Transport for NSW v Eureka Operations Pty Ltd

Transport for NSW (the acquiring authority) appealed and Eureka Operations Pty Ltd (the lessee) cross-appealed from a decision of the Land and Environment Court concerning compensation payable for the compulsory acquisition of part of a leased property. The property was used by Eureka Operations for a service station and convenience store business. The dispute centred on the valuation of the acquired land and the diminution in value of the remaining land (the residue), and specifically, the appropriate methodology for assessing compensation.

The primary legal issues before the Court of Appeal were whether the Land and Environment Court had erred in its valuation methodology, particularly concerning the assessment of the diminution in cash flow of the business, and whether the court had correctly considered an equitable term of the lease for its extension. The appeal also raised a question of law regarding the valuation method adopted by the primary judge.

The Court of Appeal, in its reasoning, considered the "before and after" approach to valuation, which involves assessing the value of the land before the acquisition and then its value after the acquisition, including the value of the residue. The court determined that the primary judge's valuation methodology, which included an assessment of the diminution in cash flow of the business, was permissible. However, the court found that the primary judge had erred by not adequately accounting for an equitable term of the lease, which provided for an extension of the lease until 2 February 2029, subject to certain termination provisions.

Consequently, the Court of Appeal dismissed Transport for NSW's appeal but allowed Eureka Operations' cross-appeal. The proceedings were remitted to the Land and Environment Court for redetermination of the compensation, with specific regard to the extended lease term.