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Supreme Court of New South Wales - Court of Appeal

Roads and Maritime Services v Allandale Blue Metal Pty

Ltd [2016] NSWCA 7 (9 February 2016)

Last Updated: 9 February 2016

Court of Appeal

Supreme Court
New South Wales

Case Name: Roads and Maritime Services v Allandale Blue Metal Pty Ltd
Medium Neutral Citation: [2016] NSWCA 7
Hearing Date(s): 30 September and 1 October 2015
Decision Date: 9 February 2016
Before: Basten JA at [1];

Ward JA at [75];

Sackville AJA at [76]

Decision: (1) Allow the appeal in part and set aside order (1) made
by
Pain J on 24 March 2015.

(2) In place
thereof, determine that the compensation
payable by Roads and Maritime Services
to Allandale Blue
Metal Pty Ltd pursuant
to the Land Acquisition (Just Terms
Compensation) Act 1991 be the sum of
$3,115,171.

 (3) Order that the appellant pay 80%

of the respondent’s
costs of the proceedings in this Court.
Catchwords: APPEAL – grounds – question of law – factual finding not
challengeable where some evidence available and finding
reasonably open –
Land and Environment Court Act 1979
(NSW), s 58

ENVIRONMENT AND
PLANNING – acquisition of land –
compensation – whether
compensation payable to owner of
acquired
land should be reduced on account of
payment to
lessee – whether owner’s interest in fee simple qualified
by
expectation
that the lessee would have continued to exploit
the quarry on the
land – whether lessee’s compensable
interest exceeds
the market
value of its monthly tenancy

ENVIRONMENT AND PLANNING –

acquisition of land –
valuing residual land – whether loss of value
caused by
carrying
out purpose of acquisition – when calculation to be
undertaken

STATUTORY INTERPRETATION – statutory provision for

compensation on just terms – whether expression of
elements of
compensation
varies effect of general law
principles

WORDS AND
PHRASES – “market value” – Land
Acquisition (Just Terms
Compensation) Act 1991 (NSW), s
55, s 56; “special value of the
land” - Land Acquisition (Just
Terms Compensation) Act 1991 (NSW), s
55(b); “loss
attributable to disturbance” – Land Acquisition
(Just Terms
Compensation) Act 1991 (NSW), s 55(d), s 59
Legislation Cited: Conveyancing Act 1919 (NSW), s 88E

Environmental Planning and Assessment

Act 1979 (NSW), s
115B

 Land Acquisition (Just Terms Compensation) Act 1991

(NSW), ss 4, 55, 56, 57, 58, 59, 61

Land and Environment Court Act 1979

(NSW), ss 19, 24, 57

Public Works Act 1900 (NSW), s 117

Roads Act
1993 (NSW), ss 10, 46, 49
Cases Cited: EL Boustani v The Minister administering the Environmental
Planning and
Assessment Act 1979 [2014] NSWCA 33; 199
LGERA 198

George D Angus Pty Ltd v

Health Administration
Corporation [2013] NSWLEC 212

Health Administration
Corporation v George D Angus Pty
Ltd (2014) 88 NSWLR 752; [2014] NSWCA
352

Housing Commission of New South Wales v Falconer [1981]

1 NSWLR 547

In
re Lucas and the Chesterfield Gas and Water Board
(1909) 1 KB 16

Knight v
Rosshaven Marine Pty Ltd [1992] QCA 290

Leichhardt Council v Roads &

Traffic Authority (NSW) [2006]
NSWCA 353; (2006) 149 LGERA 439

Minister for
Aboriginal Affairs v Peko-Wallsend Ltd [1986]
HCA 40; (1986) 162 CLR 24

Roads & Traffic

Authority of New South Wales v Peak [2007]
NSWCA 66

Spencer v The
Commonwealth [1907] HCA 82; (1907) 5
CLR 418

The Minister v New South Wales Aerated Water

and
Confectionary Co Ltd [1916] 22 CLR 57

Tolson v Roads and Maritime

Services [2014] NSWCA 161;
 201 LGERA 367

Walker Corporation Pty Ltd v Sydney

Harbour Foreshore
Authority (2008) 233 CLR 259; [2008] HCA 5
Category: Principal judgment
Parties: Roads and Maritime Services (Appellant)

Allandale Blue Metal Pty Ltd

(Respondent)
Representation: Counsel:

Mr P C Tomasetti SC/Mr N M Eastman (Appellant)

Mr R
Lancaster SC/Mr M Seymour (Respondent)

Solicitors:

Ashurst
Australia (Appellant)

Sparke Helmore Lawyers (Respondent)

File Number(s): 2015/116637
Decision under appeal:

Court or Tribunal: Land and Environment Court

Jurisdiction: Class 3
Citation: [2015] NSWLEC 18
Date of Decision: 24 March 2015
Before: Pain J
File Number(s): 2010/30853

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11)
that unless the Court
otherwise orders, a judgment or order is taken to be
entered when it is recorded in the
Court's computerised
court record system.
Setting aside and variation of judgments or
orders is dealt with by Rules 36.15,
36.16, 36.17 and 36.18. Parties should in particular note
the time limit of
fourteen days in Rule 36.16.]

HEADNOTE

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

In February 2010, the Roads and Traffic Authority of NSW, predecessor to
Roads and
Maritime Services (“RMS”), acquired
land for the purpose
of constructing the F3 Freeway to
Branxton Highway Link, also known as the
Hunter Expressway. Allandale Blue
Metal Pty Ltd
(“ABM”) was the
owner of the acquired land, over which it had granted a lease for an annual
rental to Quarry
Products (Newcastle) Pty Ltd (“QPN”) to carry on a
quarrying business. The
lease had expired by the date of acquisition
but
expressly provided for the lessee to continue
occupancy, terminable on one
month’s notice. ABM used part of the land, when
not in use
as a quarry,
for grazing. Both ABM and QPN made claims for compensation under the Land
Acquisition (Just Terms Compensation) Act 1991 (NSW) (“Just Terms
Act”).

As a result of the acquisition, it was calculated that QPN stood to lose 1.7
years of
production potential in the quarry (amounting
to a reduction from
approximately 12 years to
10.3 years of productivity). QPN commenced proceedings
claiming financial loss suffered
as
the lessee, which were discontinued on
acceptance of $807,758 in compensation as
calculated by an RMS appointed
valuer.

ABM rejected an offer of compensation, and continued with its claim in the
Land and
Environment Court. On 17 February 2015, Pain J
ordered payment to ABM
of compensation
of $3,387,796.

RMS appealed the judgment and orders, limited to specific parts of the
calculation.

RMS contended that ABM and QPN could not be compensated for the same loss in
circumstances where the loss might be borne by one or
the other, but not by
both. ABM had
sought to recover compensation for the reduction in the market
value of the retained land for
which QPN had already received compensation
relating to its reduced quarry potential; QPN
and ABM were companies with the
same controlling
interests; and neither party intended to
terminate the lease
until the quarry was exhausted. RMS submitted that the judge had failed
to take
these factors into account as relevant considerations, which she was bound, as a
matter of law, to take into account.

RMS also appealed against an award for the cost of rebuilding a cottage used
to
accommodate a caretaker with oversight responsibilities
over the quarry and
grazing cattle.
Located on a lot bisected by the Expressway following the land
acquisition and
consequently separated
from the main access to the quarry and
the bulk of the grazing land,
evidence was led at trial to support the notion
that these oversight
responsibilities were
made impractical as a result of the
acquisition.

In addition to the smaller area of land on which the cottage and stockyard
were located, a
larger area of timbered land was severed
from the residue land
as a result of the acquisition.
The only means of accessing this land following
the severance was through an
underpass,
constructed as part of the Expressway.
RMS submitted that the land’s most valuable use
was as bio-banking, access
for which was not required. Further, RMS had given consent to
ABM and its
successors in title to use the underpass in perpetuity
and undertook to
facilitate
registration of this consent on the title to the relevant land.
However, as at the date of
acquisition,
the legal steps necessary to secure the
arrangement had not been executed,
and ABM was awarded compensation for a 15%
reduction in
the value of the severed land.
The issues for determination on appeal were whether:

(i) a second party could recover compensation for “the

same loss” for which one party had
already received compensation;

(ii) ABM’s interest in the residual land was

equivalent to a fee simple estate unencumbered
by a leasehold interest;

(iii) the award for replacement of the caretaker’s

cottage was warranted on the evidence;

(iv) the award for restriction on access to the timbered

land was warranted.

The Court (Basten JA; Ward JA and Sackville AJA agreeing) upheld the appeal
in part,
Sackville AJA also giving his own reasons.

In relation to (i)

1. A loss suffered by two separate entities cannot be said

to be “the same loss” as
contended by RMS on appeal. The
Just Terms
Act does not preclude each separate entity
from recovering compensation
from the same circumstances resulting in its loss: [45], [89].
Whilst s 56(2) of
the Just Terms Act prevents former owners of interests in the land from
receiving sums for the market value of each interest exceeding the market value
of the land,
QPN (former tenants) received a sum for its loss as a lessee, not
compensation on account
of the market value of the
land: [3], [45], [90]. The
value of ABM’s interest was assessed
independently of the compensation
offered to and accepted by
QPN: [92]. If there was any
element of double-dipping
it was the result of the payment to QPN, the propriety of which
was not in
issue
on the appeal: [45].

In relation to (ii)

2. The method of determining the “value” of land

assessed under s 55(f) the Just Terms Act
follows the hypothetical sale
concept identified by the High Court, as involving a willing but
not anxious
seller and buyer on the
date of acquisition: [21]-[22], [91].

Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418, at 432, discussed.

3. Actual intentions based on speculation as to the future

conduct of parties are irrelevant
when determining the value of an interest
in
land: [23]–[27], [43]. Compensation to ABM was
correctly assessed as
involving an entitlement to the market value of the
acquired land on
the basis
that that QPN had a terminable monthly interest: [43], [46].

The Minister v New South Wales Aerated Water and Confectionary Co Ltd
[1916] HCA 48;
[1916] 22 CLR 56, discussed; Leichhardt Council v Roads & Traffic
Authority (NSW) [2006]
NSWCA 353; (2006) 149 LGERA 439, discussed; George
D Angus (2014) 88 NSWLR 752;
[2014] NSWCA 352, discussed
and distinguished.

In relation to (iii)

4. The trial judge held that conduct of the owner in

relocating the caretaker’s cottage was
reasonably necessary, having regard
to the actual use of the residual land. That finding was
available on the
evidence: [52].
In relation to (iv)

5. The primary purpose of s 55(f) is to consider the change

(increase or decrease) in value of
residual land owned by the person
from whom
other land has been acquired: [62]. The
variation in value may occur before,
after or during the carrying out of the public
purpose,
which may occur during,
after, or in anticipation of, the date of acquisition. The assessment
cannot be
restricted to the
date of acquisition. In practical terms ABM already had
unrestricted access through the underpass, soon to be legally secured. Further,
there was no
evidence to suggest that RMS might depart from its legal
obligations incurred as a condition
of its consent to use the
underpass: [68],
[70]. AMB was not entitled to this head of
compensation: [70].

JUDGMENT

1. BASTEN
JA: In February 2010, the Roads and Traffic Authority of NSW, the
predecessor
to Roads and Maritime Services (“RMS”), acquired
land
for the purpose of constructing a
part of the F3 Freeway to Branxton Highway
Link, also known as the Hunter Expressway.
The
Expressway bisected an area of
some 631 hectares owned by the respondent, Allandale
Blue Metal Pty Ltd
(“ABM”). The Expressway
crossed the land in a broadly north-east
–
south-west direction. (Annexed to this judgment is an aerial view
depicting the
respondent’s
land and the Expressway.) Some 54.7 hectares of
the land were acquired, leaving a residue
of 576 hectares.
2. At
the time of the acquisition, part of the land was used for grazing, although
that use was
subsidiary to the use of another part
as a quarry. ABM did not
carry on the quarrying
business itself; rather, it had granted a lease to a
related company, Quarry Products
(Newcastle) Pty Ltd (“QPN”) for an
annual rental of $70,000. The valuable resource was a
rock known as andesite,
which
was located in the south-western portion of the land and now
entirely to
the south of the Expressway. Although the acquired land
did not contain
andesite,
the construction of the Expressway limited the quarrying operations by
the need for a buffer
zone extending
300 metres from the Expressway. As a
result, the expected life of the quarry
was reduced from approximately 12 years
to 10.3 years.
3. Both
ABM and QPN made claims for compensation under the Land Acquisition (Just
Terms Compensation) Act 1991 (NSW) (“Just Terms Act”). A valuer
appointed by RMS
calculated the financial loss to QPN as a consequence of the
acquisition
at $765,850. With
the addition of legal costs and valuation fees, a
total figure of $807,758 was identified as the
lessee’s
loss. Although QPN
commenced proceedings for compensation, those proceedings
were discontinued on
acceptance of that amount. ABM
rejected an offer a little in excess of
$1
million and continued with its claim in the Land and Environment Court. On
17 February
2015 Pain J gave judgment, following an 18 day hearing:
Allandale Blue Metal Pty Ltd v
Roads Maritime Services (No 6)
(“ABM”).[1] The
lengthy judgment did not result in final
orders, but made specific findings of
fact and identified the appropriate basis for
calculation
of the compensation
payable. As a result, the parties were able to make the necessary
calculations,
which resulted in
an order for payment to ABM of compensation of $3,387,796;
the
orders were made on 24 March 2015 and entered on 9 April 2015. The
calculation by
which this figure was reached was not revealed in this
Court.
4. RMS
appealed from the judgment and orders, though limited to specific parts of the
calculation.

Nature and scope of appeal

5. Claims
for compensation arising from the compulsory acquisition of land are determined
in the Class 3 jurisdiction of the Land and
Environment
Court.[2] An appeal from a judgment
in
such proceedings is limited to challenging an order or decision of the Court on
a question
of law.[3]
6. The
principal challenge, identified in ground 1 in the notice of appeal, was based
on the
proposition that ABM had recovered expenses
and losses for which its
lessee, QPN, had
already received compensation. The affirmative part of the
appellant’s case was articulated
in ground 2, which identified the sole
bases of compensation to which, it was submitted,
ABM was entitled. These
included (a) the
market value of the land acquired, namely
$273,426; (b) the
cost of replacing certain cattle yards, namely $39,000; and (c) the net
present
value of the loss of rent from the quarry for the period by which the life of
the quarry
was foreshortened, namely 1.7 years.
The appropriate compensation
identified in the notice
of appeal was $505,746, being a little less than half
the amount offered at
the
commencement of the proceedings.
7. Those
three elements expressly excluded two further items of compensation which had
been allowed by the trial judge. Ground 3 challenged
an allowance for the
replacement of a
cottage used by an employee responsible for control of access
to the land, including the
management
of ABM’s cattle. The cost, including
noise attenuation costs due to its proximity
to the Expressway, was $280,000. As
the employee
served the purposes of both ABM and
QPN, the trial judge allowed
half the cost, namely $140,000. According to ground 3, this
amount
should have
been disallowed in its entirety.
8. Ground
4 related to an allowance made with respect to a significant area of timbered
land
to the north of the Expressway, which had
been severed from the rest of the
land owned by
ABM. The area of 145.4 hectares had been valued, prior to the
acquisition, at $12,500
per
hectare. The judge allowed a reduction in value of
15%, which would have given rise to an
award of $272,625. The notice of appeal
asserted that access had been provided by way of
an underpass and, further, the
highest and best (economic) use of the land was for
“bio-
banking”,
in which case access was not necessary.

Background

9. The
area of some 631 hectares owned by ABM prior to the acquisition may conveniently
be seen, for present purposes, as comprising
four parts. First, there was the
area of some
54.7 hectares which was acquired. No issue arises as to the amount
allowed for that
land.
Secondly, there was the area of 145.4 hectares of
timbered land to the north of the
Expressway which was the subject matter
of
ground 4. Thirdly, there was a small area on the
western extremity of the land,
adjoining Lovedale Road, on which stood the cottage
and
stockyards. Although
little turns on it, this area was not the subject of the lease to QPN. It
was
the claim for relocation of
the cottage and stockyards which was the subject of
ground
3.
10. Finally,
the fourth area constituted the bulk of the remaining lands, following the
acquisition. This constituted the whole of the
area south of the Expressway. It
was this area
which contained the andesite resource which was being quarried by
QPN. The rest of
that
parcel was either open grazing country or timbered land.
The only aspect relevant for the
purposes of the appeal was the diminution
of
value for quarrying.
11. The
lease under which QPN operated the quarrying business at the date of acquisition
had expired. Granted for a term of five years
in 1995, it terminated in July
2000, but expressly
provided for QPN to continue in occupancy, subject to the
same terms including
as to rent,
but terminable by either party on one
month’s notice.[4]
12. The
lease covered all the land owned by ABM, except the area of the cottage and
stockyards.[5] QPN was entitled to use
the leased area for quarrying; ABM was entitled to
use for grazing so much of
the property as was not actually
occupied by QPN for quarrying
purposes.[6] QPN paid an annual rental
of $70,000; there were no further payments by way
of royalties on the andesite
extracted and sold. This,
it was accepted, was not a commercial
relationship. It
followed that the hypothetical purchaser of ABM’s interest in the land
would
terminate, or require ABM to terminate, QPN’s lease, so that the
purchaser would be able to
carry on the quarrying business
itself, or lease the
land to an operator on a commercial
basis.

Relevance of payment
to QPN – grounds 1 and 2

(a) scope of ground 1

13. Ground
1 of the notice of appeal was in an expansive form; it identified 10 questions
of
law in respect of which the trial judge was
said to have erred. The
substantial point
underlying each of the first nine questions was that the
quarry was operated by QPN and
the
loss caused by the sterilisation of part of
the andesite resource was a loss for which QPN
should be, and had been,
compensated.
The tenth question of law asserted a failure on the
part of the
primary judge to have regard to “relevant circumstances”,
of which
seven were
itemised. For this purpose, the term “relevant
consideration” adopted the concept
articulated by
Mason J in Minister
for Aboriginal Affairs v Peko-Wallsend
Ltd,[7] namely that
the judge
failed to take into account a factor which she was bound, as a matter of law, to
take into account. Such factors,
if not expressly stated, may be identified by
reference to the
subject matter, scope and purpose of the Act. The
considerations identified
included the fact
that ABM was claiming “the
same compensation” as had been paid to QPN.
14. Both
in this Court and in the Court below submissions on behalf of RMS were
articulated
in colloquial terms as a need to avoid “double
dipping”.
That language was misleading, in so
far as it implied that one person was being
paid twice for the same loss. The
complaint was
rather that two parties were
claiming (and obtaining) compensation for the same loss in
circumstances where
the loss
might have been borne by one or other, but not both. In
particular, RMS
submitted, ABM sought to recover the value of the sterilized
part of the
andesite resource, for which compensation had been paid to QPN. Further, QPN had
obtained compensation necessary to carry
out capital works on the land required
by the
construction of the Expressway which, it was assumed, the hypothetical
purchaser of
ABM’s
fee simple estate would also be required to undertake
and for which ABM was being
compensated. (These works included
wind monitoring
and dust suppression measures.)
15. ABM
responded that the same circumstances might indeed give rise to a loss suffered
both by the owner of the land and its tenant.
If, in such a situation, the Just
Terms Act
entitled each to claim compensation, there could be no complaint of
double compensation.
Alternatively, ABM contended that whatever QPN had
received, its (ABM’s) claim was the
only one before the Court and was to
be assessed, and had been properly assessed, in
accordance with the
statute.
16. The
reply by RMS to this latter submission was that QPN, having accepted the offer
made to it, had been entitled to discontinue its
claim, a course which RMS could
not resist.
Thus, avoidance of double payment required that the fact of payment
to QPN be taken into
account in assessing ABM’s loss. The statute should
be construed so as to require this
approach. It submitted that the judge
should
have taken into account the unchallenged
evidence that “QPN and ABM did
not intend to terminate the lease to QPN until
the andesite
was exhausted and
the quarry remediated” and that “QPN and ABM were companies with
related controlling interests”.
17. According
to ABM, if the amounts claimed by ABM were properly payable to ABM, RMS
could
not complain if it had earlier (even mistakenly)
paid the same amount to a third
party,
namely QPN. Nor was it relevant that ABM and QPN had overlapping
directorships and
shareholdings.
18. As
will be explained below, the position adopted by ABM should be accepted, though
not entirely for the reasons it put forward. The
apparent anomaly identified by
RMS, whilst
understandable on the basis of current case law, should be seen as
an artefact, not the
product of the statutory scheme. It is convenient,
therefore, to explain first why the trial judge
was correct in her assessment
of
ABM’s claims for the reduction in value of the residual land
south of the
Expressway.

(b) ABM’s claim for reduction

in market value

19. The
acquired land did not include any area the subject of the quarry, nor was any of
the
andesite resource located within that land.
Loss of access to the resource
could therefore
diminish the value only of the retained land. As the owner of
the affected but retained
land,
ABM claimed an entitlement to compensation for
the reduction in the market value of that
land. That involved, it submitted,
a
simple application of the provisions relating to
compensation for the owner of
acquired land identified in s 55(f). It is convenient
to set out s
55,
together with s 56, in full:

55 Relevant matters to be considered in determining amount

of
compensation

In determining the amount of compensation to which a person is entitled, regard

must be had to the following matters only (as assessed
in accordance with this
Division):

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

acquisition,

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

(c) any loss attributable to severance,

(d) any loss attributable to disturbance,

(e) solatium,

(f) any increase or decrease in the value of any other land of

the person at the
date of acquisition which adjoins or is severed
from the
acquired land by reason
of the carrying out of, or the proposal to carry out,
the public purpose for which
the land was
acquired.

56 Market value

(1) In this Act:

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

(a) any increase or decrease in the value of the land caused by

the carrying out
of, or the proposal to carry out, the public purpose
for which
the land was
acquired, and

(b) any increase in the value of the land caused by the

carrying out by the
authority of the State, before the land is acquired,
of
improvements for the
public purpose for which the land is to be acquired,
and

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

(2) When assessing the market value of land for the purpose of
paying
compensation to a number of former owners of the land, the
sum of the
market
values of each interest in the land must not (except with the approval of
the
Minister responsible for the authority
of the State) exceed the market value
of
the land at the date of acquisition.
20. ABM
claimed compensation pursuant to s 55(f) with respect to the decrease in value
of
the land containing the sterilized andesite
resource. In making an assessment
for the
purposes of the subparagraphs in s 55, it is necessary to have
regard to the subsequent
provisions which identify more precisely the concepts
set out in s 55. There is, however, no
further development of the language
in par (f). Reference to “market value” in s 56 applies to
par
(a), but the phrase used in par (f) is different, namely
“the value”
of any other land. It was
not disputed, however, that the hypothetical sale
concept adopted in the chapeau
to s 56(1)
was also applicable to the
exercise required under par (f). That is because it reflects the
method of
determining the
value of land identified by the High Court more than a century
ago in Spencer v The
Commonwealth,[8] which finds its
current emanation in s 56(1). There
was no challenge to the assessment of the
decrease in value, which was undertaken
by the
Court accepting expert evidence
and the application of a discounted cash flow methodology
in relation to an
efficiently run
business.
21. This
approach assumed that, given the ability of ABM to terminate the lease to QPN on
one month’s notice, ABM’s interest
in the residual land was
effectively equivalent to a fee
simple estate unencumbered by a leasehold
interest. RMS submitted, in effect,
that ABM’s
interest was to be viewed
in a different light because, whatever the fragility of QPN’s interest
in
legal
terms, there was unqualified evidence from the directors of the companies
that
neither QPN nor ABM intended to terminate the lease
during the life of the
quarry.
22. The
trial judge summarised ABM’s submissions in response to that argument in
the
following
terms:[9]

“The determination of compensation for market value requires consideration

of a
sale transaction between a ‘willing but
not anxious’ seller and
buyer on the date
of
acquisition.[10] That is a
hypothetical transaction. The intentions of the actual
owner (let alone the
actual lessee) in respect of future use of
the land is not a
relevant
consideration.[11] It is incorrect
to suggest that the actual intention of
ABM and QPN (to continue their lease
arrangements after the date of acquisition
until all the resource is quarried)
is relevant to the determination of the market
value of ABM's interest in land
at the date of
acquisition. The market value of
ABM's interest in land is the
amount that a willing but not anxious purchaser
would pay for it,
and that
purchaser would pay an amount that reflects the fact
that, as the incoming
owner, it could and would immediately terminate
the QPN
lease and itself quarry
and sell the andesite resource in the land.”

23. It
is apparent that the judge accepted that submission; however, to reach that
conclusion it was necessary to distinguish authority
in this Court which appears
to have
accepted the relevance of the intention of the parties with respect to a
continuing
relationship,
at least for the purpose of valuing the interest of the
tenant. Before turning to
that authority, it is convenient to note the principle
established in The Minister v New South
Wales Aerated Water and Confectionary
Co Ltd (“Aerated
Water”),[12] which also
involved a
claim for compensation brought by a tenant.
24. The
legal interest of a tenant is not increased by the mere fact that there is a
family
relationship between the owners and directors
of each company, from which
one might
readily infer that, although terminable at will, the lease will not in
fact be terminated.
The
irrelevance of actual intentions was explained by the
High Court in Aerated Water. Although
concerned with the assessment of
the value of an interest in land held by a lessee pursuant
to s 117 of the
Public Works Act 1900 (NSW), its reasoning would have application to the
determination of the market value of land under s 55(a) and (f), the case
being
determined
after Spencer. So much was recognized in principle by
this Court in Leichhardt Council v
Roads & Traffic Authority
(NSW),[13] where Spigelman CJ
stated:[14]

“Section 56(1) is an objective test to which considerations entirely

personal to
the owner are not material.”

25. Aerated
Water involved an individual lessor who held 90% of the capital of the
lessee.
The lessee held the land under a lease having a term of
seven years and
three months, with
two years to run at the date of the resumption. Although the
secretary of the company
asserted
that it considered it had a “perpetual
tenancy” and would suffer very serious loss if
moved on at end of the
lease, the
Minister submitted that the contingency of a renewal of
the lease was
irrelevant and inadmissible. The High Court agreed with the
Minister. Griffith
CJ stated:[15]

“I venture to illustrate this position by two concrete instances. The

present
lessee of land may be a highly desirable tenant
whose occupancy of the
premises adds to the general reputation of the locality, so that it is extremely
unlikely that he will be
called upon to vacate the premises at the expiration of
his
lease. Or the lessor may be a person of amiable character, who has an
extreme
dislike to disturbing a tenant. Both these considerations relate to
personal
matters, depending in the one case on the personality
of the tenant and
in the
other on the personality of the landlord. Neither of them is a matter
‘depending
upon the nature and
circumstances’ of the land itself.
Neither of them, therefore,
can be taken into consideration in estimating the
value of the
term.”[16]

26. Further,
in the language of Isaacs J, “[t]he ‘interest’ of which the
Company was deprived
and which passed to the
Crown, and for which therefore the
Crown has to pay, was a
leasehold interest for two years. Nothing more, and
nothing less.”[17] Isaacs J
continued:[18]

“Now, should [the lessor’s] shareholding interest in the Company

have been
considered? It is plain that such interest,
though it might or might
not impel him
to grant a further lease to the Company, is a personal matter, and
therefore, as
we all concur,
is not to be considered as influencing the value of
the interest
actually taken. But as the law says nothing affirmatively about
excluding
personal matters, the exclusion must be due to some negative
consideration.
The exclusion must be because, being personal,
it necessarily is
not inherent in
or bound up with the interest taken so as to run with it in the
hands of a
purchaser for the
Company.”[19]
27. Taking
actual intention into account in valuing an interest in land would be directly
contrary to the reasoning of the High Court
in Aerated Water. This
proposition was expressly
adopted by ABM in its written
submissions:[20]

“It is irrelevant to the calculation of market value under s 56(1) to

have regard to
the actual, idiosyncratic intentions of
either the owner or the
lessee of the land.
[21] However,
before the primary judge and in this appeal, RMS refuses to accept
that the
actual intention of ABM and QPN at the date
of acquisition (namely, to
maintain
their lease arrangement for the foreseeable future) was not material to,
let
alone determinative
of, the basis on which a hypothetical sale would occur
for
the purposes of determining market value (in which an incoming quarry
operator
would terminate the monthly tenancy of QPN).”

28. Both
in the Land and Environment Court and on the appeal, reference was made to the
reasoning of this Court in Health Administration Corporation v George D Angus
Pty Ltd.[22]
That case,
like Aerated Water, involved a claim for compensation by a tenant. The
tenant
was a company providing medical services through its sole director,
Dr
George Angus. The
company leased the premises from the registered owner,
being a company whose sole
director and shareholder was
Dr Angus’
wife. As in this case, the tenancy was determinable
at will by either party on
one month’s notice. The tenant’s
interest in land had no market
value and none was claimed. However, the resumption of the land resulted in
destruction of
part of
the business, Dr Angus being of the view that after
relocation he could no longer
continue his obstetric practice in premises more
remote from the local hospitals.
Compensation was claimed as a “loss
attributable to disturbance”, under s 55(d) and
s 59(f).
29. This
Court in George D Angus relied on the primary judge’s finding of
fact that, subject
to the tenant paying the rent, it had been given
“exclusive
possession of the [property
acquired] on which to conduct its
medical practice for an indefinite period” and, had there
been
no
acquisition “there was no reason to believe that the tenancy would not
have
continued for at least the following two
years.”[23] The reasoning in
Aerated Water would
have rejected reliance on the intentions of the
family members controlling the two
companies. However, it was held by this
Court
that:[24]

“... the decision in Aerated Water does not assist the appellant.
That was a case
where the relevant lease was to expire at the end of a fixed
term. Any grant of a
new lease was dependent upon the personal relationship
between the parties
continuing. In the present case the tenancy at will found
by
the primary judge
would continue indefinitely unless and until Benantra, as
lessor, took the
decision to give one month's notice
in writing and there was no
reason to
assume that it would give such a notice so long as Dr Angus wished to
practise
from the [acquired]
land. On the other hand in Aerated Waters
there was no
reason to assume or contemplate that the lessor would grant the
lessee whose
interest was compulsorily acquired, a new
lease on the expiry of
the term of the
existing lease. In any event, the issue in Aerated Waters
was the market value of
 the interest compulsorily acquired. In the present case
the court is concerned
with post-acquisition disturbance
losses. The issues are
quite different.”

30. The
first point of distinction, namely that between a periodic tenancy which had not
expired and one that had, has no bearing on the
principle relating to the value
of the interest
in land. The second, (“no reason to assume” future
conduct) does not
reflect the reasoning in
Aerated Water set out at
[25]-[26] above. The third ground of distinction, namely that Aerated
Water was concerned with “the market value of the interest as opposed
to post-acquisition
disturbance losses” was not applicable
to a claim
under s 55(f) (rather than s 55(d)), but is
also unpersuasive. First, it
assumed the conclusion that such losses can only
be dealt with
as
“post-acquisition disturbance” and, secondly, it assumed that the
legislative changes
created by the
identification of separate heads of loss have
not merely significantly
expanded the bases of recovery (potentially permitting
two
parties to recover the same loss)
but have also rendered the subjective
intentions of the parties relevant.
31. It
is accepted that a claim can be made for loss of profits by a business where it
has an
interest in the acquired land, even if that
interest has no compensable
value. What is
puzzling is why, under the Just Terms Act, the business is valued
as if it had a secure
tenancy, whereas its legal interest was entirely insecure.
That requires reference to a curious
approach adopted with respect to
the
operation of s 55 and its defining provisions.
32. In
George D Angus, the tenant received the value of the loss of part of its
business as
compensation for “loss attributable to disturbance”,
pursuant to s 55(d). That term is defined
in s 59:

59 Loss attributable to disturbance

In this Act:

loss attributable to disturbance of land means any of the

following:

(a) legal costs reasonably incurred by the persons entitled to

compensation in
connection with the compulsory acquisition of the
land,

(b) valuation fees reasonably incurred by those persons in

connection with the
compulsory acquisition of the land,

(c) financial costs reasonably incurred in connection with the

relocation of those
persons (including legal costs but not including
stamp duty
or mortgage costs),

(d) stamp duty costs reasonably incurred (or that might

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

(e) financial costs reasonably incurred (or that might

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

(f) any other financial costs reasonably incurred (or that

might reasonably be
incurred), relating to the actual use of the land,
as a
direct and natural
consequence of the acquisition.

33. Paragraphs
(a)-(e) are in similar terms; par (f) is differently expressed, one difference
being the absence of identification of the
person by whom the costs are or might
be
incurred. More importantly, it would be surprising if it expanded the
carefully delimited
costs
recoverable as financial costs, in the previous five
paragraphs, by allowing losses of other
kinds. Yet in George D Angus the
Court
held:[25]

“El Boustani ... mandates rejection of the appellant's submission

that loss of
income and/or profits due to disturbance can be compensated for
as
part of
‘special value’ as now separately and differently defined in
s 57.”

34. The
reasons continued, saying that “special value to the owner cannot be
assessed by
capitalising the savings and additional
profits which the business
would probably have
earned but for its destruction by the acquisition of the
land”.
35. The
loss of profits of the obstetric practice being operated by the tenant arose
from the
fact that the acquired land, close to the
local hospitals, had allowed
Dr Angus to carry on his
that part of his practice without the possible
delay incurred by having to
travel from another
part of the rural city. Thus the
acquired land had “special value” to its owner. Why the loss
could
not be treated as special value under the Just Terms Act must have depended upon
some limitation imposed by s 57 (which defined “special
value”)
not explained in the
reasons, except by the reference to El
Boustani.
36. El
Boustani v The Minister administering the Environmental Planning and Assessment
Act 1979[26] did not concern any
distinction between the interests of landlord and tenant, but
involved a claim
by the owners of resumed land.
The statements of principle dealt with
matters
involved in the assessment of the market value of land, pursuant to s 61 of
the Just
Terms Act, and were not directly concerned with other elements of
s 55. However, the
reasoning appeared to reject, as no longer relevant,
statements in cases involving earlier
legislation recognising claims for
disturbance and special value, including a passage from
the judgment of Mahoney
JA in Housing Commission of New South Wales v
Falconer.[27] The
reasoning also
required that prior authorities, including those referring to “value to
the
owner”, a term not used
in the Just Terms Act, must be “treated
with care.”[28] Caution may
be
appropriate, but the Just Terms Act adopts (and defines) terms which have an
established
provenance in this area of
the law. Further, the fact that s 55
(and accompanying provisions
in Pt 3 Div 4) are to be the only matters
to be addressed does
not imply that each is
independent of the other and
self-sufficient. The conclusion that loss of profits of a business
cannot be
accommodated in market value of the land or special value to the owner, but must
be a loss attributable to disturbance, is an overly
prescriptive
position.[29]
37. There
is a second difficulty in seeking to shoehorn the recovery of lost profits into
s 59(f).
The ordinary meaning of the term “loss”
would
undoubtedly include costs, but costs would
generally be considered a subset of
loss, rather than as having the same
meaning.[30] The
reasons for taking
a contrary view appear to have been threefold. The first was textual,
apparently
based on the use in s 61(b)
of the phrase “any financial loss that
would
necessarily have been incurred in realising” the potential use of
the land
other than its
current use. However, the relevance of s 61(b) is
obscure; it is concerned with the
assessment of “the market
value of
land”, not with any other head of compensation. There is
no reason to read
“other financial costs reasonably
incurred”, in s 59(f) as meaning
“other
losses suffered”; indeed there is every reason not to. Apart
from the matters
noted, the word
“other” becomes inapt.
38. The
second justification appears to have been based on the fact that contrary to
earlier
statutory provisions, where losses would
have been understood as part of
the “value to the
owner”, the Just Terms Act provides different
concepts encompassing
“market value”,
“special value”,
and “disturbance”. It followed that aspects of loss attributable
to
disturbance, which might formerly have been included as a kind of special value,
must now
be dealt with
elsewhere.[31]
39. Putting
to one side the scope of the definition of “special value”, which
does not seem
to require this conclusion, the
rest of the reasoning is based on
the separate elements of
compensation available under the Just Terms Act and
appears to have a
strong element of
circularity: that is, loss of future profits
must be assessed under s 59(f) as “other financial
costs”
because it cannot be assessed elsewhere. If, as a matter of construction, it
does not
readily fall within s 59(f), and is not recoverable
by the tenant
with no security of tenure, it
may (as this case demonstrates) be recoverable by
the owner of the land.
40. The
primary judge relied upon George D Angus as support for the view that
although the
interest held by QPN, as a tenant at will, “had no relevant
market value”,
it was,
nevertheless, entitled to make a claim for
compensation “limited to losses attributable to
disturbance.”[32] However, if
the tenancy was, as a matter of law, terminable on one month’s
notice, it
could not become a lease for an indefinite
period because of the intentions of
the
parties, without departure from Aerated Water. If it was not a right
of exclusive possession
for an indefinite period, but only for one month, it is
difficult to understand how
it could
justify a substantial sum for
disturbance.
41. George
D Angus became relevant in these proceedings only indirectly. As RMS
explained, it had relied upon George D Angus before the primary judge as
the first step in its
double dipping claim. In its submission, a disturbance
claim could only arise from
“actual
use” of the land which, in
accordance with George D Angus, was a claim properly made by
QPN as a
tenant in exclusive possession, reflecting the subjective intentions of the
parties. If
it
had such a continuing interest, that interest was exclusive of
ABM and should have
precluded the latter’s claim.
42. It
is difficult to see how the result in the present case can stand with the
reasoning in
George D Angus. It is difficult to avoid the conclusion that
it is anomalous to assess
compensation to the owner on the basis that the
tenancy may
be terminated immediately, for
the purpose of the hypothetical sale,
but to assess compensation to the tenant on the basis
that the
current use of
the land will continue indefinitely.
43. However,
it is the latter proposition that is untenable because it depends not on legal
interests and entitlements but speculation
as to the future conduct of the
parties. Those
considerations are to be disregarded, in accordance with the
reasoning in Aerated Water.
ABM’s claim was properly assessed on
the basis that QPN had a terminable interest.
44. That
conclusion is not sufficient to dispose entirely of RMS’s first ground of
appeal.
RMS, having identified the anomaly, contended
that ABM could not recover
for “the same
loss” for which QPN had received compensation.
45. There
are two responses to that proposition. First, it is not “the same
loss” if it is
suffered by two separate entities.
Secondly, to the extent
that each entity suffers a loss
arising from the same circumstance, there is
nothing in the Just Terms Act
to preclude each
recovering its separate loss.
Although s 56(2) prevents, in general, former owners of land
receiving a
sum for the
market values of each interest which, together, will exceed the
market value of the land, QPN received no amount on account of the
market value
of the
land. No other provision of the statute achieved such a result in the
circumstances of the
present case. Nor
is there any basis for reading such a
term into the Act. To the extent the
result is anomalous, the anomaly arises
from the way in
which QPN’s claim was assessed.
46. Accordingly,
grounds 1 and 2 of the appeal should be rejected. ABM is entitled to the
market
value of the land which has been acquired
and the diminution in value of the
residual
land, pursuant to s 55(a) and (c) respectively. For the reasons
explained, it is arguable
that
the statute gives rise to no anomaly.
Nevertheless, to the extent that the latter conclusion
involves departure from
earlier
authority of this Court, which was not sought to be
challenged by either
party, that reasoning, being only indirectly supportive
of the rejection of
grounds 1 and 2, need not be pursued further.

Replacement of
caretaker’s house – ground 3

47. Ground
3 challenged the award of $140,000 being half the value of a new cottage, with
acoustic protection. Access to ABM’s land
was obtained from Lovedale Road,
which (prior to
the acquisition) crossed the narrow north-western tip of the
land. This area comprised
a title
identified as lot 201 on DP 1099068. The
Expressway bisected this lot, with a flyover at
Lovedale Road and feeder lanes,
ending in roundabouts, providing an exit from and entry to
the Expressway at the
junction with Lovedale Road.
48. There
was a cottage and stockyards on lot 201 which, after the acquisition, were
located
on the residue of the lot to the north of
the Expressway. The main
access to the quarry and
the bulk of the grazing land was to the south of the
Expressway. RMS accepted that
an
amount should be paid for construction of new
stockyards to the south of the Expressway,
but rejected a claim for the
replacement
of the cottage with a building to the south, adjacent
to the road
used for access to the land. Ground 3 in the notice of appeal merely
alleged an
error of law in awarding compensation with respect to the cottage. The ground
did not
identify the nature of the legal
error. RMS’s submissions
identified two grounds, namely that
particular material findings were made
without evidence and that
the judge “asked herself
and answered the wrong
question.”
49. The
reasoning of the trial judge was set out in the following
passages:

“[434] According to Mr Malcolm Frost’s affidavit

..., the cottage intended to be
replaced ... is rented by a QPN employee.
That
employee is a caretaker
oversighting both the QPN quarry business and the ABM
grazing business. The
location of the cottage
is important as the occupant of
the cottage must be able
to see the entrance to the quarry for security
purposes. Given that the
quarry is
operated by QPN and that loss of caretaker
oversight is not a loss to ABM’s
business that aspect of this claim is
not
claimable by ABM .... The separation of
the cottage from the main parcel of ABM
land by the [Expressway] has been
established
as having a negative impact on
oversight of the grazing business
conducted by ABM. Such an impact was obvious
from the view and is
also
attested to in Mr Malcolm Frost’s written and
oral evidence.

[435] Contrary to RMS’s submission that no loss has been

suffered by ABM
because it still receives rent from the cottage,
the loss
suffered by ABM is the
financial cost of building a new cottage in an
operationally useful location. ...
That loss arises
directly from the actual use
of the residue land which use was
closely related to the use of the acquired
land.”

50. The
approach taken by the primary judge to a claim under s 59(f) is consistent
with that
identified by this Court in Roads & Traffic Authority of New
South Wales v Peak,[33] an
authority relied upon by RMS. To say that there was no evidence to support the
findings of
the trial judge was simply to record
a disagreement with the finding
made. The submission
stated that even before the construction of the Expressway,
“the cattle
were spread widely
across ABM’s land and the cattle
could not necessarily be observed from the cottage when
grazing.”
That may
have been true, but the finding favouring a cottage on the larger portion
of the
residue and next to the entrance reflected
an assessment of the reasonableness
of the
evidence proffered by the respondent.
51. Mr Frost,
a director and shareholder of ABM, gave evidence that, following the
construction of the Expressway, “it will be no
longer practical for the
resident of the existing
cottage to keep a close eye on the activities that are
taking place on the land,
particularly
people entering or attempting to enter
the property through the Lovedale Road frontage.” In
the course of
cross-examination,
Mr Frost gave evidence that “cattle can break out
of – if
there’s a fence down, especially if someone’s broken
into the place, they can stray onto the
road and they can be hit by vehicles and
the owner of the cattle is
responsible.”[34]
52. While
Mr Frost accepted that a person living in the present house could go out
and tend
the cattle, the weight to be given to various
aspects of the evidence
was a matter for the trial
judge. The judge accepted that the cottage, located
to the north of the Expressway,
could
not reasonably serve its prior purpose,
when the entrance from Lovedale Road, and most of
the cattle, would be on the
south
side of the Expressway. She assessed the use of the
cottage as half in the
interests of ABM and half in the interests of QPN. Accordingly,
she
allowed ABM
to recover half of the cost of the new cottage. There is no substance in the
challenge to this finding. It was not
true that there was no evidence to support
it; nor could it
be said that the finding was not reasonably open on the
evidence, that
being the only
available question of
law.

Severance of timbered land – ground 4

53. The
Expressway severed two parts of the residue land from the main area on which the
quarrying and grazing took place. Apart from
the small area on which the cottage
and
stockyards were located, there was a significantly larger area of timbered
land, known as
lot
76.
54. The
area of timbered land to the north of the Expressway was isolated from all other
parts of the residue land, being land not acquired
by RMS. It was surrounded by
private
property in the hands of others. The only means of access was by way of
an underpass
constructed
as part of the Expressway. The trial judge allowed
compensation for what was
described as “injurious affection”,
assessed
at 15% of the value of the severed land.
55. As
noted in Tolson v Roads and Maritime
Services,[35]
“injurious affection” is a concept
developed under the law
preceding the Just Terms Act and not reflected in that Act.
Compensation may be
awarded with respect to residue land either for any loss “attributable
to
severance”,[36] or which
involves a “decrease in the value of any other land ... severed
from the
acquired land”.[37] The term
“loss attributable to severance” is defined in s 58 to
mean
“the amount of any reduction in the market
value of any other land of the
person
entitled to compensation which is caused by that other land being severed
from other land of
that person.”
56. There
are two differences between the language adopted in s 55(c) and that in
s 55(f).
Thus, loss attributable to severance under
s 55(c) requires
that there be two portions of the
residue (unacquired) land, where one portion
is severed from another. By contrast,
s 55(f)
deals (relevantly) with a
decrease in the value of other land which either adjoins or is severed
from the
acquired land.
(There are other differences in the terminology which are not
presently relevant.) Although it is possible to construct a claim based
on a
decrease in the
value of lot 76 because it is land which adjoins and is severed
from the acquired land,
pursuant to par (f),
the more natural approach is to
treat the claim as arising from one portion
of the land being severed from
another unacquired portion
and thus as one for loss
attributable to severance,
under par (c).
57. It
was not submitted that the reference to a “decrease in the value of any
other land”, in
par (f), was different in effect
from the reference to
“any reduction in the market value of any
other land” in s 58,
for the purposes of par (c). Although
the term “market value” is
defined in
s 56(1), for the purposes of the whole Act, the definition does
not apply to s
55(f), because s
56(1) requires that which is
identified as a basis for compensation under par (f) to be
disregarded.[38] That is no doubt a
reason why the term “market value” is not used in par (f).
On the
other hand, the term “market
value” is used in s 58, giving
rise to inconsistency if the
definition were to be applied, requiring that the
Court disregard
any decrease in the value of
the land resulting from the
carrying out of the public purpose.
58. The
parties did not engage with the issue of statutory construction, but it may have
been
relevant to one aspect of the reasoning
of the trial judge. Thus the
definition of market value
includes the following language, namely “the
amount that would have
been paid for the land
if it had been sold at that
time by a willing but not anxious seller to a willing but not anxious
buyer”.[39]
59. In
stating the issue to be addressed, the trial judge
said:[40]

“The date of acquisition is the point in time at which any loss must be
assessed
so that the fact that the underpass has since
been completed is on one
view
immaterial.”

60. RMS
contended that this statement in the judgment derived from a misreading of
s 55(f).
The temporal element in that provision should
be understood to
refer to the ownership of the
other land by the person seeking compensation. The
increase or decrease in value of
the
land must occur by reason of the carrying
out of, or the proposal to carry out, the public
purpose for which the land was
acquired.
This variation in value may occur before the land is
acquired (for
example, when a proposal is announced), or even by the carrying
out of the
public purpose, which may occur before the date of acquisition. Alternatively,
if the change
in value is caused by the
carrying out of the public purpose, that
may not occur until after
the date of acquisition. The assessment required under
s 55(f)
cannot be restricted to the
date of acquisition. Nor is there any
temporal element incorporated into s 55(c) by s 58.
61. Although
it may have been wrong for the trial judge to confine her consideration to that
specific point in time, the critical question
is whether it affected her
assessment of the
change in value of the severed land.
62. There
is also an issue as to whether it was incorrect to assess the loss under
s 55(f),
rather than s 55(c). Although there may be
overlap between
the circumstances which can be
assessed under either provision, the primary
purpose of par (f) is to consider the
change in
value of the residual land owned
by the person from whom other land has been acquired.
Where land is acquired for
road
works, the typical effect is a diminution in the value of
adjoining
residential land which will be affected by the increased noise
and pollution
from the
greater traffic flow. That is a result of the carrying out of the
public purpose, not of the
severing of the
land from other land. By contrast, a
loss attributable to “severance” arises
because a parcel of land has
been divided
by the acquisition of a strip from within the parcel.
Where the
land is farming land, severance may make it expensive for a farmer
to move
animals or equipment from one part of the residual land to the other. That is
this case.
63. RMS
first submitted that there was no reduction in value resulting from the
severance,
because access was not required in order to
allow the land to be used
for its most valuable
use, namely bio-banking.
64. That
submission should not be accepted. Even land which is to be reserved from active
use requires access by the landowner, who will
have responsibilities which may
include
steps to minimise the risk of fire and the removal of invasive
species.
65. The
next question was whether adequate access had been provided. The trial judge
recognised that the conditions of approval for the
construction of the
Expressway, imposed
as part of the consent given by the Minister under
s 115B of the Environmental Planning and
Assessment Act 1979 (NSW),
required that RMS provide access for ABM to lot 76, north of
the Expressway. The
judge referred to the conditions as imposing
a “legal
responsibility” on
RMS. The judge also said that this is “not
ironclad, enforceable legal access but it
is fairly
close.” She further
concluded that legal certainty would be provided in the near future,
accepting
evidence given
by an officer of RMS (Mr Gant) that it “will consent
to ABM and its
successors in title using the underpass in perpetuity for
a
purpose that is consistent with the
authorised use of the land and will
facilitate registration of this consent on the title to
the
residue of the
relevant ABM land (being lot 76) by lodging a s 88E
instrument,[41] executed by
RMS and
ABM recording the terms of restriction of access to and from the [Expressway]
and
the terms of consent to access
and use [of] the
underpass.”[42] The judge
noted[43] that this
arrangement was
“not in place at the date of acquisition”, but
stated:[44]

“While there could be some uncertainty in the mind of a hypothetical

purchaser
in these circumstances the risk is relatively
small given the express
responsibility
in the conditions of development consent at the date of
acquisition to provide
access. There
is some injurious affection to lot 76 in
these circumstances.”

66. Allowance
was made for a 15% reduction in the value of the severed land to the north of
the Expressway.
67. There
would appear to be a degree of artificiality about this exercise, in two
respects.
First, at any point in time, access to lot
76, could only be achieved
by an owner of adjoining
land or a person who enjoyed an easement providing
access over adjoining land:
the
severed portion of lot 76 is isolated from
public roads. In a practical sense, the opportunity
to obtain such an easement
would
appear to be a far greater concern for the hypothetical
purchaser than
access through the underpass.
68. Secondly
and more importantly, it appears that the reason why the grant of a legally
enforceable entitlement to use the underpass
had not yet eventuated was the fact
that as at
the date of the trial, the Expressway was still to be dedicated as a
public road pursuant
to s
10 of the Roads Act 1993 (NSW), declared a
main road pursuant to s 46 of the Roads Act
and declared a
controlled access road pursuant to s 49 of the Roads Act. There was
no
evidence that RMS might depart from its intention to register the necessary
instrument.
According to the evidence,
a significant sum ($2.14
million[45]) had been expended on
construction of the underpass in order to give effect to the condition of
consent requiring
provision of access
to the northern part of lot 76. The
unchallenged evidence was, further,
that although there was a gate controlling
access to the
underpass, ABM had a key to the
gate. In practical terms, it
already had unrestricted access. In legal terms, that arrangement
would
be
secured shortly.
69. The
question, for present purposes, is whether the judge was correct to make an
assessment of the possible diminution in the value
of the severed land at the
date of
acquisition, when the carrying out of the public purpose was not
complete, particularly in so
far as the legal steps necessary to complete the
purpose had not been executed.
70. Although
the respondent contended that the trial judge did not impose “an unduly
narrow temporal requirement” in determining
this issue, it also noted that
neither at the date
of acquisition nor at the date of trial had an enforceable
property right been
conferred on
ABM to use the underpass to obtain access to
lot 76. However, there being no challenge to
the propositions put forward
on
behalf of RMS that it not only would, but was legally obliged
by the conditions
of consent, to provide such access in perpetuity,
the judge should have
found
that ABM had failed to establish a reduction in the value of lot 76. Ground 4
should be
upheld.

Conclusions

71. RMS
has thus been successful in respect of one element of the award of compensation,
amounting to $272,625. The determination of compensation
should be reduced by
that
amount, leaving a balance payable of $3,115,171, assuming that the figure
provided in order 1
(the makeup
of which is not known to the Court) did not
contain interest.
72. RMS
has thus succeeded only in a minor respect. The compensation payable pursuant
to
the judgment in the Land and Environment Court
was approximately $3.4 million.
The
notice of appeal sought that that amount be reduced to $505,000, the
difference being some
$2.88
million. Accordingly, the reduction achieved by RMS
is approximately 10% of the
amount in dispute on the appeal. In that event, it
is appropriate to award ABM 80% of its
costs of the appeal.
73. RMS
sought an order that the respondent pay its costs in the Land and Environment
Court. The orders of the Land and Environment Court
entered on 9 March 2015
did not
include an order with respect to costs. Accordingly, this Court is not
aware as to whether
there
is such an order; if there is, should it be varied and
in what way as a result of the
outcome of the appeal? Absent this information,
the application by RMS that the respondent
pay its costs in the Land and
Environment Court must be rejected. Any outstanding issues
as to the costs in
the Land and Environment Court should be determined by that Court.
74. On
this basis, the Court should make the following orders:
. (1) Allow the
appeal in part and set aside order (1) made by Pain J on 24 March
2015.
. (2) In place
thereof, determine that the compensation payable by Roads and Maritime
Services
to Allandale Blue Metal Pty Ltd pursuant
to the Land Acquisition (Just Terms
Compensation) Act 1991 be the sum of $3,115,171.
. (3) Order that
the appellant pay 80% of the respondent’s costs of the proceedings in this
Court.
75. WARD
JA: For the reasons given by Basten JA, I agree that the appeal should be
allowed in part and I agree with the orders that his Honour
has proposed.
76. SACKVILLE
AJA: I gratefully adopt Basten JA’s account of the facts and the
relevant
legislation.
77. I
agree with the orders proposed by Basten JA. I also agree with his
Honour’s reasons in
relation to Grounds 3 and 4 of the
appeal (concerning
the caretaker’s house and severance
of the timbered land). However I wish
to state my own reasons for rejecting
Grounds 1 and 2
of the appeal. These
grounds concern the award of compensation for the decrease in the
value of the
land retained
by the respondent (ABM) on which andesite quarrying
operations
took place or, but for the acquisition, would have taken place
(Retained Land).

The Issues
78. The
compensation awarded to ABM, by the primary Judge included a component for the
decrease in the value of its interest in the Retained
Land pursuant to s 55(f)
of the Land
Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just
Terms Act).[46] It is convenient
to reproduce s 55, which reads as follows:

“In determining the amount of compensation to which a person is entitled,

regard must be had to the following matters only
(as assessed in accordance
with
this Division):

(a) the market value of the land on the

date of its acquisition,

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

(c) any loss attributable to severance,

(d) any loss attributable to disturbance

(e) solatium,

(f) any increase or decrease in the value of any other land of

the
person at the date of acquisition which adjoins or is severed
from
the
acquired land by reason of the carrying out of, or the proposal
to carry out,
the public purpose for which the land was
acquired.”

79. The
primary Judge did not assess the amount of compensation to be awarded in
respect
of the Retained Land in the Primary Judgment
itself. Her Honour left the
calculations
to the parties in the light of her findings as to the valuation
methodology to be adopted.
80. Her
Honour considered that compensation to ABM under s 55(f) of the Just Terms Act
should be assessed on a “before and after”
approach, using a
discounted cash flow (DCF)
model. This required a comparison to be made
between the value of the andesite resource
exploited by the quarry (including
the reserves
that could be exploited with likely planning
approval[47]) unaffected by the
proposed acquisition of ABM’s land, and the value of the
resource after
the acquisition. The key variable
in the comparison was that the acquisition of
the land required for the Hunter Expressway reduced the expected productive life
of
the
quarry by 1.7 years.
81. The
parties apparently agreed on the basis of the primary Judge’s findings
that ABM
should be awarded a total of $3,387,796
as compensation for its
interest in the acquired
land. The order made by her Honour does not break down
this sum by reference to
its
components. However, correspondence between the
parties after delivery of the Primary
Judgment suggests that the parties
attributed
$2,633,000 to the “quarry-related component”
of
ABM’s compensation claim.
82. The
challenge by the appellant (RMS) to the award of compensation for the
decrease in
the value of ABM’s interest in the Retained Land relied
essentially on two
arguments.
83. First,
RMS submitted that the primary Judge should not have awarded compensation to
ABM
for the decrease in the value of the andesite
resource without regard to the
successful
claim by Quarry Products (Newcastle) Pty Ltd (QPN) to be
compensated for what RMS said
was precisely the same loss. Mr Tomasetti SC, who
appeared with Mr Eastman for RMS,
contended
that the Just Terms Act, properly
construed, precluded an award of
compensation to ABM for the decrease in value
of the andesite
resource on the Retained
Land. This was because QPN had already
claimed and received compensation for the
decrease in its interest
in the
Retained Land assessed by the same methodology – that is, by
reference to
the net present value of the foregone income
stream from quarrying operations
on
the Retained Land. Mr Tomasetti submitted that having regard to the compensation
awarded to QPN
for its lost profits, ABM had in truth suffered no loss.
Therefore to award
compensation to ABM would depart from the injunction
in s
54(1) of the Just Terms Act that
compensation should:

“justly compensate the person [whose land has been acquired] for the
acquisition of the land”.

84. Secondly,
RMS submitted that the primary Judge should not have held that
compensation for
the diminished value of the andesite resource
should be assessed on the
basis
that a hypothetical purchaser of the Retained Land would terminate QPN’s
monthly
lease in order
to maximise returns from the quarry. Her Honour’s
approach was said to be
inconsistent with evidence given by the directors
of ABM
and QPN in support of the
companies’ respective claims for compensation.
Each stated that neither company
proposed to
terminate QPN’s lease of the
Retained Land or to alter the rental payable to
ABM, despite the rental of
$70,000 per annum payable
by QPN to ABM being less than
market
value.

The First Argument: Double Counting

85. Mr
Tomasetti correctly pointed out that the assessment of compensation under the
Just
Terms Act is determined by the terms of the
legislation, not by an
“abstract body of
‘valuation
principles’”.[48] In my
view, however, the primary Judge’s approach does not
depend on abstract
valuation principles, but is supported by the
language of the Just Terms
Act.
86. The
right to compensation is created by s 37 of the Just Terms Act. It provides
that:

“[a]n owner of an interest in land which is divested, extinguished or

diminished
by an acquisition notice is entitled to be
paid compensation in
accordance with
[Part 3]”.

87. Division
4 of Part 3 is headed “Determination of amount of compensation”. The
key
provision is s 54(1), upon which Mr
Tomasetti relied. It is important,
however, to appreciate its
precise terms. Section 54(1) is as
follows:
 “The amount of compensation to which a person is entitled under this Part
is
such amount as, having regard to all relevant matters under this Part,
will
justly compensate the person for the acquisition of the
land.” [Emphasis added.]

88. Under
the statutory scheme each owner of an interest in land which is divested by an
acquisition notice is entitled to be paid compensation
in accordance with Part 3
of the Just
Terms Act. The amount of compensation payable to each such person is
such amount as,
having regard to all relevant matters under Part 3, will
justly compensate the person for
the acquisition of the land (that is, the
person’s interest in land
acquired[49]). Section 55
requires
compensation to be assessed having regard to the six matters specified in that
section and only to those matters. Thus the statutory formulation of the
relevant matters to
be taken into account is “expressed to be
exhaustive”.[50] It follows
that the concept of just
compensation referred to in s 54(1) is a statutory
construct, the meaning of which in a
particular
case will depend solely on the
interpretation and application of the six matters
identified in s 55 (as
elaborated in the succeeding
provisions of the Just Terms Act).
89. QPN’s
interest in the in the acquired land was distinct from ABM’s interest in
that land.
Similarly, QPN’s interest
in the Retained Land was (and is)
distinct from that of ABM. Nothing
in the language of s 55 suggests that
compensation payable to
ABM in respect of the
acquisition of its interest in the
acquired land should be assessed having regard to the
compensation paid
or
payable to QPN in respect of the acquisition of its interest in that land.
In
particular, none of the matters identified in s
55 refer, explicitly or
implicitly, to
compensation paid or payable to a person other than the person
seeking compensation for
the
acquisition of its interest in land. This is the
case regardless of whether the other person
happens to be a corporation or
individual
related to the claimant.
90. When
the Just Terms Act seeks to limit the overall amount that can be claimed by
individual claimants it does so expressly. Section
56(2) provides that in
assessing the market
value of land for the purpose of paying compensation to a
number of former owners of
the
land, the sum of the market values of each
interest must not exceed the market value of the
land at the date of the
acquisition.[51] Section 56(2) does
not apply to the present case
because it is concerned with the market value of
land formerly owned by more than one
person, as distinct from the value
of land retained by the same “owners”.
91. Nor
is RMS’s submission consistent with the language of s 55(f) of the Just
Terms Act.
That provision directs attention to “any
... decrease in the
value of [the Retained Land] of
[ABM] ... by reason of the carrying out of ...
the public purpose for which the
[Expressway
Land] was acquired”. This
language requires ABM’s interest in the Retained Land to be
valued so that
the
relevant comparison “before and after” can be made. The value of
ABM’s
interest in the Retained Land was not affected
by the amount of
compensation paid or
payable to QPN for the decrease in the value of its
distinct interest in the Relevant Land.
The
value of ABM’s interest in the
Retained Land is to be determined in accordance with well-
established
principles, requiring
consideration of the price a willing but not anxious
purchaser would be prepared to pay for the interest.
92. Of
course there is a threshold question which must be answered before ABM’s
interest
in the Retained Land can be valued, namely
the nature and extent of
ABM’s interest. The
nature and extent of QPN’s interest in the
Retained Land, to which ABM’s
fee simple estate
is subject, obviously must
affect both the precise nature and the value of ABM’s interest. But
once
the threshold
question is answered (in this case by the primary Judge finding
that
ABM’s fee simple estate was subject only to QPN’s
lease
terminable on one month’s notice),
the value of ABM’s interest in
the Retained Land is to be assessed independently
of the
compensation offered to
and accepted by QPN.
93. There
is no issue in this appeal as to whether the compensation offered to and
accepted
by QPN was correctly assessed by the Valuer-General.
There is therefore
no need to
consider whether the compensation was assessed in conformity with the
statutory criteria
applicable
to QPN’s claim. I note nonetheless that
QPN’s claim for compensation for the
decrease in the value of its interest
in
the Retained Land rested on a different statutory basis
than the claim made
by ABM.
94. The
claim lodged by ABM under s 39 of the Just Terms Act incorrectly invoked s 55(a)
of
the Just Terms Act (which concerns the market
value of land actually
acquired). The Valuer-
General’s report characterised QPN’s
“sterilisation” claim as
a disturbance claim made
pursuant to ss
55(d) and 59(f) of the Just Terms Act. As Basten JA pointed out in Tolson v
Roads and Maritime
Services:[52]

“Disturbance covers legal costs, valuation fees, financial costs of

relocation and
other financial costs relating to the actual
use of the land: s
59. Such costs are
entirely separate from the value of the acquired land or the
retained land. It is
consistent
with the legislative purpose of providing
compensation for such
amounts that they be allowed or disallowed in accordance
with the
specific
statutory entitlements, without regard to the value of any
land involved.”

95. It
is true that the Valuer-General happens to have valued QPN’s disturbance
loss by
employing a similar (although not necessarily
identical) methodology to
that adopted by the
primary Judge in assessing ABM’s claim under s 55(f).
It may also be the case
that QPN
could have invoked s 55(f) in support of its
claim, since it had an interest in both the
Expressway Land and the Retained
Land. Even so, the compensation offered to QPN and
accepted by it was assessed
under ss 55(d) and 59(f) of the Just Terms Act and
not under s
55(f). Thus the
compensation offered to and accepted by QPN was assessed by reference to
different statutory criteria
than the compensation ultimately awarded to
ABM.
96. For
these reasons I reject RMS’s first argument.

The Second
Argument: The Parties’ Subjective Intentions

97. Section
55(f) of the Just Terms Act relevantly requires a comparison to be made between
the value of ABM’s interest in the Retained
Land at the time of
acquisition and its value
having regard to the carrying out of the public
purpose for which the Expressway Land
was
acquired. At all material times, as I
have explained, ABM held a fee simple estate in the
Retained Land subject to
QPN’s
tenancy terminable on one month’s notice.
98. No
submission was made to the primary Judge or to this Court that the
directors’
evidence justified a finding that ABM’s
entitlement to
terminate the lease was constrained as
a matter of law by the dealings between
the two related corporations. Such
a finding may
have been made if, for example,
ABM and QPN had made an enforceable oral agreement
entitling QPN to remain in
possession
as lessee for a fixed term. A similar finding might have
been made if
the principles of proprietary estoppel enhanced QPN’s
interest in the
Retained
Land and correspondingly diminished ABM’s interest. But in the
absence of any such
submission, the
primary Judge correctly sought to value
ABM’s interest as a fee simple
estate, subject only to QPN’s lease
terminable
on one month’s notice.
99. For
the reasons I have given, s 55(f) required the value of ABM’s interest in
the Retained
Land to be assessed in accordance
with well-established principles.
Thus the value had to
be assessed without regard to what the High Court in the
Aerated Water Case[53]
referred to
as the “personal views or wishes of the individuals”
who also have an interest in the
Retained Land. The value
of ABM’s
interest was therefore to be determined by the amount a
prudent purchaser would
be willing to pay for that interest,
having regard to the best and
highest use
of the Retained Land.
100. Plainly
one of the factors that a prudent purchaser would take into account is that
ABM’s fee simple reversion could be converted
into an unencumbered fee
simple estate
simply by giving one month’s notice to the tenant. The
prudent purchaser would not be
affected by the subjective intentions of ABM and
QPN if these had no bearing on the nature
and extent of ABM’s interest in
the Retained Land or on its ability to terminate QPN’s lease.
Nor would
the prudent purchaser be constrained in assessing the
value of ABM’s
interest by
the uneconomic rent to which it had previously agreed.
101. In
reaching this conclusion, I do not think it is necessary to form a view as to
the
correctness of the decision of this Court in
Health Administration
Corporation v George D
Angus Pty
Ltd.[54] That case involved a
claim by a tenant for a large amount of
compensation as disturbance under ss
55(d) and 59(f) of the Just Terms
Act. The tenant
succeeded notwithstanding that
his lease was terminable on a month’s notice.
102. The
Court in George D Angus distinguished Aerated Waters on a number
of grounds.
One distinction was that Aerated Water was concerned with
assessing the market value of
acquired land while George D Angus involved
a claim for

“costs reasonably incurred ... relating to the actual use of the land, as
a direct
and natural consequence of the
acquisition”.[55]

103. In
my view, George D Angus concerned issues different from those presented
by a
compensation claim under s 55(f) of the Just Terms Act such as the claim
made
by ABM. I
do not think that there is any inconsistency between the
reasoning in George D Angus and
the conclusion I have reached in the
present case.

**********
[1] [2015] NSWLEC
18.

[2] Land and

Environment Court Act 1979 (NSW), s 19(e) and
s 24.

[3]
Land and Environment Court,
s 57(1).

[4]
Lease, cl
3.2.

[5] Lease,
cl 1.1(11).

[6]
Lease, cl 5.1 and
5.2.

[7] [1986] HCA 40; (1986)

162 CLR 24 at 39.

[8]
[1907] HCA 82; (1907) 5 CLR 418 at 432 (Griffith CJ); 440-441 (Isaacs
J).

[9] ABM at
[158].

[10]
Section
56(1).

[11]The
Minister v New South Wales Aerated Water and Confectionary Company Limited
[1916] HCA 48; (1916) 22 CLR 56 at 63-64 (Griffith CJ), 70-71 (Barton J) and 77
(Isaacs J)

[12]
See fn 11.

[13]
[2006] NSWCA 353; (2006) 149 LGERA
439.

[14]
Leichhardt Council at
[42].

[15]
Aerated Water at
63-64.

[16]
The
internal quotation was from a passage in In re Lucas and the Chesterfield Gas
and
Water Board (1909) 1 KB 16 at 29 (Fletcher Moulton
LJ).

[17]
Aerated Water at
74.

[18]
Aerated Water at
77.

[19]
See
also at 70-71 (Barton J) and at 83 (Gavan Duffy and Rich JJ); Cf Knight v
Rosshaven
Marine Pty Ltd [1993] 2 Qd R 161; [1992] QCA
290.

[20]
Written submissions filed 1 September 2015 at par
20.

[21]See,
for example, The Minister v New South Wales Aerated Water & Confectionary Co
Ltd
[1916] HCA 48; (1916) 22 CLR 56 at 63-64, 70-71,
76-78.

[22]
(2014) 88 NSWLR 752; [2014] NSWCA 352 (“George D
Angus”).

[23]
George D Angus at [65] (Tobias AJA, Emmett and Leeming JJA
agreeing).

[24]
George D Angus at
[68].

[25]
George D Angus at
[55].

[26]
[2014] NSWCA 33; 199 LGERA 198, (Preston CJ of LEC, Beazley P
and Gleeson JA
agreeing).

[27]
[1981] 1 NSWLR 547 at 573; El Boustani at
[77].

[28] El
Boustani at [85].

[29]
Cf George D Angus at
[56].

[30] Cf
George D Angus at [34(3)] and
[61].

[31] El
Boustani at [76]-[77] and
[85]-[86].

[32]
ABM at [163], referring to George D Angus at
[16].

[33]
[2007] NSWCA 66 at
[71].

[34]
Tcpt,
p 169(15).

[35]
[2014] NSWCA 161; 201 LGERA 367 at
[36].

[36] Just
Terms Act, s 55(c).

[37]
Just Terms Act,
s 55(f).

[38]
Just Terms Act,
s 56(1)(a).

[39]
Just Terms Act, s 56(1) chapeau; emphasis
added.

[40] ABM
at [421].

[41]
Referring to provision made by s 88E of the Conveyancing
Act 1919 (NSW).

[42]
ABM at
[419(d)].

[43]
ABM at
[421].

[44] ABM
at [422].

[45]
ABM at
[419].

[46]
Allandale Blue Metal Pty Ltd v Roads and Maritime Services (No
6) [2015] NSWLEC 18
(Primary
Judgment).

[47]
Primary Judgment at
[284].

[48]
Leichhardt Council v Roads and Traffic Authority (NSW) [2006]
NSWCA 353; 149 LGERA
439 at [36] (Spigelman CJ, Beazley, Bryson, Basten JJA,
Campbell J agreeing); see also
Walker Corporation Pty Ltd v Sydney Harbour
Foreshore
Authority [2008] HCA 5; 233 CLR
259 at [31] per
curiam.

[49]
“Land” is defined in s 4(1) of the Just Terms Act
to include any interest in
land.

[50]
Leichhardt Council v Roads and Traffic Authority (NSW) at
[36].

[51]
“Owner” is defined in s 4(1) to mean “any
person who has an interest in the
land”.

[52]

[2014] NSWCA 161 at [83]; see also at [9]-[11] (Beazley P);

Health Administration
Corporation v George D Angus Pty Ltd [2014] NSWCA 352 at
[57] (Tobias AJA, Emmett and
Leeming JJA
agreeing).

[53]
The Minister v The New South Wales Aerated Water and
Confectionary Company Ltd
[1916] HCA 48; 22 CLR 56 at 64 (Griffith CJ); see also
67 (Barton J).

[54]
[2014] NSWCA
352.

[55]Just
Terms Act s 59(f); see Health Administration Corporation v George D Angus Pty
Ltd
at [68].