Melino v Roads and Maritime Services

[2018] NSWCA 251

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:

Melino v Roads and Maritime Services [2018] NSWCA 251

Hearing dates:

6-7 June 2018

Date of orders:

02 November 2018

Decision date:

02 November 2018

Before:

Beazley P at [1], Basten JA at [2], Payne JA at [31]

Decision:

(1) Appeal allowed.
(2) Set aside order 1(c) relating to disturbance items made by Moore J on 15 November 2017.
(3) Remit the matter to the Land and Environment Court to determine in accordance with these reasons whether any allowance to the owners in relation to the cattle years and farm sheds would exceed the amount already allowed and, if so, to award that additional amount.
(4) No order as to costs in this Court.

Catchwords:

LAND AND ENVIRONMENT – compulsory acquisition of land – compensation – compensation awarded for market value – whether claim for disturbance available – relationship between heads of compensation for market value and disturbance – whether costs claimed were or would be reasonably incurred as a direct or natural consequence of acquisition – whether costs claimed related to the actual use of the acquired land – Land Acquisition (Just Terms Compensation) Act 1991 (NSW), ss 55, 59

Legislation Cited:

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), ss 54, 55, 56, 59
Land and Environment Court Act 1979 (NSW), s 57

Cases Cited:

Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280; [1993] FCA 456
Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) [2000] NSWLEC 139; (2000) 108 LGERA 417
Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752; [2014] NSWCA 352
Hossain v Minister for Immigration and Border Protection [2018] HCA 34; 92 ALJR 780
ISPT Pty Ltd v Valuer General (NSW) [2009] NSWCA 31; (2009) 165 LGERA 25
Konduru (t/as Warringah Road Family Medical Centre) v Roads and Maritime Services [2017] NSWLEC 36; (2017) 224 LGERA 262
Leichhardt Council v Roads and Traffic Authority (NSW) [2006] NSWCA 353; (2006) 149 LGERA 439
Marshall v Director-General, Department of Transport (2001) 205 CLR 603; [2001] HCA 37
Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWCA 314
Richardson v Roads and Traffic Authority (NSW) (1996) 90 LGERA 294
Roads and Maritime Services v Allandale Blue Metal Pty Ltd [2016] NSWCA 7
Roads and Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236
Roads and Traffic Authority (NSW) v Peak [2007] NSWCA 66
Tolson v Roads and Maritime Services [2014] NSWCA 161; (2014) 201 LGERA 367
Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5
Wei v Minister for Immigration and Border Protection (2015) 257 CLR 22; [2015] HCA 51

Category:

Principal judgment

Parties:

Michele Antonio Melino (First Appellant)
Tonina Maria Melino (Second Appellant)
Domenica Margherita Fox (Third Appellant)
Anna Colomba Bufalino (Fourth Appellant)
Roads and Maritime Services (Respondent)

Representation:

Counsel:

 

Mr I Hemmings SC / Ms A Pearman (Appellants)
Ms S Pritchard SC / Mr N Eastman (Respondent)

 

Solicitors:

  Stacks Law Firm (Appellants)
Clayton Utz (Respondent)

File Number(s):

2017/361555

 Decision under appeal 

Court or tribunal:

Land and Environment Court of New South Wales

Jurisdiction:

Class 3

Citation:

[2017] NSWLEC 118

Date of Decision:

14 September 2017

Before:

Moore J

File Number(s):

2016/342887

Headnote

[This headnote is not to be read as part of the judgment]

The appellants, members of the Melino family, were the registered proprietors of farm land in regional NSW used for sugar cane farming. In 2016 the respondent, Roads and Maritime Services, compulsory acquired part of the appellants’ land for the purpose of constructing an upgrade of the Pacific Highway.

At the time of acquisition, the acquired land was being used for both sugar cane production and cattle grazing. There was a dwelling on the acquired land occupied at the date of acquisition by a tenant as well as various fixtures relating to the farming operations.

The appellants made several claims for compensation pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (“Just Terms Act”). The primary judge awarded the appellants compensation in respect of the market value of the acquired land (including fixtures), the decrease in value of the adjoining land and a number of disturbance claims. However, the primary judge declined to award compensation for disturbance in respect of the replacement costs of the construction of a replacement dwelling, new cattle yards, a new shed, a new garage, new water tanks and an effluent disposal system to be constructed on the residue land for the purpose of conducting the continuing cattle grazing business. The primary judge also declined to award compensation for the costs incurred in an abandoned proposal to relocate the existing dwelling, loan establishment fees and interest and an agreed sum for the cost of road works.

On appeal the issues were:

(i)   Whether the primary judge erred in declining to award compensation for the costs of building a new dwelling and relocating the existing dwelling;

(ii)   Whether the primary judge erred in declining to award compensation for the cost of replacing the farm structures;

(iii)   Whether the primary judge erred in declining to award compensation for loan establishment fees and interest;

(iv)   Whether the primary judge erred in failing to award compensation at an agreed amount for the cost of road works.

The Court (Beazley P, Basten JA, Payne JA) held, allowing the appeal:

In relation to issue (i),

Per Payne JA (Beazley P agreeing):

The Just Terms Act does not expressly or implicitly provide that the value paid for land compulsorily acquired necessarily includes “the full compensatory value for all fixtures included in the acquisition”. It was an error on a question of law for the primary judge to so conclude: [82]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), ss 55, 59; Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWCA 314; Roads and Traffic Authority (NSW) v Peak [2007] NSWCA 66; Roads and Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236; Tolson v Roads and Maritime Services [2014] NSWCA 161; (2014) 201 LGERA 367; Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752; [2014] NSWCA 352; Roads and Maritime Services v Allandale Blue Metal Pty Ltd [2016] NSWCA 7 applied.

The correct approach to s 59(1)(f) in the present case was to ask whether the appellants had reasonably incurred financial costs (or might reasonably incur such costs), relating to the actual use of the land, as a direct and natural consequence of the acquisition: [83]-[84]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), ss 59(1)(f) applied.

Applying this approach, on the findings made by the primary judge the appellants had already received compensation for the market value of the dwelling, which encapsulated the right to potential profits from renting the property after the date of the acquisition. The primary judge’s reasoning did not disclose error on a question of law: [85]

While the primary judge did not consider the appellants’ claim for the cost of a replacement dwelling under s 59(1)(c), this was not a material error: [95]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), ss 59(1)(c) applied.

Per Basten JA:

Section 59(1)(c) of the Just Terms Act, which covers financial costs reasonably incurred “in connection with the relocation of those persons” is only engaged where those persons are relocated. None of the owners was living on the land at the date of acquisition and therefore none required relocation: [9]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), s 59(1)(c) applied.

No item in s 59 was intended to allow for the cost of purchasing land for relocation, nor, indeed, for other purposes. It follows that the reference in s 59(1)(f) to “any other financial costs” relating to the actual use of the acquired land, and incurred as a “direct and natural consequence of the acquisition”, does not include the cost of replacing the old house which had been on the acquired land and for which market value was payable under s 55(a): [10]-[12]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), s 59(1)(f) applied.

In relation to issue (ii),

Per Payne JA (Beazley P agreeing):

The question of whether s 59(1)(f), like other parts of s 59(1), is restricted to ancillary costs, and does not extend to purchasing or rebuilding structures should be determined in a case where the point has been squarely addressed by the parties: [77]

Roads and Traffic Authority (NSW) v Peak [2007] NSWCA 66; Roads and Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236; Roads and Maritime Services v Allandale Blue Metal Pty Ltd [2016] NSWCA 7 considered.

The primary judge erred on a question of law in failing to address the appellants’ separate claim for disturbance. The matter must be remitted to the Land and Environment Court: [86]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), s 59(1)(f) applied.

Per Basten JA:

Section 59(1)(f), like other parts of s 59(1), is restricted to ancillary “costs”, and does not extend to purchasing or rebuilding structures: [19]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), s 59(1)(f) applied.

As a matter of statutory construction, the correct exercise is to assess the loss of the farm structures as special value of the land to the person entitled to compensation, on the date of acquisition, pursuant to s 55(b). Because the valuers did not approach their valuations on that basis, and the primary judge consequently did not allow any amount for the loss of the farm structures beyond their value to the hypothetical purchaser of the acquired land, the issue must go back for redetermination in the Land and Environment Court: [20]-[24]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), s 55 applied.

Tolson v Roads and Maritime Services [2014] NSWCA 161; (2014) 201 LGERA 367; Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWCA 314 considered.

In relation to issue (iii),

Per Payne JA (Beazley P agreeing):

Neither of the amounts claimed as financial costs reasonably incurred in connection with the execution of a new mortgage resulting from the relocation were allowable within the scope of s 59(1)(e): [110]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), s 59(1)(e) applied.

Section 59(1)(f) must be read in its context as part of s 59 and in its place part of the tightly drawn constraints imposed by the section. It would not be a coherent application of s 59 for a financial cost which is specifically excluded from compensation by s 59(1)(e) to be allowable under the immediately succeeding sub-paragraph, 59(1)(f): [111]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), s 59(1)(f) applied.

Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) [2000] NSWLEC 139; (2000) 108 LGERA 417 considered.

Per Basten JA:

If the capital costs of the new farm structures were recoverable under s 59(1)(f), the financing costs must also be a direct and natural consequence of the acquisition. That connection was not established in circumstances where interest on compensation is payable pursuant to s 49(1), at the rate provided for in s 50, from the date of acquisition to the date of payment of the compensation: [26]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW), ss 49(1), 50, 59(1)(f) applied.

In relation to (iv),

Per Payne JA (Beazley P and Basten JA agreeing):

The primary judge’s award of compensation for the cost of road works was based on the only evidence before him of the cost of the road. The decision to accept this evidence was not “irrational, illogical and not reasonably open on the evidence”. The appellants, who were given the opportunity to produce further evidence of additional payments made for the road, produced no such evidence: [123]

Judgment

1. BEAZLEY P: I have had the advantage of reading in draft the reasons of Basten JA and Payne JA.  I agree with the orders of Payne JA for the reasons his Honour gives.  In expressing my agreement, I would join with him in expressing some reservations as to the line of authority in this Court in respect of the Land Acquisition (Just Terms Compensation) Act1991 (NSW), s 59(1). However, in the absence of full argument and where there has been no challenge to those decisions, I am of the view that those authorities should be applied insofar as they are relevant to the case in hand.

2. BASTEN JA: On 18 March 2016 the respondent acquired from the appellants an area of just under seven hectares of land for the purpose of upgrading the Pacific Highway between Woolgoolga and Ballina. The land formed part of the estate of the late Costanzo Melino and had been transferred to four members of the Melino family (the appellants) as joint tenants. (It was said that the land was held by them in their capacity as executors of the estate of Costanzo Melino.)

3. The proposed new highway divided the Melino property of some 102 hectares. There was a small area to the east of the acquired land which was severed from the remainder. No issue remains as to the compensation for that land. The bulk of the land lay to the west of the proposed highway. It was used for cattle grazing and growing sugar cane at the time of acquisition.

4. The trial judge found that the acquired land contained a number of structures. First, there was a house, water tanks and garage (“the old house”) which was not occupied by any of the registered owners, but was let to a tenant. Secondly, there were a number of structures described by the primary judge as “cattle yards, sheds, and other ancillary structures necessary to support the management of the overall Melino landholding for its grazing and sugarcane-growing farming activities.”[1] These structures (other than the old house) may be referred to as the “farm structures”.

   1. Michele Melino and three others in their capacity as executors of the Estate of the late Costanzo Melino v Roads and Maritime Services [2017] NSWLEC 118 at [139].

5. The grounds of appeal, somewhat confusingly, did not identify specific claims which had been rejected, but rather challenged the basis on which they had been rejected, except with respect to a claim for “loan establishment fees and loan interest” (ground 6) and a claim for an increased allowance with respect to the cost of an access road (ground 7). Ground 7 should be dismissed for the reasons given by Payne JA.

6. With respect to the other matters, it is convenient to deal separately with (a) the cost of replacing the old house; (b) the cost of replacing the farm structures, and (c) the claim for loan establishment fees and interest.

Cost of replacing the old house

7. The primary judge rejected the claim for the cost of a new dwelling on the basis that the old house was part of the land which had been acquired and for which compensation had been allocated. There is no basis in s 55 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (“Compensation Act”) to allow an owner the market value of the acquired land and the value of purchasing a replacement. That approach was correct. As Spigelman CJ observed in Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales:[2]

“[46] The before and after method [of valuation], albeit in this rolled up way, … places a person in the same position as that person would have been in if the acquisition had not occurred. This approach to compensation is, of course, equivalent to the measure of damages in tort. I do not wish to suggest that this is the criterion, because it bears a close analogy with a reinstatement basis for valuation to which ss 54 and 55 are not directed.”

2. [2006] NSWCA 314 (Handley JA agreeing).

8. The appellants claimed that the cost of building a new house was compensable as “loss attributable to disturbance” under s 55(d) pursuant to s 59(1)(c), and pursuant to s 59(1)(f). It is convenient to address the two bases of this claim separately.

(i)   construction of s 59(1)(c)

9. It may be assumed that, in so far as the old house was on the acquired land, it was appropriate to consider “any loss attributable to disturbance” of the acquired land under s 55(d) and s 59. [3] However, the elements of s 59(1) are an exclusive list of the financial costs which can be recovered. The first two items, pars (a) and (b), deal with legal costs and valuation fees reasonably incurred by the persons entitled to compensation, being costs incurred in connection with the compulsory acquisition of the land. Paragraph (c) covers financial costs reasonably incurred “in connection with the relocation of those persons”. Both par (b) and (c) use the term “those persons”, which refers back to “the persons entitled to compensation” in par (a). Thus, par (c) is only engaged where those persons are relocated. None of the owners was living on the land at the date of acquisition and therefore none required relocation. No claim was available under par (c).

   3. Roads and Traffic Authority of New South Wales v Peak [2007] NSWCA 66 at [99].

(ii)   construction of s 59(1)(f)

10. This provision may be addressed on the same assumption, namely that the claim was properly characterised as one for disturbance. Paragraph (d) of s 59(1) is not directly invoked, but is relevant. It allows as a loss attributable to disturbance of the land, stamp duty costs “reasonably incurred … by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired)”. This limitation (together with a similar limitation in par (e) with respect to mortgage costs) suggests that no item in s 59 was intended to allow for the cost of purchasing land for relocation, nor, indeed, for other purposes. No item contradicts this inference. It would subvert the clear effects of s 59 to allow an owner who did not require relocation to obtain the value of purchasing land or, as in the present case, building a house on other land owned by that person.

11. It follows that the reference in s 59(1)(f) to “any other financial costs” relating to the actual use of the acquired land, and incurred as a “direct and natural consequence of the acquisition”, does not include the cost of replacing the old house which had been on the acquired land and for which market value was payable under s 55(a).

12. If the appellants’ contrary submission were correct, it could not be limited to the cost of building a new dwelling; it would extend to the cost of purchasing an existing dwelling on other land, at least equivalent in value to the market value of the land and dwelling which had been acquired. The phrase “any other financial costs” clearly envisages costs of a similar kind to those in pars (a)-(e) above. They would not include the “cost” of a new dwelling house, whether purchased or constructed.

Replacement of farm structures

13. I understand the finding of the primary judge noted at [4] above to be acceptance that the acquired land was used for two independent purposes, one being the letting of the house and the other being as an integral part of the grazing and sugar cane growing business. That finding, whether express or implicit, was a finding of fact and not open to challenge (nor was it challenged).

14. The next question is whether the persons entitled to compensation can claim the replacement cost of new farm structures in place of those situated on the acquired land. The view taken by the primary judge was that these costs fell into the same category as the replacement of the house, the compensation for the loss being part of the calculation of market value of the acquired land. In principle that would be correct, if the value of the farm structures as part of the ongoing farm business were fully reflected in the market value of the acquired land. If that were not the case, it would presumably be because the value of the farm structures was quite limited to a purchaser of the land which was too small to farm, but was higher for the owner of the adjoining agricultural land. That conforms to the approach adopted by Spigelman CJ in Mir Bros:

“[83]   I accept the Appellant’s submission that the ‘before and after’ test will not always compensate loss of the character claimed, ie lost capacity to use the adjoining land in conjunction with the acquired land. Such a loss may be special to the owner of the adjoining land and could be a loss sustained in addition to the market value of the adjoining land. The ‘before and after’ test, which operates by reference to market value only, will not necessarily compensate such a loss.”

15. On the approach accepted in Mir Bros, the farm structures on the acquired land had “special value” for the owners of the acquired land, as provided for by s 55(b) and s 57 of the Compensation Act. That value was “incidental to” the owners’ use of the acquired land for the farming enterprise partly carried out on the adjoining land to the west of the acquired land.

16. How the special value should be assessed would be a matter for expert evidence. For example, one view might be that the value to the owners was the saving through not having to replace the farm structures, or not having to replace them for a number of years. That value might not be the current replacement cost of the farm structures, but the present value of the replacement cost deferred for the remaining life of the structures, as at the date of acquisition.

17. An alternative possibility is that the loss of the farm structures led to a diminution in the value of the other land. That might be described as a loss in value of the adjoining land as a result of “the carrying out of … the public purpose for which the land was acquired”, within the terms of s 55(f). That approach would require construing the causative factor as including the acquisition itself, because it was not the use of the acquired land as a highway which led to the loss, but purely its acquisition. That reading is at best awkward and may be rejected in the circumstances of the present case.

18. A third approach could be to value the loss of the farm structures as within “any other financial costs” which might reasonably be incurred as a direct and natural consequence of the acquisition of the acquired land, within the terms of s 59(1)(f). As noted above, that requires consideration of the phrase “any other financial costs” in par (f). The phrase invites a characterisation of the costs in conformity with the earlier paragraphs of the provision. One difficulty with that exercise is the different connecting phrases used in the other paragraphs, namely “in connection with”, rather than “relating to” in par (f). On the other hand, it could be said that the allowance for financial costs in connection with the “relocation” of persons entitled to compensation (pursuant to par (c)) provides, by analogy, a basis for allowing costs resulting from a need to relocate essential infrastructure which form part of a single enterprise carried out partly on the acquired land and partly on adjoining land.

19. The difficulty with accepting that approach is the careful formulation of the earlier paragraphs which include, for example in par (d), an allowance for stamp duty costs incurred in connection with the purchase of land for relocation, which clearly excludes recovering the purchase price of the land. Further, even the stamp duty costs in par (d), and mortgage costs under par (e), are restricted to replacement on a like-for-like basis. That would appear to be inconsistent with the possibility of acquiring new infrastructure in the form of the farm structures for full replacement cost. The better view is that s 59(1)(f), like other parts of s 59(1), is restricted to ancillary “costs”, and does not extend to purchasing or rebuilding structures.

20. As a matter of statutory construction, the correct exercise is to assess the loss of the farm structures as special value of the land to the person entitled to compensation, on the date of acquisition, pursuant to s 55(b). Because the valuers did not approach their valuations on that basis, the trial judge did not allow any amount for the loss of the farm structures, beyond their value to the hypothetical purchaser of the acquired land. On one view if the evidence did not support a claim for special value, the appellants, who bore the onus of proof, fail. However, because the case law has provided no clear answer to the statutory construction issue, the better view is that the issue will have to go back for redetermination in the Land and Environment Court. Whether the costs of the rehearing should be borne by the appellants in any event is a matter for that Court.

21. It is unclear whether the calculation of special value under s 55(b), and the calculation of loss attributable to disturbance under s 55(d) and s 59(1)(f), would achieve different results. If so, it would support a construction of the Act which allowed only one approach.

22. If either approach were available under the Compensation Act, it may be that some qualification should be made to the statement in my judgment in Tolson v Roads and Maritime Services [4] that the costs recoverable as loss attributable to disturbance “are entirely separate from the value of the acquired land or the retained land.” However, the point of that remark was not to say that a particular head of loss could only be assessed in one way, but rather to suggest that costs recoverable by way of disturbance were not to be set off against an increase in the value of other land as a result of the carrying out of the public purpose.

    4. [2014] NSWCA 161; 201 LGERA 367 at [83].

23. It does not follow from the foregoing discussion that the factors listed in s 55 of the Compensation Act are not discrete and independent. It is true that Spigelman CJ stated in Mir Bros that he would not “approach the interpretation of s 55 on the assumption that each of the component parts and specifically s 55(c), was intended to operate to the exclusion of each other.” [5] It may, perhaps, have been more accurate to describe particular losses as capable of characterisation in more than one way. Whether that is so or not, the significance of the issue is threefold. First, assuming that a particular loss is capable of being characterised as falling within more than one of the factors identified in s 55, that does not mean that it can be recovered twice. Secondly, a single loss should be assessed on a consistent basis. Relevantly for present purposes, if the farm structures had a special value to the owners which was not simply their replacement value, they should not be able to recover the full replacement value by way of a claim for disturbance. Thirdly, it is clear that some forms of valuation, including the “before and after” method, will encompass more than one of the factors identified in s 55.

    5. Mir Bros at [55]; see also [56].

24. The amount claimed for the purchase and construction of new cattle yards and a new farm shed came to approximately $104,000. The appellants accepted that they should allow a reduction of some $40,000 for the value of the farm infrastructure which had been included in the market value of the acquired land. It is to be hoped that the expense of further proceedings in relation to a claim which, even if allowed in full, is worth less than $100,000 will be avoided.

Claim for loan establishment fees and interest

25. Ground 6 related to a claim for costs associated with the construction of the new farm structures, work on which had apparently commenced prior to the proceedings in the Land and Environment Court. The amount claimed appeared to relate to financing obtained for a range of expenses, including the building of a new dwelling on the adjoining land, the capital cost of which was not compensable. If any financing costs are compensable, they could only be those with respect to the funding of costs which were otherwise themselves compensable under the Act. On the preferred view, that the loss should be recoverable as special value under s 55(b), no basis for claiming financing costs would arise.

26. If the capital costs of the new farm structures were recoverable under s 59(1)(f), the financing costs must also be a direct and natural consequence of the acquisition. That connection was not established in circumstances where interest on compensation is payable pursuant to s 49(1), at the rate provided for in s 50, from the date of acquisition to the date of payment of the compensation. It would be inconsistent with the legislative scheme to provide a separate amount for borrowing costs where the borrowing was for the purpose of spending the compensation before it was obtained. Ground 6 must be rejected.

Conclusion

27. In my view the appeal should be allowed in part and the matter remitted to the Land and Environment Court to allow for the calculation of an amount sufficient to provide for the special value to the appellants of the farm structures on the acquired land.

Costs

28. The appellants have had a limited success on the appeal. The major items raised on the appeal in respect of which the appellants failed were the claim for the construction of a new dwelling, garage and water tanks (some $383,000) and additional costs of the new road (some $250,000). The allowance for special value of the farm infrastructure on the acquired land is unlikely to exceed the claim of $104,000 for the construction of the farm shed and the cattle yards, less the $40,000 allowed for the value of the farm structures in the assessment of the market value of the acquired land. In short, the likely success on the appeal is perhaps 10% of the amount claimed. There is therefore a question as to whether the appellants should pay some part of the respondent’s costs.

29. Because there were issues of principle involved and because the legal issues relevant to the appellants’ limited success took a considerably greater proportion of the time of the appeal than the proportion of the amount claimed, the better view is that there be no order as to the costs of the appeal, leaving the parties to bear their and its own costs.

Orders

30. I would propose the following orders:

1. Allow the appeal in part.

2. Remit the matter to the Land and Environment Court to determine whether any allowance for special value to the owners of the cattle yards and farm sheds on the acquired land would exceed the amount already allowed and, if so, to award that additional amount.

3. No order as to the costs in this Court.

31. PAYNE JA: This is an appeal from a decision of Moore J in Michele Melino and three others in their capacity as executors of the Estate of the late Costanzo Melino v Roads and Maritime Services [2017] NSWLEC 118; 226 LGERA 337.

32. The appellants, members of the Melino family, were the registered proprietors (in their capacity as executors of the Estate of the late Costanzo Melino) of two parcels of farm land in regional NSW, used for sugar cane farming, at 604 Back Channel Road, Wardell and 428 Old Bagotville Road, Wardell.

33. On 18 March 2016, the respondent, Roads and Maritime Services (“RMS”), compulsorily acquired part of the appellants’ land for the purpose of constructing an upgrade of the Pacific Highway between Woolgoolga and Ballina. The area of the acquired land was 6.89 hectares; the residue land comprised 101.81 hectares.

34. At the time of acquisition, the acquired land was being used for both sugar cane production and cattle grazing. On the acquired land there was a cottage occupied at the date of acquisition by a tenant who was not engaged with the sugar cane production or grazing operations. The dwelling had been tenanted since 2010 when the late Costanzo Melino had moved to a residential care facility in a nearby town. The primary judge accepted that Mr Michele Melino intended, upon his retirement, to live on the property and conduct farming activities. The acquired land also contained a garage, a machinery shed, an old machinery shed, dairy bales, a storage shed, an old storage shed, cattle yards and water tanks.

35. In the proceedings below, the appellants made several claims pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (“Just Terms Act”). They made claims for the market value of the acquired land and the decrease in value of the adjoining land as a consequence of the public purpose pursuant to s 55(a) and (f) of the Just Terms Act. Those claims are not in issue on this appeal, at least directly. The appeal concerns claims for disturbance made pursuant to s 55(d) of the Just Terms Act which were rejected by the primary judge.

Primary judgment

36. The primary judge awarded the appellants compensation in respect of the market value of the acquired land (including fixtures), the decrease in value of the adjoining land and a number of the disturbance claims. However, his Honour declined to award compensation for disturbance being claims for the replacement costs of the construction of a replacement dwelling, new cattle yards, a new “Colorbond” farm machinery shed, a new garage, new water tanks and an effluent disposal system to be constructed on the residue land for the purpose of conducting the continuing cattle grazing business. Some compensation pursuant to s 55(a) and (f) of the Just Terms Act had been awarded to the appellants for each of these items as fixtures on the acquired land.

37. The primary judge (at [153]-[157]) found that the costs of the construction of a replacement dwelling on the residue land were not available because of the decision of this Court in Tolson v Roads and Maritime Services [2014] NSWCA 161; (2014) 201 LGERA 367 at [83] per Basten JA (Beazley P expressly agreeing at [9]) and in particular the statement that disturbance claims are entirely separate from the value of the acquired land or the residue land.

38. His Honour found that it was “now settled” that the value paid for land compulsorily acquired pursuant to the Just Terms Act includes, in the quantum of compensation, whether agreed to by the dispossessed owner or determined by this Court, “the full compensatory value for all fixtures included in the acquisition”.

39. As the appellants had received compensation for the value of the fixtures which were acquired, it followed that no compensation was payable for disturbance in relation to the claim to rebuild the replacement dwelling, new cattle yards, a new “Colorbond” farm machinery shed, a new garage, new water tanks and an effluent disposal system on the residue land.

40. His Honour concluded, however, that some costs (for access, telephone and power connection to the new structures) associated with building the new structures (rather than the cost of such structures themselves) could be recovered for disturbance as falling within s 59(1)(c) or (f).

41. The primary judge next rejected a claim for disturbance in respect of the costs of an abandoned proposal to physically relocate the existing dwelling. The primary judge found (at [213]-[214]) that although Mr Melino had incurred costs in a contemplated relocation of the pre-existing dwelling to a prospective new site on the residue land, an inspection of the structure revealed that this was not feasible because of the need to strip the structure of its asbestos cladding. His Honour concluded that had Mr Melino carried through with this proposal, the value of the dwelling would not have been included in the market value compensation for the strip of land acquired. However, as this relocation proposal was not viable, the dwelling was acquired and demolished, along with all the related structures. As these costs were not connected with an “actual” relocation or an “actual” use of the land, they were not recoverable as disturbance costs.

42. Mr Melino established a loan facility with the National Australia Bank to build the replacement farm buildings on the residue land. The borrowed funds were also intended to be used to build a new access track and obtain the necessary approvals for the buildings. A claim was also made for interest paid on funds drawn down on the facility. Both amounts were claimed as disturbance under s 59(1)(f). The primary judge rejected that claim. The primary judge stated (at [235]-[236]) that he would follow his prior decision in Konduru (t/as Warringah Road Family Medical Centre) v Roads and Maritime Services [2017] NSWLEC 36; (2017) 224 LGERA 262, by which he apparently meant that any difference between the rate of interest prescribed by s 49 of the Just Terms Act which was payable on amounts of compensation awarded and the rate actually paid by a claimant was not compensable as disturbance. It followed that the loan establishment fee and interest differential claim failed. This conclusion was drawn as a matter of “first principle”. As to the establishment fee, his Honour apparently rejected the claim on the basis that the funds borrowed were directed at activities which were essentially commercial in nature.

43. Finally, his Honour made an allowance for compensation for disturbance being the costs of building an internal roadway to provide access to the new farm machinery shed constructed on the residue land. Following the delivery of the primary judge’s reasons on 14 September 2017, there was an exchange between the parties about the amount actually spent on building the roadway. There was a further hearing on 2 November 2017 before the primary judge. An invoice was tendered by the respondent. The position of the respondent was that the invoice recorded the total amount that was payable to the appellants for the roadway. The position of the appellants was that the invoice recorded part payment only and that considerable additional costs remained to be incurred to build the roadway. The primary judge said that he proposed to act on the evidence before him, that the invoice recorded the amount payable for building the road, but his Honour informed the parties that if evidence relating to additional expenditure on the road could be produced he would consider it. It was common ground that no additional evidence was produced by the appellants. On 15 November 2017, orders were made the effect of which was that only the amount recorded in the invoice was allowed for building the road.

Legislation

44. The provisions of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) relevant to this appeal are ss 54, 55, 56 and 59. As at the date of acquisition, 18 March 2016, those provisions provided as follows:

“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.

(2)    If the compensation that is payable under this Part to a person from whom native title rights and interests in relation to land have been acquired does not amount to compensation on just terms within the meaning of the Commonwealth Native Title Act, the person concerned is entitled to such additional compensation as is necessary to ensure that the compensation is paid on that basis.

55    Relevant matters to be considered in determining amount of compensation

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

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

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

(c)    any loss attributable to severance,

(d)    any loss attributable to disturbance,

(e)    solatium,

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

56 Market value

(1)    In this Act:

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

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

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

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

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

59    Loss attributable to disturbance

(1)    In this Act:

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

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

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

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

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

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

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

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

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

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

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

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

Grounds of appeal

45. On 14 February 2018, the appellants filed a notice of appeal. The notice listed seven grounds of appeal, although the appellants did not press ground four and it may thus be put to one side. The remaining grounds of appeal were:

“1. The Court erred on a question of law by deciding not to award disturbance pursuant to s 55(d) (whether by way of s 59(1)(c) or s 59(1)(f)) because the Court found an entitlement to market value pursuant to s 55(a).

2. The Appellant’s s 55(d) disturbance claim was framed in the alternative pursuant to s 59(1)(c) and 59(1)(f). The Court failed to address the Appellant’s claim pursuant to s 59(1)(c) and so erred on a question of law.

3. The Court did not make any finding of fact as required for the purposes of s 59(1)(f) as to the “actual use” of land. Alternatively, if such findings are to be implied, the Court made inconsistent findings of fact.

…

5. In considering s 59(1)(c) at [214] the Court erred by implying a limitation not found in the text of the provision (an “actual relocation”).

6. The Court erred in its “first principle” ([236]) refusal to award compensation pursuant to s 59(1)(f) (for loan establishment fees and loan interest).

7. On the facts fully found, the Appellants were entitled to an award for disturbance, in relation to the access road, in the amount of $253,706. By awarding only $85,463.64 the Judge erred.”

Ground one

46. The appellants submitted that the primary judge erred in rejecting the disturbance claim for a replacement dwelling, new cattle yards, a new “Colorbond” farm machinery shed, a new garage, new water tanks and an effluent disposal system to be constructed on the residue land for the purposes of conducting the continuing cattle grazing business. The primary judge found that the “full compensatory value for all fixtures” had been included in the market value claim.

47. The essence of the appellants’ submission was that market value (s 55(a)) and disturbance (s 55(d)) are distinct heads of compensation and compensation for the latter cannot be discounted on the basis of an allowance for the former. The appellants accepted that if the court were satisfied on this ground, the matter would need to be remitted.

48. The respondent submitted that the appellants’ disturbance claim did not fall within s 59(1)(f) because the costs claimed were not a “loss attributable to disturbance” and instead were effectively a claim for reinstatement. As compensation had already been awarded for the loss in market value of the improvements the subject matter of the claim pursuant to s 55(a), an allowance for disturbance pursuant to s 55(d) would impermissibly involve a “double-dip”: Richardson v Roads and Traffic Authority (NSW) (1996) 90 LGERA 294 at [303]; Roads and Traffic Authority (NSW) v Peak [2007] NSWCA 66; Roads and Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236.

49. Further, s 59 provides that a “loss” is necessary before a claim for disturbance under s 55(d) may be allowed: Tolson at [3]-[4] per Beazley P. The respondent submitted that, after the appellants had been compensated for the loss in market value of the improvements, there was no longer a relevant “loss” to found the disturbance claim.

50. The respondent submitted that the costs allegedly incurred by the appellants could not be “reasonably incurred” where compensation for market value had already been given for the subject matter of the claim. In such circumstances the appellants’ claim amounted to reinstatement rather than compensation for loss: Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWCA 314 at [46].

Consideration

51. Claims for compensation arising from the compulsory acquisition of land are determined in the Class 3 jurisdiction of the Land and Environment Court. An appeal from a judgment in such proceedings is limited to challenging an order or decision of the Court on a question of law: Land and Environment Court Act 1979 (NSW), s 57. That section provides, relevantly:

“57    Class 1, 2, 3 and 8 proceedings—appeals

(1)    A party to proceedings in Class 1, 2, 3 or 8 of the Court’s jurisdiction may appeal to the Supreme Court against an order or decision (including an interlocutory order or decision) of the Court on a question of law.

(2)    On the hearing of an appeal under subsection (1), the Supreme Court shall:

(a)    remit the matter to the Court for determination by the Court in accordance with the decision of the Supreme Court, or

(b)    make such other order in relation to the appeal as seems fit….”

52. Accordingly, this appeal is limited to a question of law. It is not confined to an error of law: Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority (NSW) [2006] NSWCA 314 at [27]. The Court will only intervene if the error on a question of law is a material error: see, in relation to jurisdictional error, Hossain v Minister for Immigration and Border Protection [2018] HCA 34; 92 ALJR 780 at [31] (Kiefel CJ, Gageler and Keane JJ) citing Wei v Minister for Immigration and Border Protection (2015) 257 CLR 22; [2015] HCA 51 at [23].

53. This case was heard at the same time as Moloney v Roads and Maritime Services [2018] NSWCA 252. Many of the issues overlap. As the parties tended to address submissions about the legal tests applying interchangeably between the two cases, it will be necessary to address a number of the same issues here.

54. The starting point in construing the appellants’ right to compensation under the Just Terms Act is the decision of the High Court in Marshall v Director-General, Department of Transport (2001) 205 CLR 603; [2001] HCA 37. In that case Gaudron J said at [38]:

“Although the rule that legislative provisions are to be construed according to their natural and ordinary meaning is a rule of general application, it is particularly important that it be given its full effect when, to do otherwise, would limit or impair individual rights, particularly property rights. The right to compensation for injurious affection following upon the resumption of land is an important right of that kind and statutory provisions conferring such a right should be construed with all the generality that their words permit. Certainly, such provisions should not be construed on the basis that the right to compensation is subject to limitations or qualifications which are not found in the terms of the statute.”

55. In Marshall, Hayne J agreed (at [67]) with these observations about the importance of construing legislation according to its natural and ordinary meaning. The approach in Marshall is consistent with the correct approach to the Just Terms Act explained in Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5 at [31] and [35].

56. The Just Terms Act should be approached on the basis that the appellants’ right to compensation should not be subject to limitations or qualifications which are not found in the terms of the statute.

57. In Leichhardt Council v Roads and Traffic Authority (NSW) [2006] NSWCA 353; (2006) 149 LGERA 439 at [37] Spigelman CJ held that s 55 of the Just Terms Act constituted “an exhaustive list to which regard must be had when determining the amount of compensation under s 54”. The Chief Justice went on to explain that the matters specified in each of the sub-sections of s 55 do not constitute a “mathematical formula”. His Honour added:

“[37] The dominant test is contained in s 54, that is, the task is to determine the amount that will 'justly compensate the person for the acquisition of the land'. This carries into effect the object of the Act set out in s 3(1)(b) 'to ensure compensation on just terms for the owner of land that is acquired ...'.”

58. The Chief Justice also pointed out at [29] that:

“… It is always dangerous to characterise a statutory provision and then to apply the formulation in the characterisation, rather than to apply the words of the statute...”

59. Despite this admonition, in a number of the cases in this Court non-statutory language has been used (“just terms override” and “double-dipping” being two prominent examples). I agree with Spigelman CJ that it is dangerous to seek to characterise no doubt convenient short hand terms which were developed for the purposes of a particular case and seek to apply those terms in place of the language of the statute.

60. It is clear that the various heads of compensation in s 55 are capable of overlapping. That is so despite those heads addressing different issues and involving different tests to determine whether compensation is available and, if so, the amount of that compensation. So much was established in Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales [2006] NSWCA 314 per Spigelman CJ (Handley and Tobias JJA agreeing). The potential for overlap between compensation for the market value of the acquired land and compensation for disturbance is a key question in the present case, as it has been in a number of cases in this Court. In addressing this question it is necessary to refer to these earlier decisions, which are not always easy to reconcile.

61. The first is the decision of this Court in Roads and Traffic Authority (NSW) v Peak [2007] NSWCA 66. In that case, the Pacific Highway was widened. This involved the realignment of the road and conversion to two lanes in each direction with an increase in the maximum speed limit from 100kph to 110kph. The proposed new alignment resulted in the eastern boundary of the new highway being 35 metres closer to the respondents’ residence and more elevated than was previously the case. The respondents’ land, including the acquired land, was used as a cattle stud farm. The respondents claimed costs for disturbance related to the relocation of their dwelling from one position to another within the residue land. Beazley and Tobias JJA held that “if the actual use of the residue land is so intimately connected with the actual use of the acquired land so that use of the one is dependent on use of the other, then that is sufficient to bring it within s 59(f) [now s 59 (1)(f)]”: at [71]. In Peak v Roads and Traffic Authority [2006] NSWLEC 3, the primary judge had concluded at [79]:

“The costs of relocating the dwelling are not able to be claimed under s 59(f) as the reason the Applicants’ wish to build a new house is due to the public purpose, namely the highway, not because of the disruption to the Applicants’ business as was the case in McBaron. In that case the use of the acquired land and the residue land was so intimately connected that a claim under s 59(f) was maintainable.”

62. The primary judge was found to have erred in three respects in her determination of the claim under what is now s 59(1)(f). First, her Honour asked herself the wrong question. Pursuant to s 59(1)(f), her Honour was required to consider whether the respondents had reasonably incurred any other financial costs or might reasonably incur other financial costs relating to the actual use of the acquired land as a direct and natural consequence of the acquisition. That question was not to be determined by reference to the respondents’ ‘‘wish” in relation to the building of a new dwelling. The second error was that the primary judge had assumed that the “before” and “after” values of the residue land, undertaken as part of the market value claim had encapsulated any injurious affection so that the claimed items had been included in the “after” value. Their Honours held:

“[75] … it cannot be assumed that the items now claimed were captured in the market valuation of the realty. Indeed, it is difficult to see that they could have been, having regard to the separate basis of valuation adopted with respect to the market value of the residence. This is particularly so in relation to certain of the items, in particular the costs of the bridge, the costs of complying with the development application for the new dwelling and the relocation of fences.”

63. Their Honours found at [86] that it was wrong for the appellant to submit that to allow the same costs as disturbance under what is now s 59(1)(f) as might have been taken into account under s 55(f) will result in an increase in the value of the residue land which will involve “double-dipping” or “double- counting”. Their Honours found that no such loss of value of the residue land had been incorporated here:

“[86] …There would only be double dipping if injurious affection resulted in the ‘after’ value of the residue land being reduced so that the differential between the ‘before’ value of the whole property and the ‘after’ value of the residue land increased and then disturbance in respect of the same costs as were reflected in the injurious affection of the residue land were awarded in addition.”

64. The correct question to be asked under s 59(1)(f) was identified as being whether the use of the dwelling on the residue land was an intimate part of the use of the acquired land and the residue land for the purpose of the respondents’ cattle breeding business.

65. The decision in Peak thus involved a rejection by this Court of one of the key submissions made by the respondent in the present case. The Court described it as “wrong” to submit that to allow the same costs as disturbance under s 59(1)(f) as might have been taken into account under s 55(f) will necessarily result in an increase in the value of the residue land involving “double-dipping” or “double-counting.”

66. The second case is Roads and Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236. There Tobias JA (with whom Giles and Macfarlan JJA agreed) dealt with a case where a public authority acquired part of a landholder’s land to which a dwelling and a shed were affixed. The respondent landowner planned to rebuild the dwelling and the shed on the residue land. A claim for compensation for disturbance was made for the cost of connecting services to the new dwelling (but not rebuilding it) and the cost of construction of the new shed on the residue land. The appellant challenged the claim on the following grounds, set out at [47]-[48]:

“[47] Both before the primary judge and on the appeal, the RTA essentially relied upon two propositions. The first was that the disturbance costs claimed and allowed by his Honour ran foul of s 61(b) of the Just Terms Act. The second was that even if that was not so, those costs had been taken into account by the adoption of the ‘before’ and ‘after’ method of valuation so that a separate award of those costs would involve double-dipping.

[48] At [122] his Honour recorded the RTA’s submission that if the market value of the acquired land as part of the parent land was assessed on the basis that it had the potential to be used as part of a seven lot rural residential subdivision, then s 61(b) operated to exclude the contested disturbance items. At [123] he observed that that provision precluded a claim for disturbance costs to the extent that it was inconsistent with a claim for market value based on the potential use of the land for otherwise the respondent would be unjustly compensated. Thus, he said that

‘…s 61(b) precludes compensation for financial loss based on the existing use if that use would necessarily be terminated in realising that potential’.”

67. Tobias JA held, at [60], that if:

“a disturbance cost answers a description in s 59, it is recoverable unless it is excluded by s 61 or is double-dipping. Although not referred to in the Just Terms Act, double-dipping of disturbance costs is implicitly excluded by the just compensation override in s 54 and by the requirement of s 55 that one amount of compensation be determined having ‘regard’ only to the heads of compensation prescribed in that provision.”

68. His Honour, however, accepted at [61] that in some cases disturbance costs may be captured by adoption of the “before and after” method. Peak was explained thus:

“[62] The point sought to be made in Peak and, particularly in [83] and [87], was that there would only be double-dipping in that case if the costs of relocating the residence 300m from the new highway, which was claimed as disturbance, had been taken into account in the ‘after’ valuation. This would result in a lower value being attributed to the retained land in that situation and, as a consequence, a greater differential between the “before” and “after” values. In such a case, those relocation costs would be captured by the adoption of the ‘before’ and ‘after’ method.”

69. Tobias JA opined, however, that attributable disturbance “would rarely, if ever, be captured by the adoption of the ‘before’ and ‘after’ method of valuation”:

“[88] …. Attributable disturbance would rarely, if ever, be captured by the adoption of the ‘before’ and ‘after’ method of valuation. The reason for this is that loss attributable to disturbance relates to losses or costs incurred post-acquisition and as a ‘direct and natural consequence of the acquisition’: see s 59(f). Whether those costs are expended upon the residue land (where only part of a parcel is compulsorily acquired) or on a different parcel of land (where the whole of the parcel is acquired) simply matters not.”

70. In addressing the present question, it is important to understand what this Court did in McDonald. The case provides an express endorsement of the approach of the primary judge in identifying the extent to which allowance had been made in the “before” valuation of the parent land for the services which, as a consequence of the compulsory acquisition, had to be reinstated upon the residue land to enable the respondent to relocate. Those services were valued by agreement at $30,000. This was “the extent of the double-dipping”. The primary judge reduced the amount of compensation paid for disturbance in rebuilding services by that amount. This Court approved that approach. It was specifically held not to be a barrier to a compensation claim for disturbance that part of the amount claimed had already been claimed as part of the market value calculation. The case is also important in that in addressing whether the expenditure for disturbance was “reasonably incurred”, the Court, albeit by describing what it was doing as avoiding “double-dipping”, deducted from the amount of the disturbance claim that amount ($30,000) which had already been allowed in the market value claim for the acquired land.

71. The third case, which was at the heart of the appellants’ submissions in this Court, is Tolson v Roads and Maritime Services [2014] NSWCA 161; (2014) 201 LGERA 367. In Tolson, Basten JA (with whom Beazley P agreed) said (at [83]):

“[83] Nevertheless, in this aspect of the case, the appellants' point as to statutory construction should be accepted: the conclusion sought by the appellants, that an increase in the value of retained land should not be offset against loss attributable to disturbance, follows from two propositions. First, s 55 requires that "regard must be had" to the identified matters, without specifying how they should be understood to interrelate. Secondly, regard may not be had to other matters (the list being exhaustive). In relation to the present issue, the interrelationship between the different paragraphs can be considered without reference to extraneous factors. Losses attributable to disturbance and solatium fall into a different category from changes in the value of land. Thus, solatium is concerned with ‘non-financial disadvantage’, arising from the necessity of relocating one's home: s 60. Disturbance covers legal costs, valuation fees, financial costs of relocation and other financial costs relating to the actual use of the land: s 59. Such costs are entirely separate from the value of the acquired land or the retained land. It is consistent with the legislative purpose of providing compensation for such amounts that they be allowed or disallowed in accordance with the specific statutory entitlements, without regard to the value of any land involved.” (emphasis added)

72. Two points should be noted about this passage. Basten JA commences consideration of the question with “in relation to the present issue”. The statement does not purport to be a statement about the relationship between disturbance costs and market value which is universally correct. Secondly, the point of construction being accepted, “that an increase in the value of retained land should not be offset against loss attributable to disturbance”, does not of itself involve a universal rule that there may never be an overlap between an amount claimed as compensation for disturbance and an amount claimed as compensation for market value of the acquired land or the retained land.

73. Tolson is not authority for the proposition that a cost claimed as compensation for disturbance, and falling within the statutory requirements in s 59(1)(f), could never as a matter of construction of s 55 overlap with an amount claimed as compensation for market value of the acquired land or the residue land.

74. Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752; [2014] NSWCA 352, relied upon by the appellants, gives rise to no different conclusion. It does not stand for the proposition that a cost claimed as compensation for disturbance, and falling within the statutory requirements in s 59(1)(f), could never overlap with an amount claimed as compensation for market value of the acquired land or the residue land. In the passage relied upon by the appellants at [47], Tobias JA (with whom Emmett and Leeming JJA agreed) said:

“[47] In my view the appellant's submissions are contrary to authority. Whereas prior to the commencement of the Just Terms Act, it was true that loss due to disturbance was not a separate head of compensation, it now is. As Spigelman CJ, with whom Beazley, Bryson and Basten JJA as well as Campbell J agreed, observed in Leichhardt Council v Roads and Traffic Authority (NSW) [2006] NSWCA 353; (2006) 149 LGERA 439 at [29], whereas in the prior case law under s 124 of the Public Works Act, the relevant formulation was ‘value of the land’, that is not the formulation that falls to be interpreted under the Just Terms Act. …”

75. That a cost claimed as compensation for disturbance, and falling within the statutory requirements in s 59(1)(f), could overlap with an amount claimed as compensation for market value of the acquired land or the residue land, is demonstrated by the subsequent decision in Roads and Maritime Services v Allandale Blue Metal Pty Ltd [2016] NSWCA 7; 212 LGERA 307. One of the issues in that case was an award of compensation under s 59(1)(f) for disturbance, being 50 per cent of the cost of rebuilding a cottage on residue land used to accommodate a caretaker with oversight responsibilities over a both a quarry and grazing cattle. The cottage was located on a lot bisected by a road following the acquisition of part of the respondent’s land and consequently separated from the main access to the quarry and the bulk of the grazing land. The evidence was that these cattle oversight responsibilities were made impractical as a result of the acquisition. Basten JA held at [47]-[52] that the primary judge’s reasoning upholding the claim for disturbance costs for rebuilding the cottage on the residue land disclosed no error on a question of law. The location of the cottage was important as the occupant of the cottage needed to be able to see both the entrance to the quarry and the grazing cattle. The separation of the cottage from the main parcel of land by the road had a negative impact on oversight of the grazing cattle. The loss suffered by the grazing business was the financial cost of 50 per cent of building a new cottage in an operationally useful location. That loss arose directly from the actual use of the residue land which use was closely related to the use of the acquired land. Basten JA concluded that:

“The approach taken by the primary judge to a claim under s 59(f) is consistent with that identified by this Court in Roads & Traffic Authority of New South Wales v Peak, at [71] …. To say that there was no evidence to support the findings of the trial judge was simply to record a disagreement with the finding made. The submission stated that even before the construction of the Expressway, ‘the cattle were spread widely across ABM’s land and the cattle could not necessarily be observed from the cottage when grazing.’ That may have been true, but the finding favouring a cottage on the larger portion of the residue and next to the entrance reflected an assessment of the reasonableness of the evidence proffered by the respondent.”

76. The importance of Allandale to the present consideration is that the amount claimed as compensation for disturbance, and falling within the statutory requirements in s 59(1)(f), could have overlapped with an amount claimed as compensation for market value of the acquired land or the residue land under s 55(a), (b) or (f), depending on the approach taken by the valuer engaged to conduct the valuation.

77. There is much to be said for the construction of s 59 and in particular s 59(1)(f) of the Just Terms Act found by Basten JA at [10]-[12] and [20]. But for the way that this Court has hitherto approached s 59(1)(f), I would have agreed with his Honour that s 59(1)(f), like other parts of s 59(1) was restricted to ancillary costs, and does not extend to purchasing or rebuilding structures. It is true that while the precise point of construction was not apparently raised in these earlier cases, Peak, McDonald and Allandale all proceeded on the basis that what is now s 59(1)(f) was an available basis to order that compensation be paid for the costs of purchasing or rebuilding (in whole or in part) structures. It may be that those earlier cases are able to be distinguished. It may be, however, that to decide this issue this Court would need to give consideration to whether those cases were correctly decided. For this reason, the question of whether s 59(1)(f), like other parts of s 59(1) was restricted to ancillary costs, and does not extend to purchasing or rebuilding structures should be determined in a case where the point has been squarely addressed by the parties.

78. In the absence of a submission that Peak, McDonald or Allandale were relevantly distinguishable or incorrectly decided, I do not accept the respondent’s submission that, if compensation for market value could have been obtained by the appellants by adopting a valuation methodology calling in aid s 55(a), (b) or (f), the appellants are thereby automatically not entitled to obtain compensation for disturbance for “the same loss” claimed under s 55(d) as reflected by s 59(1)(f) of the Just Terms Act. Such an approach is inconsistent with the approach to the construction of the Just Terms Act adopted by this Court in the authorities described above.

79. Nor do I accept the appellants’ contention that, whatever be the content of a claim made and addressed under s 55(a), (b) or (f), the Court must separately determine entitlement to compensation for disturbance under s 55(d) as reflected by s 59(1)(f) of the Just Terms Act, without regard to the fact that the same amount, in whole or in part, has already been the subject of a claim for compensation under s 55(a), (b) or (f) of the Just Terms Act. This approach is inconsistent with the overlapping nature of the heads of compensation in s 55 and with prior authority in this Court, including McDonald which was otherwise heavily relied upon by the appellants.

80. I agree with Basten JA at [14] that on the approach accepted by Spigelman CJ in Mir Bros the farm structures on the acquired land had “special value” to the owners. It would have been far preferable if the expert valuation evidence had approached the question in this way.

81. As I have said, on the assumption that s 59(1)(f) was capable of applying in this case, the correct approach to the section was to apply the words of the section, without putting any gloss on those words. The focus of s 59(1)(f) is the costs incurred or which might be incurred by the landholder relating to the actual use of the land, being the acquired land: Mir Bros at [88] per Spigelman CJ. Those costs must be reasonably incurred (either now or in the future) as a direct and natural consequence of the acquisition.

82. The Just Terms Act does not expressly or implicitly provide that the value paid for land compulsorily acquired necessarily includes “the full compensatory value for all fixtures included in the acquisition”. It was an error on a question of law for the primary judge so to conclude.

83. The question posed by s 59(1)(f) in the present case was whether the appellants had reasonably incurred financial costs (or might reasonably incur such costs), relating to the actual use of the land, as a direct and natural consequence of the acquisition. The answer to that question required findings to be made about the actual use of the acquired land at the time the land was acquired, whether the appellants had reasonably incurred costs or might reasonably incur such costs and whether those costs were incurred or might reasonably be incurred as a direct and natural consequence of the acquisition.

84. In addressing that claim for disturbance, the first question is whether costs claimed for rebuilding the dwelling (and the associated garage, water tanks and an effluent disposal system), are costs reasonably incurred or which might reasonably be incurred, relating to the actual use of the land (being the acquired land as a part of a working cattle farm), as a direct and natural consequence of the acquisition of the land. The second question is whether costs of the cattle yards and farm machinery shed are costs reasonably incurred or which might reasonably be incurred, relating to the actual use of the land (being the acquired land as a part of a working cattle farm), as a direct and natural consequence of the acquisition of the land.

85. As to the first question, relating to the dwelling (and the associated garage, water tanks and effluent system), the primary judge found that the house had been tenanted since 2010 when the late Costanzo Melino had moved to a residential care facility, and was not used for the period 2010 to 2018 as part of either the sugar cane farm or cattle farming enterprise. Although the primary judge found that Mr Michele Melino planned upon his retirement to return to the property, no finding of actual use of the dwelling (and the associated garage, water tanks and effluent system), other than as a rental property, was made. On those findings, the appellants had already received compensation for the market value of the dwelling (and the associated garage, water tanks and effluent system). The right to potential profits from renting the property after the date of the acquisition is encapsulated in the market value of the land. The market value of the acquired land included the capacity of that land to generate a profit in the future by renting the dwelling. No error on a question of law is disclosed in the reasoning of the primary judge.

86. As to the second question, relating to the cattle yards and farm machinery shed, despite the reservations I have about the construction given to s 59(1)(f) by earlier authority in this Court, I have concluded that the primary judge was bound to consider the separate claim for disturbance. That question was not addressed by the primary judge. It was an error on a question of law for him to fail to do so. The matter must be remitted. Upon the remitter, as I have said it would be far preferable if this question is addressed as being whether the farm structures on the acquired land had “special value” to the owners. The appellants, however are not bound to adopt that approach and on the existing authority of this Court are entitled to rely on s 59(1)(f). If this was to occur findings would need to be made about the actual use of the acquired land at the time the land was acquired, whether the appellants had reasonably incurred costs or might reasonably incur such costs in constructing the cattle yards and farm machinery shed and whether those costs were incurred or might reasonably be incurred as a direct and natural consequence of the acquisition.

87. In whatever compensation is permitted, it will be necessary to subtract the amount of compensation paid for the value of the demolished farm buildings, $40,000, which had already been allowed. Ultimately, Senior Counsel for the appellants accepted in this Court that such a subtraction would be necessary.

Grounds two and three

88. Ground two was the appellants’ contention that their claim for disturbance under s 55(d) relied on two alternative bases, ss 59(1)(c) and 59(1)(f). The appellants submitted that the primary judge erred by not making any findings as to s 59(1)(c) despite noting the viability of such a claim.

89. The appellants submitted that this constituted a denial of procedural fairness, as did the alleged failure of the primary judge to give reasons for his Honour’s decision. Alternatively, the appellants submitted that there was a “constructive failure to exercise jurisdiction” because the primary judge failed to address the s 59(1)(c) claim.

90. The respondent submitted that, by reaching the conclusion that the appellants had been compensated for the value of all fixtures, the primary judge found that the disturbance claim under s 55(d) did not require consideration. As s 55(d) is informed by s 59, the primary judge thereby dealt with the claims under ss 59(1)(c) and (f). As disturbance is available pursuant to s 55(d), which in turn is informed by s 59, the primary judge dealt with ss 59(1)(c) and (f).

91. The respondent submitted that the primary judge expressly accepted (at [153]) the respondent’s submissions in respect of the claim for the replacement dwelling, which included submissions on s 59(1)(c). As such, the primary judge dealt with the s 59(1)(c) issue.

92. In ground three the appellants submitted that the primary judge erred by making no express findings as to whether the costs claimed under s 59(1)(f) related to the “actual use of the land”. Under the appellants’ construction of the term, “actual use” must be determined as at the date of acquisition. Once determined to be “actual use”, so it was submitted, the issue then becomes whether costs were reasonably incurred that related to that actual use.

93. Instead of following that approach, the primary judge rejected the costs associated with the physical relocation of the existing house on the basis that the costs were a “potential use that was abandoned”. The appellants submitted that this was erroneous because actual relocation is irrelevant to the inquiry.

94. In relation to ground three, the respondent submitted that it was unclear which aspect of the primary judgment this ground of appeal sought to address.

Consideration

95. It is true that the primary judge did not consider the appellants’ claim under s 59(1)(c). That error was not, however, a material error. I agree with Basten JA at [9] that s 59(1)(c) covers financial costs reasonably incurred “in connection with the relocation of those persons”; and that “those persons” refers to “the persons entitled to compensation” in subpar (a). On the findings of the primary judge, none of the owners was living on the land at the time and none required relocation. It follows that grounds two and three should be dismissed.

Ground five

96. This ground concerned relocation costs claimed under s 59(1)(c). The appellants originally intended to relocate the existing dwelling on the acquired land to a new location on their farm and incurred costs for the development application, consultancy and professional fees. In light of these costs, the appellants made a claim pursuant to s 59(1)(c). It was subsequently discovered that the existing dwelling contained asbestos and could not be relocated. The appellants nonetheless submitted that these relocation costs satisfied the requirements of s 59(1)(c).

97. The primary judge found that “these costs were not connected with an actual relocation”. The appellants submitted that “actual use of land” is only a requirement under s 59(1)(f) and not s 59(1)(c), and thus the primary judge erred by implying this requirement into s 59(1)(c).

98. The appellants submitted that had the proper test been applied, the claim would have been allowed. This was because the claimed costs were reasonably incurred in connection with the relocation, notwithstanding that the method of relocating was abandoned.

99. In relation to ground five, the respondent submitted that if this Court were to find that there was no error in relation to ground one, then this ground must also fail. This is because the primary judge found that value for the dwelling was part of the s 55(a) award of compensation.

100. The respondent submitted that even if the costs associated with relocation could form part of a disturbance claim pursuant to s 55(d), no such award could be made in favour of the appellants because no relocation actually occurred. An award of costs for something that has not occurred is not contemplated by s 59(1)(c). Rather, the correct construction of s 59(1)(c) is that it assumes the existence of a state of affairs, namely relocation.

96. In any event, the respondent submitted that the primary judge also gave consideration to the costs of the potential relocation pursuant to 59(1)(f), a “catch-all” provision that can encompasses any future relocation that might reasonably occur. It follows that any error alleged to stem from the primary judge’s treatment of the claim pursuant to s 59(1)(c) would be vitiated.

Consideration

102. I have rejected the respondent’s principal response to this ground by upholding ground one.

103. The view taken by the primary judge about the ambit of s 59(1)(c) was too narrow. The finding that “these costs were not connected with an actual relocation” did not reflect the language of s 59(1)(c). It was an error on a question of law to address the claim in the way that his Honour did by apparently conflating s 59(1)(c) and s 59(1)(f) of the Just Terms Act. “Actual” relocation is not a requirement of s 59(1)(c).

104. I have concluded, however, that the error was not a material error. The question which must be addressed is whether the appellants have reasonably incurred financial costs in connection with the relocation of “those persons” (including legal costs but not including stamp duty or mortgage costs). “Those persons” are the persons entitled to compensation referred to in s 59(1)(a). As I have found in addressing grounds two and three, none of the owners were living on the land at the time and none required relocation. It follows that ground five should be dismissed.

Ground six

105. At issue here was the primary judge’s rejection of the appellants’ claim for loan establishment fees and loan interest on a “first principle” basis. The appellants submitted that such an approach was contrary to this Court’s decision in Roads and Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236 (at [136]) and failed to consider the requirements of s 59(1)(f). Had the correct approach been taken, the appellants submitted, the claimed amounts would have fallen within the scope of the Just Terms Act.

106. The respondent submitted that the primary judge properly considered s 59(1)(f) and did not err because his Honour set out extensive passages of argument in relation to s 59(1)(f) from analogous authorities and expressly adopted (at [235]) his earlier reasoning on s 59(1)(f) in Konduru (t/as Warringah Road Family Medical Centre) v Roads and Maritime Services [2017] NSWLEC 36. In doing so, his Honour properly considered s 59(1)(f). In Konduru, his Honour held that a claim of this type cannot be characterised as “loss attributable to disturbance” on a “first principles statutory construction basis”.

Consideration

107. Mr Melino borrowed money from a bank to build a replacement farm shed and cattle yards on the residue land. The borrowed funds were also intended to be used to build a new access track and obtain the necessary approvals for the buildings. Additional security was provided, being mortgages over two properties (being neither of the rural properties here the subject of the compensation claim) and a guarantee and indemnity from Deborah Lee Melino. Mr Melino paid a loan establishment fee and was paying interest on funds drawn down.

108. As correctly understood, neither cost was recoverable as disturbance. Section 59 contains a set of tightly drawn constraints on recovery of financial costs.

109. So far as the establishment fee is concerned, it was, within the meaning of s 59(1)(e) of the Just Terms Act, a financial cost in connection with the execution of a new mortgage. Section 59(1)(e) limits recoverability of financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage). The establishment fee here comprised an application fee of $1,000.00, PPSR search fees of $20.00, mortgage stamp duty of $1,261.00, collateral stamp duty of $50.00, a mortgage registration fee of $109.50, a title search fee of $32.92 and a discharge of pre-existing mortgage fee of $109.50. These were all financial costs incurred in connection with the execution of the new mortgages. So far as interest payable is concerned, the words of s 59(1)(e) “in connection with” are broad. The interest payable was a financial cost incurred in connection with the execution of the new mortgages.

110. The words of restriction in s 59(1)(e), that the amount claimed not exceed the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage, apply here. Neither of the amounts claimed as financial costs reasonably incurred in connection with the execution of a new mortgage resulting from the relocation, were allowable within the scope of s 59(1)(e).

111. It would not be a coherent application of s 59 and the tightly drawn constraints imposed by the section, in this case by s 59(1)(e), for a financial cost which is specifically excluded from compensation by that sub-section to be allowable under the immediately succeeding sub-paragraph, 59(1)(f). I reject the appellants’ submission, based on remarks made by Lloyd J in Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) [2000] NSWLEC 139; (2000) 108 LGERA 417, that s 59(1)(f) is a “catch all provision”. The provision must be read in its context as part of s 59 and in its place part of the tightly drawn constraints imposed by the section.

112. Ground six should be dismissed.

Ground seven

113. The appellants submitted that the primary judge erred in refusing to award the agreed sum of $253,706.00 for road works (valued by the respondent’s quantity surveyor), even though his Honour was satisfied that such future costs might reasonably be incurred.

114. The primary judge ultimately awarded $85,463.64 for the road works, stating that:

“It merely means that Mr [Monti's] quarry operation is remarkably more efficient than the persons [from] whom Mr Makin [the respondent’s quantity surveyor] had initially used to derive his estimate of the overall cost.”

115. The appellants submitted that this finding was “irrational, illogical and not reasonably open on the evidence”: ISPT Pty Ltd v Valuer General (NSW) [2009] NSWCA 31; (2009) 165 LGERA 25.

116. The respondent submitted it was open to the primary judge to make the impugned finding as to costs actually incurred and known as a question of fact.

Consideration

117. It will be recalled that his Honour made an allowance for compensation for disturbance being the costs of building an internal roadway to provide access to the new “Colorbond” shed constructed on the residue land. The amount estimated by the respondent’s expert, Mr Makin, to do this work was $253,706. Mr Makin also estimated, on an alternative basis, that $85,250 would be required to be paid for “900 cubic metres of fill”. Mr Makin’s report in this respect was based upon quotes obtained from a firm described as “Civil Constructions”.

118. Following the delivery of the primary judge’s reasons on 14 September 2017, there was an exchange between the parties about the amount actually spent on building the roadway. There had been a call during the trial for the appellant to produce invoices relating to costs which had been incurred in relation to building the roadway. At some point an invoice from “Monti’s Quarry” for $85,463.65 was produced to the respondent. That invoice is described as being for “construction of road and building pad on property at 604 Back Channel Rd Wardell as per estimates supplied 20/3/16” and “supply of pipes and installation of culverts under above road”.

119. There was a further hearing on 2 November 2017 before the primary judge. The parties agreed that the primary judge should determine any disputes orally and was not required to provide any written reasons. The “Monti’s Quarry” invoice for $85,463.65 was tendered by the respondent. The position of the respondent was that $85,463.65, being the amount shown on the invoice, was all that was payable to the appellants for building the road. The position of the appellants was that $85,463.65 was part payment only for the road and that considerable additional costs remained to be incurred to build the road, being a further $253,706, the amount described as reasonable by Mr Makin based on the quote from “Civil Constructions”.

120. The primary judge said that he proposed to act on the evidence before him, that $85,463.65 was the amount payable for building the road. His Honour informed the appellants that “if you can find it [evidence of additional payments made for the road] provide it to [counsel for the respondent], his instructing solicitor and my determination is that any such demonstrated actual expenditure in addition to $85,463.65 is to be added to the [amount allowed for disturbance]”. It was common ground that no additional evidence of expenditure was produced by the appellants.

121. On 15 November 2017, almost two weeks after this hearing, orders were made in which only $85,463.65 was allowed as a disturbance cost for lifting the road.

122. It is no doubt curious that a road which was estimated by the respondent’s expert to cost $253,706 to build and to require $85,250 worth of fill to raise its level could be constructed for only $85,463.65. The appellants submitted below (and repeated the submission in this Court) that the explanation was that $85,250 represented part only of the cost of building the road. The difficulty with that submission was that the only evidence of expenditure on building the road (rather than estimates of cost) before the primary judge was the “Monti’s Quarry” invoice for $85,463.65 which said, on its face, that it related to the work described at [117].

123. The primary judge’s decision to accept that invoice as the only evidence before him of the cost of the road was not “irrational, illogical and not reasonably open on the evidence”; to the contrary, his Honour correctly determined that it was the only evidence before him of actual expenditure on the road. Left unexplained, as it was, the invoice appeared to relate to the total cost of building the road. The primary judge allowed the appellants to produce further evidence of additional payments made for the road. His Honour’s determination was that any demonstrated actual expenditure in addition to $85,463.65 was to be added to the amount allowed for disturbance. The appellants produced no such additional evidence.

124. Ground seven should be dismissed.

Costs

125. Although our reasoning differs in material respects, the practical outcome for the parties in this case of my analysis and that of Basten JA is virtually the same. I agree with Basten JA that there should be no order as to costs in this Court.

Conclusion and orders

126. For the foregoing reasons I would allow the appeal. I propose the following orders:

1. Appeal allowed;

2. Set aside order 1(c) relating to disturbance items made by Moore J on 15 November 2017;

3. Remit the matter to the Land and Environment Court to determine in accordance with these reasons whether any allowance to the owners in relation to the cattle yards and farm sheds would exceed the amount already allowed and, if so, to award that additional amount;

4. No order as to costs in this Court.

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Endnotes

Amendments

28 June 2019 - Inserted LGERA citations in [31] and [75];

Removed "which pre-dates the Just Terms Act" in [54];

Corrected pinpoint reference in [57] and [58];

Inserted citation of judgment below in [61];

Changed "concerned" to "corrected" in [97] and [103];

Changed "Monte's" to "Monti's" in [114].

Decision last updated: 28 June 2019