Nasser v Roads and Traffic Authority (NSW)

[2006] NSWLEC 562

Reported Decision: (2006) 149 LGERA 289

Land and Environment Court

of New South Wales

CITATION:	Nasser v Roads and Traffic Authority; Millstar Holdings Pty Limited v Roads and Traffic Authority (No 3) [2006] NSWLEC 562
PARTIES:	APPLICANTS Fred Nasser Michael Nasser George Nasser Millstar Holdings Pty Ltd RESPONDENT Roads and Traffic Authority
FILE NUMBER(S):	30162 of 2003; 30163 of 2003
CORAM:	Pain J
KEY ISSUES:	Compulsory Acquisition of Land :- disturbance - whether stamp duty and legal costs for acquisition of replacement property claimable Costs
LEGISLATION CITED:	Land Acquisition (Just Terms Compensation) Act 1991 s59, s61
CASES CITED:	Bezzina Developers Pty Limited v Leichhardt Municipal Council [2006] NSWLEC 175 ; Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259 ; Constantino v Roads and Traffic Authority of New South Wales (No 2) (2005) 144 LGERA 224; Damjanovic & Anor v Roads and Traffic Authority (No 2) (2005) NSWLEC 371; Fitzpatrick Investments Pty Ltd v Blacktown City Council NSWLEC, Lloyd J, 28 April 1998, unreported; Fitzpatrick Investments Pty Ltd v Blacktown City Council (No 2) [2000] NSWLEC 139 ; Horton v Wyong Shire Council (No 2) [2005] NSWLEC 45; Maggiotto v Roads and Traffic Authority [2006] NSWLEC 54 ; Nasser v Roads and Traffic Authority; Millstar Holdings Pty Limited v Roads and Traffic Authority [2006] NSWLEC 181; North Albury Shopping Centre Pty Ltd v Albury Municipal Council (1983) 49 LGRA 215 ; Pastrello v Roads and Traffic Authority of New South Wales (2000) 110 LGERA 223; Sebastian Cannavo and Busa v Roads and Traffic Authority of New South Wales [2004] NSWLEC 570 ; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2004] NSWLEC 535 ; Willis v Roads and Traffic Authority (NSW) NSWLEC, Lloyd AJ, 15 November 1995, unreported; Yakas v Roads and Traffic Authority of New South Wales [No 2] [2004] NSWLEC 589
DATES OF HEARING:	30/08/2006; written submissions
DATE OF JUDGMENT:	09/21/2006
LEGAL REPRESENTATIVES:	APPLICANTS Mr P McEwen SC with Mr A Pickles SOLICITORS Allens Arthur Robinson RESPONDENT Mr J Maston SOLICITORS Corrs Chambers Westgarth

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Pain J

21 September 2006

30162 of 2003, Fred Nasser, Michael Nasser & George Nasser v Roads and Traffic Authority;
30163 of 2003 Millstar Holdings Pty Limited v Roads and Traffic Authority (No 3)

JUDGMENT ON DISTURBANCE AND COSTS

1 Her Honour: I handed down judgment in relation to compensation for Millstar Holdings Pty Ltd (“Millstar”) on 6 June 2006 in Nasser v Roads and Traffic Authority; Millstar Holdings Pty Limited v Roads and Traffic Authority [2006] NSWLEC 181.

2 I handed down a further judgment in relation to compensation for the Nasser land on 8 September 2006; Nasser v Roads and Traffic Authority (No 2) [2006] NSWLEC 561.

3 This judgment deals with the claim for disturbance and costs in both those matters. I will deal with disturbance first.

Disturbance

4 Section 59 of the Land Acquisition (Just Terms Compensation) Act 1991 (“the Just Terms Act”) relevantly states:

In this Act:

"loss attributable to disturbance" of land means any of the following:
…
(b) valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land,
…

(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.

5 Disturbance is claimed under s 59(b) of the Just Terms Act for valuers’ fees. Both Applicants claim $7,700 for valuation fees. These costs are agreed by the RTA and I will award them.

6 The Applicants also claim under s 59(f) stamp duty and legal costs of $6,000 each payable by the Applicants on acquisition of replacement properties for those acquired. Nasser claims $254,878.35 for stamp duty and Millstar claims $113,552.90 for stamp duty. The RTA disputes the Applicants’ entitlement to these sums.

7 Section 61 of the Just Terms Act states:

If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:
(a) any financial advantage that would necessarily have been forgone in realising that potential, and
(b) any financial loss that would necessarily have been incurred in realising that potential.

8 Evidence filed in support of the Applicants’ claim were two affidavits of Michael Nasser, both sworn 17 July 2006, one of the owners of the Nasser land, an affidavit of Fred Nasser, sworn 17 July 2006, Michael Nasser’s brother and one of the owners of the Nasser land, and an affidavit of George Nasser, sworn 17 July 2006, brother to Michael and Fred Nasser and joint owner with them of the Nasser land. Annexure A to the longer affidavit of Michael Nasser sworn 17 July 2006 sets out a list of property dealings involving the Nasser brothers and companies owned by Nasser family members, including Millstar. In that affidavit Michael Nasser attests to the fact that Millstar Holdings Pty Limited was incorporated as a company limited by shares in 1991, with Fred Nasser owning 6 shares and Michael Nasser owning 4 shares. Annexure B to the same affidavit sets out inquiries relating to the purchase of replacement properties made by Michael Nasser on behalf of Millstar and the Nasser brothers.

9 Tax records of the Nasser brothers were also relied on. These records showed the Nasser property in these proceedings earning rental income, and referred to the Nasser partnership income. No tax records for Millstar were provided.

Applicants’ submissions

10 The evidence relied on demonstrates that the Applicants are in the business of land development, the expenses are a direct result of the RTA’s acquisition of the Applicants’ land and the expenses claimed will be reasonably incurred. No alternative property has been purchased yet, but the affidavit of Michael Nasser shows that efforts to locate an alternative property are being made.

11 The Applicants relied on Fitzpatrick Investments Pty Ltd v Blacktown City Council (No 2) [2000] NSWLEC 139 (“Fitzpatrick No 2”) at first instance, upheld on appeal in Blacktown Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259.

12 Maggiotto v Roads and Traffic Authority [2006] NSWLEC 54 was also relied on. In this matter Cowdroy J allowed stamp duty and legal costs for the purchase of a property because these costs related to the actual use of the land for development purposes by the applicants.

RTA submissions

13 Section 59(f) requires that there be actual use of land. The RTA argued there was no evidence of the land being actually used for the business of land development because at the date of acquisition, the subject lands were vacant, unoccupied and unused in a physical sense. It was legally impossible to actually carry out any development on them for any significant urban purpose, such as residential or industrial subdivision. The subject lands in this case were used by the Applicants for the purpose of investment in the hope of some future rezoning which had not occurred at the date of acquisition. These facts indicate that at no stage in the ownership of the land by the Applicants did the land have any actual capacity to constitute the trading stock of a business of acquiring, developing and reselling land. Accordingly the situation in Fitzpatrick did not apply to this case and the case here is more analogous to the situation in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2004] NSWLEC 535 and Damjanovic & Anor v Roads and Traffic Authority (No 2) (2005) NSWLEC 371. In accordance with Talbot J’s finding at [28] in Walker, the prospective use of land (in the present case, industrial purposes) was not capable of being disturbed because there was no capacity to enjoy it in the first place at the date of acquisition.

14 Furthermore, on the available evidence, the Court should not be satisfied that the Applicants were engaged in any significant on-going business involving the purchase, development and resale of land for subdivision, so that the land owned by them could be seen to be held as stock in trade for a business. The only property owned by Millstar is the subject property. There is no evidence of the existence of a business for the purchase, development and resale of land by Millstar. The only property which is owned jointly by the Nasser brothers is the other subject property. Finally, there have been only three previous transactions in which the Nasser brothers, along with others, have acquired land and only one of these was purchased in order to subdivide the land.

15 Further, s 61 of the Just Terms Act applies so that disturbance under s 59(f) is also not claimable because of that section.

16 Finally, the RTA argued that if stamp duty is payable it should only be for the developable portion of the land acquired, not the non-developable portion. The stamp duty would therefore be calculated on a lesser area than the actual area of the acquired lands.

Finding
Does s 61 apply in this case?

17 Section 61 prevents the recovery of compensation where land is assessed for market value on a basis other than its current use and a claim for a loss incurred in realising that potential is made. In Fitzpatrick Investments Pty Ltd v Blacktown City Council NSWLEC, Lloyd J, 28 April 1998, unreported, the land acquired was originally zoned partially residential, with a strip of land along its southern and western boundaries reserved as open space when the Blacktown Local Environment Plan (“the Blacktown LEP”) was made in 1988. An amendment to that LEP commencing on 17 March 2005 rezoned the whole of the subject land as open space. Lloyd J held at [6] that this zoning was done in furtherance of the proposal to carry out the public purpose of acquiring the land for open space. Therefore Lloyd J assumed the land had been zoned residential for the purpose of determining the market value of the land on the date of acquisition. In his judgment on disturbance (Fitzpatrick (No 2)), Lloyd J held at [21] that the land had been kept by Fitzpatrick for the purpose of development by way of a residential subdivision, being the applicant’s business. The applicant purchased other land which was zoned industrial use. At [22], Lloyd J held that it was irrelevant that the acquired land had been residential land and the newly purchased land industrial land. He stated at [22] that:

In my view, the purchase of the land by the applicant for an industrial subdivision is related to the actual use for which it held the acquired land, namely for the purpose of development by way of subdivision.

18 At [6], [20] and [23] Lloyd J stated:

16. … the resolution of the claims may be determined by simply applying the plain words of the statutory provision … untrammelled by authority or any gloss upon those words.

20. Paragraph (f) of section 59 is wider than the preceding paragraphs. It is a "catch-all" provision: "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". As a "catch-all" provision, the words "any other financial costs" should not, in my opinion, be read down. This does not mean, however, that this paragraph opens the flood-gates. The costs must be "reasonably incurred" and must relate to the actual use of the land, as a direct and natural consequence of the acquisition.

23. … The applicant had by reason of the acquisition lost its parcel of developable land. It replaced the developable land which it lost by acquiring other developable land. But for the acquisition, the applicant could have developed the land acquired by the respondent. If it wanted to continue to develop land by way of subdivision it had to purchase other land for that purpose. …

19 This decision was upheld on appeal. In Blacktown City Council v Fitzpatrick Investments Pty Ltd Stein JA held at [4]:

The nature of the respondent's business was that of a land developer and the acquired land was part of its stock-in-trade constituting its `land bank'. Holding the land in its land bank for subdivision was a use of the land in fact. That is sufficient to make it an `actual use of the land' within s 59(f) of the Act.

20 There was no mention of s 61 in that case.

21 In Walker, Talbot J considered a claim for disturbance under s 59(f) for the costs of obtaining advice for the future development of the acquired land for residential purposes. In that case the land was zoned for industrial use and the realisation of that development potential for residential use required rezoning. His Honour held that s 61 did apply in relation to that claim for disturbance and did not allow the claim. His Honour distinguished between an actual use of land and a future or potential use. He referred to the Court of Appeal decision in Blacktown City Council v Fitzpatrick as holding that developable land in a land bank for future development could be an actual use for the purposes of s 59(f).

22 Damjanovic dealt with a claim for the costs of purchasing replacement property under s 59(c) and (d) of the Just Terms Act. At [23], Bignold J held that disturbance was not recoverable in that case because of the operation of s 61 of the Act. At [25], he stated:

…it is the fact that the compensation awarded in respect of the market value of the compulsorily acquired land based upon a higher potential use of the land far exceeds the combined amount reflecting (i) market value based upon its current and existing use and (ii) the Applicants’ disturbance claim, that attracts the operation of s 61 of the Act the effect of which is to deny recovery of the claimed compensation for disturbance.

23 In Damjanovic, Fitzpatrick was expressly referred to by Bignold J where he considered that while Lloyd J had not referred expressly to s 61 in his judgment, it was unlikely that s 61 could have applied to the circumstances in Fitzpatrick in any case. At [26], he held that this was because:

It is difficult to appreciate how s 61 could apply to the facts of that case where in addition to compensation for market value of the compulsorily acquired land, compensation for disturbance was awarded in respect of legal costs and stamp duty incurred in the acquisition of a replacement property because it was held that the claimant was engaging in the business of subdividing land and by virtue of the compulsory acquisition it had lost the opportunity to subdivide the land and if it wished to continue in its business it had to acquire replacement land for the purpose of its business.

24 The disturbance claim in this case is different to that which had to be considered in Walker and Damjanovic. I consider the facts in this case fall squarely within those of Fitzpatrick at first instance and on appeal. I held in my judgment dated 6 June 2006 that but for the WSO proposal the Applicants’ land would have been zoned industrial at the date of acquisition. There would have been capacity to use the land for industrial purposes at the date of acquisition but for the WSO. Section 61 does not apply in these circumstances because what is being claimed is not a financial loss incurred in realising the potential of the land relating to the actual use of the land. The stamp duty and legal costs for the purchase of a replacement property are potentially recoverable under s 59(f).

Are the Applicants in the business of land development?

25 In relation to whether all the Applicants have demonstrated that they are in the business of land development for the purposes of subdivision and that they intend to purchase another property as part of that business, it is useful to consider other cases to determine in what circumstances such a finding has been made. Fitzpatrick is the principal example of where the Court held an applicant was conducting such a business. In Bezzina Developers Pty Limited v Leichhardt Municipal Council [2006] NSWLEC 175 Talbot J was not convinced that the ownership of a single parcel of land for the purpose of carrying out specific development is analogous to holding tracts of land for the purpose of subdivision and resale. He did not allow stamp duty on the purchase of other land as disturbance, holding that circumstance was not the same as the situation considered in Fitzpatrick.

26 In Sebastian Cannavo and Busa v Roads and Traffic Authority of New South Wales [2004] NSWLEC 570 the applicants claimed as disturbance under s 59(f) of the Act, stamp duty and legal and mortgage costs incurred in purchasing replacement properties. The first applicant used the subject property to conduct a business, whilst the second applicant received rental income derived from a single cottage and the industrial use of the land. The first applicant had a long term plan to develop the land with his neighbours, using fill generated from other industrial sites. He also had previous experience in filling, excavating and developing land such as the subject land. Both applicants had also purchased other properties as investments. However, unlike the applicant in Fitzpatrick, it was held they did not hold the property as part of “trading stock” in the form of a land bank. There was no evidence that either of the applicants acquired the land as developable land or that they intended to develop the replacement land by way of subdivision. Although the first applicant had development experience, his primary occupation was as a contractor to his construction and development company, and the second applicant had no previous business involvement in land development. At its highest, the evidence showed the applicants were holding the land as investment property. Disturbance was not awarded.

27 In relation to the Nasser land which the three Nasser brothers own in their own names it is demonstrated on their evidence that they are in the business of land development for subdivision purposes both on their own and with others. I consider they can recover stamp duty costs for the purchase of another property under s 59(f) as a cost that might reasonably be incurred relating to the actual use of the land as a consequence of the acquisition.

28 According to Annexure A of Michael Nasser’s affidavit, Millstar owned only one property being the property the subject of the claim and I do not consider that this demonstrates that this company is in the business of land development, in the absence of more evidence of its activities in that regard as a company. Reliance on general evidence from a single director, Michael Nasser, is insufficient evidence to make good the claim for disturbance. Tax records of the Nasser brothers’ partnerships relied on in evidence do not attach any records regarding Millstar. The circumstances of Millstar are similar to those in Bezzina and Sebastian Cannavo. I do not therefore consider that Millstar can claim disturbance under s 59(f).

29 In relation to the RTA’s argument that stamp duty should only be awarded in relation to the developable land, I consider that in a compulsory acquisition case where a claim under s 59(f) is maintainable as it is here for the Nasser brothers, that it is appropriate that the Court err in favour of just compensation to the extent that is provided for under the Just Terms Act. An early case to this effect is Dixon J in Commissioner of Succession Duties (SA) v Executor Trustee & Agency Co of SA Ltd (1947) 74 CLR 358 at 374.

30 I consider therefore that stamp duty is claimable by the Applicants, the Nasser brothers, to the full extent of the resumed land. Accordingly the Nasser brothers are entitled to $254,878.35 for stamp duty and $6,000 for legal costs under s 59(f) of the Just Terms Act.

Costs

31 The Applicants also claim their costs of these proceedings as they have been successful in obtaining awards of compensation in excess of the amount awarded by the Valuer-General. The Applicants relied on numerous cases in support of this claim.

32 At [7] to [10] of Constantino v Roads and Traffic Authority of New South Wales (No 2) (2005) 144 LGERA 224, Bignold J held that in compulsory acquisition matters, the discretion of the Court under s 69 to award costs has been uniquely applied to tilt the discretion in favour of the dispossessed owner. In so finding, Bignold J applied the interpretation of the discretion as outlined previously by Cripps J in North Albury Shopping Centre Pty Ltd v Albury Municipal Council (1983) 49 LGRA 215 at 221, where Cripps J stated:

The resumption of land is a serious matter. It is not apparent to me why a person who has had his land taken by a government or some other statutory authority should, in addition to losing his land, bear his own costs of seeking what in fact turns out to be just compensation.

33 The Applicants submitted that the rationale behind this principle can be found in Pastrello v Roads and Traffic Authority of New South Wales (2000) 110 LGERA 223, where Talbot J held at [17]-[18] that:

There needs to be a strong justification for awarding costs against an applicant where the effect of making that order is to erode the benefit of the just compensation recovered as a consequence of the Court’s determination…An order for costs against the interests of the Applicants in this case would clearly have a significant impact on the ultimate amount to be recovered by the Applicants…

This was recently confirmed by Talbot J in Horton v Wyong Shire Council (No 2) [2005] NSWLEC 45 at [26]-[28].

34 The Applicants also argued that apportionment of costs or special costs orders are not favoured by this Court, as evidence in Willis v Roads and Traffic Authority (NSW) NSWLEC, Lloyd AJ, 15 November 1995, unreported. In that case, the respondents submitted that as the applicants were awarded less than they had claimed, costs should be apportioned. This was rejected by Lloyd AJ, who held:

The Applicants have been awarded a sum which is more than 50 percent greater than the Respondent’s offer. They have been required to come to Court in order to obtain that sum, which they would not have obtained otherwise. Accordingly they should have an order that the Respondent pay their costs of doing so.

35 The case of Yakas v Roads and Traffic Authority of New South Wales (No 2) [2004] NSWLEC 589 was also relied on, where I held at [20] that:

…where an Applicant in a compulsory acquisition matter is successful in obtaining a larger award of compensation than that initially awarded by the authority acquiring the land under the compensation process giving rise to the litigation and:
(a) the case run by the Applicant was arguable or not unarguable and consisted of cogent arguments;
(b) the Applicant has not pursued frivolous, vexatious, dishonest or grossly exaggerated claims; and
(c) the proceedings were not extended due to any procrastination or wasting of time by the Applicant;
the Court’s discretion to grant an award of costs under s 69 of the Land and Environment Court Act 1979 ought to be exercised in favour of the Applicant.

36 The RTA argued that only 50 per cent of costs ought be awarded as the claims for compensation made were excessive.

Finding

37 The claim for compensation made for the Nasser land was $6,793,000 plus disturbance and for the Millstar land $7,350,000 plus disturbance. I have awarded $4,452,700 and $2,116,742 respectively. The Applicants have recovered more than the amount of compensation for acquisition determined by the Valuer-General, but less than the amount claimed by them.

38 While I have concerns that the valuation evidence filed included exaggerated claims by the Applicants’ valuer as I referred to at [194] of my judgment dated 6 June 2006, in light of the way the matter was ultimately argued the valuation issues were relatively confined. I consider the Applicants should receive all their legal costs in conformity with the cases relied on in the Applicants’ submissions and referred to at par 32 – 35 above.

39 The parties should file short minutes of order which give effect to all three judgments delivered in this matter by 17 October 2006. If the orders are agreed there is no need for a mention of the matter. Exhibits can be returned when the orders are made.