NEW SOUTH WALES. Resumption-Land-Acquisition by Commonwealth-Large office building-Lease-
hold interest in building-Coffee-lounge business-Tenants permitted to remain in possession for a period-Compensation-Principles-Goodwill-Local not SYDNEY,
The respondents were lessees of a room in a large office building in which, July 1.
since 1937, they had carried on the business of a coffee lounge. The coffee lounge was conveniently situated in a busy area and was patronized by occupants of, and persons using, the building. On the expiration of the lease, a further lease was granted to the respondents for a period of three years from 1st November 1942, and it contained a provision that should the respon- dents remain in possession after its expiration they should do so as tenants from month to month at a stated monthly rental. On 8th November 1945, the Commonwealth resumed the whole of the land occupied by the building. The respondents remained in possession and by the payment of rent to and the receipt of it by the Commonwealth, became monthly tenants of the Commonwealth until October 1946 when they went out of possession. The respondents claimed compensation under the Lands Acquisition Act 1906- 1936 for the interest of which the resumption had deprived them.
Held that compensation for the interest resumed should be based on the fact that the goodwill was local, not personal, and therefore attached to the
The principles of assessing compensation applicable where a tenant's interest in the land resumed is taken or extinguished, discussed.
Decision of the Supreme Court of New South Wales (Full Court) Reeve and Another v. The Commonwealth of Australia, (1948) 49 S.R. (N.S.W.) 242, affirming the decision of Owen J., (1948) 65 W.N. (N.S.W.) 262, affirmed.
In May 1937, Mrs. Rose Reeve became a sub-tenant of one Priest of room No. 2 on the ground floor of a large building, referred to as the Grace Building, which was situate on a piece of land fronting King Street, York Street and Clarence Street, Sydney, and which contained many suites of offices. Mrs. Reeve conducted a coffee shop or lounge in room No. 2 which was patronized by persons employed in the Grace Building or in the vicinity, or who visited the building. In September 1939, her daughter, Dorothy Mavis Reeve, became her partner in the business. The sub-lease from Priest expired in October 1939 and Mrs. Reeve and her daughter then became the tenants of Grace Bros. Pty. Ltd., the owner of the building, under a lease for three years from 31st October 1939. On its expiration they obtained a further lease in respect of the room for three years from 1st November 1942, at a rental of £416 per annum payable at the rate…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
The Commonwealth v Reeve [1949] HCA 22
Case
[1949] HCA 22
Decision Date
CaseChat Overview and Summary
The Commonwealth appealed to the High Court of Australia from a decision of the Full Court of the Supreme Court of New South Wales, which had affirmed a compensation award made by Owen J. The respondents, Mrs. Rose Reeve and her daughter Dorothy Mavis Reeve, were monthly tenants of a room in the Grace Building, Sydney, where they operated a coffee lounge. The Commonwealth resumed the land on which the building stood, thereby extinguishing the respondents' tenancy. The respondents claimed compensation under the Lands Acquisition Act 1906-1936 for the interest of which they had been deprived.
The central legal issue before the High Court was the correct principle for assessing compensation payable to a tenant whose leasehold interest is extinguished by a compulsory acquisition. Specifically, the court had to determine whether the value of the business conducted on the premises, particularly its goodwill, should be included in the compensation awarded for the extinguished tenancy, and if so, how it should be valued. The Commonwealth argued that compensation should be limited to the value of the land interest itself, and that the value of the business, including its goodwill, was not a compensable loss. The respondents contended that the goodwill of their coffee lounge business was local, attached to the premises, and therefore formed part of the value of their leasehold interest.
The High Court, in affirming the decision of the lower courts, held that compensation for a resumed leasehold interest should reflect the value of that interest to the tenant, which can include considerations of the business conducted on the premises. The court reasoned that the suitability of the premises for a particular business, and the potential for profit derived from that use, are factors that contribute to the market value of the tenancy. This is not because the acquiring authority is liable for the loss of the business itself, but because these factors enhance the value of the land interest to the tenant. The court acknowledged that while the goodwill of a business is distinct from the land, a local goodwill that is attached to the premises can increase the value of the leasehold interest. The court found that the respondents' monthly tenancy, particularly given the protection afforded by the National Security (Landlord and Tenant) Regulations, had a special value due to its location and suitability for the coffee lounge business, and that this value was properly reflected in the compensation awarded.
The High Court dismissed the appeal, upholding the compensation award of £1,250. This amount was based on the valuation of the respondents' leasehold interest, which included an assessment of the value of their coffee lounge business, particularly its local goodwill, as a factor contributing to the value of the tenancy. The court found that while the evidence regarding the precise calculation of the business's value had some unsatisfactory features, the overall valuation was a matter of opinion that had been considered and approved by two lower courts, and therefore would not be disturbed.