is that the Applicants, acting reasonably and because of the Public Purpose, ceased carrying out various activities and this resulted in the market value of the Land on the Date of Acquisition being less than what it would otherwise have been. The evidence of such a decrease is available by a comparison of the value determined by the Respondent’s valuer on its scenario compared to any of the other Respondent’s values determined by any of the valuation scenarios which adopt some or all of the works relied upon by the Applicants. On any view, a decrease in the value of the Land caused by the Public Purpose which engages s 56(1)(a) is established on the evidence.

36. Contrary to the Respondent’s position that s 56(1)(a) is to be read down to exclude a very particular kind of decrease in value caused by the public purpose: a decrease in value that arises because the Acquired Land itself was not physically developed in a particular way due to the Public Purpose, the text of s 56(1)(a) does not specify particular kinds of decreases in value but refers to any kind of decrease in value in land so long as it is caused by the Public Purpose.

37. There is simply no warrant in the text of s 56(1)(a) for the Respondent’s approach. There is a limited ability to construe a statutory provision in a manner that departs from the natural meaning of its terms – it must be plain that Parliament intended the provision to have another meaning: Esso Australia Pty Ltd v Australia Workers’ Union (2017) 263 CLR 551 at [52]. The Respondent’s interpretation of s 56(1)(a) departs from the natural meaning of its terms.

38. Further, the context and purpose of s 56(1)(a) make it plain that the Respondent’s construction could never have been intended.

39. The entitlement to compensation is provided for in s 54 of the Just Terms Act.

40. While s 54 does not add to or subtract from the exhaustive list of matters in s 55 of the Just Terms Act to which regard is to be had in determining the amount of compensation, it is relevant to the question of construction of ss 55 and 56(1) for the reasons that follow.

41. First, the words in parentheses in s 55 (“as assessed in accordance with this Division”) “pick up” s 54(1) with the result that the assessment of the amount of compensation having regard to the specified matters in s 55 must be directed towards determining an amount which will “justly compensate” the former owner for the acquisition: Tolson v Roads and Maritime Services (2014) 201 LGERA 367 (Tolson) at [37], [89] per Basten JA; see also [118], [126] per Preston CJ of LEC.

42. Second, the purpose identified in s 54, to justly compensate the former owner, may properly inform the interpretation of s 55 and subsequent provisions (which would include s 56(1)(a)) in Div 4: Tolson at [93] per Basten JA.

43. Had the Applicants continued to progress the development (rather than abandoning it because of the Public Purpose), the value of the Land on the Date of Acquisition would have increased. In these circumstances, the Respondent would have been liable to compensate the Applicants for this increased value. Yet, if the Respondent’s interpretation of s 56(1)(a) is correct, the Applicants are not entitled to that increased value even though they acted reasonably in abandoning the development because of the Public Purpose. That would be a completely unjust result. In the terms of s 54, the amount of compensation would not “justly compensate” the Applicants for the acquisition of the Land.

44. The Respondent’s interpretation of s 56(1)(a) would also not further the object of the Just Terms Act to guarantee that the amount of compensation will not be less than the market value of the Acquired Land “(unaffected by the proposal)”: s 3(1)(a). The generality of this phrase is consistent with the generality of the language used in s 56(1)(a). It is antithetical to the Respondent’s interpretation of s 56(1)(a) that seeks to read down its general language to exclude particular kinds of reductions in value caused by the Public Purpose.

45. The available authorities which touch upon this issue also support the Applicants’ interpretation of s 56(1)(a).

46. The decision in Blacktown City Council v Lasseter [1996] NSWCA 51 (Lasseter) is directly contrary to the Respondent’s approach to s 56(1)(a). Although Lasseter did not concern s 56(1)(a) itself, the Court of Appeal considered and rejected arguments that the principle now underlying the provision did not authorise the Court “to rewrite history so far as the physical characteristics of the land was concerned”: at p 3.

47. Further, the Court of Appeal accepted that the principle that the resumed land is to be valued in the condition in which it existed at the date of resumption (upon which the Respondent relies) was “subject to” s 116 of the Environmental Planning and Assessment Act 1979 (NSW) (EP&A Act) (which performed a similar role to s 56(1)(a)): at p 4.

48. In Griffith City Council v Polegato (1990) 20 NSWLR 696 (Polegato) the facts bear some similarity to the present proceedings, but with one important distinction, namely that the acquisition was not causative of the decrease in value.

49. In Polegato, the former owners obtained development consent in 1976 and were in the process of developing their land as shops and flats. Those plans were ultimately frustrated by the acquisition of the land by the local council which had first raised the possibility of acquisition with the owners in 1977. The development was financially viable at this point but, by the time the land was ultimately acquired in 1980, it had become unviable due to dramatic increases in construction costs.

50. The primary judge awarded compensation on the basis that the viability of the development had to be assessed in 1977 not at the time of the acquisition in 1980. He did so on the basis of the decision of the High Court in Housing Commission of New South Wales v San Sebastian Pty Ltd 140 CLR 196 (San Sebastian) which concerned similar principles to those underlying s 56(1)(a).

51. The Court of Appeal overturned the decision of the primary judge. It accepted that the former owners had acted reasonably in ceasing work on the development of the land and that the development was deferred by the acquisition process until it ceased to be economically viable. However, that loss of viability was due to the effect of economic and market forces, not the acquisition process.

52. In Polegato the Court of Appeal stated at 701:D-E:

It is clear that [the approach in San Sebastian] cannot assist the owners in the present case because the development potential which existed at what they claim was the start of the resumption process had disappeared for reasons other than the proposed resumption by the date of the acquisition. The principles applied in Housing Commission of New South Wales v San Sebastian require the land to be valued at the relevant date on the artificial, but just, assumption that such value has not been affected by the resumption process. It does not require or authorise the court to disregard facts themselves independent of the resumption process such as costs of building and general market values at the date of resumption.

53. The owners in Polegato were therefore unsuccessful because, on the acquisition date, their land had not suffered a decrease in value caused by the acquisition process. While that process had frustrated their plans for the development of the land, by the acquisition date, that development had been rendered unviable due to intervening market forces independent of that process.

54. This can be contrasted with the position of the Applicants. Even on the Respondent’s case, the frustration of the Applicants’ development plans by the Public Purpose led to a decrease in the value of the Land taking into account all relevant market conditions on the Date of Acquisition.

55. Importantly, there is nothing in the judgment in Polegato that refers to let alone supports the Respondent’s approach to s 56(1)(a). Rather, the passage cited above supports the proposition that a Court is authorised to disregard any fact that is dependent on (not independent of) the resumption process. In the present case, that would include the fact that the Applicants ceased to progress the development because of the Public Purpose.

56. In Love v Roads Corporation (2014) 200 LGERA 76 (Love), the former owner claimed that, but for the public purpose, he would have secured an unrestricted permit for a quarry on the resumed land, and, by the acquisition date, an operating quarry would have been in existence: at [36]-[37], [62]. While the acquiring authority conceded that a permit would have been obtained, it denied that it would have been an unrestricted permit: at [57]. The primary judge accepted the authority’s position: at [61]. He also found that the absence of a productive quarry on the acquisition date arose from various actions of the owner and not the public purpose: at [63]-[64]. These were findings of fact that raised no issues of law for the purposes of the appeal.

57. However, the primary judge also made observations to the effect that the Victorian equivalent to s 56(1)(a) did not extend to authorise the making of an assumption that hypothetical improvements existed on the resumed land and the valuation of the land on that assumption: at [66], [68]. These observations are similar to the contentions put by the Respondent in the present proceedings. Ultimately, the Court of Appeal did not need to determine whether the primary judge’s observations were erroneous because Mr Love’s case failed on the facts as set out above. However, it noted that, contrary to the primary judge’s observations, there was “a line of authority that suggests that hypothetical improvements can be taken into account”: at [69]. That line of authority included cases referred to by the Applicants in these proceedings including: Woollams v The Minister (1957) 2 LGRA 338 (Woollams); Polegato; Roads and Traffic Authority v Mosca (2006) 146 LGERA 335 (Mosca); and Halley v Minister Administering the Environmental Planning and Assessment Act 1979 (2010) 178 LGERA 327 at [70]-[75].

58. The thrust of the Court of Appeal’s analysis in Love supports the Applicants’ interpretation of s 56(1)(a). Notably, Lasseter was not referred to in Love and, as set out above, this directly supports the Applicants’ approach. At the very least, the position was left open. This can be contrasted to the Respondent’s approach, which treats the principle that land is to be valued in its existing physical condition as immutable.

59. In addition, the Respondent relies heavily on Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156 (Yates) and in particular the following passage from the judgment of Handley JA at p 175:

In the appellant’s submission it was open to the judicial valuer to value this vacant land by assuming that buildings are erected and leased, capitalising net rents and deducting building and establishment costs.

In my view the trial judge was correct in principle in rejecting any such approach. It is contrary to the fundamental principle that what must be valued is the property taken in the condition at which it existed at the date of resumption.

60. It is not clear that the analysis in this passage is dealing with the scope of what is now s 56(1)(a) and its requirement to disregard decreases to the market value of land caused by the public purpose. The essence of the appeal was the primary judge’s approach to the assessment of “special value”, not market value. In this regard, the issue was whether an operating market could be assumed to be present on the land and appears to have been raised in the context of this claim for special value. The primary judge, Cripps CJ in the LEC, had determined that “the ‘value to the owner principle’ does not require me to assume that the markets were built and functioning”: Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1990) 70 LGRA 187 at 196 (Yates LEC).

61. Further, the cases cited by Handley JA immediately following the above passage of Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer Vizagapatam [1939] AC 302 (Raja’s Case) and Turner v Minister of Public Instruction (1956) 95 CLR 245 (Turner), did not concern the operation of the principle requiring the disregard of the impact of the purpose of an acquisition on value, they merely contain statements of general principle about the need to treat and value future potential uses of land as potential (not actual) uses. This supports the view that the passage was not directed at the principle underlying s 56(1)(a).

62. In any event, even if Handley JA was referring to the principle underlying s 56(1)(a) in the passage, his reasoning should not be followed in these proceedings.

63. First, it is directly inconsistent with the later decision in Lasseter as set out above. In fact, as mentioned above, the judgment in Lasseter expressly referred to this passage from Yates and accepted that it was “subject to” s 116 of the EP&A Act which was of similar effect to s 56(1)(a): at p 4:1-12.

64. Second, the approach to the passage in Yates taken in Lasseter has been followed in other cases: see Overton Investments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (2001) 113 LGERA 439 at [21].

65. Third, the position was at least left open by the Victorian Court of Appeal in Love.

Respondent’s submissions – construction of s 56(1)(a)

66. Section 55 requires that the market value of the Acquired Land be assessed for the purpose of compensation and s 56(1)(a) does not change that primary directive. Section 56(1)(a) is a definitional provision to the effect that, in carrying out the assessment of market value of land, any increase or decrease in the value of that land by virtue of the public purpose to be disregarded. Nothing in s 56(1)(a) alters the fundamental requirement in s 55 to assess the market value of the land being the Acquired Land as it in fact was, as required by the hypothetical transaction.

67. Section 55 of the Just Terms Act, which constitutes an exclusive code for assessment of compensation following the acquisition of land, requires and allows regard to be had to, inter alia,

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

68. There can be no doubt that the land, where referred to, is the land that has been acquired. This would be so in any event but the reference to its acquisition in the provision puts this beyond doubt. Thus, the required inquiry is as to the market value of the land what was actually acquired.

69. The concept of market value is explained in the definitional provision, s 56(1). Section 56 is simply not directed to the question of what land is to be valued as it commences with the general description “market value of land”, that is: whatever land is to be valued this is how to determine its market value under the Just Terms Act. It is s 55 that identifies the land for which compensation is payable for market value, and that is the acquired land.

70. As a matter of general statutory interpretation definitions, including that in s 56(1) are not intended to enact substantive law: Alliance Australia Insurance Ltd v GSF Australia Pty Ltd (2005) 221 CLR 568 at [12] (emphasis added):

Except in rare cases, definitions are not intended to enact substantive rules of law. Their function is to aid the construction of those substantive enactments that contain the defined term or terms. Moreover, the meaning of the definition depends on the context and object of the substantive enactment. As I pointed out in Kelly v The Queen:

[T]he function of a definition is not to enact substantive law. It is to provide aid in construing the statute. Nothing is more likely to defeat the intention of the legislature than to give a definition a narrow, literal meaning and then use that meaning to negate the evident policy or purpose of a substantive enactment ... [O]nce ... the definition applies, ... the only proper ... course is to read the words of the definition into the substantive enactment and then construe the substantive enactment - in its extended or confined sense - in its context and bearing in mind its purpose and the mischief that it was designed to overcome. To construe the definition before its text has been inserted into the fabric of the substantive enactment invites error as to the meaning of the substantive enactment ... [T]he true purpose of an interpretation or definition clause [is that it] shortens, but is part of, the text of the substantive enactment to which it applies."

71. The very clear words of s 55(a) reflect the basic principle of compensation law that it is the land that has been acquired that must be valued at the relevant date. This requires the valuation exercise to be undertaken for the land in its existing condition with all its potentialities as potentialities: Mosca at [15] per Handley JA (Mason P and Bryson JA agreeing), citing Yates at 175-6.

72. Section 56 does not change that which is required to be valued by the operative provision, s 55. Rather, it requires by its clear wording, any effect of the public purpose on the value of the land, whether positive or negative, to be disregarded for the purpose of assessing compensation.

73. There are no words within s 56 that could be construed as enabling compensation to be awarded for land other than the Acquired Land. There are simply no words anywhere in the provisions that allow any increased value that might have resulted from some physical change of Acquired Land that was not undertaken due to the impending acquisition, as if that development had actually occurred.

74. The very clear intent of the Just Terms Act, articulated most clearly in s 54, is that it is directed to awarding compensation. Compensation is a well understood expression, the purpose of which is to place in the hands of the claimant the monetary equivalent of that which they have been deprived, being the property taken from them. Compensation in the Just Terms Act is, prima facie, "compensation ... for loss": Leichhardt Council v Roads & Traffic Authority of NSW (2006) 149 LGERA 439 per Spigelman CJ at [37]-[38].

75. The Applicants' construction would provide compensation for something that the Applicants never had and did not lose (a well progressed development site); it is not within the well understood expression as above. That is, the Applicants did have and did lose the Acquired Land in its "as is" state at the Date of Acquisition with all of the improvements, with all of its potentialities including the potential for future development.

76. Further to this, there are also no words in the provision that allow any of the costs of realising that notional development to be taken into account in assessing value. That is, the compensation sought by the Applicants is for the transaction selling something that does not in fact exist and for which they have had to actually expend no money to achieve, however, the compensation assumes that this money has been spent in the carrying out of work as the market pays a price that recognises the value of that cost expended. Such an outcome could not have been intended by the text and object of the Just Terms Act. This is confirmatory that the provision simply does not envisage the approach contended for by the Applicants at all.

77. To illustrate, if the facts had been such that the Applicants' mooted development would have been completed by the date of acquisition, on the Applicants' construction they would have been entitled to some $600 Million+ compensation without actually having incurred any actual cost of construction.

78. There have been many cases where the provision has been engaged where the public purpose had an indirect effect on value by, for example, affecting the zoning of land, or interfering with provision of services which in turn affected value. However, these cases all concerned the effect of the public purpose on matters external to the land and the effect of those matters on the value of the land as it was. That is, matters that affected the value of the acquired land as it was.

79. There is no case of which the Respondent is aware where the forgoing of an act by the owner, where that act would have changed the land itself (and thus its value), has been held to be within the disregard for the purpose of ascertaining market value so as to allow compensation for that (notional) increase.

80. The Applicants contend that Lasseter is authority for the proposition that the Respondent's arguments have been “soundly rejected”. This is not correct. The case did not consider the arguments raised herein nor could any reasoning in it be construed as having the effect of soundly rejecting them.

81. In Lasseter the issue did not arise in relation to works done (or not done) on the acquired land due to the public purpose. Rather, it arose because of the subdivision by the owner of land surrounding the acquired land so that it had become landlocked by the date of acquisition.

82. The acquiring authority argued that this landlocking was not to be disregarded because:

... the principle had no application to the present case, where the condition of the land immediately prior to the resumption (ie its landlocked condition) which depreciated its value, was not due to any establishment of a public work but was caused by the act of the[owner] in subdividing the land in the manner he did.

83. Beazley JA (with whom Priestley and Cole JJA agreed) identified the issue as follows:

The sole issue raised on the appeal is whether the principle that resumed land is to be valued at the resumption date in its then present condition is subject to the principle in Housing Commission of New South Wales v San Sebastian Pty Ltd (1978) 140 CLR 196.

84. Despite the reference to “its then present condition” the actual condition of the land itself had not changed as a result of the acquisition (nor had any intended change not been undertaken as a result of the acquisition).

85. Beazley JA then rejected the submission above saying:

The question therefore in the present case is whether the subdivision which created the landlock was part of the resumption process. In my opinion, it was, it being irrelevant that the resumption occurred after the land was subdivided. This land was always liable and likely to be resumed. The subdivision which was effected was predicated upon the basis that the land zoned 6(c) would be resumed. The limited access to the land zoned 6(c) created by the subdivision was a direct response to the zoning of that land and as such had sufficient connection with the resumption process to require that the landlock created by the subdivision be ignored for the purposes of the valuation.

86. In Polegato the Court at first instance found:

In my opinion it is permissible, and on occasions necessary, to examine the effect of the resumption process on the business of the owner. In this case it is clear that the Council's conduct frustrated the owners' project to the point of leading them to abandon it. Indeed, there is little doubt that the Council desired to achieve this end since, if the applicants continued to implement the consent and construct the shops and flats, the Council would be faced with increased compensation. In my opinion to fail to take cognizance of the process and its effect on the applicants would not only deny them compensation for disturbance, but also reward delay by a resuming authority. It would run counter to the underlying principle that compensation for the compulsory taking of land shall be fair compensation. On the contrary, if the resumption process is to be ignored in the assessment of compensation it could encourage resuming authorities to sterilise land and delay resumption in order to deflate the value of the land and thereby minimise compensation to be paid to the detriment of dispossessed landowners. It would also run contrary to the principle that a dispossessed owner is to be put back, as far as money can, in the same position as if his land had not been taken. To deny compensation for disturbance or special value incurred as a result of the resumption process could render an injustice to a dispossessed owner. Such a result would have the effect of removing the element of the "value to the dispossessed owner" from the assessment of compensation.

It is necessary therefore to test the viability of the project in 1977 and perhaps in 1978 but not in respect of 1980. In relation to this issue the Court has received considerable evidence from the valuers. The opinion of Mr. Hunt is that the project was viable in March 1977 returning to the Polegatos a surplus of close to $100,000 and a reasonable rate of return for Griffith.

87. The Court of Appeal (at p 700) upheld the Council's appeal holding, after referring to San Sebastian, that:

In the present case however Stein J seems to have relied on the decision as authority establishing an entitlement in the owners to compensation for losses due to the resumption process because they ceased building work on the land and in the event lost the opportunity to develop the land in accordance with their development consent and building approval even although that development potential no longer enhanced the value of the land acquired at the date of acquisition, but because it had done so in March 1977 at the start of the resumption process.

Although we do not think the owners can be said not to have acted reasonably in ceasing work as a result of the information they received from Council officers from time to time during and after March 1977 and although their development of the land was undoubtedly "disturbed" between 1977 and 1979 by being deferred from time to time until the development ceased to be economically viable, they cannot be compensated for losses from those causes by any assessment as at the date of acquisition itself. This is because by that date the development potential which had existed from 1977 to 1979 had already been lost due to the effect of economic and market forces.

88. In the end neither Lasseter nor Polegato are directly on point as neither considered any physical change to the actual acquired land said to have been (or not been) undertaken due to the public purpose or the acquisition. Although the land had physically changed in Polegato that was not the basis of the relevant claim. To the extent that in Polegato the Court of Appeal rejected the comprehensive “but for” claim made as to what would have happened in the years before the acquisition, but for its shadow, the case is strongly supportive of the submissions herein.

89. Where a dispossessed owner has undertaken acts which have incurred expenses consequent on (including prior to) an acquisition, and where expenses incurred in respect of the owner's thwarted plans have been wasted due to the acquisition, such expenses have been compensated as disturbance: Al Amanah College Inc v Minister for Education and Training (No 2) [2011] NSWLEC 254; SNS Pty Ltd v Roads and Maritime Services (NSW) (2018) 232 LGERA 224 (SNS) but these are clearly within s 59(1)(f) and have nothing to do with market value or the statutory disregard: Murlam Pty Ltd v Roads and Traffic Authority of New South Wales [2009] NSWLEC 1365 and Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW (1998) 101 LGERA 30 at 63; See also Caruana v Port Macquarie-Hastings Council (2007) 210 LGERA 1 at [49].

90. Consequently, what is to be valued in the hypothetical transaction is the Acquired Land in its physical state as at the Date of Acquisition, with its Approved Development Consent in place and the Potential Development Consent available, no more and no less.

Findings on construction of s 56(1)(a) of the Just Terms Act

91. It is true that the words of s 56(1)(a) contain no express words of inclusion of the Applicants’ claim and it is equally true that it also does not contain express words of exclusion of the Applicants’ claim. It is therefore necessary, adopting the usual rules of statutory construction, to ascertain from the words used, in the context of the provision and the whole of the Just Terms Act, whether the legislative intent was to include or exclude claims of this nature. In undertaking the exercise of construction, a meaning that best serves the objects of the Just Terms Act is to be preferred.

92. For the reasons that follow, I find that the provisions of the Just Terms Act do not preclude a claim for a decrease in the value of the Acquired Land caused as a consequence of the carrying out of the Public Purpose where such decrease relates to actions not undertaken where the undertaking of such actions would have produced in an increase in the value of the Acquired Land as at the Date of Acquisition. In this case, that may include actions not taken that are not (or would not have been) physically manifested on the Acquired Land.

93. The provisions of Div 4 of the Just Terms Act make provision for the determination of compensation in connection with the entitlement to compensation as expressed in s 37 as:

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.

94. Section 54 provides that the amount of compensation is such amount as, having regard to all relevant matters under that Part, will justly compensate the person for the acquisition of the land and the relevant matters are prescribed in s 55. The reference in s 55 relevant to these proceedings is that contained in s 55(a), namely market value. Section 55(a) limits the claim of market value in terms to that of the land on the date of its acquisition. It thereby fixes what is to be valued (the land) and the relevant date upon which such determination is to be made (the date of acquisition). On its face, without considering the balance of the relevant provisions it would appear (as was contended by the Respondent) that the market value of the Acquired Land is to be determined in the state it was at the Date of Acquisition. However, s 55(a) does not stand alone. The relevant term “market value” is also affected by the terms of s 56. Whilst the parties focus on s 56(1)(a) the whole of that definition is relevant in the statutory construction exercise. Section 56 provides:

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.

95. A consideration of s 56 provides for a number of assumptions to be made that are not reflective of the physical state of the acquired land at the relevant date. Rather, s 56 requires, in some cases, a disregard of a factual state of affairs – such as unlawful uses and increases and decreases caused by the carrying out or the proposal to carry out the public purpose – or the requirement to value something other than the land acquired – where reinstatement is taken to be market value. Each of these non-factual state of affairs requires the creation of assumptions that do not factually exist to enable the valuation exercise to be undertaken.

96. From the provisions of s 56 it is plain that what was not intended by the legislation is that the words of s 55 were fixing a limitation on the determination of compensation to a factually accurate state of affairs as at the date of acquisition. The reference to the land in s 55 is a reference to the interest acquired (see the definition of “land” in s 4) and not a physical manifestation of works on that land as acquired.

97. The terms of s 56(1)(a) and (b) relate to what required to be “disregarded” in the determination of the value. The disregard is expressed with the opening word “any”. That term is not defined. As was recently stated in Weston Aluminium Pty Ltd v Environment Protection Authority (2022) 253 LGERA 374 at [32]-[33]:

32   …because a term is undefined in a statute or regulation, it does not follow that it has the same usage as in ordinary speech. Indeed, the meaning intended in ordinary speech can only be identified by reference to its use in a particular sentence, in a particular context. The present context is a legal document, namely a regulation made under an Act of Parliament. How it is used in that instrument must depend on a careful analysis of the surrounding text and context.

33   Secondly, as this Court has warned on many occasions, reference to dictionaries to determine the meaning of statutory language can only assist in identifying the range of possible meanings. To determine the actual meaning, it is necessary to return to the context, and particularly the text of the statute. Indeed, dictionaries demonstrate that the term “dispose of” has more than one meaning, so that choice will be arbitrary unless the word is construed in its statutory context.

98. Having regard to the context in which that word is found, the word “any” does not operate to limit or constrain the type of increase or decrease – it merely requires, as a matter of fact, that such an increase or decrease is manifested as a fact. The words that constrain or limit the application of s 56(1) are the requirements that the increase or decrease be:

1. In the value of the land; and

2. Caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.

99. Having regard to the words in s 56, and in particular s 56(1) the only limitation on the factors that are required to be disregarded is that they fall within the requirements as identified above. That is, any increase or decrease is to be disregarded if it affects the value of the land acquired and is caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. In the present case, that construction may include (subject to be satisfied on the evidence as to the effect on value and the causation of the decrease) the decisions not to progress the development proposal on the Acquired Land.

100. Such a construction is broad, however, I do not consider that the breadth of the construction is itself a reason to construe the provision in the manner contended by the Respondent. It is plain that the object of the Just Terms Act is to compensate the dispossessed owner for acquisition of the interest in the Acquired Land and that the amount of such compensation is to be just, taking into account the relevant matters set out in the Just Terms Act: s 54. That provision itself reflects the objects of the Act in s 3(1)(a) and (b) that are:

(a)    to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and

(b)   to ensure compensation on just terms for the owners of land that is acquired by an authority of the State when the land is not available for public sale,

101. The stated object of guarantee itself references that the intended compensation determination is to be unaffected by the proposal. This language is itself broad and unconstrained referencing an intention that the relevant impacts on value – however they may arise – are not to affect the determination of compensation. The manner that such object is achieved is provided for by operation of s 56.

102. The illustration relied upon by the Respondent at [77] above to suggest that a broad construction is not appropriate does not assist in the statutory construction exercise. The illustration is seeking to demonstrate that the Applicants’ statutory construction is unavailable because the facts of this case would produce a large increase in the otherwise determined value if the provisions of the statutory disregard were not applied. Such an outcome of the application of statutory language cannot, merely by the quantum of the increase in value that would be derived in a particular case, demonstrate an error of construction. If that construction is what was intended by the legislature the fact that in some cases it will result in a numerically large number is reflective of the legislative intent not a criticism of it. Equally, a particular case may result in the reduction in value (because an increase was caused by the public purpose) may be numerically large.

103. The statutory context also includes the regime for acquisition as contained in Part 2 of the Just Terms Act. Through the application of that regime, it is intended that there be a fixed, relatively short, time period between the notice of acquisition and the acquisition itself. The application of this regime has the dual purpose of providing some fixed period for a dispossessed owner to be given compensation and providing the acquiring authority with a limited period within which changes to the acquired land may be made that may impact on value. This contextual indicator operates to limit the types of claims such as the present where notice outside the regime (such as occurred here) may lead to claims of large quantum.

104. Further, it is true that the actual value determined is, in the real world, achieved as a consequence of the expenditure by the vendor of effort and funds to create the asset being sold – such is an inherent element in the sale price. However, the Just Terms Act requires a hypothetical sale on, in the case of s 56(1)(a), a hypothetical state of affairs, which is not a real-world sale. If the legislature intended that such factors, which may produce an amount of compensation determined for market value not reflective of actual real-world loss, it could have made provision to exclude such elements in the determination of market value such as has been done, by way of example, in s 61 of the Just Terms Act. The fact that it has done so for the circumstances in s 61 and not for the statutory disregard in s 56 is a contextual indicator that such a limitation is not imposed upon the market value assessment.

105. The criticism that the Applicants will benefit from work not carried out in the real world does not reflect the exercise required by s 56(1)(a). What is being determined in the value of the Land disregarding the decrease caused by the public purpose. The decrease in the value of the Land must be determined by some metric. In this case, due to the relevant factual circumstances, the parties have proceeded to quantify that decrease by ascertaining what degree of progress would have been made and, thereafter, how much would be paid by a hypothetical purchaser for that state of affairs as compared to the land value if that progress had not occurred. This analysis does not give rise to the requirement for an accounting of expenses as it looks to the land value and not the net value to the owner. The facts of this case may produce this perceived “windfall”, however, that consequence will not necessarily follow in all cases as the factors that influence the land value will vary depending upon the facts of each case.

106. The illustrative circumstances that are relied upon by the Respondent as indicative of an inconsistency to the legislative intent to the extent that the Applicants may be compensated more generously than otherwise permitted would not arise in the usual course in the application of the legislative provisions to a usual case. The defect that the Respondent relies upon arises in large part, if not exclusively, as a consequence of its actions in this particular case, which case it is accepted by all as extremely unusual. That is, by verbally advising the Applicants on 21 October 2019 that the Land was to be acquired but taking no steps to effect that acquisition until 18 November 2020 when a proposed acquisition notice was served or until 19 March 2021 when the acquisition was effected, the Respondent created a circumstance where it would be unreasonable for the Applicants to continue the development of the Land but by doing so suffered a loss in value of that Land when valued at the Date of Acquisition. The circumstances are so unusual that the outcome produced cannot dictate a construction of the relevant statutory provision. The statutory provision is intended to apply to all circumstances in which an acquisition is effected by compulsory process, the fact that in such application peculiar facts may produce a greater or lesser sum of compensation than “usual” is the consequence of the manner of construction of the provision, not indicative of a contrary legislative intent.

107. In addition, the lack of authorities dealing with a similar factual scenario is also not of assistance in determining statutory construction. The lack of prior cases dealing with the particular circumstances that this case give rise to is not indicative that the construction is not to be accepted. The fact of the lack of prior authority could arise for many reasons unrelated to the task of statutory construction such as: acquisition by agreement rather than determination by the Court; or there not having been a factual scenario such as the present that requires the issue of construction to be resolved. Each party accepted that the facts of this case, in particular a telephone call from the acquiring authority some 18 months prior to acquisition was not known in the authorities.

108. As to the authorities that do exist dealing with matters with some connection to the question posed in this case such as Lasseter, Love and Polegato each of those cases turned on their own facts. To the extent that those facts determined the issues in dispute it was unnecessary to consider the question of the scope of the disregard in s 56 (or the equivalent applicable provisions) and to that extent provide little direct assistance in the resolution of the question in these proceedings. That being said, I do note that in none of the cases did the Court decline to deal with the factual disputes (that determined the case) due to the construction of the statutory provisions prevailing such claims at all. To that extent, I consider that such authorities are neutral in my consideration.

109. I further note that there is a line of authority (as referred to in Love at [69]) that in some circumstances, when engaging with the statutory disregard, it is open to consider hypothetical improvements. In Woollams the Court held at 345 and 346:

For the foregoing reasons I am of opinion that s 124 requires the value of the subject property to be determined without regard to any effect on such value of the decision of the Board to establish the Warragamba Storage Dam project, i.e. its proposed establishment, and without regard to any effect on such value of the various steps taken by the Board up to the date of resumption, such as other resumptions and the like, in the process of establishing the project.

…

Construing the material portion of s 124 along the lines indicated, I am of opinion that the value is to be determined on assumption that the amenities and other economic and social conditions in the subject area did not deteriorate following upon and by reason of the decision of the Board to proceed with the Warragamba Dam project, and the acquisition by the Board of a number of properties in the Valley before the relevant date, and other events and circumstances associated with or consequential upon such acquisitions, and on the assumption that those amenities and conditions would have improved during the period under consideration, as they did in other primary producing and tourist areas during the post-war years, by reason of the increase in population, the improved prices being paid for primary products and the general economic development that occurred throughout the State.

Whilst such improvements were not on the acquired land they were still to have been assumed to have occurred. Such an approach appears equally applicable where a relevant decision is taken by the dispossessed owner.

110. Such an approach is not inconsistent with the principle as espoused in Turner at 268 that (emphasis added):

…It is, of course, to be valued in cases of compensation with a view to ensuring that the actual value contained in the land is replaced in the hands of the owner by an equivalent amount of money. The value must therefore be the value to the owner which the land possessed to him in its condition at the date of resumption. That value was necessarily affected by all the advantages which the land possessed and these might be a matter of future or even contingent enjoyment. Future advantages or potentialities must not be excluded. At the same time the value of these things must be assessed according to the condition of the land as it stood at the time of resumption: " it is the present value alone of such advantages that falls to be determined": Cedars Rapids Manufacturing & Power Co. v. Lacoste (1). You must not notionally bring what is only potential into actual being and value it as if it existed.

111. In Turner the value was being assessed on the potential of the land acquired at the date of acquisition and on that basis this proposition is not remarkable. However, it does not state a principle that the statutory disregard excludes assumed improvements. Rather Turner dictates that once the statutory disregard is identified it is that state of affairs that must be valued on the potential of the acquired land.

112. In Mosca the Court of Appeal rejected the first instance determination of value based upon “lost opportunities” for development that were found to have been caused by the public purpose. In rejecting that approach the Court found that each of the asserted “lost opportunities” were relevantly not lost as a consequence of the public purpose but rather either still existed or were caused by matters not related to the public purpose. Again, as in Love, Polegato and Lasseter, the determination turned on the facts as found and not on a finding of principle that s 56(1)(a) on a proper construction precluded the consideration of a change in value as a consequence of decisions to cease progressing a development or that limited such considerations to physical works undertaken on the Acquired Land.

113. As to the reliance by the Respondent on Yates I also consider that decision to be of little assistance in the determination of the present question. Yates was dealing with questions relating to special value (being an amount additional to market value as defined in s 57) therefore were not addressing the scope of the statutory disregard. The passage relied upon relates to the facts of that case in the circumstances of the claim made and I do not understand from the text that it was intended to be read as an exhaustive statement of principle applicable to all of the relevant considerations under s 55 or in particular s 56 of the Just Terms Act.

114. The Respondent characterises the provisions of s 56 as “definitional”. To the extent that s 56 identifies what is meant by the term “market value” in s 55(a) it is definitional in that enables the legislative provisions to utilise a short form of words in lieu of the longer form of words. However, it is by its terms, even if definitional, to be read as part of the legislative regime each time the term “market value” is used in the Act such that whilst it would not alter the construction of an operative provision it does form part of the operative provision. However, s 56 is to be distinguished from a pure definitional provision in that not all parts of the “definition” will be applicable in all cases by virtue of the incorporation of the disregards inherent in that “definition”. Accordingly, I do not consider the fact that s 56 operates in the sense of a definition limits the extent to which the words in s 55 are to be read or would operate to limit the extent of the compensation to which a dispossessed owner would be entitled in the manner contended for by the Respondent.

115. For those reasons, I do not accept the Respondent’s contention that the Applicants’ claim as formulated is precluded at law by a proper construction of the provisions of the Just Terms Act. I find that on a proper construction a claim such as that made by the Applicants is available.

Application of s 56(1)(a) to facts of this case

116. Having regard to the construction of s 56(1)(a) referred to above, it is then necessary to determine on the evidence whether, in this case, there was a:

1. Decrease in the value of the Acquired Land; and

2. Caused by the proposal to carry out the Public Purpose.

117. In undertaking this component of the necessary analysis, it is important to recognise that the enquiry required by s 56(1)(a) is not the hypothetical sale to the hypothetical purchaser but rather a determination, in the circumstances of this case, as to what stage the particular development by these Applicants would have reached but for the proposal to carry out the Public Purpose.

Decrease in the value of the Acquired Land

118. In this case, it is common ground that there was evidence of a decrease in the value of the Acquired Land caused by the proposal to carry out the Public Purpose. This decrease is evidenced by a comparison of the various valuation scenarios prepared by the parties and considered by the expert valuation evidence. These valuation scenarios were developed with the intention of covering the field with respect to the factual matters in dispute on the evidence that would input into the valuation exercise.

119. What was designated scenario 1 was a valuation on the basis of the Land as it was at the Date of Acquisition, that is with the impact of the Discontinue Decision and Stop Work Decision. The balance of the scenarios identified differing valuation inputs relating to the disputed factual scenarios in the event that the Discontinue Decision and Stop Work Decision had not been made. In a comparison of each of the scenarios to scenario 1 the Land value would have increased, thereby demonstrating that the Discontinue Decision and the Stop Work Decision had an effect in decreasing the value of the Acquired Land as at the Date of Acquisition.

120. For those reasons, I find that there was a decrease in the value of the Land as a consequence of the Discontinue Decision and/or the Stop Work Decision.

Was the decrease caused by the proposal to carry out the Public Purpose?

121. The question in dispute is whether the Applicants’ Discontinue Decision and/or Stop Work Decision was caused by the proposal to carry out the Public Purpose.

Evidence relating to causation

122. The evidence relating to the making of the two relevant decisions was adduced by the Applicants from a director of each of the Applicant companies: Mr Dimitri Drivas of the First Applicant and Mr Michael Coombes of the Second Applicant. Mr Drivas and Mr Coombes were involved in the progression of the development proposed on the Land. A significant amount of documentary material was referred to by each witness.

123. The affidavit of Mr Coombes sworn 26 February 2022 specifically deposed in relation to the causation issue in the following paragraphs of his affidavit:

47   Attached at Tab 11 is a copy of an announcement of the Respondent's Sydney Metro West project (Metro West Project) dated 14 November 2016. I first became aware of the Metro West Project at or around this time. At this time, I was not concerned that the Land might be needed for the train station in Parramatta proposed under the Metro West Project (Metro Station) because I considered that it was more likely to be located under or adjacent to the existing Parramatta heavy rail train station to create an interchange between the two networks. The heavy rail station is located between Darcy Street and Argyle Street in the Parramatta CBD which is approximately 250 metres from the Land.

…

75   From around 2018, Sydney Metro began a program of issuing notifications of works proposed for the Metro West Project. Notifications under this program regarding proposed works in the Parramatta CBD were received by Ms Georgina Amanonce (the Applicants' property manager for its Parramatta and Penrith properties) and then forwarded by her to me.

76    On 28 May 2018, I received a notification regarding a proposed geotechnical investigation in Houison Place which is the lane off Horwood Place directly adjacent to the Land. On receiving this notification, I became concerned about the implications of these investigations as they were so close to the Land and therefore whether the Land (or some part of it) might be acquired for, or affected in some way by, the construction of the Metro Station. I discussed these concerns with Dimitri and Pascal. I do not recall the exact words spoken but I recall that Dimitri and I decided not to change any aspect of the 50 Macquarie St Project because we considered that there was still a significant degree of uncertainty about whether the Land would be affected by the Metro Station. A copy of the Sydney Metro notification dated 28 May 2018 is at Tab 27.

…

101   Anthony Khoury is the Director of Khoury and Partners, a real estate agency base in Parramatta. I have known Anthony for a number of years.

102 On 11 February 2019, Dimitri and I received an email from Anthony Khoury which advised us that the likely Metro Station location was within the vicinity of George Street, Church Street, Phillip Street and Horwood Place. A copy of this email is at Tab 47.

103   On 22 February 2019, I read an article in the Sydney Morning Herald that included a map showing the locations of prior geotechnical investigations carried out by Sydney Metro in relation to the Sydney Metro West Project (including the one referred to at paragraph 76). Later that day, Anthony Khoury sent Dimitri and I a map upon which he had marked the exact locations of previous geotechnical investigations carried out by Sydney Metro in or around Horwood Place in November 2018. A copy of the article and the email and map from Anthony Khoury are at Tab 48 and Tab 49, respectively. I also recall having a conversation with Greg Crone around that time in which he expressed concern around the likelihood that the Metro Station could be located over the Land and the Horwood Place Carpark.

…

105   After considering the emails, the article and my conversation with Greg Crone referred to in paragraphs 102 and 103 above, I formed the view that the most likely location for the Metro Station would be over the Horwood Place Car Park due to its central location within the Parramatta CBD, its proximity to Parramatta Square and its distance from the Parramatta River. I also assumed that resuming the Horwood Place Car Park from PCC was likely to be less difficult for Sydney Metro than if it resumed land from a private owner.

106   I was also aware that the platforms of stations on the Sydney Metro City and Southwest line were approximately 200 metres long and assumed that the Metro Station in Parramatta was therefore highly likely to be the same length. I understood that the Horwood Place Car Park was in the order of 105 metres long and would therefore be unable to accommodate a platform 200 metres long. Accordingly, I considered that land additional to the Horwood Place Car Park would be required for the Metro Station, either a further 50m in a south easterly direction to Smith Street and/or a further 110m in a north westerly direction through the Land to Church Street.

366. In their evidence both experts acknowledged that the Sydney CBD was a stronger prestige commercial market than the Parramatta CBD. Ms Cheong analysed capitalisation rates in the Sydney CBD as being in a range 4.25%-4.75%. Mr Hillier accepted that his adopted capitalisation rate was comparable to those of the Sydney CBD rather than a lower order CBD. I do not accept that a developer in the Parramatta CBD would consider a capitalisation rate materially less than the expected upper range for the Sydney CBD would be appropriate. There is a stronger market in the Sydney CBD for premium commercial buildings with commensurate rental returns. Accordingly, I reject Mr Hillier’s capitalisation rate of 4.625% as being too low.

367. Ms Cheong’s capitalisation rate of 4.8% was influenced by a consideration of suburban commercial areas, which I consider to be less desirable than the Parramatta CBD. Accordingly, I give little weight to the range of capitalisation rates identified for those areas but to observe that the risk associated with the Parramatta CBD would be considered less than reflected for those areas.

368. Ms Cheong also took into account a concern relating to the extent of tenant precommitment for the development. For the reasons identified earlier, I do not accept that as at the Acquisition Date that the hypothetical purchaser would consider the position of tenant precommitment of a concern that the capitalisation rate would be affected to the extent considered by Ms Cheong or at all.

369. I also do not accept the consideration of Ms Cheong that there was market evidence as at the Date of Acquisition of drops in rents in Parramatta or increased vacancies. The significant drops to which Ms Cheong referred occurred after the Date of Acquisition. Further, the impacts of COVID comprising the second lockdown period in NSW was also after that date, such that to take those factors into account in the manner that Ms Cheong has would be to take into account hindsight derived from later event, which is impermissible in the exercise required by s 55 of the Just Terms Act.

370. For each of those reasons, I consider the capitalisation rate adopted by Ms Cheong to be too high.

371. To the extent that the Respondent submitted that Ms Cheong’s capitalisation rate was already too generous to the Applicants with the inference being that even if it was not accepted it should not be reduced, I do not accept that approach. Ms Cheong derived her capitalisation rate and did not resile from it, notwithstanding the Respondent’s criticism of it as compared to other markets. By identifying the reasons for the fixing of the rate if I do not accept such reasons then as a matter of logic and consistency of the evidence before me the rate must be adjusted from its starting position.

372. Accordingly, doing the best I can with the evidence available to me, I consider a capitalisation rate towards the upper end of the range for the Sydney CBD to be appropriate as it represents the higher risk end of the CBD which would broadly reflect a lower risk level for the Parramatta CBD and reflect the difference in the relative markets whilst acknowledging the supremacy of the Parramatta CBD over lower order commercial centres. Having regard to the totality of the evidence including the nature of this development as an A grade commercial development where there was evidence of relatively strong demand and a “window” of supply required that this development was able to target I consider the appropriate capitalisation rate to be 4.7%

Consequential determination of market value

374. In light of my findings above, the table of EstateMaster inputs as provided by the parties in which they identified the matters that required determination, I find that the inputs that I was required to determine which I have inserted in the table below in the “findings required” column are the inputs to be adopted for a determination of the market value as at the Date of Acquisition. To the extent that there remain inputs where findings are required and there is no material difference on the evidence between the approaches of the relevant experts, I accept the Applicants’ submission at [315] that the sums referred to at [313] should be applied with the exception of car parking/motorbike parking. There remains one input identified in the table as “Development Leasing Cost – Downtime” for which I could identify no corresponding evidence or submission. Accordingly, I have noted this in the table and ascribed at $0 value.

375. These determined inputs are not a wholesale adoption of either the Applicants’ or the Respondent’s case and will, therefore, require a re-running of the EstateMaster programme with the adopted inputs as identified below. Until that process is complete the exact quantification of my findings as an amount of compensation cannot be made, however, the approach to the identification of that sum has been fixed. I will make directions to enable this process to occur.

Topic

Finding Required?

Modelling Assumptions

Capitalisation Rate ‘As If Complete’

Yes – 4.7%

Office Area

Yes – 37,583m²

Only 1m² difference – adopt the higher number of Ms Cheong.

Retail Area

Yes – 2,373m²

There was no dispute between experts

Adopt agreed sum from Exhibit F page 19.

Total Net Income

No – sum of indented amounts as found below.

Office Rental

Yes – Adopt Ms Cheong

$24,356,455pa

Retail Rental

Yes – Accept Mr Hillier less 15%

$3,075,000pa

Car Parking Rental

Yes – $338,250

As the difference appears to relate to a division by Mr Hillier of car and motor bike parking and Ms Cheong assuming only car parking it is appropriate to consolidate the two and utilise the marginally higher total of Mr Hillier.

Motorbike Rental

n/a combined into car park rate above.

Signage Rental

Yes – $125,000

Telecommunications Rental

Yes – $ 100,000

Storage Rental

Yes – $225,250

Embedded Network

Yes – $100,000

Development Timing (from Acquisition Date to Practical Completion

Yes

32 months

Commencement of Development Works

Yes

4.5 months after Date of Acquisition.

Cost of Development Works Completed as at Acquisition Date

Yes – to be recalculated in accordance with Mr Bolt’s costings.

Cost of Outstanding Development Works as at Acquisition Date

Yes – to be recalculated in accordance with Mr Bolt’s costings.

Assumed tenant occupancy at Practical Completion

Yes – 76.53%

Assumed tenant occupancy within 12 months post Practical Completion

Yes – 100%

Topic

Finding Required?

Treatment of GST (GST – net model)

No – agreed between the parties that there is not net difference. Agreed to adopt the Respondent’s approach.

EstateMaster Inputs – Revenues

Gross Sale Revenue

No – function of capitalisation rate and total net income ultimately found.

Net Sales Revenue

No – calculated from Gross Sales Revenue less Selling Costs ultimately found.

Gross Rental Income

No – calculated from Office and Retail rentals.

Net Rental Income

No – calculated from Gross Rental Income less Leasing Costs.

Total Revenue

No – calculated from Net Sales Revenue plus Net Rental Income.

EstateMaster Inputs – Costs

Land Acquisition – Stamp Duty

No – agreed to be 5.5% of land purchase cost ultimately found.

Land Acquisition Cost – Due Diligence

Yes – $300,000

Construction Costs (including any contingencies)

Yes – to be recalculated in accordance with Mr Bolt’s costings.

Statutory Fees (s 7.12)

No – agreed to be 3% of construction costs ultimately found.

Development Leasing Cost – Total Office Leasing Incentives

Yes – $71,739,525

Calculated in accordance with Mr Hillier’s costings at item 24 of Table 3 Exhibit F.

Development Leasing Cost – Total Retail Leasing Incentives

Yes – calculated in accordance with Mr Hillier’s costings at item 25 of Table 3 Exhibit F.

Development Leasing Cost – Leasing Marketing Costs

Yes – $500,000

Development Leasing Cost – Agents Leasing Fees

Yes – 14% total gross face rental

Development Leasing Cost – Downtime

Yes – no evidence found. Adopt $0.

Land Holding Cost – Land Tax

Yes – this input together with Council rates, water rates and insurance to be calculated in accordance with Mr Hillier’s composite rate at item 100 of Table 3 Exhibit F.

Land Holding Cost – Council Rates

Yes – this input together with Council rates, water rates and insurance to be calculated in accordance with Mr Hillier’s composite rate at item 100 of Table 3 Exhibit F.

Land Holding Cost – Water Rates

Yes – this input together with Council rates, water rates and insurance to be calculated in accordance with Mr Hillier’s composite rate at item 100 of Table 3 Exhibit F.

Topic

Finding Required?

Land Holding Cost – Insurance

Yes – this input together with Council rates, water rates and insurance to be calculated in accordance with Mr Hillier’s composite rate at item 100 of Table 3 Exhibit F.

Selling Cost – Agents Fees

Yes – 0.35%

Selling Cost – Transaction Marketing

Yes – $155,000

Selling Cost – Legal Fees

Yes – $310,000

Financing Charges – Loan Establishment Fees

Yes – $0

Interest Expense (Debt Costs)

Yes – 3%

This sum was agreed if the senior debt premised on securing tenant precommitment required by the lender. In light of findings on tenant precommitment this is considered the appropriate debt cost.

EstateMaster Inputs – Performance Indicators

Target IRR

Yes

Agreed IRR of 12% adopted with a resultant IRR of not less than 10.97%.

Target P&R

Yes – not applicable.

Disturbance

Disputed disturbance claimed

376. The amounts for disturbance were agreed with the exception of remaining disputes relating to the Applicants’ claims for:

1. The recovery of the fees of two valuers under s 59(1)(b); and

2. The recovery of stamp duty, legal fees and loan establishment fees under on the purchase of a property to replace the Land under s 59(1)(f).

Applicants’ submissions

Valuation fees – s 59(1)(b)

377. The Applicants claim $286,631 in valuation fees pursuant to s 59(1)(b), being $182,845 for Mr Peter Dempsey of Dempsey Valuation Advisory and $103,786 for Mr Dwight Hillier and Mr Joe Bolster of Colliers. The Respondent contends there is no entitlement to compensation for the cost of two valuers as the costs are not reasonably incurred. The Respondent supports this contention by pointing to the fact that the Applicants have only adduced evidence from Mr Hillier in the proceedings.

378. Pursuant to s 59(1)(b), loss attributable to disturbance includes “valuation fees of a qualified valuer reasonably incurred by those persons in connection with the compulsory acquisition of the land.” It is undisputed that the fees claimed are “valuation fees”, and that those charging the fees fall within the meaning of “qualified valuer”. The reference to “a qualified valuer” may be properly construed as “qualified valuers”: s 8(b) of the Interpretation Act 1987 (NSW).

379. The fees must be reasonably incurred. The requirement for reasonableness governs the word “incurred”, and thus the issue is whether the relevant fees are incurred reasonably: George D Angus Pty Ltd v Health Administration Corporation (2013) 205 LGERA 357 at [70] and [103].

380. Having regard to the magnitude of the estimated value of the Land and the significant complexity regarding its valuation, incurring the costs of the two valuers was reasonable in the circumstances.

381. That evidence was adduced from only Mr Hillier is not relevant. First, it is uncommon for the Court to permit evidence from two valuers. Secondly, forensic decisions made about the identity of expert witnesses in these proceedings are not germane to the statutory test which only requires valuation fees to be incurred “in connection with the compulsory acquisition of land.” Such a connection is present here where Mr Dempsey’s report was prepared for and provided to the Valuer-General in support of the Applicants’ claim for compensation following the acquisition of the Land by the Respondent.

382. In the event the Court considers valuation fees for only one valuer is reasonable, in accordance with the principle described above at [315], the Applicants as dispossessed owners should be entitled to the larger fees in Mr Dempsey’s invoice in the amount of $182,845.

Stamp duty etc – s 59(1)(f)

383. The Applicants are property developers. On the Acquisition Date, they held the Land as an asset of their business of property development together with a number of other properties.

384. The acquisition of the Land by the Respondent has removed it from that portfolio of property assets and the Applicants intend to purchase a property to replace the Land in the portfolio should a suitable opportunity arise. The Applicants will incur stamp duty, legal costs and loan establishment fees in respect of that purchase.

385. In the circumstances, such costs are compensable under s 59(1)(f) of the Act. So much was first established in Blacktown City Council v Fitzpatrick [2001] NSWCA 259 (Fitzpatrick); see more recently SNS at [345]-[347].

386. In a series of recent decisions, the Court of Appeal has preferred a narrower interpretation of s 59(1)(f) than previously adopted: see Melino v Roads and Maritime Services (2018) 235 LGERA 63; Moloney v Roads and Maritime Services (2018) 233 LGERA 363; Roads and Maritime Services (NSW) v United Petroleum Pty Ltd (2019) 236 LGERA 389 (United Petroleum); and Alexandria Landfill Pty Ltd v Transport for NSW (2020) 243 LGERA 102 (Alexandria Landfill).

387. The essence of that interpretation is that s 59(1)(f) is not a “catch-all” provision to be interpreted literally and independently of the other paragraphs of s 59(1). Rather, and particularly given the use of the phrase “other financial costs” in s 59(1)(f), the provision is limited to recovery of amounts of the same kind as those recoverable under the preceding paragraphs, being amounts in the nature of expenditure or outgoings: see United Petroleum [13]-[14], [96]; and Alexandria Landfill at [123]-[124], [414]-[415]. Thus, the provision does not permit recovery of loss of profits: Alexandria Landfill at [137]-[139], [416].

388. None of these cases overruled Fitzpatrick - to the contrary, both Alexandria Landfill and Fitzpatrick have been applied recently in the Court of Appeal: G Capital Corporation Pty Ltd v Roads and Maritime Services (2019) 100 NSWLR 771 (G Captial). Nor does the interpretation of s 59(1)(f) adopted in those cases require that result. Stamp duty, legal costs and loan establishment fees are plainly in the nature of expenditure or outgoings.

389. The Respondent says that the Applicants had no actual use of the Land. That contention should be rejected. The principle established in Fitzpatrick is that use of land does not have to be a physical use and that the holding of land for the purpose of a land development business is an actual use of land for the purpose of s 59(1)(f): see Fitzpatrick at [4]-[5].

390. If this kind of use can be established on the facts, as it can with the Land for the reasons set out above, the fact that the land may have been leased to tenants does not alter the position: G Capital [17(b)], [25]-[27]. This is particularly so where, as in the present case, the tenancies were able to be terminated by notice to facilitate the Development.

391. The Respondent’s grounds of objection to this claim are twofold. Notably, it does not contend that Fitzpatrick should be overruled so that no claim of the kind advanced by the Applicants is recoverable under s 59(1)(f). Rather, as set out below, the Respondent contends that the Applicants have not made out certain aspects of their claim on the facts.

392. First, as relevant to s 59(1)(f), it is contended that the Applicants had no “actual use” of the Land. This is incorrect, the Applicants’ use of the Land was their holding of the Land for the purpose of their business of land development.

393. Secondly, the Respondent contends there is no evidence that the Applicants themselves (as opposed to the wider CGP or DPG) were property developers who held the Land as part of the stock in trade of that business. That is also incorrect. Both Mr Coombes and Mr Drivas provide detailed evidence as to the development business of the Applicants. This includes details of the properties held by the Applicants as part of that business which included the Land. This evidence is consistent with the 2022 financial statement prepared for the Applicants which identifies the various properties owned by them.

394. In these circumstances, it is plain that the Land, and these other properties, were held by the Applicants themselves on the Date of Acquisition for the purpose of their land development business. In other words, together with these other properties, the Land formed part of the “stock in trade” of the Applicants’ business: see G Capital at [25] referring to Hazcorp Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWLEC 661.

395. Evidence supporting the amounts claimed is contained in Mr Coombes’ affidavit sworn 5 August 2022 at pars 11-19.

396. With respect to the Respondent’s reliance on s 61 it is only engaged; that is, if the market value of the land is assessed on the basis if the land had the potential to be used for a purpose other than that for which it's currently used. Such is not the factual circumstances based on the evidence in this case. In this case, the actual use in retail/commercial and it will remain so.

Respondent’s submissions

Applicants' claim under s 59(1)(b)

397. The claim is articulated in the Amended Schedule of Disturbance Losses. Mr Dempsey has apparently charged $182,845 and Mr Hillier (and another at his firm) $103,786.

398. The Respondent accepts that the Applicants have an entitlement to compensation under s 59(1)(b) of the Just Terms Act. However, there is no entitlement to be compensated for the cost of two valuers as they are not costs reasonably incurred. This is made clear by the fact that the Applicants have only adduced evidence from one valuer in these proceedings.

399. The Applicants’ fallback position is to claim one valuer's fees, but the higher amount. The problem with this is that this is Mr Dempsey's fee, whereas it is clearly Mr Hillier who has been relied on by the Applicants including in these proceedings.

400. The Applicants bear the onus in establishing their claim: Roads and Traffic Authority v Perry (2001) 116 LGERA 244 at [67]. They have brought no evidence to support the proposition that it was reasonable to engage two valuers.

Applicants' claim under s 59(1)(a)-(e) (which is subject to claims under this provision in the alternative to claims under s 59(1)(f))

401. The Applicants were not in occupation, nor did they have any actual use of the Acquired Land.

402. Whilst there is evidence of an intention on the part of the Applicants to develop the Acquired Land, there is no evidence that the Applicants, in their own right as the former registered proprietors of the Acquired Land, are property developers who held the land as stock in trade and could be entitled to stamp duty or mortgage establishment costs or legal fees on a replacement property.

403. The Applicants, despite being on notice of this at all times, have only adduced evidence as to the businesses of the broader Coombes Group and Drivas Group, but none of that is relevant in the absence of some express agency arrangement: Dial a Dump Industries Pty Ltd v Roads and Maritime Services(NSW) (2017) 221 LGERA 73 at [32] per Beazley P with whom McColl and Leeming JJA relevantly agreed; confirming Dial A Dump Industries Pty Ltd v Roads and Maritime Services (2016) LGERA 285 at [28] per Preston CJ of LEC.

404. In the alternative, if stamp duty would otherwise be payable under s 59 it is precluded by operation of s 61:

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.

405. In Blacktown City Council v Concato (No 4) (2020) 245 LGERA 14 at [140] Campbell J in dealing with an objection to an enrolled valuation where market value had been assessed on the basis of site ripe for redevelopment said:

There can be no doubt that the market value of the acquired land as at the date of acquisition on which the Valuer-General proceeded gave what might be regarded as "full freight" for its potential to be used for the purpose of medium density housing development in accordance with the underlying zoning of R3. It also follows, that the question I have posed whether relocation costs and stamp duty are financial losses that would necessarily have been incurred in realising that potential must also be answered in the affirmative. If this is correct, s 61 was fully engaged and the relocation costs and stamp duty on the former owner's new home were not losses attributable to disturbance.

406. In doing so Campbell J referred to Caruso at [185] where Tobias JA (with whom the other judges agreed) said:

Of course, it does not necessarily follow that if s 61 applies it trumps each of the sub-paragraphs of s 59. Relevantly to the present case, it only denies compensation for disturbance where the relevant costs in respect of which a claim is made under s 59 would necessarily have been incurred in realising the potential to which s 61(b) refers. Thus, s 61 would not prevent a claim for disturbance under ss 59(a) and (b). But where stamp duty is incurred by persons entitled to compensation in connection with the purchase of land for relocation where that relocation is necessary to enable the potential to which s 61 refers to be realised, then in my views 61 denies a claim under s 59(d).

407. In these proceedings, on any view the Applicants will be compensated on the basis of the land being used for a higher and better use than its use at the Date of Acquisition, namely as a development site for use as addressed by all the witnesses. To use the phrase of Campbell J, compensation for market value will reflect full freight for that potential and so s 61 is fully engaged.

408. Contrary to the Applicants’ submissions the use of the term “purpose” in the Just Terms Act does not necessarily mean purpose in the terms that the language uses are characterised in a planning law context. The Just Terms Act is about uses that are different to the current use, meaning a different development, a different thing. It is not involved in categorising the purpose for which the development was used as opposed to categorising the purpose for which the development might be used in a market value assessment. The intent of the provision is to identify something that will produce a different value.

Findings on disturbance

Applicants' claim under s 59(1)(b)

409. As to the Applicants’ claim for the two valuation reports I accept the Applicants’ submissions that there is nothing in the text of s 59(1)(b) that would preclude a claim for more than one valuation report where the obtaining of more than one report would be reasonable in the circumstances of a particular case.

410. However, I also accept the Respondent’s submissions that the Applicants bear the onus in establishing that the incurring of those costs was reasonable. In this case, apart from an assertion of the complexity of the matter warranting two valuation reports, there is no evidence before me that makes good that submission. This is not a case where it is so obvious on the face of the material that more than one valuer was reasonably required. It is a complex case. That being said its complexity was adequately addressed before me through a single valuer for each side. There is nothing on the face of the material that would appear to justify the second valuation report, to do so in the circumstances is mere speculation.

411. To the extent that it may be said that a dispossessed owner may, on a large and complex matter, wish to have the comfort of a second opinion, if that were the case then I would expect evidence of that fact to be adduced where such foundation was being relied upon to justify the claim.

412. As there is no evidentiary foundation to support the reasonableness of the claim for two valuation reports, and absent an apparent justification, I reject the claim for the second valuation.

413. I allow the claim for Mr Dempsey’s valuation in the sum of $182,845. I have allowed Mr Dempsey’s claim as I was required to select one of the two claims and Mr Dempsey’s valuation was the one submitted to the Valuer-General in support of the Applicants’ submission to them as to the proper assessment of compensation. Therefore, I consider this claim to be clearly related to the purpose of s 59(1)(b).

Applicants' claim under s 59(1)(a)-(e) (which is subject to claims under this provision in the alternative to claims under s 59(1)(f))

414. In light of the evidence in this case, in particular the evidence of Mr Coombes and Mr Drivas together with the accounting evidence available I am satisfied that the Applicants together held the Land, owned jointly, for the purposes of a common business of identifying, then acquiring, prime commercial real estate with development potential, undertaking appropriate refurbishment or redevelopment to add value and then actively managing the improved property going forward as a long-term income generating asset. The Applicants conduct the business referred to as part of an ongoing relationship which runs as part of but distinct from the broader Coombes Group and Drivas Group of companies. This is so on the facts of this case that the Applicants were in fact actively in the process of developing the Land, not just passively holding it.

415. I am therefore satisfied that the Land was held as part of the stock in trade of the business such that, applying the principles in Fitzpatrick that the Applicants’ use of the Land was an actual use of Land for the purposes of s 59(1)(f) of the Just Terms Act and would be entitled to the disturbance they claim for replacing the Land.

416. The Respondent contends that s 61 does also arise for consideration. In this case, the valuation method utilised to determine the market value was on the basis of the potential of the Land for a redeveloped commercial/retail development of greater floor area and superior market attraction than the use being undertaken actually on the Land as at the Date of Acquisition. This fact is complicated in the present circumstances by the statutory disregard. In light of my findings, the Land must be assumed as being in the process of redevelopment including, but not limited to, the current building being demolished. On that assumption, the market value is being determined (in effect) on the assumed fact that the Expanded Building is under construction in the broad sense.

417. Section 61 applies where the land had potential to be used for a purpose other than that for which it is currently used where that potential remained unrealised. In this case, it is not the potential for redevelopment that was being determined as part of market value, but rather the actual in progress use was for that future use that is the potential had been realised. Accordingly, I find that s 61 is not applicable to the circumstances of this case.

418. For the foregoing reasons, I find that the Applicants are entitled to their claim pursuant to s 59(1)(f) for stamp duty on replacement land; legal fees on purchase of replacement land; and loan establishment fees. Each of these items are dependent upon the ultimate market value determined after the EstateMaster programme has been run utilising the input values determined by me, and I will make directions to permit the disturbance claims to be determined as a consequence of the finding on market value.

Conclusion and directions

419. For the reasons outlined herein I am presently unable to determine the quantum amount of compensation until such time as the RLV is undertaken utilising the inputs I have found herein. Accordingly, I publish these reasons as interim findings pending that determination.

420. In light of the detailed input determinations, I expect that the quantification of the compensation should be undertaken in reliable manner such that there is ultimately a quantification that can be adopted by consent. However, there are some components, such as the revised quantity surveyor adjustment that may produce some degree of dispute. With that in mind I will make directions that permit the parties some time to consider the totality of my findings and produce further material for consideration before bringing the matter back for mention.

421. In light of my findings, I direct:

1. The parties to address me at 9am on 20 March 2023 as to whether any part or parts of these reasons should remain restricted from publication having regard to the confidentiality orders made on 9 August 2022;

2. The Applicants to serve a report prepared by Mr Bolt adjusting his costing figures to the Date of Acquisition by 3 April 2023;

3. The Respondent to advise the Applicants if Mr Bolt’s adjusted costing is agreed by 17 April 2023;

4. If Mr Bolt’s figures are accepted by the Respondent, the Applicant undertake an EstateMaster determination of RLV utilising the inputs contained in the table at [375] above by 24 April 2023;

5. If the quantum of market value and disturbance as determined in accordance with these reasons is agreed the parties are to file short minutes of order setting out that agreement by 1 May 2023;

6. In the event that there is any disagreement as to Mr Bolt’s costings or the RLV calculation or the disturbance claims the parties are to advise the Court by 1 May 2023 of the nature and scope of the dispute;

7. The matter be listed for mention on 2 May 2023 at 9am;

8. The parties at the mention of the matter on 2 May 2023 at 9am are to indicate whether a hearing in respect to costs is required and if so to provide short minutes of order to facilitate such a hearing; and

9. The parties have liberty to apply on 1 days’ notice.

Annexure A

Orders – 29 May 2023

422. The Court orders that:

1. The compensation for market value payable to the Applicants by the Respondent pursuant to s 55(a) of the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) is $178,986,153;

2. The compensation for disturbance pursuant to s 55(d) of the Just Terms Act, payable to the Applicants by the Respondent is $10,819,388.85, being comprised of:

1. $419,826.62 for legal costs pursuant to s 59(1)(a) of the Just Terms Act; 

2. ​​​​$182,845.00 for valuation costs pursuant to s 59(1)(b) of the Just Terms Act; and

3. $10,216,717.23 for other financial costs pursuant to s 55(f) of the Just Terms Act;

3. Within 28 days of the date of these orders, the Respondent is to pay the Applicants (in equal shares) the amounts referred to above in orders (1) and (2), less any advanced payments already made, plus interest calculated in accordance with s 49 and s 50 of the Just Terms Act; and

4. The Respondent is to pay the Applicants' costs as agreed or assessed.

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Amendments

15 March 2023 - Published as Restricted - lifted

29 May 2023 - Final orders entered - [422]

Decision last updated: 29 May 2023