Nelson v Commissioner of Highways (No 2) - [2023] SASC 7

Supreme Court of South Australia
(Land and Valuation Division)
NELSON v COMMISSIONER OF HIGHWAYS (No 2)
[2023] SASC 7
Judgment of the Honourable Justice Blue
19 January 2023
REAL PROPERTY - COMPULSORY ACQUISITION OF LAND - OCCUPATION OF ACQUIRED LAND
REAL PROPERTY - COMPULSORY ACQUISITION OF LAND - COMPENSATION - ASSESSMENT - MARKET VALUE
The respondent compulsorily acquired land pursuant to section 16 of the Land Acquisition Act 1969 (SA). The land was owned by the first applicant and was subject to an equitable lease in favour of the second applicant, which was a company owned and controlled by the first applicant and the trustee of his family trust, and which carried on a barbecue and heater retail business on the land.
The market value of the land as at the date of acquisition was previously determined to be $2,330,000: Nelson v Commissioner of Highways [2020] SASC 109.
These reasons for judgment address other claims for compensation by the applicants.
The claims by the second applicant are:
1Goodwill of the business.
2Discounted future maintainable earnings of the business.
3Closing down costs of the business.
4Warehousing costs for unsold stock and equipment of the business.
5Loss of profit of the business in the 2013/14 year.
6Special value by reference to employment in the business of the first applicant’s family members.
The claims by the first applicant are:
1Lost opportunity to earn a wage as the manager employed by the business.
2Lost/reduced rent and salary for 2013/14 year (in the alternative to the second applicant’s claim).
3Rates and taxes on the land.
4Time spent as a consequence of the acquisition.
Held in respect of the claims by the second applicant:
1The market value of the business was $236,844 from which must be deducted the value of stock and equipment, leaving goodwill valued at $106,305 (at [233]).
2In relation to the claim for compensation by reference to the present value of the future maintainable earnings of the business:
(a)the claim is open to be advanced by the second applicant having regard to its pleadings and the manner in which it ran its case (at [257]); but
(b)the second applicant failed to establish the claim on the merits (at [273]).

3The second applicant is entitled to compensation of $37,749.73 for closing down costs (at [280]).
4The second applicant is entitled to compensation of $19,042 for warehousing costs for unsold stock and equipment (at [304]).
5The second applicant is entitled to compensation of $106,876 for loss of profit in the 2013/14 year (at [331]).
6In relation to the claim for compensation for special value by reference to employment of the first applicant’s family members:
(a)the claim is open to be advanced under the Act (at [421]); but
(b)the second applicant failed to establish the claim on the merits (at [430]).

7The second applicant is entitled to compensation totalling $269,972.73 (at [466]).
Held in respect of the claims by the first applicant:
8In relation to the claim for compensation for loss of opportunity to earn a wage as the manager employed by the business:
(a)the claim is open to be advanced by the first applicant having regard to his pleadings and the manner in which he ran his case (at [346]);
(b)the claim is open to be advanced under the Act (at [367]); but
(c)the first applicant failed to establish the claim on the merits (at [390]).

9The first applicant is not entitled to compensation for lost rent and reduced salary for the 2013/14 year because that would involve double counting with the second applicant’s claim for loss of profit in that year (at [433]).
10The first applicant is entitled to compensation of $3,455.97 for rates and taxes on the land in respect of the period after the acquisition (at [454]).
11The first applicant is entitled to compensation of $10,000 for time spent as a consequence of the acquisition (at [465]).
12The first applicant is entitled to compensation totalling $13,455.97 (at [467]).

Land Acquisition Act 1969 (SA) s 6(1), s 10, s 16, s 22B, s 23C, s 25; Land Tax Act 1936 (SA) s 4; Local Government Act 1999 (SA) s 178, s 178(8); Water Industry Act 2012 (SA) s 36, referred to.
Arkaba Holdings Ltd v Commissioner of Highways [1970] SASR 94; Boland v Yates Property Corporation Pty Ltd [1999] HCA 64, (1999) 74 ALJR 209 ; Bligh v Minister Administering Environmental Planning and Assessment Act [2011] NSWLEC 220; Bronzel v State Planning Authority (1979) 21 SASR 513; Chadrysiak v Commissioner of Highways (1975) 10 SASR 384; Commissioner of Highways v George Eblen Pty Ltd (1975) 10 SASR 384; Commissioner of Highways v Tynan (1982) 53 LGRA 1 ; Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1974) 74 CLR 358; Cook v City of Stirling (1991) 4 WAR 469; Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111; Emerald Quarry Industries Proprietary Limited v Commissioner of Highways (1976) 18 SASR 438; Gugusheff v South Australian Urban Land Trust (1990) 55 SASR 268; Minister Administering the Heritage Act 1977 v Haddad (1988) 67 LGRA 438; Moloney v Roads and Maritime Services [2018] NSWCA 252; Pastoral Finance Association Limited v The Minister [1914] AC 1083; Roads and Maritime Services v United Petroleum Pty Ltd (2019) 99 NSWLR 279; South Australian Land Commission v Bletas (1978) 77 LSJS 344; Spencer v The Commonwealth (1907) 5 CLR 418; Sydney Water Corporation v Caruso [2009] NSWCA 391; Todorovic v Waller (1981) 150 CLR 402; United Petroleum Pty Ltd v Roads and Maritime Services [2018] NSWLEC 35, considered.

NELSON v COMMISSIONER OF HIGHWAYS (No 2)
[2023] SASC 7
Civil

BLUE J: In March 2014 the respondent, the Commissioner of Highways, compulsorily acquired land (the Land) at 38A South Road Torrensville pursuant to section 16 of the Land Acquisition Act 1969 (SA) (the Act). The Land was owned by the first applicant, Colin Nelson. The Land was subject to an equitable lease in favour of the second applicant Colin Nelson Nominees Pty Ltd as trustee of the Colin Nelson Family Trust, which carried on a barbecue and heater retail business on the Land.
The applicants, under section 23C of the Act, referred to the Court the question of the compensation to which they are entitled under section 22B of the Act. I previously determined that the market value of the Land as at the date of acquisition was $2,330,000.[1]
[1] Nelson v Commissioner of Highways [2020] SASC 109.
These reasons for judgment address other claims for compensation by Mr Nelson and the claims for compensation by Colin Nelson Nominees Pty Ltd.
The claims by the Company are:
1Goodwill of the business.
2Discounted future maintainable earnings of the business.
3Closing down costs of the business.
4Warehousing costs for unsold stock and equipment of the business.
5Loss of profit of the business in the 2013/14 year.
6Special value by reference to employment in the business of Mechelle Nelson and Carlo Nelson.
The claims by Mr Nelson are:
1Lost opportunity to earn a wage as the manager employed by the business.
2Lost/reduced rent and salary for the 2013/14 year.[2]
3Rates and taxes on the Land.
4Time spent as a consequence of the acquisition.
[2] This claim is in the alternative to the Company’s fifth claim referred to above.
Background
I set out here matters of background relevant to the claims the subject of this judgment. More detailed background facts (particularly about the Land) are set out in my previous judgment.[3]
[3] Nelson v Commissioner of Highways [2020] SASC 109.
Mr Nelson was born in October 1950.
In May 1983 Mr Nelson and his then wife Ilona incorporated Colin Nelson Nominees Pty Ltd (the Company) to carry on a barbecue and heater business as trustee of the Colin Nelson Family Trust (the Trust). Mr Nelson and Ilona were the sole (equal) shareholders and directors of the Company. In February 1997, upon their divorce, Ilona transferred her share to Mr Nelson and ceased to be a director.
In 1983 a trust deed for the Trust was executed. The trust deed cannot now be located. A deed of renunciation executed in April 1997 was tendered. It indicates that the Trust was a discretionary family trust and that Mr Nelson and Ilona were the primary beneficiaries. By the deed of renunciation, Ilona renounced any interest in the Trust. I infer that, following the renunciation, Mr Nelson was the sole primary beneficiary and the other eligible beneficiaries were his spouse (if any), his children and his remoter issue (if any). This is consistent with the Trust’s financial statements which show income distributions to Mr Nelson, his current wife Mechelle and his sons.
In 1983 the Company as trustee of the Trust leased land at 59-61 South Road Torrensville and commenced carrying on business trading as “Bonza BBQ’s and Stoves” (the Business). Mr Nelson worked full time in the Business and after about 12 months also employed a sales assistant.
In 1989, upon the premises burning down, the Company moved the Business into temporary premises directly across the road at Hindmarsh and searched for alternative long term premises.
In February 1991 Mr Nelson settled on the purchase of the Land. The Land was about four kilometres by road south-west of the centre of the Adelaide central business district. It had a frontage onto the western side of South Road. Its area was 2,106 square metres.[4]
[4] All areas in square metres are rounded to the nearest square metre unless otherwise indicated.
In 1991 Mr Nelson constructed a showroom and offices on the Land as stage 1 of its development (the showroom). The gross lettable area (GLA) of the showroom was 552 square metres.
At that stage Mr Nelson worked full time in the Business and also employed a sales assistant.
In 2000-2001 Mr Nelson constructed a showroom addition on the Land as stage 2 of its development (the showroom addition).[5] The GLA of the showroom addition was approximately 195 square metres.
[5] There was an issue the subject of my previous reasons for judgment whether this building was a combination showroom/warehouse or merely a warehouse. I used the term “showroom addition” in a neutral sense, taking it from the description of the development on the submitted plans.
Mr Nelson’s sons Richard (Richard), Carlo (Carlo) and Benjamin (Benjamin), who were born in 1989, 1991 and 1992 respectively, worked part time in the Business during school holidays when they were old enough.[6]
[6] Mr Nelson also had an older son, Andrew, and younger son, Matt, neither of whom worked in the Business or were involved in any meaningful way.
In 2007, upon completing year 12 at school, Richard commenced working full time in the Business. He worked up to five or six days per week. He performed various roles, including sales and office manager duties. He continued employment in the Business until November 2012.
In 2009, upon completing year 12 at school, Carlo commenced working full time in the Business. He worked up to eight hours per day six days per week as a sales assistant and storeperson. He continued employment in the Business until its closure in June 2014. After Richard left in November 2012, Carlo’s hours and responsibilities increased.
In June 2010 Mr Nelson’s wife Mechelle Nelson (Mechelle) commenced working part time in the Business as the assistant officer manager. She performed office and bookkeeping work and cleaned and vacuumed the premises.
In 2011 Mr Nelson constructed a storeroom on the Land as stage 3 of its development (the storeroom). The GLA of the storeroom was 259 square metres.
In about 2011 Mr Nelson reduced his day-to-day involvement in the Business. His evidence was vague as to when this occurred, describing it only as in “about 2011” and “2011 or 2012”. He said that at the time he had distractions in relation to the Business, including building the storeroom. During the period of Mr Nelson’s reduced involvement, he worked three days a week, being Mondays, Wednesdays and Fridays.
In 2012, upon completing year 12 at school, Benjamin commenced working part time, and then in August 2012 commenced working full time, in the Business. He worked as a storeperson and general hand. He continued employment in the Business until July 2013.
In late 2012 the last non-family member employee, Mr Braithwaite, ceased employment in the Business.
In November 2012 Richard ceased working in the business. Mr Nelson returned to becoming fully involved in the Business again.
On 15 May 2013 the Department of Planning Transport and Infrastructure (the Department) sent a letter in standard form to Mr Nelson addressed “Dear Property Owner” with the title South Road Upgrade. It said that the Australian and State Governments had announced funding to upgrade South Road between Regency Road and Anzac Highway. It said that more space was required than the existing road corridor and the Department would begin negotiating with owners of affected properties immediately. It invited letter recipients to telephone the Department’s Property Section to organise a time to discuss the steps in the acquisition process.
On 20 May 2013 Mr Nelson telephoned Ms Ward of the Department. He said that his preferred option was that he be relocated onto the Brickworks site and his second preference was that the Department buy the Land and the Business.
On 31 May 2013 Mr Nelson, his lawyer Peter Allen and accountant John Humphries (of HBS Chartered Accountants) met with Ms Ward and Mr Letsch of the Department. They discussed options including relocation of the Business; sale of the Land and the Business; and reconfiguration of the current site to refit the Business.
On 4 September 2013 the Minister responsible for the Department, Tom Koutsantonis, met with Mr Nelson at the site. The Minister said that, if Mr Nelson did not sell voluntarily, the Department would compulsorily acquire the Land. He said that the Department needed the Land to widen the road.
On 24 September 2013 Department officers met with Mr Nelson and Mr Allen. The Department officers said that works were to commence “this side of Christmas”. They said that, under all situations, the entirety of the Land was required by the Department.
Mr Nelson said that the Business was difficult to relocate, comprising 60 per cent repeat business. He said that he did not consider that it was viable to relocate and re-establish the Business elsewhere (other than within the Brickworks redevelopment). He said that he wanted the Department to buy out the Business, he having been 30 years at that location. He had made the decision and the boys wanted to sell the Business. It was agreed that the tentative date for vacation of the site was 31 March 2014. There was a discussion about the parties obtaining valuations of the Land and the Business.
In 2013 Mr Nelson commenced to look for alternative sites to purchase in order to relocate his Business. He did not find any that were acceptable to him.
In October 2013 Mr Nelson ceased ordering stock for the Business other than to fulfil special orders.
On 23 October 2013 Mr Allen sent a letter to Ms Ward confirming the discussion at the meeting on 24 September 2013, requesting confirmation from the Department and requesting that a notice be issued to Mr Nelson so that the formalities could commence without further delay.
On 25 October 2013 the Commissioner served on Mr Nelson notice of intention to acquire the Land pursuant to section 10 of the Act. This was a statutory precondition to the Commissioner acquiring the Land. Subsection 16(1) requires at least three months notice of intention to acquire land compulsorily.
On 31 October 2013 the Department sent a letter to Mr Allen confirming the discussion at the 24 September meeting. It said that the decision to sell the Business as well as the Land to the Department necessitated a valuation of the Business so that it could make a comprehensive offer to Mr Nelson and his entities. It had therefore retained Brian Sander to provide a business valuation as soon as possible. He noted that Mr Nelson wished to retain ownership of the stock and wished to have a closing down sale.
In late 2013/early 2014 Mr Nelson commenced to look for sites to purchase where he could store the Business’s stock and office equipment.
On 13 March 2014 the Commissioner compulsorily acquired the Land. The Company continued to conduct the Business on the Land (rent free) after that date.
On 13 March 2014 the Commissioner made an offer to purchase the Land for $2,120,000 and paid that amount into Court.
On 14 April 2014 the Company as trustee of the Trust entered into a contract to purchase a warehouse on Port Road Beverley (the Beverley Warehouse) for $995,000, with settlement due to take place on 11 July 2014. The Beverley warehouse has a floor area of 457 square metres.
Mr Nelson agreed with the vendor that, on paying the deposit of $50,000, he could commence to use the warehouse to store his stock. He paid the deposit on 16 April 2014.
On 16 April 2014 Brian Sander provided to the Department a valuation of the Business (Mr Sander’s report). He valued the Business at $600,000 He used future maintainable earnings of $212,758 (using the 2013 profit figure with adjusted expenses) and an implicit capitalisation rate of 35 per cent.
On 23 April 2014 the Department sent a letter to Mr Allen. It said that it had received a formal valuation valuing the Business at $600,000. It noted that the average stock figure over the last four years was $140,000 and said that the Department therefore offered $460,000 for the Business exclusive of stock. It said that, if not all of the stock was sold during the proposed closedown sale, a valuation of any remaining stock could be undertaken and an adjustment made to the figure of $460,000 to include the remnant.
On 27 May 2014 Mr Allen sent a letter to the Department requesting a copy of Mr Sander’s valuation. On 30 May 2014 the Department sent a letter to him enclosing a copy of the valuation.
On 13 June 2014 the Company ceased to conduct the Business and vacated possession of the Land. It transported the remaining stock, shelving and equipment to the Beverley warehouse.
On 20 June 2014 Mr Nelson receive payment out of the monies in court of $2,120,000.
On 11 July 2014 the Company settled on the purchase of the Beverley warehouse. It used the monies paid out of court to pay the balance of the purchase price.
No stocktake was undertaken by the Company as at 30 June 2014
On 15 July 2016 Michael McClaren provided to Mr Nelson’s solicitors a valuation of the Business (Mr McClaren’s first report). He valued the Business at $651,230 using future maintainable earnings of $161,778 (using the 2013 profit figure with adjusted expenses) and a capitalisation rate of 30 per cent. He also estimated the loss of opportunity of Mr Nelson and family members to earn a future salary in the Business.
On 18 September 2016 Simon Winter provided to the Department a valuation of the Business. This valuation was not tendered. However, Mr McClaren made references to it in his second report. It appears from those references that Mr Winter valued the Business at $189,262 using future maintainable earnings of $79,490 (using the 2013 profit figure with adjusted expenses) and a capitalisation rate of 42 per cent.

In January 2021 Mr Nelson and Carlo undertook a stocktake of the Company’s stock located at the Beverley warehouse (the 2021 stocktake). They recorded the stock and its cost on stock sheets (the 2021 stock sheets). The total cost of the stock recorded on the stock sheets, excluding “dead stock”, was $159,377.25 inclusive of GST. The total cost of “dead stock” was $121,048.90 inclusive of GST. Dead stock was old or obsolete stock not readily saleable.
On 31 March 2021 Louis Mapanzure of Evans & Clarke valued the auction realisable value of the Company’s stock located at the Beverley warehouse recorded in the 2021 stock sheets as being $129,800 inclusive of GST.
On 19 May 2021 Mr McClaren provided a second report responding to Mr Winter’s report and updating his calculations (Mr McClaren’s second report). He now valued the Business at $491,393 using future maintainable earnings of $147,418 (using the 2013 profit figure with adjusted expenses) and a capitalisation rate of 30 per cent.
On 13 July 2021 Jamie Codling of Mason Gray Strange valued the current auction realisable value of the Company’s stock located at the Beverley warehouse recorded in the 2021 stock sheets as being $122,704 inclusive of GST as at June 2014. The parties subsequently agreed the value of that stock at $124,000 inclusive of GST.
On 26 July 2021 Mr Winter provided to the Department a revised valuation of the Business (Mr Winter’s first report).[7] He valued the Business at $165,000 using future maintainable earnings of $69,372 (using the 2013 profit figure with adjusted expenses) and a capitalisation rate of 42 per cent.
[7] This was Mr Winter’s second report but because it was not tendered it is convenient to define it as his “first report”. Likewise I define below his report dated 28 October 2021 as his “second report” and his report dated 14 January 2022 as his “third report”.
On 28 October 2021 Mr Winter provided to the Department a supplementary report (Mr Winter’s second report). He adjusted the stock figures shown in the Trust’s financial statements as at 30 June 2011, 2012, 2013 and 2014. He valued the Business at $183,751 (which he rounded to $185,000) using future maintainable earnings of $71,663 (using the average 2010 to 2012 profit figure with adjusted expenses) and a capitalisation rate of 39 per cent.
On 9 November 2021 Mr McClaren provided a third report (Mr McClaren’s third report). He undertook an alternative valuation of the Business on the assumption of Mr Winter’s gross profit adjustments for the 2010 to 2012 years at $364,685 using future maintainable earnings of $121,586 (using the average 2010 to 2012 profit figure with adjusted expenses) and a capitalisation rate of 33.34 per cent.
On 11 November 2021 Mr McClaren, Mr Sander and Mr Winter provided to the Court a Joint Statement (the Joint Statement). They set out alternative assessments of the value of the Business using the 2013 year or the average of the 2010 to 2012 years. Mr Sander updated his assessment due to various developments since his original valuation in 2014. Mr Sander valued the Business at $359,221 using future maintainable earnings of $134,708 using the 2013 profit figure with adjusted expenses and a capitalisation rate of 37.5 per cent. He valued the Business alternatively at $235,691 (which he rounded to $235,000) using future maintainable earnings of $88,384 using the average 2010 to 2012 profit figure with adjusted expenses and a capitalisation rate of 37.5 per cent.
On 24 January 2022 Mr Winter provided to the Department a further report (Mr Winter’s third report).
The hearing
Three written witness statements of evidence by Mr Nelson were tendered. His second statement (to which I refer for convenience as Mr Nelson’s written witness statement) was his primary witness statement. This was supplemented by a third witness statement addressing a handful of topics. Mr Nelson’s first witness statement which was tendered at the previous trial was also tendered at this trial.
Mr Nelson gave supplementary oral evidence in chief and was cross-examined and re-examined. Various documents were attached to his statements and in addition Mr Nelson tendered various other documents (including those described below).
Financial statements for the Trust for the years ended 30 June 2011 to 30 June 2014 (each showing comparative figures from the prior year) were tendered). For ease of reference, I refer to a financial year ended on 30 June 20XX as the 20XX year. In addition, a compilation of extracts from the profit and loss statements of the Trust for the 2005 year to the 2014 year prepared by Mr Humphreys in December 2014 was tendered.
The 2021 stock sheets were tendered. However, no stock sheets for the 2013 year or earlier years were tendered as Mr Nelson gave evidence that they were destroyed before the Land was vacated in June 2014.
A written witness statement of evidence by Margaret Haarsma, a traditional and digital marketing expert, was tendered. Her evidence related to the level of online sales activity as at the 2014 year.
A report by Daryl Stillwell, an organisation psychologist and recruitment expert, was tendered. He gave supplementary oral evidence in chief and was cross-examined and re-examined. His evidence related to Mr Nelson’s prospects of obtaining employment in the employment market.
Several documents were tendered by the Commissioner. These included a statement of agreed facts.
Mr Nelson called Mr McClaren and Mr Sander to give expert valuation evidence. Mr McClaren’s three reports and Mr Sander’s report were tendered.
The Commissioner called Mr Winter to give expert valuation evidence. Mr Winter’s three reports were tendered.
The three valuers gave concurrent oral evidence. Their Joint Statement was tendered. Various spreadsheets and calculations by them were also tendered.
Principles relating to determination of compensation
Section 22B of the Act confers a right to compensation for the divestment or adverse effect on a person’s interest in acquired land. As at March 2014 it provided:
22B—Entitlement to compensation
Subject to this Act, a person is entitled to compensation for the acquisition of land under this Act if—
(a) the person's interest in land is divested or diminished by the acquisition; or
(b) the enjoyment of the person's interest in land is adversely affected by the acquisition.
Section 25 sets out certain principles governing the determination of the amount of compensation. They include the following:
25—Principles of compensation
(1)The compensation payable under this Act in respect of the acquisition of land shall be determined according to the following principles:
(a)     the compensation payable to a claimant shall be such as adequately to compensate him for any loss that he has suffered by reason of the acquisition of the land; and
(b)     in assessing the amount referred to in paragraph (a) of this section consideration may be given to—
(i)    the actual value of the subject land; and
(ii)the loss occasioned by reason of severance, disturbance or injurious affection; and
(c)     compensation shall be fixed as at the date of acquisition of the land; …
It is common ground that “the actual value of the subject land” means its market value in accordance with the definition in Spencer v The Commonwealth,[8] namely “what would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell”.[9]
[8] (1907) 5 CLR 418.
[9] At 432 per Griffiths CJ. Applied in Commissioner of Highways v Tynan (1982) 53 LGRA 1 at 7 per Wells J.
It is common ground that, in assessing the value in the context of a compulsory acquisition of land, when considering hypothetical purchasers it is appropriate to include the dispossessed owner of the land as one of those hypothetical potential purchasers.[10]
[10] Minister Administering the Heritage Act 1977 v Haddad (1988) 67 LGRA 438 at 444-445 per Mahoney JA (with whom Clarke JA generally agreed).
It is common ground that, when assessing the value in the context of a compulsory acquisition of land, “doubts are resolved in favour of a more liberal estimate”.[11] However, this approach only applies as a last resort when there is no basis on the assessment of the evidence to prefer one finding over another on the relevant issue.
[11] Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1974) 74 CLR 358 at 374 per Dixon J; Gugusheff v South Australian Urban Land Trust (1990) 55 SASR 268 at 272 per Jacobs J; Cook v City of Stirling (1991) 4 WAR 469 at 473 per Anderson J; Sydney Water Corporation v Caruso [2009] NSWCA 391; (2009) 170 LGERA 298 at [3] per Allsop P.
In Cook v City of Stirling[12] two valuers adopted a capitalisation rate of 13 per cent and one valuer adopted a capitalisation rate of 12.5 per cent. Anderson J adopted the capitalisation rate of 12.5 per cent, which was favourable to the plaintiff, and said:
This is very much a matter for judgment. None of these valuers was guilty of any fallacious reasoning in selecting their respective capitalisation rates, so far as I can determine. None took into account irrelevant considerations or gave too much weight to trivial matters or too little weight to weighty matters. Yet they came to different conclusions. As I am not able to regard one opinion as any more meritorious than another on this point, I must resolve the question in favour of the rate that will result in the more liberal award of compensation.[13]
[12] (1991) 4 WAR 469.
[13] At 473.
In Sydney Water Corporation v Caruso[14] Allsop P said:
The general principle that in determining compensation to a dispossessed owner doubts should be resolved in favour of a more liberal estimate is well-known. That does not, however, detract from the need to engage with and evaluate evidence and competing witnesses. If, however, upon engagement and assessment, the judicial valuer finds, for example, as Anderson J did in Cook and Edwards v City of Sterling, that the reasoning of both valuers was not fallacious, that their respective capitalisation rates were open, that none took into account irrelevant considerations and no errors otherwise appeared, the proper conclusion might be that there are simply two open views on the relevant issue – as there can be in ascribing a value. In such circumstances, applying the general principle would be uncontentious.
It is not helpful to examine the scope of the general principle in the abstract beyond saying that it is not a licence to accept one expert over another without undertaking the task of assessing the evidence in the usual way.[15]
[14] [2009] NSWCA 391, (2009) 170 LGERA 298.
[15] At [3]-[4]. (Citations omitted).
Qualifications of valuers
Mr McClaren completed a Bachelor of Arts (Accountancy) in 1980, a Master of Business Administration in 2002 and a Diploma of Financial Planning in 2014. He was admitted to the Institute of Chartered Accountants in 1982. He is a Fellow of Chartered Accountants Australia and New Zealand, the Taxation Institute in Australia and the Australian Institute of Company Directors and a member of CPA Australia.
Mr McClaren commenced employment as an undergraduate accountant in 1975. Between 1986 and 2003 he was a director of William Buck (SA) Chartered Accountants. Between 2003 and 2016 he was director of Bentleys (SA) Chartered Accountants. Since 2016 he has acted as a consultant to Bentleys and its clients.
In the past 10 years, in his capacity as an accountant, Mr McLaren has advised clients in relation to sales of businesses or interests in businesses. Over a period of more than the last five years (it not being clarified in evidence how much longer than five years) he has completed valuations of various businesses.
Mr Sander completed a course in valuation in 1967 and was admitted to what is now the Australian Property Institute in 1968. Between 1968 and 1978 he worked as a valuer of residential and commercial properties. In the late 1970s he commenced working as a business sales agent.
Between 1981 and 2002 Mr Sander was the managing director of Sander and Associates, a specialist business valuation and sales firm, working primarily as a business valuer. Between 2002 and 2014 he worked primarily as a business valuer at Dale Wood Business Sales Consultancy, a firm created by the merger of Sander and Associates and Dale Wood Business Brokers.
In 2014 Mr Sander became the South Australian Manager of Benchmark Business & Commercial Sales, working in business sales and valuations.
Mr Winter completed a Bachelor of Economics in 1976, a Post Graduate Diploma in Property in 2002 and a Master of Business in 2003. He is a Certified Practising Accountant, Certified Practising Valuer and licensed real estate agent.
Mr Winter is a director of Raine and Horne Business Sales. He has 25 years experience in business sales, having sold approximately 450 businesses. He has 20 years experience in business valuations, having completed approximately 250 business valuations.
Value of goodwill
It is agreed that the value of goodwill is the value of the Business less the net auction realisable value of the stock and the depreciated value of the equipment retained by the Company following cessation of the Business.
It is agreed that the net auction realisable value of the stock retained by the Company was $124,000 (inclusive of GST). The Trust’s financial statements for the 2014 year show the depreciated value of plant and equipment as being $17,816.22.
Each valuer assessed the value of the Business by assessing its future maintainable earnings and multiplying that figure by a capitalisation rate. Each valuer ultimately assessed future maintainable earnings by two alternative methods:
1 by reference to adjusted profit shown in the profit and loss statement of the Trust for the 2013 year; and
2by reference to average adjusted profit shown in the profit and loss statements of the Trust for the 2010 year, 2011 year and 2012 year with adjusted stock figures explained below.
Each valuer made adjustments to the profit shown in the profit and loss statements to remove depreciation and financing costs, one off costs and to adjust non-arm’s length costs (salaries and rent) to commercial arm’s length rates.
The final valuations using the 2013 year’s profit and loss statement of the Trust (and Mr Sander’s revised wages figure of $175,000) are summarised in the following table:

Item McClaren Sander Winter

Reported Net Profit $134,361 $134,361 $134,361

Addback depreciation $18,619 $18,619 $18,619

Addback financing costs $8,800 $8,800 $8,800

Addback land tax $12,571 $12,571 $12,571

Addback motor vehicle $4,136 $2,742

Addback accounting $1,775

Addback filing fee $300

Addback wages costs $271,219 $249,271 $275,254

Less commercial wages costs -$170,100 -$175,000 -$254,883

Addback rent $60,000 $60,000 $60,000

Less commercial rent -$188,050 -$188,050 -$188,050

FUTURE MAINTAINABLE EARNINGS $147,419 $124,708 $69,372

CAPITALISATION RATE 33.34% 37.5% 42%

BUSINES VALUE $442,166 $332,555 $165,171

The adjustments made by the valuers to the 2010 to 2012 years’ profit and loss statements of the Trust are summarised in the following tables:

2010 year

Item McClaren Sander Winter

Reported Net Profit $216,194 $216,194 $216,194

Addback depreciation $10,742 $10,742 $10,742

Addback financing costs $5,193 $5,193 $5,193

Addback land tax $10,403 $10,403 $10,403

Addback legal expenses $8,492 $8,492 $8,492

Addback motor vehicle $9,572 $10,956

Addback accounting $4,608

Addback filing fee $467

Addback donations $54

Addback wages costs $201,554 $147,090 $201,554

Less commercial wages costs -$197,723 -$175,000 -$254,883

Addback rent $70,000 $70,000 $70,000

Less commercial rent -$188,050 -$188,050 -$188,050

Adjusted Profit $136,805 $114,636 $90,131

2011 year

Item McClaren Sander Winter

Reported Net Profit $148,371 $148,371 $148,371

Addback depreciation $23,890 $23,890 $23,890

Addback financing costs $5,758 $5,758 $5,758

Addback land tax $12,223 $12,223 $12,223

Addback legal expenses $3,182 $3,182 $3,182

Addback motor vehicle $10,373 $8,807

Addback travel expense $7,018 $7,018

Addback accounting $2,924

Addback filing fee $218

Addback donations $200

Addback wages costs $274,173 $200,886 $274,173

Less commercial wages costs -$198,103 -$175,000 -$254,883

Addback rent $25,000 $25,000 $25,000

Less commercial rent -$188,050 -$188,050 -$188,050

Adjusted Profit $113,462 $66,633 $63,232

2012 year

Item McClaren Sander Winter

Reported Net Profit $191,794 $191,794 $191,794

Addback depreciation $24,346 $24,346 $24,346

Addback financing costs $10,009 $10,009 $10,009

Addback land tax $10,586 $10,586 $10,586

Addback legal expenses $909 $909 $909

Addback motor vehicle $5,983 $6,566

Addback travel expense $4,653 $4,653

Addback accounting $2,941

Addback filing fee $227

Addback donations $120

Addback wages costs $233,036 $148,306 $233,036

Less commercial wages costs -$197,723 -$175,000 -$254,883

Addback rent $25,000 $25,000 $25,000

Less commercial rent -$188,050 -$188,050 -$188,050

Adjusted Profit $114,492 $53,883 $61,637

The final valuations using the 2010 to 2012 profit and loss statements of the Trust are summarised in the following table:

Item McClaren Sander Winter

Future Maintainable Earnings $121,586 $88,384 $71,667

Capitalisation Rate 33.34% 37.5% 39%

Calculated value $364,686 $235,691 $183,761

BUSINESS VALUE $365,000 $235,000 $185,000
Adjustments to expenses

The valuers made the same adjustments to reported profit for depreciation, financing costs, land tax, rent and legal expenses.
The major difference between the valuers relates to wages, with lesser differences in relation to motor vehicle expense, travel expenses, accounting expenses, filing fees and donations.
Wages adjustments
The principal issues in relation to wages relate to the commercial, arm’s length, wages that notionally would have been paid if the Business had only employed arm’s length employees. However, it is first necessary to address the actual wages paid to family and arm’s length employees.
Actual wages
Each valuer added back to their reported profit of the Business for each relevant financial year an amount on account of actual wages and superannuation (and in some cases WorkCover levy) paid by the Business derived primarily from the Trust’s profit and loss statements.
Subject to one exception, Mr McClaren and Mr Winter added back all wages, superannuation and WorkCover levy, and used the same figures, for each of the financial years. The exception is that, for the 2013 year only, Mr McClaren did not add back the WorkCover levy of $4,036. It is agreed by the parties that this was an oversight and that Mr McClaren’s add back for that financial year should be increased by $4,036 and match Mr Winter’s add back.

By contrast with the approach of Mr McClaren and Mr Winter, Mr Sander added back only the Nelson family members’ wages and superannuation and did not add back the wages and superannuation that were paid to an arm’s length employee. It is agreed by the parties that, since Mr Sander subtracted commercial wages for all employees, for consistency he should have added back the actual wages paid to all employees. It is agreed by the parties that the addback figures used by Mr Winter (and Mr McClaren as adjusted in the previous paragraph) should be adopted.
Mr McClaren set out in an appendix to his first report a breakdown of wages paid by the Business between the 2010 year and the 2014 year, summarised in the following table, to which I have added WorkCover levies from the financial statements:

Employee 2010 2011 2012 2013 2014

Mr Nelson 52,000 53,000 19,000 53,764 13,096

Mechelle 2,500 29,650 34,620 53,764 20,096

Richard 47,088 50,316 36,922 27,616 4,000

Carlo 26,500 38,012 35,838 58,552 18,096

Benjamin 7,390 27,647 3,308

Total family 128,088 178,768 126,380 221,343 58,596

Arm’s length 48,833 64,031 72,018 19,814

Total wages 176,921 242,399 198,398 241,157 58,596

Superannuation 21,857 27,480 31,371 30,062 25,256

WorkCover 2,776 4,294 3,267 4,036 3,458

Total 201,554 274,173 233,036 275,255 87,310

Mr Nelson gave evidence that his wage was only determined after the end of the financial year and was determined in consultation with his accountant by reference in part to the profit generated by the Business. It appears from the above table that a similar approach was adopted at least in respect of Mechelle.
Commercial wages
Opening hours
Mr Nelson gave evidence about the opening hours of the Business. In relation to weekdays other than Thursdays, in his written witness statement he said that the Business was open from 9.00 am to 5.30 pm. In oral evidence, he was asked if he closed between 5.00 and 6.00 pm and he did not answer. It is agreed by the parties that I should proceed on the basis that the closing time was 5.30 pm (which is the mid point between 5.00 and 6.00 pm in any event). I would in any event have made that finding.
In relation to Thursdays, in his written witness statement Mr Nelson said “The opening hours of the business were 9am - 5:30pm Monday to Friday and 10:00am - 4:00pm on Saturday and Sundays”. However, Mr Nelson gave the following oral evidence in cross-examination:
Q.I want to ask you about your trading hours, and I would imagine Thursday nights were a relatively busy time as well for trading.
A.    It was consistent, but it wasn't a rush.
Q.    But Thursday nights were busier that other nights of the week.
A.    Well, Thursday nights we closed between 8 and 9 o'clock.
Q.    You would close at 8 or 9 o'clock at night.
A.    Late night shopping.
Mr Nelson contends that a finding should be made that the Business closed at 6.00 pm on Thursdays. Mr Nelson relies primarily on a photograph attached to his statement that depicts a sign (the hours sign photograph) showing hours on Thursday of “9AM‑6PM” (in contrast to hours shown for Monday to Friday of “9AM-5.30PM”).[16] Mr Nelson also relies on a statement in Mr Sander’s report, which recorded that Mr Nelson told him that the shop traded between 9 am and 5.30 pm on Monday to Friday. Mr Nelson submits that his oral evidence in cross-examination was an off-the-cuff response rather than a considered one and not responsive to the question put.
[16] I note for completeness that other photographs taken of other signs at different (unknown) times show different weekend hours.
The Commissioner submits that there is no reason to doubt Mr Nelson’s oral evidence and it was confirmed by his subsequent reference to “late night shopping”. No weight, or little weight, should be placed on the hours sign photograph, the Commissioner submits, because there is no evidence when the photograph was taken. Little weight should be placed on Mr Sander’s statement in his report because it is likely that Mr Nelson was referring to ordinary trading on weekdays and not to Thursday night trading.
I find that the closing time on Thursday nights was between 8.00 and 9.00 pm. In broad terms, I accept the Commissioner’s contentions. I have no reason to doubt the reliability of Mr Nelson’s oral evidence and, if I did so, it would have implications for my acceptance of his evidence generally. It is inherently likely that the Business did trade at night on Thursdays to take advantage of customers who worked during the day. The hours sign photograph is of little evidentiary value given that no evidence was adduced about when it was taken. It is also possible that it was simply not updated when the Business commenced to trade on Thursday nights. Mr Sander’s statement as to what he was told by Mr Nelson is hearsay that was only admitted as an assumption used by Mr Sander in expressing his valuation opinion. In any event, it is likely that, just as in his written witness statement Mr Nelson was referring to ordinary trading on weekdays and not to Thursday night trading, Mr Nelson was doing that when speaking to Mr Sander.
Mr Nelson submits that it is difficult to make a finding as to how often the Business traded until 8.00 or 9.00 pm (as opposed to 5.30 pm or 6.00 pm) because no evidence was adduced about how often this occurred, whether it was seasonal and whether it was merely occasional. I reject that contention. In Mr Nelson’s oral evidence that the Business was open for late night shopping (traded until 8.00 or 9.00 pm), there was no suggestion that this was non-uniform or seasonal.
Mr Nelson submits that it is difficult to make a finding as to how often the Business traded until 9.00 pm as opposed to 8.00 pm for the same reasons. In the absence of evidence, it is appropriate to adopt the midpoint of an average of 8.30 pm.
I find that the trading hours of the business on Thursdays were from 9 am until, on average, 8.30 pm, being the mid point between 8 and 9 pm.
In relation to Saturdays and Sundays, in his written witness statement Mr Nelson said “The opening hours of the business were … 10:00am - 4:00pm on Saturday and Sundays”. However, Mr Nelson gave oral evidence that on weekends he traded from 9 am. It is agreed by the parties that it should be found that the Business traded on weekends between 9 am and 4 pm.
In summary, the Business traded (on average) 59.5 hours per week being:
·9 am to 5.30 pm on Monday, Tuesday, Wednesday and Friday;
·9 am to 8.30 pm on Thursday; and
·9 am to 4.00 pm on Saturday and Sunday.
Wages
In his first report, Mr Winter made his own assessment of a commercial (arms’ length) wage for a manager of $62,400 plus superannuation of $5,616. For the remaining staff, he started with the actual wages cost incurred in 2013 (Mr Nelson’s remuneration being called “salary” in the financial statements as opposed to wages), excluded the wage paid to Mr Braithwaite and derived a wages cost of $168,508. He added to that figure superannuation at nine per cent of wages, which he calculated to be $14,895.[17] This resulted in total wages and superannuation for the remaining staff of $183,403 and total wages and superannuation for all staff of $251,419. He added WorkCover levy at 1.5 per cent, which he calculated to be $3,464. This resulted in a total cost of $254,883.
[17] He appears to have made an arithmetical error because 9 per cent of $168,508 is $15,165.
In his third report, Mr Winter made his own assessment of commercial (arms’ length) wages for all staff. He referred to the evidence given by Mr Nelson concerning opening hours of the Business and the number of staff required to work during those opening hours. He proceeded on the basis that the business was open 59.5 hours per week but ultimately used a lower figure of 57 hours per week. Mr Nelson’s evidence was that he needed on average three staff (based on a range of two to four staff) (sales and warehouse) during the week and three to four staff (sales and warehouse) on the weekend. In addition, Mechelle worked at least two and a half days per week (20 hours per week) doing bookkeeping and cleaning.
Mr Winter used a range of 57 to 62 trading hours per week (based on a range of one hour in the closing time on weekdays). Based on three staff working during the week and 3.5 staff working on weekends, together with Mechelle working 20 hours per week, this gave a range of 198 to 213 hours per week. Assuming (conservatively) that a full-time equivalent worked 40 hours per week, this resulted in between 4.95 and 5.32 full-time equivalent staff.
Mr Winter used Mr Braithwaite’s hourly rate of $22 (being an arm’s length rate) for all employees except Mr Nelson. For Mr Nelson, he used an annual salary of $62,400 assuming 46 hours worked per week. Based on the lower figures of opening for 57 hours per week and staff hours of 197 hours per week, and including superannuation at nine per cent and WorkCover levy at 1.5 per cent, Mr Winter calculated total wages at $259,834. He continued however to use the lower figure from his second report of $254,376.
Mr Winter’s assessment in his third report is summarised in the following table showing wages and superannuation (but not WorkCover levy).

Position FTE annual wage[18] Hours per week % of full time[19] Annual wage plus super

Manager $59,144 46 1.15 $68,016

Office/bookkeeping $49,878 20 0.5 $24,939

Sales/warehouse $49,878 46 1.15 $57,360

Sales/warehouse $49,878 45 1.125 $56,113

Sales/warehouse $49,878 40 1.0 $49,878

Total 197 4.925 $256,306
[18] These figures do not appear in the report but are mathematically implicit.
[19] These figures do not appear in the report but are mathematically implicit.

In his oral evidence, Mr Winter said:
One of the problems of employing only a family is you tend to lose a bit of control; the tail's wagging the dog a bit. And so I think it could be more efficiently run. So I think that, based on Nelson's evidence, it should have been five or 5.3 full-time equivalent. I am of the view that it could be more like 4.5. There's nothing that I would see in this business that would suggest it could be as low as 3.5.
Mr Sander was informed by Mr Nelson that the Business employed family members representing the full-time equivalent of 2.5 staff. In his report, he added back what he understood were the actual wages paid to family members and deducted his assessment of the commercial cost of wages paid to the full-time equivalent of 2.5 staff, which he assessed at $125,000. Mr Sander used a wage and superannuation rate of $50,000 per annum for all staff. Mr Sander did not say in his report or in his oral evidence whether his reference to the full-time equivalent of 2.5 staff was a reference to all staff or only to family member staff. The parties agree that it is more likely that he was referring to all staff and I so find.
When the Joint Statement was prepared, Mr Sander adjusted his assessment of the commercial cost of wages paid to the full-time equivalent of 3.5 staff, which he assessed at $175,000.[20] Mr Sander used a wage and superannuation rate of $50,000 per annum for all staff. It is agreed that, when he referred to the full-time equivalent of 3.5 staff, Mr Sander was referring to all staff and not just family staff.
[20] In the Joint Statement, he showed this figure as $165,000 but in his oral evidence he said that this was a mathematical error and the figure should be $175,000.
In his first report, Mr McClaren made his own assessment that the Business required the staff at the cost (wages plus superannuation) shown in the table at the end of this paragraph. This resulted in total wages and superannuation of $148,500. He did not explain why he selected the FTE proportion for each staff member that he did or how he derived the FTE annual wage/superannuation for each staff member.

Position FTE annual wage[21] Hours per week[22] % of full time Annual wage

Manager/purchasing/sales $55,000 40 1.0 $55,000

Office/bookkeeping $55,000 20 0.5 $27,500

Sales $50,000 24 0.6 $30,000

Warehousing $45,000 32 0.8 $36,000

Total 116 2.9 $148,500
[21] These figures do not appear in the report but are mathematically implicit.
[22] These figures do not appear in the report but are mathematically implicit.

In his second report, Mr McClaren increased the warehousing staff member from 0.6 to 0.8 FTE, giving a total of the full-time equivalent of 3.1 staff members, and adopted different full-time equivalent wage/superannuation, as shown in the table at the end of this paragraph. This resulted in total wages and superannuation of $170,100. He did not explain why he selected the FTE proportion for each staff member that he did or how he derived the FTE annual wage/superannuation for each staff member. He had regard to an IbisWorld Report “Domestic Appliance Retailing in Australia” that showed an average ratio of wages to sales in the 2013 financial year of 12.25 per cent and observed that the total of $170,100 was 12.1 per cent of sales of the Business in the 2013 year (which were approximately $1.4 million).

Position FTE annual wage[23] Hours per week[24] % of full time Annual wage

Manager/purchasing/sales $60,300 40 1.0 $60,300

Office/bookkeeping $44,400 20 0.5 $22,200

Sales $54,750 32 0.8 $43,800

Warehousing $54,750 32 0.8 $43,800

Total 124 3.1 $171,100
[23] These figures do not appear in the report but are mathematically implicit.
[24] These figures do not appear in the report but are mathematically implicit.

In his third report, Mr McClaren made the calculation for the 2010 to 2013 years as a result of Mr Winter doing so in his report. Mr McClaren adjusted wages and superannuation expense to $195,000 per annum on the basis of using a benchmark ratio of wages to sales of 12 per cent based on sales for the 2010 to 2012 years being approximate $1.62 million. This was approximately the same percentage to which he had referred in his second report, but the expense was higher for the 2010 to 2012 years because the sales were higher in those years than in the 2013 year. In an appendix setting out adjusted profit and loss figures, Mr McClaren allocated the $195,000 between the manager of $65,700 and other staff of $129,300. He did not explain how he made the allocation.
In his oral evidence, Mr McClaren said that the $129,300 comprised $54,730 for the salesperson, $57,140 for the warehouseperson and $17,000 for the bookkeeper/cleaner. He said that this was based on the salesperson and warehouse person each working 45 hours per week (matching the opening hours that he assumed) and the bookkeeper/cleaner working 12 hours per week. He said that he used a superannuation rate of 9.25 per cent. His evidence is summarised in the following table:

Position FTE annual wage[25] Hours per week % of full time[26] Annual wage

Manager/purchasing/sales $65,700 40 1.0 $65,700

Office/bookkeeping $56,667 12 0.3 $17,000

Sales $48,649 45 1.125 $54,730

Warehousing $50,791 45 1.125 $57,140

Total 142 3.55 $194,570
[25] These figures do not appear in the report or Mr McClaren’s oral evidence but are mathematically implicit.
[26] These figures do not appear in the report or Mr McClaren’s oral evidence but are mathematically implicit.

In his oral evidence, Mr McClaren said that he made the assessment that trading hours for the Business should have been 45 hours per week, being closed on Monday, with no late night shopping on Thursday and five hours trading on Sunday. He said that he used eight hours trading on each of Tuesday to Saturday and five hours trading on Sunday.
Staff hours
In relation to staff hours required to be worked in the Business, I prefer Mr Winter’s approach and his calculations.
Mr McClaren relied on an IBISWorld report entitled “Domestic Appliance Retailing in Australia”, which showed an average ratio of wages to sales in the 2013 year at 12.25 per cent.
Mr Nelson contends that Mr McClaren only relied on the IBISWorld report as a secondary check of his primary method of assessing hours and hourly rates of employees that he considered were necessary to work in the Business. Conversely, the Commissioner contends that Mr McClaren relied on the IBISWorld report as his primary method and only used his assessment of hours and hourly rates of employees as a secondary check.
I find that in his second report Mr McClaren used his assessment of hours and hourly rates as his primary method and used the IBISWorld report as a secondary check. This is clear from the fact that he derived his figure of $170,100 first by assessing hours and hourly rates and then observed that this was approximately 12.1 per cent of sales.
Conversely, I find that in his third report Mr McClaren used the IBISWorld rounded figure of 12 per cent as his primary method and used his assessment of hours and hourly rates as a secondary check. This is clear from the fact that he derived his figure of $195,000 first by using the IBISWorld percentage and then assessed hours and hourly rates. It is confirmed by his statement in the Joint Report that, if the valuation were to be based on the 2010 to 2012 years (where the sales were over $1.6 million), he was content to use his figure of $195,000 but, if it were to be based on the 2013 year (where the sales were only approximately $1.4 million), he would refer to his figure of $171,100 (thereby preserving a wages to sales ratio of approximately 12 per cent).
Mr McClaren did not demonstrate any basis on which it could be assessed that an industry average ratio of wages to sales should be applied to the Business. Domestic appliance retailing is an extremely diverse range of businesses. It may be expected that there would be a large range of ratios as between different types of domestic appliances. It may be expected that there would be a significant range of ratios as between retailers of the same domestic appliance depending on factors including the scale of their operations. Mr McClaren evidently does not have knowledge of these ratios and, in any event, did not give evidence about them, nor did Mr Nelson adduce evidence about them. The fact is that, on the state of the evidence adduced, it is simply unknown what is the range of ratios and upon what factors the ratio for a particular business depends. In the circumstances, I am unable to place any reliance upon the average domestic appliance industry ratio. Mr McClaren relied substantially but not exclusively upon the average ratio.
Mr McClaren also relied on his own assessment of the hours that the Business could and should trade and of the hours required to be worked by staff. His assessment of working hours required was 124 hours if the revenue was $1.4 million and 142 hours if the revenue was $1.6 million. He conceded that reducing the trading hours could reduce the Business’s turnover, and this was also the opinion of Mr Winter and Mr Sander. Mr McClaren accepted that a purchaser would look at sales data before notionally reducing trading hours and also that a purchaser would not want to make wholesale changes immediately after purchasing the Business. Mr McClaren was not in a position to make a reliable assessment of the adverse effects of reducing the trading hours as he proposed.
Mr McClaren accepted Mr Nelson’s evidence that he needed two salespeople to cover the sales areas and a third person to help customers retrieve goods from the second storeroom.

Mr Winter and Mr Sander based their assessments primarily on their understanding of the staff working in the existing Business, albeit Mr Sander’s understanding involved an underestimation of that number. By contrast, Mr McClaren’s assessment was only theoretical.
In general terms, Mr Winter has extensive practical experience in operating businesses and in buying and selling small businesses. Mr McClaren’s experience primarily arises from his accounting and valuation practice. I prefer Mr Winter’s approach and his evidence in relation to the staff hours.
On the one hand, the starting point is the actual hours worked by staff in the Business, which Mr Winter calculated at 197 or 198 hours per week or the full-time equivalent of approximately 4.9 full-time staff and, on my findings, the actual hours worked would have been 205 hours per week. On the other hand, Mr Winter accepted that the Business could have been run more efficiently and referred to a figure of not less than 4.5 full-time equivalent staff (which translates to 180 hours per week).
I find that the appropriate staff hours are 180 hours per week. I have taken into account Mr McClaren’s assessment of 124 to 142 hours but give it relatively little weight compared to Mr Winter’s assessment for the reasons given above. I have also taken into account Mr Sander’s ultimate assessment of 140 hours but give it relatively little weight because it was based essentially on his understanding of staff employed by the Business, which was substantially understated.
Hourly rates
In relation to the hourly rate for staff excluding the manager, Mr Winter used the rate of $22 per hour paid to Mr Braithwaite. Mr McClaren used award rates which were both below and above that rate. Mr Sander used a rounded annual cost of $50,000 inclusive of superannuation and WorkCover levy. There is very little difference between the different rates used by the different valuers.
I adopt Mr Winter’s approach, partly because it reflects the actual wage being paid to an arm’s length employee in the Business and partly because I prefer his approach overall to the assessment of wages costs.
In relation to the salary of the manager, Mr Winter used an annual salary of $62,400 plus superannuation of $5,616 giving a total of $68,016 (plus WorkCover levy). Mr McClaren initially used an annual salary of $60,300 inclusive of superannuation (when the turnover was $1.4 million) but later adjusted it to $65,700 (when the turnover was $1.6 million). Mr Winter proceeded on the basis that the manager would work 46 hours per week whereas Mr McClaren proceeded on the basis that the manager would work 40 hours per week. Mr Sander did not distinguish between the manager’s salary and wages paid to other employees.
I prefer Mr Winter’s assessment in relation to the salary of the manager. It is agreed by the parties that Mr Winter’s assessment of $68,016 (plus WorkCover levy) should be accepted.
Superannuation rate
In relation to superannuation, it is agreed that the compulsory superannuation rate for the relevant financial years up to the 2013 year (the year ended 30 June 2013) was nine per cent. It is agreed that with effect on 1 July 2013 the superannuation rate was increased to 9.25 per cent.
As explained below, the valuers used either the average adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) for the 2010 to 2012 financial years or the adjusted EBITDA for the 2013 financial year. Mr Winter used 9.0 per cent for both valuations. Mr McClaren used 9.25 per cent.
It is appropriate to use 9.0 per cent because that was the rate applying in the years used by the valuers.
Total wages costs
I find that the appropriate allowance for wages and superannuation should be $235,107 per annum calculated as follows.

Position FTE annual wage Hours per week % of full time Annual wage & super

Manager $59,144 46 1.15 $68,016

Office/bookkeeping $49,878 20 0.5 $24,939

Sales/warehouse $49,878 40 1.0 $49,878

Sales/warehouse $49,878 40 1.0 $49,878

Sales/warehouse $49,878 34 0.85 $42,396

Total wages and super 180 4.5 $235,107

Total wages $215,695

Total super $19,412

In relation to WorkCover levy, Mr Winter and Mr McClaren took different approaches. Mr Winter applied a fixed WorkCover levy rate across all financial years of 1.5 per cent. Mr McClaren in his third report derived the WorkCover levy from the ratio of actual WorkCover levy paid to wages for each financial year. Mr Sander included WorkCover levy in his total of wages, superannuation and WorkCover levy of $50,000 per annum.
The ratios of WorkCover levy to wages for the 2010 and 2013 financial years are as follows:

Year WorkCover levy Wages Ratio

2010 2,776 176,921 1.57%

2011 4,294 242,399 1.77%

2012 3,268 198,398 1.65%

2013 4,036 241,157 1.67%

Average 1.67%

The Commissioner accepts that Mr McClaren’s approach is to be preferred as a more precise measure than Mr Winter’s broader axe approach (although the dollar difference is small).
In the circumstances, I adopt the average WorkCover levy rate of 1.67 percent. This gives a WorkCover levy of $3,602. This gives a total of wages, superannuation and WorkCover levy of $238,709.
Rent adjustments
Each valuer added back the rent actually paid by the Trust to Mr Nelson and subtracted a commercial rent as determined in my previous judgment ($188,050 per annum). The actual rent paid by the Trust to Mr Nelson for the 2010 to 2014 years is shown in the following table.

2010 2011 2012 2013 2014

70,000 25,000 25,000 60,000 Nil

Mr Nelson gave evidence that the rent was only determined after the end of the financial year and was determined in consultation with his accountant by reference in part to the profit generated by the business.
Other expense adjustments
There are five relatively minor expenses in respect of which the valuers adopted different approaches in relation to which they were not cross-examined. In broad terms, Mr Nelson submits that Mr Winter’s approach to these expenses should be adopted; whereas the Commissioner submits that Mr McClaren’s approach should be adopted.
Motor vehicle expense and FBT
The first category is motor vehicle expense and associated fringe benefits tax recovery. Each valuer adopted a different approach.
Mr Winter added back the motor vehicle expense and subtracted the fringe benefits tax contribution income. Mr Sander added back the motor vehicle expense but did not adjust for the fringe benefits tax contribution income. Mr McClaren did not add back the expense or subtract the income.
Mr Nelson submits that Mr Winter’s approach should be adopted. The Commissioner submits that the approach of none of the valuers should be adopted and instead the fringe benefits tax contribution income should be subtracted but there should be no add back of motor vehicle expenses.
There was no motor vehicle expense or fringe benefits tax contribution income for the Business in the 2005 to 2009 years. In the 2010 to 2013 years, there appeared both motor vehicle expenses and fringe benefits tax reimbursement. In the 2010 year, the motor vehicle expense was $10,956 and the contribution income was $5,599. In the 2011 and 2012 years, motor vehicle expense dropped to $8,807 and $6,567 respectively, but the contribution income remained at $5,599. In the 2013 year, motor vehicle expense was $2,743 and the contribution income was $2,117. The notes to the financial statements show that motor vehicle expense comprised interest payable to BMW Finance, repairs and maintenance, registration and insurance and fuel.
Mr Nelson at paragraph 49 of his witness statement said:
The motor vehicle expenses shown in the financial statements comprise a private car provided to an employee with the taxable value of the FBT being reimbursed.
Mr Nelson’s evidence was that most items were collected by customers or, in the case of wood heaters, by the installer. A minority of barbecues and wood heaters were delivered by courier (apparently at the cost of the customer). It appears that no items were delivered in a vehicle owned or paid for by the Business.
I find that the vehicle expenses were private expenses of an employee in respect of a BMW motor vehicle used by the employee for private purposes. As a result, the Business incurred fringe benefits tax, which was reimbursed by the employee. This finding is based on paragraph 49 of Nelson’s witness statement and reinforced by the fact that there was no expense or contribution income in the years up to the 2009 year.
In the circumstances, both the expense and the contribution income should be removed from the financial statements for comparative purposes because they do not represent business income or expense. I accept Mr Winter’s approach.
The Commissioner draws attention to paragraph 53 of Mr Nelson’s witness statement, in which he said that “the expenses shown in the Business’s financial statements are a fair statement of the business use of the private vehicles in the Business”. This paragraph is inconsistent with paragraph 49. Mr Nelson was not cross‑examined in relation to these two paragraphs. In light of the circumstances referred to above, I disregard paragraph 53 of Mr Nelson’s witness statement.
Travel expenses
Mr Winter and Mr Sander both added back travel expenses. Mr McClaren did not add back travel expenses in his first or second reports because in those reports he addressed only the 2013 financial year and there were no travel expenses in that year. However, in his third report Mr McClaren considered the 2010 to 2012 financial years and said that he agreed with Mr Winter that travel expenses should be added back because he considered that they were probably unnecessary and avoidable for the conduct of the Business.
Mr Nelson submits that travel expenses should be added back. The Commissioner submits that they should not.
The financial statements show that travel expenses were sporadic. There were no travel expenses in the 2007, 2009, 2010 or 2013 financial years. Travel expenses in the other years ranged from $1,382 to $12,361.
Mr Nelson in his witness statement said:
All the travel expenses shown in the financial statements of the Business related to the Business.
Although there is no suggestion that Mr Nelson did not actually incur travel expenses for the purpose of the Business, the valuers were unanimous in their opinion that they should be added back as avoidable. I accept that unanimous evidence. Travelling expenses should be added back.
Accounting expenses
Mr Winter added back the excess of accounting expenses over $5,000. Mr Sander and Mr McClaren did not add back any accounting expenses.
Accounting expenses shown in the financial statements were relatively stable between the 2005 and 2009 years at just over $5,000. The aberration was the 2006 year where accountancy expenses were over $12,000. In the 2010 year, accounting expenses were approximately $9,600; in the 2011 and 2012 years, they were approximate $7,900; and in the 2013 year, they were approximate $6,775.
Mr Winter was not cross-examined on why he took a different approach to the other two valuers. I do not have the benefit of an explanation by him for his approach. In the circumstances, I adopt the approach of Mr McClaren and Mr Sander and do not add back an amount on account of accountancy expenses.
Filing fees
Mr Winter added back filing fees. Mr McClaren and Mr Sander did not.
It is agreed that filing fees should be added back.
Donations
Mr Winter added back donations. Mr McClaren and Mr Sander did not.
It is agreed that donations should be added back.
Conclusion
For the purposes of determining the value of the Business, the following adjustments should be made to reported expenses for the 2010 to 2013 financial years:

Expense 2010 2011 2012 2013

Reported expenses $402,341 $457,944 $405,305 $477,553

Addback depreciation -$10,742 -$23,890 -$24,346 -$18,619

Addback financing costs -$5,193 -$5,758
-$10,009
-$8,800

Addback land tax -$10,403 -$12,223 -$10,586 -$12,571

Addback legal expenses -$8,492 -$3,182 -$909

Addback motor vehicle expense -$10,956 -$8,807 -$6,567 -$2,743

Subtract FBT income $5,599 $5,599 $5,599 $2,117

Addback travel expenses -$7,018 -$4,635

Addback filing fee -$467 -$218 -$227 -$300

Addback donations -$54 -$200 -$120

Addback wages -$201,554 -$274,173 -$233,036 -$275,254

Subtract commercial wages $238,709 $238,709 $238,709 $238,709

Addback rent -$70,000 -$25,000 -$25,000 -$60,000

Subtract commercial rent $188,050 $188,050 $188,050 $188,050

Adjusted Expenses $516,838 $529,883 $522,228 $528,142
Relevant years

The valuers gave evidence that it is normal practice in undertaking valuations to have regard to the three most recent complete financial years. However, each valuer in his initial report chose to use the 2013 year alone as the basis for assessing future maintainable earnings. They disregarded the 2014 year as it was obviously affected by the closing down of the Business. They also disregarded the 2011 and 2012 years due to gross profit margin issues.
Gross profit margins
In Mr Winter’s first report, he observed that there were fluctuations in the gross profit percentage achieved between the 2010 and 2014 years which he described as enormous.
The gross profit percentages derived from the profit and loss statements of the Trust for the 2005 to 2014 financial years (adjusted for 2014 as described at [174] below) are shown in the following table:

Year Sales Gross Profit GP %

2005 1,108,557 389,742 35.2

2006 929,274 310,906 33.5

2007 1,054,857 359,436 34.1

2008 1,413,798 389,994 27.6

2009 1,604,324 455,446 28.4

2010 1,615,993 612,936 37.9

2011 1,625,491 546,766 33.6

2012 1,622,599 399,973 24.6

2013 1,401,153 609,796 43.5

2014 573,425 298,248 52.0

Average 33.8

The financial statements for 2014 showed a nil closing stock value. Consequently they showed gross profit of $138,870. This is plainly incorrect. The 2021 stock sheets showed stock at cost of $159,377 inclusive of GST (excluding dead stock). Adding that figure as closing stock to $138,870 gives an adjusted gross profit of $298,248. Although stock figures should have been GST exclusive, it appears from Mr Nelson’s evidence that they were recorded on a GST inclusive basis. To compare like with like, I have used the GST inclusive figure.
Mr Winter drew particular attention to the large difference of 18.8 percentage points between the gross profit percentage in the 2012 year (abnormally low at 24.6 per cent) and the gross profit percentage in the 2013 year (abnormally high at 43.5 per cent). I observe that there was also an abnormally high gross profit percentage in the 2014 year (52.0 per cent) once closing stock is included.
Mr Winter referred to theoretical explanations for fluctuations in gross profit percentages identified by Mr McClaren in his first report. Those theoretical explanations were accounting errors, write-downs of old or obsolete stock, accommodation of timing of purchases, pricing decisions by suppliers and adverse exchange rate movements and discounting to achieve sales. Mr Winter expressed the opinion that these theoretical explanations would not explain such large fluctuations. Leaving aside discounting (addressed below), Mr Nelson’s evidence did not support any of these theoretical explanations.
Mr Winter identified additional theoretical explanations for fluctuations as being incorrect stock valuation, rapid growth of a business in infancy, major restructuring of a business, large capital or non-business expenses being mischaracterised as costs of goods sold or sales being understated. Leaving aside incorrect stock valuation (addressed below), Mr Nelson’s evidence did not support any of these theoretical explanations.
In Mr Nelson’s written witness statement, he addressed the gross profit fluctuation issue identified by Mr Winter. He said that in about 2011 he reduced his day-to-day involvement in the Business and Richard assumed much of the management responsibility for the Business. After a key non-family employee departed in January 2012, Richard experienced personal issues that affected his ability to manage the Business. During that time, Richard and Carlo engaged in excessive discounting and compromised profit margins to make sales. In November 2012, Mr Nelson returned to become fully involved in the Business again and business profitability was increasing.
In Mr Winter’s second report, he expressed the opinion that the gross profit volatility was not the product of excess discounting. He observed that sales had not varied, whereas aggressive discounting usually results in higher sales; aggressive discounting is usually accompanied by aggressive marketing but advertising expenditure was consistent over the period; and the gross profit margin did not normalise after the putative cessation of the discounting but became abnormally high.
Mr Winter expressed the opinion that the reason for the gross profit volatility was inaccurate stocktaking. He observed that the gross profit percentage for the 2014 year (taking into account closing stock) was 52 per cent, which was not only abnormally high but was not credible given that this was a close down year. Mr Winter expressed the opinion that, given the special circumstances applying to that year, it is likely that the actual gross profit percentage was in the region of 25 per cent. To arrive at such a percentage, all other things being equal, it was necessary to increase the opening stock value as at 1 July 2013 from the reported value of $98,444 to the vicinity of $250,000 (giving a gross profit percentage of 25.6 per cent using the rounded figure of $250,000) for the 2014 year.
Mr Winter expressed the opinion that the normal gross profit percentage for the Business was approximately 37 per cent (based on the 2010 year). He expressed the opinion that, if the closing stock value as at 30 June 2013 were adjusted to $250,000, as explained in the previous paragraph, to give a gross profit percentage of approximately 37 per cent for the 2013 year, it was necessary to adjust the opening stock value as at 1 July 2012 from $154,519 to the vicinity of $400,000 (giving 36.8 per cent using the rounded figure of $400,000).
Mr Winter expressed the opinion that, if the closing stock value as at 30 June 2012 were adjusted to $400,000 as explained in the previous paragraph, to give a gross profit percentage of approximately 37 per cent for the 2012 year, it was necessary to adjust the opening stock value as at 1 July 2011 from $182,051 to the vicinity of $236,000 (giving 36.5 per cent).
Mr Winter expressed the opinion that, if the closing stock value as at 30 June 2011 were adjusted to $236,000 as explained in the previous paragraph, this would result in a gross profit percentage of 37 per cent for the 2011 year.
Mr Winter adjusted the gross profit for the 2011 to 2014 years as described above as summarised in the following table.

Year Sales Gross Profit GP %

2010 1,615,993 612,936 37.9

2011 1,625,491 600,716 37.0

2012 1,623,599 591,503 36.5

2013 1,401,153 515,872 36.8

2014 573,426 146,692 25.6

Mr Winter calculated that making these stock value adjustments would have the effects on reported gross profit and net profit shown in the following table.

The Australian Law Reform Commission in its report Land Acquisition and Compensation[56] said:
The concept of special value is, in the decided cases, intertwined with ‘value to the owner’. Properly understood … special value means that additional economic advantage which the owner obtains, by reasons of his ownership or occupation, and which is not reflected in the market value.[57]
[56] Report No 14 (1980).
[57] At [239]. (Citations omitted).
In Director of Buildings and Lands v Shun Fung Ironworks Ltd[58] the Privy Council said:
Land may, of course, have a special value to a claimant over and above the price it would fetch if sold in the open market. Fair compensation requires that he should be paid for the value of the land to him, not its value generally or its value to the acquiring authority. As already noted, this is well established.
…
When a tribunal is determining the amount of the loss sustained by a claimant such as the claimant company, the market perception of the risks attached to the type of business is likely to be of assistance in arriving at an appropriate discount rate. However, this must not lead the Tribunal into the error of equating the amount of the claimant’s loss with the price he could obtain if he sought to sell the future profit stream to an outside commercial investor. Even on the willing seller basis, a prudent landowner running his own business might be prepared to pay more to keep his land and business and the expected profits than would an outside investor to acquire them. He might be prepared to accept a lower rate of return than an outsider who has no personal links with the business. In appropriate circumstances a tribunal may properly recognise this and make a modest allowance accordingly.[59]
[58] [1995] 2 AC 111.
[59] At 125, 134 per Lord Nicholls of Birkenhead, Lord Keith of Kinkel, Lord Mustill, Lord Slynn of Hadley and Lord Lloyd of Berwick.
In Boland v Yates Property Corporation Pty Ltd[60] Gleeson CJ (with whom Gaudron J relevantly agreed) said:
It was established in Pastoral Finance Association Ltd v The Minister, which has been followed in many subsequent cases, that in some circumstances land may have a special value to the owner which exceeds the market value. If, in a given case, it is contended that such special value exists, that also raises an issue for factual judgment…
…
The idea that an item of property may have a value to one person which exceeds the price it would bring if sold to a third party in an open market is not peculiar to this area of discourse. It is also reflected in insurance law and practice, where a distinction is sometimes drawn between the market value of property and its value to an insured.
… Market value, or the amount that would be realised from a sale in a market where the price is agreed by freely contracting parties, provides a measure of value from the perspective, not only of the particular purchaser and vendor, but also of others in the market who are not parties to the particular transaction. Special value to the owner directs attention to the perspective of the vendor. What is insisted upon is that, leaving to one side any claim for damages founded upon the relevant statutory provisions, what is in question is the value of the land or other resumed or acquired asset, not the fixing of compensation for all loss resulting from the resumption or acquisition.[61]
[60] [1999] HCA 64, (1999) 74 ALJR 209.
[61] At [80], [82], [83]. (Citations omitted).
Special value comprises the excess (if any) of the economic value to the owner over the market value; to paraphrase the words of the Australian Law Reform Commission, the additional economic advantage that the owner obtains from ownership or occupation that is not reflected in the market value. The measure of special value (where it exists) is the amount that a prudent purchaser in the position of the owner would be willing to pay to obtain the relevant interest in land rather than fail to obtain it in excess of its market value. This involves a valuation rather than an assessment of damages.
Is the claim open under the Act
The Commissioner contends that the claim is not open under the provisions of the Act.
First, the Commissioner submits that the concept of special value has been recognised in relation to land, but not a business and contends that it has no application to the valuation of a business.
I reject that contention for two reasons. First, the value of the Company’s leasehold interest in the Land is the value of its Business. There is no reason in principle why special value should be applicable in the case of a freehold interest in land but not a leasehold interest in land. Secondly, the concept of special value is derived from the concept that a claimant is entitled to be compensated for the value to the claimant of what the claimant has lost as a result of the acquisition even if that value exceeds the market value of what the claimant has lost.
Secondly, the Commissioner submits that is not unusual for small to medium‑sized businesses to be family owned and employ family members. Any benefit to a prospective purchaser by being able to employ family members will already be encompassed in the market value of the business.
I reject that contention. Each of the valuers valued the Business based on a multiple of EBITDA calculated on the assumption that employees of the business were paid commercial remuneration. The identity of the employees was irrelevant to the valuers’ opinion as to market value. If (hypothetically) the Company obtains some special additional economic advantage by reason of employing family members rather than arm’s length employees, that is reflected in the Business having a higher economic value to the Company than to the hypothetical purchaser, which qualifies as falling within the concept of special value.
Thirdly, the Commissioner submits that special value is a rare thing requiring something exceptional that allows the claimant to derive a special benefit. The Commissioner submits that the employment of family members in a small business is not rare and therefore does not qualify.
I reject that contention. The question of special value does not turn upon an assessment of how rare are the circumstances that give rise to the special value (which would require the application of an arbitrary dividing line in any case) but rather upon the question whether the claimant in fact derives a special benefit giving rise to the business having a higher value to the claimant than its market value.
Fourthly, the Commissioner submits that compensation is not payable for subjective affection, emotional involvement, sentiment or long attachment, citing Bronzel v State Planning Authority[62] and Boland v Yates Property Corporation Pty Ltd.[63] I accept that proposition. However, the claim by the Company is for special economic value and not subjective non-economic matters.
[62] (1979) 21 SASR 513 at 525 per Wells J.
[63] (1999) 74 ALJR 209 at [292] per Callinan J.
Fifthly, the Commissioner submits that the Company is an artificial legal person that has no family, no familial ties and no emotional attachments, even if they were relevant to compensation. The Commissioner submits that accordingly the Business cannot have a special value to the Company merely because it provided long-term employment to members of the Nelson family.
I reject that contention for the same reason as the Commissioner’s previous contention. The Company’s claim for special value is a purely economic claim and the fact that it is a corporate entity rather than an individual is irrelevant.
Sixthly, the Commissioner contends that the market value of the Business already allows for the future income of the Business, capitalised having regard to risk; by the special value claim the Company seeks to be compensated for not being able to devote a portion of its revenue stream to employ Nelson family members. The Commissioner contends that this is a form of impermissible double counting.
I reject that contention. Each of the valuers derived the market value of the Business based on a multiple of EBITDA calculated on the assumption that employees of the Business were paid commercial remuneration. If (hypothetically) the Company obtains some special additional economic advantage by reason of employing family members rather than arm’s length employees that is reflected in the Business having a higher economic value to the Company than to the hypothetical purchaser, that additional (special) value is ex hypothesi not included in the market value of the Business.
The Company cites the decision in Bligh v Minister Administering Environmental Planning and Assessment Act[64] as authority recognising the concept of special value to an owner of a business by reference to their ability to employ family members. In that case, Biscoe J awarded compensation of 25 per cent of the market value of Erolhold Pty Ltd’s piggery/meat processing and wholesaling business conducted on the acquired land as special value due to factors personal to its owners, the Bligh brothers, one of which was the ability to employ family members in the business. Biscoe J said:
[64] [2011] NSWLEC 220.
In my opinion, the business has a special value, meaning a financial advantage to Erolhold, by reason of the fact that David and Richard Bligh are its only shareholders and directors and its principal employees.
In coming to that conclusion, I have had regard to the following;
(a) Both men are employed by the company.
(b)As employees and directors, they are able to determine their salary and what funds they or the company will pay into their respective superannuation funds and, in that way, take advantage of benefits available to them.
(c)Other members of the Bligh family are employed in the business. The business records show that substantial payments are made by the business to their respective superannuation funds representing an advantage to those persons, which will reflect favourably on David and Richard Bligh.
(d)It is reasonable to expect that the four other Bligh family members will have a greater sense of loyalty to the business, indicating that staff turnover can be expected to be very low. In addition, because of the family connection, they can be regarded as more trustworthy and prepared to do anything reasonably possible to promote the business and enhance its profitability, including attending to after hours duties when necessary.
(e)Richard Bligh lives at 171 Bringelly Road immediately adjacent to the processing plant, while David Bligh lives at 177 Bringelly Road in a comparatively new home directly opposite the processing plant and within 40 metres of same. By residing on site both men are able to provide after hours security and by being in contact with each other they can ensure that one of them is on the premises at all times. For this reason, engagement of outside security personnel is not required. No expenditure on security personnel is recorded in any of the financial statements.
(f)Convenience to work, especially when after hours activities are necessary and the ability to return home during the day, for whatever reason, has to be regarded as an advantage.
(g)If the business were sold, the brothers would lose control over the activities of the business which may, impact upon their lifestyle and enjoyment of their homes. The business conducted by them has a very good record of low or minimal impact on adjacent properties, which may not continue in different ownership.
(h)Holidays by the brothers can be managed to ensure that there is always one on site at any time. This occurred some years ago when extended leave was taken by each brother at separate times.
(i)The brothers are at an age when they may not be contemplating seeking employment when the business was sold and may, because of their very specialised experience, find it hard to obtain meaningful and rewarding work. The benefits of being able to remain as employees of Erolhold and manage their own affairs through superannuation payments must be regarded as an advantage.
(j)It appears inevitable that rezoning of the land for residential purposes will occur at some, at this stage, indefinite date. Obviously, a hypothetical purchaser of the business at market value would require a lease of some years. Agreeing on the term of lease may impact upon the ability of the brothers to take advantage of the zoning change and, at worst, may involve them in making a payment to the purchaser of the business to terminate the lease at a date largely beyond their control. Therefore, there is an advantage to them in running the business through Erolhold on their own land, which has a financial value over and above the market value of the business.
The quantification of the financial advantage is a matter of judgment and is difficult to assess. I have come to the conclusion that having regard to the market value of the business, which I have already determined, the financial advantage should be assessed at 25 per cent of market value.[65]
[65] At [138]-[140].
Of the ten matters listed in the middle paragraph reproduced above, the only relevant matter is (i). Ultimately, Biscoe J made a collective assessment in respect of all ten matters that they gave rise to special value. I do not comment on the other nine matters or on whether there appears from the judgment to have been an evidentiary basis for a finding that, by reason of those factors, a prudent person in the position of Erolhold would have paid more than market value for the business or that the special value was equal to 25 per cent of the market value. The inclusion of paragraph (i) provides support, as a matter of principle, for the Company’s contention as a matter of principle in respect of special value.
The Commissioner cites the decision in Monti v Roads and Maritime Services (No 4)[66] as authority against recognition of the concept of special value to an owner of a business by reference to their ability to employ family members. In that case, the three Monti brothers carried on a quarrying business in partnership on land owned by them. They each worked in the quarrying business but were not paid wages; rather, their remuneration was obtained solely by way of profits of the partnership. They argued that, because the market value of their business was assessed after allowing for commercial wages, payment of the market value would not compensate them for the value of their labour for which they were unpaid. This was an entirely different contention to that advanced by the Company in the present case (or by Erolhold in Bligh v Minister Administering Environmental Planning and Assessment Act). No reference was made to any difficulty in the Montis earning alternative remuneration after the acquisition or the effect of this on the value to the owner. Unsurprisingly, Pepper J rejected the special value claim, giving four reasons for doing so. This decision is not of assistance on the present issue.
[66] [2019] NSWLEC 11.
In conclusion, as a matter of principle, the Company’s claim is open under the Act. However, it is significant that the only case in which compensation has been awarded for special value by reason of the employment of family members (to the extent that it was one factor in ten) is Bligh v Minister Administering Environmental Planning and Assessment Act. This no doubt reflects the fact that generally it will be difficult for a claimant to prove the existence and quantum of special value of the type claimed by the Company.
Merits of the claim
Relatively little evidence was adduced by the Company in support of this claim.
In his written witness statement, Mr Nelson said that in 2015 Mechelle completed an Early Childhood Certificate 3 Course at TAFE SA. She then worked for three to four weeks at a childcare centre. From September 2015 onwards she worked in a child care centre three to five days per week casually on call.
In his written witness statement, Mr Nelson said that, after closure of the Business, Carlo undertook volunteer work for approximately two years (during which time he was not employed). Since 2016 he has been employed as the manager of a bottle department.
In his written witness statement, Mr Nelson said that Mechelle and Carlo enjoyed working in the Business and he expressed the belief that, but for the acquisition, they would still be working in the Business.
Neither Mechelle nor Carlo gave evidence. It is true that Mr Nelson was the directing mind and will of the Company, the issue is whether there was an additional value to the Company of the Business by reason of continuing employment of Mechelle and Carlo and this is to be determined prospectively as at the time of the acquisition. However, in the absence of evidence from them, I do not have a clear evidentiary basis to assess the desirability of Mechelle and Carlo continuing in employment by the Company.
Mr Nelson himself did not give evidence that he, as the directing mind and will of the Company, would have been prepared to pay an additional amount, in excess of market value, for the Business to obtain the continuing employment of Mechelle and Carlo. The Company did not adduce evidence that satisfies me that a prudent person in the position of the Company would have paid an additional amount.
In addition, the Company formulates the quantum of its claim by reference to the wages that it would have paid to Mechelle and Carlo for nine months after June 2014 but for the acquisition, discounted by risk factors and for present value. That is not the appropriate measure of a special value claim. As identified above, the measure of a special value claim is the difference between the amount that a prudent person in the position of the owner would have paid over market value to obtain the Business. This involves valuation as opposed to an assessment of damages.
The Company did not adduce valuation evidence in this respect. Mr McClaren performed exactly the same type of calculation in respect of wages and superannuation for Mechelle and Carlo as he performed for the claim by Mr Nelson addressed above in relation to wages and superannuation. He did not express the opinion that a prudent purchaser in the position of the Company would have paid that amount over market value to obtain the Business. Self‑evidently, he did not produce reasoning to support such an opinion.
The Company’s special value claim in respect of the employment of Mechelle and Carlo is not established.
My understanding is that ultimately the Company does not advance a special value claim in respect of the employment of Mr Nelson; rather, Mr Nelson advances his own claim for loss of future wages and superannuation which I have addressed above. However, any claim by the Company for special value in respect of the employment of Mr Nelson is not established for essentially the same reasons as in respect of Mechelle and Carlo.
Losses in 2014 year
Mr Nelson claims the following losses said to have been suffered in the 2014 year as a result of the acquisition:
1the market rent treated as payable by the Company to Mr Nelson in the calculation of future maintainable earnings pro rated to 13 March 2014 ($126,793); and
2the difference between the commercial wage and superannuation treated as payable by the Company to Mr Nelson as manager in the calculation of future maintainable earnings for the 2014 year ($68,016) and the actual wage paid to Mr Nelson for that year ($25,546), pro rated to 13 March 2014 ($29,904).
I have already taken into account the difference between market rent and market wages and superannuation for Mr Nelson and the actual amounts paid during the 2014 year for rent and wages and superannuation for Mr Nelson in assessing the amount of the Company’s claim for loss of profit during the 2014 year. It would be double counting to award any amount in favour of Mr Nelson on account of these matters.
Rates and taxes

Mr Nelson claims $3,955.34 being a portion of rates and taxes on the Land that he paid allocated to the period from 11 March to 30 June 2014 when the Land was owned by the Commissioner.
The claim comprises:
1land tax $1,761.96 being 110/365 of the single holding annual liability of $5,847;
2council rates for 1 April to 30 June 2014 of $1,587.45; and
3water and sewerage charges for 1 April to 30 June 2014 of $605.93.
The Commissioner concedes the claim for council rates on the basis that the rate notice for the last quarter of the 2014 financial year was not issued until April 2014; by that time the Commissioner was the owner of the Land and the “principal ratepayer” within the meaning of section 178 of the Local Government Act 1999 (SA); Mr Nelson was not the “principal ratepayer” when he paid those rates; and Mr Nelson has a statutory entitlement under subsection 178(8) to recover the amount from the Commissioner as principal ratepayer.
The Commissioner disputes the claims for land tax and water and sewerage charges.
Land tax
Land tax is imposed by the Land Tax Act 1936 (SA) generally in respect of land in the State[67] on the “owner” of the land,[68] which includes the legal owner of the fee simple.[69] It is imposed in respect of a financial year ending on 30 June. Liability to the tax arises at the commencement of the financial year.[70]
[67] Land Tax Act 1936 (SA) section 4(1).
[68] Land Tax Act 1936 (SA) sections 14 and 16.
[69] Land Tax Act 1936 (SA) subsection 2(1) definition of “owner”.
[70] Land Tax Act 1936 (SA) section 4(2).
Subsections 4(1) to (3) relevantly provide:
4—Imposition of land tax
(1) Taxes are imposed on all land in the State, with the following exceptions:
…[71]
(2)The taxes are imposed and payable in respect of every financial year and liability to the taxes arises at the commencement of every financial year.
(3)The taxes so imposed for a particular financial year will, subject to this Act, be calculated as at midnight on 30 June immediately preceding that financial year on the basis of circumstances then existing.
[71] Exceptions omitted.
Land tax for the 2014 financial year was imposed in respect of the Land for and in respect of the entire financial year but the liability to pay was imposed on 1 July 2013 at the commencement of the financial year.
Mr Nelson was awarded compensation for the market value of the Land which I assessed at $2,330,000.[72] However, if Mr Nelson had sold the Land on the open market, he would have been entitled to receive payment by the purchaser of a pro rata amount of the land tax that he had paid referable to the period after transfer of title to the Land, namely between 14 March and 30 June 2014. I make that finding based on the terms of the standard Law Society of South Australia sale of land contract, which was tendered by Mr Nelson, and by taking judicial notice that it is an almost universal term of contracts for the sale of commercial land that land tax is adjusted in this matter.
[72] Nelson v Commissioner of Highways [2020] SASC 109.
Mr Nelson was deprived by the compulsory acquisition of recovering a pro rata contribution to the land tax that he had paid. In addition, in return for paying land tax for the whole year, Mr Nelson was entitled to quiet enjoyment of the Land without interference by the Commissioner of Land Tax. He did not receive that benefit of the payment in respect of the period from 14 March and 30 June 2014. He is entitled to recover the pro rata amount as compensation for the loss that he suffered by reason of the acquisition of the Land pursuant to section 25(1)(a) of the Act.
Mr Nelson is entitled to recover $1,761.96 compensation in respect of land tax.
SA Water charges
The Commissioner contends that the supply of water and sewerage infrastructure and services by SA Water to Mr Nelson and his liability to pay charges to SA Water arose as a matter of contract rather than statutory obligation, albeit the terms of the contract may be standard terms and conditions fixed by SA Water under section 36 of the Water Industry Act 2012 (SA).
The Commissioner contends that the charges imposed by SA Water represent payment by a consumer for services provided by a provider and are therefore not recoverable as compensation from the Commissioner. I reject that contention for two reasons.
First, as in the case of land tax, if Mr Nelson had sold the Land voluntarily, he would have been entitled to recover from the purchaser a pro rata contribution to the charges imposed by SA Water in respect of the period from 14 March to 30 June 2014. He was deprived by the compulsory acquisition of such recovery.
Secondly, Mr Nelson paid for infrastructure provided by SA Water in respect of the period from 14 March to 30 June 2014, being the water reticulation system making water available on demand and the sewerage disposal system making the disposal of sewage available on demand. He was deprived by the compulsory acquisition of the benefit for which he had paid.
The charges by SA Water comprise:
·a water supply charge for making water available on demand, being a fixed charge regardless of whether water is taken;
·a water usage charge being a variable charge per kilolitre for water taken; and
·a sewage disposal charge, being a fixed charge regardless of whether or how much sewerage is discharged into the sewer system.
Mr Nelson does not seek compensation from the Commissioner in respect of the water usage charge.
The Commissioner contends that Mr Nelson should not recover compensation for the water supply charge or sewage disposal charge in respect of the period from 14 March to 13 June 2014 because the Business had the benefit of the provision of those services by SA Water. The Commissioner contends that Mr Nelson should only recover compensation for these charges (if at all) in respect of the period from 14 June to 30 June 2014.
I accept the Commissioner’s contention. There is no material distinction between the water usage charge and the water supply charge. Both charges are imposed in return for SA Water making available the supply of water. There is no material distinction between the two water charges and the sewerage disposal charge. The sewerage disposal charge is imposed in return for SA Water making available the sewerage disposal system. The position is analogous to the supply of electricity where the retail supplier charges a fixed charge for making electricity supply available on demand and a variable charge for the electricity actually taken. It is true that the sewerage disposal charge is calculated by SA Water by reference to the value of the property, rather than being fixed in the manner of the water supply charge, but this is not a material difference for present purposes.
Upon acquisition of the Land, the Commissioner could have terminated the supply of water and sewerage services by SA Water. The only reason that the Commissioner did not do so was that Mr Nelson and the Company needed the continuation of those services for the Business to continue to trade. There is no basis for them to recover from the Commissioner the cost of those services in respect of the period from 14 March to 13 June 2014.
Mr Nelson is entitled to recover compensation in respect of SA Water charges in respect of the period 14 June to 30 June 2014 in the amount of $106.56.
Conclusion
Mr Nelson is entitled to recover compensation in respect of rates and taxes paid in respect of the period after 13 March 2014 totalling $3,455.97.
Time spent
Mr Nelson claims $20,910[73] as the value of time spent by him as a consequence of the acquisition.
[73] In his second witness statement Mr Nelson claimed $28,710 including for time spent searching for alternative sites up to December 2015. However, in closing address he accepted that the claim for that time should be up to December 2014.
The claim is for 697[74] hours at $30 per hour. The time claimed to have been spent comprises:
1time spent performing the 2021 stocktake comprising an estimated 30 hours spent by Mr Nelson and an estimated 12 hours spent by Carlo;
2time spent closing the Business and sorting and dumping items comprising an estimated 160 hours spent by Mr Nelson;
3time spent in assisting and supervising the movement of stock from the Land to the Beverley warehouse comprising an estimated 50 hours spent by Mr Nelson;
4time spent in discussions with the Department, Badge Constructions, valuers, the Council and the Ombudsman comprising an estimated 60 hours spent by Mr Nelson; and
5time spent searching for alternative sites for the Business between July 2013 and December 2014[75] comprising an estimated 385 hours spent by Mr Nelson on the basis of an estimated five hours per week.
[74] In his second witness statement Mr Nelson claimed 957 hours including for time spent searching for alternative sites up to December 2015. However, in closing address he accepted that the claim for that time should be up to December 2014.
[75] In his second witness statement Mr Nelson claimed 645 hours spent searching for alternative sites up to December 2015 at five hours per week. However, in closing address he accepted that the claim for that time should be up to December 2014.
The Commissioner contends that Mr Nelson is not entitled to compensation for some of the items of time spent, has not proved the time spent in respect of other items and is not entitled to compensation at a rate of $30 per hour. The Commissioner accepts that Mr Nelson is entitled to total compensation in respect of time spent of $10,000 based on a broad axe assessment.
In relation to the 2021 stocktake, I accept the Commissioner’s submission that, because Carlo is not a claimant and there is no evidence that he was paid by the Company or Mr Nelson for working on the stocktake, compensation cannot be recovered for his time working on the stocktake. I am not persuaded that the stocktake should have been performed before the stock was moved from the Land on closure of the Business. However, it should have been performed shortly after the stock was moved to the Beverley warehouse. If it had been performed then, it should have been completed in substantially less time than was ultimately devoted.
In relation to time spent closing the Business, Mr Nelson gave no evidence explaining when this time was spent or how the number of hours, being 160 hours, was calculated. Given the paucity of evidence, it is difficult to assess this claim.
In relation to time spent on the movement of stock to the Beverley warehouse, I accept that in principle compensation should be awarded for this time. However, Mr Nelson gave no evidence explaining how the number of hours, being 50 hours, was calculated. Again, it is difficult to assess this claim.
In relation to time spent in discussions with the Department, Badge Constructions, the Council, the Ombudsman and valuers, I accept the Commissioner’s submission that compensation is not recoverable for time spent in discussions with the Council or the Ombudsman. Mr Nelson gave no evidence about the number of hours spent in discussions with the Department, Badge Constructions or valuers or explaining how the number of hours, being 60 hours, was calculated. It appears that his only discussion with valuers (other than in the course of this proceeding) would have been his discussion with Mr Sander in 2014. Again, given the paucity of the evidence, it is difficult to assess this claim.
In relation to time spent searching for alternative sites for the Business, I have found above that Mr Nelson did not begin seriously searching for alternative sites until September 2013. In his witness statement, he said that he continued searching intensively for alternative sites until late 2014. However, he claimed for time spent at the rate of five hours per week until December 2015. I find that this is a typographical error and should be December 2014. Mr Nelson did not explain how he arrived at his estimate of five hours per week.
In the circumstances, it is not possible other than to make a broad axe assessment in respect of time spent as submitted by the Commissioner.
Mr Nelson claims compensation for time spent at the rate of $30 per hour based on a manager’s wage. However, when he spent that time, he was not employed. It is not appropriate to award compensation based on his manager’s rate of remuneration. However, Mr Nelson should not recover nothing for time spent because he was not employed and did not forego remuneration as a result of the time spent. The position is analogous to a witness fee which is payable to a witness for time spent giving evidence even if the witness is not employed. It is appropriate to adopt a rate of $20 per hour for an owner who is not employed.
My broad axe assessment is that it is appropriate to award compensation for time spent in the amount of $10,000 conceded by the Commissioner. Mr Nelson has not justified an award for any greater amount.
Conclusion
The Company is entitled to compensation totalling $269,972.73, comprising the following elements:
·market value of the Business less stock and equipment $106,305
·closing down costs  $37,749.73
·stock warehousing  $19,042
·2014 year loss of profit  $106,876.
Mr Nelson is entitled to compensation totalling $13,455.97, comprising the following elements:
·rates and taxes $3,455.97
·time spent $10,000.
I will hear the parties concerning the final orders to be made.

Item	McClaren	Sander	Winter
Reported Net Profit	$134,361	$134,361	$134,361
Addback depreciation	$18,619	$18,619	$18,619
Addback financing costs	$8,800	$8,800	$8,800
Addback land tax	$12,571	$12,571	$12,571
Addback motor vehicle	$4,136	$2,742
Addback accounting	$1,775
Addback filing fee	$300
Addback wages costs	$271,219	$249,271	$275,254
Less commercial wages costs	-$170,100	-$175,000	-$254,883
Addback rent	$60,000	$60,000	$60,000
Less commercial rent	-$188,050	-$188,050	-$188,050
FUTURE MAINTAINABLE EARNINGS	$147,419	$124,708	$69,372
CAPITALISATION RATE	33.34%	37.5%	42%
BUSINES VALUE	$442,166	$332,555	$165,171

2010 year
Item		McClaren	Sander		Winter
Reported Net Profit		$216,194	$216,194		$216,194
Addback depreciation		$10,742	$10,742		$10,742
Addback financing costs		$5,193	$5,193		$5,193
Addback land tax		$10,403	$10,403		$10,403
Addback legal expenses		$8,492	$8,492		$8,492
Addback motor vehicle		$9,572		$10,956
Addback accounting		$4,608
Addback filing fee		$467
Addback donations		$54
Addback wages costs		$201,554	$147,090		$201,554
Less commercial wages costs		-$197,723	-$175,000		-$254,883
Addback rent		$70,000	$70,000		$70,000
Less commercial rent		-$188,050	-$188,050		-$188,050
Adjusted Profit		$136,805	$114,636		$90,131
2011 year
Item	McClaren			Sander		Winter
Reported Net Profit	$148,371			$148,371		$148,371
Addback depreciation	$23,890			$23,890		$23,890
Addback financing costs	$5,758			$5,758		$5,758
Addback land tax	$12,223			$12,223		$12,223
Addback legal expenses	$3,182			$3,182		$3,182
Addback motor vehicle	$10,373		$8,807
Addback travel expense	$7,018			$7,018
Addback accounting	$2,924
Addback filing fee	$218
Addback donations	$200
Addback wages costs	$274,173			$200,886		$274,173
Less commercial wages costs	-$198,103			-$175,000		-$254,883
Addback rent	$25,000			$25,000		$25,000
Less commercial rent	-$188,050			-$188,050		-$188,050
Adjusted Profit	$113,462			$66,633		$63,232
2012 year
Item		McClaren	Sander		Winter
Reported Net Profit		$191,794	$191,794		$191,794
Addback depreciation		$24,346	$24,346		$24,346
Addback financing costs		$10,009	$10,009		$10,009
Addback land tax		$10,586	$10,586		$10,586
Addback legal expenses		$909	$909		$909
Addback motor vehicle		$5,983		$6,566
Addback travel expense		$4,653	$4,653
Addback accounting		$2,941
Addback filing fee		$227
Addback donations		$120
Addback wages costs		$233,036	$148,306		$233,036
Less commercial wages costs		-$197,723	-$175,000		-$254,883
Addback rent		$25,000	$25,000		$25,000
Less commercial rent		-$188,050	-$188,050		-$188,050
Adjusted Profit		$114,492	$53,883		$61,637

Employee	2010	2011	2012	2013	2014
Mr Nelson	52,000	53,000	19,000	53,764	13,096
Mechelle	2,500	29,650	34,620	53,764	20,096
Richard	47,088	50,316	36,922	27,616	4,000
Carlo	26,500	38,012	35,838	58,552	18,096
Benjamin	7,390	27,647	3,308
Total family	128,088	178,768	126,380	221,343	58,596
Arm’s length	48,833	64,031	72,018	19,814
Total wages	176,921	242,399	198,398	241,157	58,596
Superannuation	21,857	27,480	31,371	30,062	25,256
WorkCover	2,776	4,294	3,267	4,036	3,458
Total	201,554	274,173	233,036	275,255	87,310

Position	FTE annual wage[18]	Hours per week	% of full time[19]	Annual wage plus super
Manager	$59,144	46	1.15	$68,016
Office/bookkeeping	$49,878	20	0.5	$24,939
Sales/warehouse	$49,878	46	1.15	$57,360
Sales/warehouse	$49,878	45	1.125	$56,113
Sales/warehouse	$49,878	40	1.0	$49,878
Total	197	4.925	$256,306

Position	FTE annual wage[21]	Hours per week[22]	% of full time	Annual wage
Manager/purchasing/sales	$55,000	40	1.0	$55,000
Office/bookkeeping	$55,000	20	0.5	$27,500
Sales	$50,000	24	0.6	$30,000
Warehousing	$45,000	32	0.8	$36,000
Total	116	2.9	$148,500

Position	FTE annual wage[23]	Hours per week[24]	% of full time	Annual wage
Manager/purchasing/sales	$60,300	40	1.0	$60,300
Office/bookkeeping	$44,400	20	0.5	$22,200
Sales	$54,750	32	0.8	$43,800
Warehousing	$54,750	32	0.8	$43,800
Total	124	3.1	$171,100

Position	FTE annual wage[25]	Hours per week	% of full time[26]	Annual wage
Manager/purchasing/sales	$65,700	40	1.0	$65,700
Office/bookkeeping	$56,667	12	0.3	$17,000
Sales	$48,649	45	1.125	$54,730
Warehousing	$50,791	45	1.125	$57,140
Total	142	3.55	$194,570

Position	FTE annual wage	Hours per week	% of full time	Annual wage & super
Manager	$59,144	46	1.15	$68,016
Office/bookkeeping	$49,878	20	0.5	$24,939
Sales/warehouse	$49,878	40	1.0	$49,878
Sales/warehouse	$49,878	40	1.0	$49,878
Sales/warehouse	$49,878	34	0.85	$42,396
Total wages and super	180	4.5	$235,107
Total wages	$215,695
Total super	$19,412

Year	WorkCover levy	Wages	Ratio
2010	2,776	176,921	1.57%
2011	4,294	242,399	1.77%
2012	3,268	198,398	1.65%
2013	4,036	241,157	1.67%
Average	1.67%

Expense	2010	2011	2012	2013
Reported expenses	$402,341	$457,944	$405,305	$477,553
Addback depreciation	-$10,742	-$23,890	-$24,346	-$18,619
Addback financing costs	-$5,193	-$5,758	-$10,009	-$8,800
Addback land tax	-$10,403	-$12,223	-$10,586	-$12,571
Addback legal expenses	-$8,492	-$3,182	-$909
Addback motor vehicle expense	-$10,956	-$8,807	-$6,567	-$2,743
Subtract FBT income	$5,599	$5,599	$5,599	$2,117
Addback travel expenses	-$7,018	-$4,635
Addback filing fee	-$467	-$218	-$227	-$300
Addback donations	-$54	-$200	-$120
Addback wages	-$201,554	-$274,173	-$233,036	-$275,254
Subtract commercial wages	$238,709	$238,709	$238,709	$238,709
Addback rent	-$70,000	-$25,000	-$25,000	-$60,000
Subtract commercial rent	$188,050	$188,050	$188,050	$188,050
Adjusted Expenses	$516,838	$529,883	$522,228	$528,142

Year	Sales	Gross Profit	GP %
2005	1,108,557	389,742	35.2
2006	929,274	310,906	33.5
2007	1,054,857	359,436	34.1
2008	1,413,798	389,994	27.6
2009	1,604,324	455,446	28.4
2010	1,615,993	612,936	37.9
2011	1,625,491	546,766	33.6
2012	1,622,599	399,973	24.6
2013	1,401,153	609,796	43.5
2014	573,425	298,248	52.0
Average	33.8