Bligh Consulting Pty Ltd v Ausgrid

SOLICITORS: Speed and Stracey Lawyers (Applicant) Maddocks (Respondent) File Number(s): 16/165214

Compensation payable following compulsory acquisition

1. The Respondent Ausgrid compulsorily acquired the following interests in 31 Bligh Street Sydney (the land) owned by the Applicant Bligh Consulting Pty Ltd ("Bligh") on 8 August 2014: 1. an easement for crane swing on the terms set out in Schedule 2 of the acquisition notice over Bligh's land ("the crane swing easement"); 2. an easement for rock anchors in the terms set out in Schedule 2 of the acquisition notice ("the rock anchor easement"); 3. an easement for scaffolding in the terms set out In Schedule 2 of the acquisition notice over the Bligh land ("the scaffolding easement").
2. Ausgrid has plans to build an electrical substation on the neighbouring land at 33 Bligh Street Sydney. The easements facilitate demolition and excavation, and construction, of the substation. I thank Acting Commissioner Parker for his valuable assistance in this matter.
3. The Court is acting as the judicial valuer in this case per Sydney Water Corporation v Caruso [2009] NSWCA 391; (2009) 170 LGERA 298 at [3], [35], [37], [146] and [150] and Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156; 73 LGRA 47. As a general principle in determining compensation doubts should be resolved in favour of a more liberal estimate: Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Ltd [1947] HCA 10; (1947) 74 CLR 358 at 374.
4. Bligh is the owner of the land at 31 Bligh Street, which is leased to the National Trust of Australia (New South Wales) and subleased back to Bligh. Bligh sub-subleased the land to the Lowy Institute for International Policy ("Institute"). As owner and sublessee, Bligh has two interests in the land however this was not a matter of contention during the hearing and the compensation payable to Bligh will be calculated on the basis of its freehold interest.

The statutory framework - Land Acquisition (Just Terms Compensation) Act 1991

1. Section 3(1) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) ("JT Act") provides: 3 Objects of Act (1) The objects of this Act are: (a) to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and (b) to ensure compensation on just terms for the owners of land that is acquired by an authority of the State when the land is not available for public sale, and (c) to establish new procedures for the compulsory acquisition of land by authorities of the State to simplify and expedite the acquisition process, and (d) to require an authority of the State to acquire land designated for acquisition for a public purpose where hardship is demonstrated, and (e) to encourage the acquisition of land by agreement instead of compulsory process.
2. "Public purpose" is defined in s 4 as "any purpose for which land may by law be acquired by compulsory process under this Act".
3. Section 4 of the JT Act defines "land" as "any interest in land".
4. Section 54 (1) of Pt 3 Div 4 provides: 54 Entitlement to just compensation (1) 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.
5. Section 55 provides: 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.
6. Section 56 (1) provides: 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.

The terms of easements acquired

1. On 8 August 2014, three acquisition notices were published in the NSW Government Gazette for the acquired easements as follows: AUSGRID declares with the approval of Her Excellency the Governor with the advice of the Executive Council that the easement described in Schedule 1 below is acquired by compulsory process under the provisions of the Land Acquisition (Just Terms Compensation) Act 1991 for the purposes of exercising its functions under the Electricity Supply Act 1995 in respect of the building demolition, site excavation, and construction by Ausgrid of the integrated substation development (being the 'City East Zone Substation'), as authorised under the Electricity Supply Act 1995. …
2. Schedule 2 of each of the notices set out the terms of the easements as follows: Terms of Easement for Crane Swing 1. Definitions Unless the contrary intention appears in this easement, the following terms have the following meanings in this easement: Ausgrid means Ausgrid as constituted from time to time, and includes its successors and assigns, any administrator thereof or other person appointed by or on behalf of the New South Wales Government or any Minister thereof or any body in which Ausgrid is merged or which as at the relevant time substantially fulfils the functions of Ausgrid. Authorised Users means every person authorised by Ausgrid for the purposes of this easement, and includes any successors, transferees, contractors, licensees, representatives, employees and agents of Ausgrid. Burdened Land means the land burdened by this easement. Development Site means the land comprised in certificate of title folio identifier 1/626651. 2. Terms of the Easement for Crane Swing Ausgrid and all of its Authorised Users have full and free right to encroach upon the airspace above the Burdened Land from the Development Site for the purpose of: (a) setting up and dismantling a tower crane; (b) slewing, suspending and swinging a tower crane for the purpose of carrying out the development works on the Development Site; and (c) having a tower crane overhang in the airspace, provided always that Ausgrid will use all reasonable endeavours to cause as little disturbance to the Burdened Land as possible and if it causes damage to the Burdened Land in exercising its rights under this easement it will make good that damage at its cost. 3. Release On completion of works on the Development Site. Ausgrid must release this easement. Terms of Easement for Rock Anchors 1. Definitions Unless the contrary intention appears in this easement, the following terms have the following meanings in this easement: Ausgrid means Ausgrid as constituted from time to time, and includes its successors and assigns, any administrator thereof or other person appointed by or on behalf of the New South Wales Government or any Minister thereof or any body in which Ausgrid is merged or which as at the relevant time substantially fulfils functions of Ausgrid. Authorised Users means every person authorised by Ausgrid for the purposes of this easement, and includes any successors, transferees, contractors, licensees, representatives, employees and agents of Ausgrid. Burdened Land means the land burdened by this easement. Development Site means the land comprised in certificate of title folio identifier 1/626651. Rock Anchors means rock anchors, rock pinning, rook nails and other structures for the purpose of supporting or protecting works on the Development Site and underpinning and supporting improvements erected on the Burdened Land. 2. Terms of the Easement for Rock Anchors Ausgrid and all of its Authorised Users have full and free right with tools, implements and machinery necessary for the purpose to enter that part of the Burdened Land beneath the surface of the land identified in the plan as "proposed easement for rock anchors" (which is limited in height and depth), underground from the Development Site for the purpose of constructing, placing, leaving, inspecting, repairing, maintaining and de-stressing Rock Anchors or any parts thereof within that part of the Burdened Land provided always that Ausgrid will use all reasonable endeavours to cause as little disturbance to the Burdened Land as possible and if it causes damage to the Burdened Land in exercising its rights under this easement it will make good that damage at its cost. Prior to the release of this easement Ausgrid must ensure that Rock Anchors or any parts thereof within the Burdened Land placed pursuant to this easement will be de-stressed. After de­stressing such redundant Rock Anchors or any parts thereof will remain in situ and form part of the Burdened Land, until such time as they may be removed by any registered proprietor of the Burdened Land. Terms of Easement for Scaffolding 1. Definitions Unless the contrary intention appears in this easement, the following terms have the following meanings in this easement: Ausgrid means Ausgrid as constituted from time to time, and includes its successors and assigns, any administrator thereof or other person appointed by or on behalf of the New South Wales Government or any Minister thereof or anybody in which Ausgrid is merged or which as at the relevant time substantially fulfils the functions of Ausgrid. Authorised Users means every person authorised by Ausgrid for the purposes of this easement, and includes any successors, transferees, contractors, licensees, representatives, employees and agents of Ausgrid. Burdened Land means the land burdened by this easement. Development Site means the land comprised in certificate of title folio identifier 1/626651. Scaffolding means a temporary structure, including access platforms, working platforms, catch platforms, landing platforms, chainmesh and shade cloth mesh, and incorporates elements of scaffolding systems as detailed using the principles of engineering design, supported on: (a) the ground; (b) a class B hoarding structure; (c) a cantilevered support structure; (d) adjacent property roof structure(s); or (e) any combination of the above as may be applicable, and braced as required using scaffold ties, anchorages and components as determined by principles of engineering design. 3. Terms of the Easement for Scaffolding Ausgrid and all of its Authorised Users have full and free right to access and remain on that part of the Burdened Land identified in the plan as "proposed easement for scaffolding" (which is limited in height and depth) with tools, implements and machinery necessary for the purpose to attach, place, leave or install Scaffolding and repair, maintain or remove such Scaffolding provided that Ausgrid will use all reasonable endeavours to cause as little disturbance to the Burdened Land as possible and if it causes damage to the Burdened Land in exercising its rights under this easement it will make good that damage at its cost. 3. Release On completion of works on the Development Site, Ausgrid must release this easement. (Emphasis added.)

Chronology

1. The parties agreed a lengthy chronology of events which has been truncated by the Court as follows: 1. 31 October 1978 - commencement of lease between Abbey Victoria Properties Pty Ltd (Lessor) and the National Trust (New South Wales) (Lessee) (R320497). Bligh is now the Lessor (lease dated 22 September 1978). Expires 30 October 2058. 2. 31 October 1978 - commencement of sublease between the National Trust (New South Wales) (Sublessor) and Kragness Pty Ltd (Sublessee) (R320499) (Note: Signed 22 February 1979). Bligh is now the Sublessee (lease dated 22 February 1979). Expires 29 October 2058. 3. 26 July 2001 - development approval D/2001/00317 in respect of 20-26 O'Connell Street - Stage 1 commercial building envelope on the site with a floor space ratio ("FSR") of 12.5:1, a height of 190m, and 41 car spaces. 4. April 2003 - the Institute founded by Mr Lowy. 5. 2003/2004 - Bligh purchased 31 Bligh Street to be the home of the Institute. 6. 2003/2004 - capital works undertaken by Bligh to restore, fit out and furnish 31 Bligh Street to make it suitable for the Institute. 7. 11 August 2004 - deed of Trust between Bligh Consulting Pty Ltd (Trustee) and Bligh Institute Pty Ltd (Beneficiary) declaring that the Trustee holds the land in trust for the Beneficiary (Note: Bligh Institute Pty Ltd now LFG Investments Pty Ltd). 8. 1 October 2004 - commencement of sub-sublease between Bligh (Lessor) and the Institute (Lessee) (AC82479B), expiring 30 September 2009. 9. October 2004 - the Institute occupied 31 Bligh Street. 10. 26 May 2005 - development approval D/2004/873 in respect of 20-26 O'Connell Street and 33-35 Bligh Street for Stage 2 development to demolish the existing commercial buildings and erect a new 30 storey commercial tower with ground level retail and basement car parking. 11. 2006 - hoardings are in place around 33 Bligh Street. 12. July 2007 - the buildings on 33 Bligh Street become vacant. 13. 30 October 2008 - Investa Properties, who was then the owner of 33 Bligh Street (also known as 20-26 O'Connell Street), obtained deferred commencement approval for the "demolition of the existing commercial building and construction of a 205 m tall commercial building comprising: 28,023m2 of floorspace; through site pedestrian link between Bligh and O'Connell Street; basement car parking for 41 cars; and ground level retail space…" 14. 7 November 2008 - development approval D/2007/2027 in respect of 20-26 O'Connell Street for demolition of the existing commercial building on the site, known as "Kindersley House", and construction of a 205m high commercial building comprising 28,023m2 of floor space over 26 commercial levels; basement level parking for 41 vehicles and provision of a ground floor through site pedestrian link and 168m2 of retail space. 15. 2009 - heads of agreement between Energy Australia and Investa. 16. June 2009 - Investa Properties sold 33 Bligh Street to Ausgrid but retained rights to construct a high rise office tower in the airspace above Ausgrid's proposed substation. 17. 20 September 2009 - Minister for Planning granted concept approval for the Sydney CityGrid Project under s 75O of the Environmental Planning and Assessment Act 1979 (EP&A Act). 18. 1 October 2009 - commencement of sub-sublease AF698892H (being lease of lease R320499) between Bligh (Lessor) and the Institute (Lessee), expiring 30 September 2014 with option to renew for a further 5 years. 19. Mid 2010 - Bligh and the Institute first informed by Ausgrid about the proposed project at 33 Bligh Street. 20. Mid to late 2010 - the Institute and Bligh make submissions to the Department of Planning. 21. July 2010 - environmental assessment report for Stage 2A(i) of the City East Zone Substation (publicly exhibited 22 July 2010 to 23 August 2010). 22. 4 November 2010 - modification to concept approval under s 75W of the EP&A Act. 23. Mid 2011 - discussions between Ausgrid, Bligh and the Institute regarding possible acquisition of 31 Bligh Street. Ausgrid notified Bligh and the Institute that it required certain access rights in respect of 31 Bligh Street. 24. 13 July 2011 - modification to concept approval under s 75W of the EP&A Act. 25. 13 July 2011 - Director-General approved Stage 2A(i) of the Sydney CityGrid Project under s 75J of the EP&A Act (relating to the demolition of the existing building (Kindersley House) at 33 Bligh Street and site preparation). 26. 12 August 2011 - Director-General's Environmental Assessment Requirements for Proposed Sydney CityGrid Project Stage 2A(ii). 27. 19 September 2011 - Ausgrid announced the final design of the electrical substation and integrated commercial tower development on the Site to be delivered with Investa. 28. Late 2011 - negotiations between Ausgrid, Bligh and the Institute in relation to an Adjoining Owners Deed regarding access rights in respect of 31 Bligh Street and possible relocation of the Institute (and/or parts of its operations). 29. February 2012 - environmental assessment report for Stage 2A(ii) (publicly exhibited from 29 February 2012 to 30 March 2012). 30. 19 March 2012 - adjoining Owner's Deed - 28-34 O'Connell Street, between Ausgrid and ACE Insurance Ltd. 31. 12 April 2012 - adjoining Owner's Deed - 37 Bligh Street, between Ausgrid and Owners of Strata Plan No. 58859. 32. 25 May 2012 - submissions response and preferred project report prepared by Ausgrid. 33. December 2012 - Director-General's Environmental Assessment Report provided in relation to Ausgrid's Proposed Development. 34. 11 December 2012 - Deputy Director-General approved Stage 2A(ii) of the Sydney CityGrid Project under s 75J of the EP&A Act. This approval was for (amongst others) the construction and operation of the City East Zone substation and integrated commercial tower including a five level basement, a substation extending to 45.68m above Bligh Street and an integrated commercial tower located above the substation with a height of approx.161.73m and 28,050m2 of floor space. 35. Late 2013 - negotiations between Ausgrid, Bligh and the Institute regarding an adjoining owner's deed ceased. 36. 30 March 2014 - date when five year option in the lease between Bligh and the Institute was required to be exercised (according to Ausgrid). 37. 14 April 2014 - proposed acquisition notices issued by Ausgrid to Bligh as sublessee and as owner. 38. 25 June 2014 - Bligh requested further details about easements to be acquired and works proposed. 39. 7 July 2014 - Ausgrid response to request for further details about easements and works. 40. 14 July 2014 - Bligh and the Institute request further details about use of proposed easement. 41. 15 July 2014 - Ausgrid response to request for further details - that proposed easements are for the construction of the substation and that the developer of the commercial tower would have to negotiate access requirements with Bligh and the Institute if required. 42. 18 July 2014 - claim for compensation pursuant to s 39 of the JT Act lodged by Bligh. 43. 8 August 2014 - easements compulsorily acquired by Ausgrid. Acquisition notices published in the Gazette. 44. 29 September 2014 - the Institute notifies Bligh through its Solicitor that it presently does not intend to exercise its option to renew the lease. 45. 29 September 2014 - letter from Bligh to the Institute consenting to the Institute occupying 31 Bligh Street on a holding over basis. 46. 30 September 2014 - Bligh Institute sub sublease terminates. The Institute remained in 31 Bligh Street on a holding over basis until 11 December 2015. 47. 2 October 2014 - Valuer General's Notice of Determination of compensation for Bligh. 48. 4 November 2014 - letter from Ausgrid to Bligh providing written notice of the Valuer General's determination and enclosing a compensation notice. 49. 2 February 2015 - class 3 application filed by Bligh. 50. 5 February 2015 - Contract for demolition works between Ausgrid and Metropolitan Demolitions Group signed. 51. 11 March 2015 - Ausgrid served Demolition notices to residents and businesses. 52. 20 March 2015 - the Institute staff inspect alternative office spaces. 53. 26 March 2015 - the Institute staff inspect further alternative office spaces. 54. 21 May 2015 - 1 Bligh Sydney - Leasing Proposal - the Institute. 55. 1 August 2015 - lease over 1 Bligh Street between Perpetual Trustee Company Limited (as Lessor) and the Institute (as Lessee) commences (1 Bligh Street Lease) (which is to terminate on 31 July 2019 with option to renew for a period of 2 x 1 year). 56. 16 September 2015 - 1 Bligh Street lease entered into (commencement date 1 August 2015). 57. 11 December 2015 - the Institute relocates from 31 Bligh Street to 1 Bligh Street.

1. The Court went on a view to 31 Bligh Street, and the Institute's new premises at 1 Bligh Street. The Court was also taken on a view of buildings throughout the Sydney CBD selected by experts as comparable to 31 Bligh Street. The buildings visited were Lot 2, 7 Bridge Street, 63 York Street, 73 York Street, 125 York Street, 93 Bathurst Street and 484 Kent Street.

Lay evidence

1. The affidavit of Ms Ng Chief Operating Officer of the Institute dated 16 April 2015 was read in part by Bligh. Her affidavit attests to the establishment and work of the Institute, its reputation, its plans for future growth and its not for profit status. Ms Ng gives evidence as to the Institute's premises at 31 Bligh Street and its use as a research centre and events space, as well as the interior fit out of the building. Ms Ng describes the way the façade of 31 Bligh Street has been used in promotional material for the Institute. In Ms Ng's opinion due to the works at 33 Bligh Street, the Institute was unable to remain at 31 Bligh Street. A substantial portion of the affidavit was read as submissions, outlining Ms Ng's predictions of the works to be undertaken by Ausgrid at 33 Bligh Street and her views on the impacts that those works would have on the building at 31 Bligh Street. Ms Ng outlines the options that she believes the Institute had available to it in relocating temporarily or permanently to other premises, which in her view must be located in the Sydney CBD.
2. A supplementary affidavit of Ms Ng dated 5 February 2016 was read in part by Bligh. In her affidavit Ms Ng attests to the Institute's occupation of 31 Bligh Street on a holding over basis from 1 October 2014 to 11 December 2015, and the rent payable under the terms of this lease. Ms Ng gives evidence as to the disruption of the Institute's operations due to the works at 33 Bligh Street, particularly the relocation of an event from 31 Bligh Street due to noise impacts. The affidavit attests to the terms of renewal of the 31 Bligh Street lease, and the rental and outgoings that the Institute would have paid had it exercised the option.
3. During cross-examination Ms Ng was questioned on the relationship between Bligh and the Institute. Ms Ng gave evidence that the Institute had over the course of her employment paid for repairs and replacement of things such as waterproofing, bathrooms, the air conditioning system and ceilings. Ms Ng agreed that the terms of the lease between Bligh and the Institute meant that there was no obligation for the Institute to pay outgoings that were incurred by the Institute's use of the building at 31 Bligh Street. She gave evidence that it was her understanding that it was the practice of the Institute to pay for such outgoings from the time before she was employed at the Institute.

What is the public purpose of the acquisitions?

1. The first issue to determine is the scope of the public purpose of the acquisitions. That will define the extent of the compensation able to be claimed by Bligh and therefore the appropriate valuation method. A finding on this issue also determines whether all of the expert evidence adduced by the parties is relevant in this case. In final submissions the parties agreed there were two alternatives. Firstly that the public purpose is the easements themselves, which Ausgrid contends for. Secondly that the public purpose is the substation development which the easements facilitate the building of, which Bligh contends for. Bligh bears the onus of establishing the nature of the public purpose per Roads and Traffic Authority (NSW) v Perry [2001] NSWCA 251; (2001) 52 NSWLR 222 at [67]. Evidence relied on by the parties included the terms of the easements and letters from Ausgrid and/or its solicitors to Bligh.

Bligh's submissions on the public purpose

1. Bligh contends that the relevant public purpose is the demolition of the existing office building (Kindersley House) at 33 Bligh Street, the excavation of the site and the construction of the proposed substation. Ausgrid's definition of the public purpose as the purpose to which the easements themselves relate (that is, separately, rock anchor, crane swing and scaffolding) defies common sense and is contrary to the stated purpose of the acquisition in the acquisition notice. The public purpose cannot simply be the acquisition of the acquired easements as that serves no public purpose at all. The acquired easements are not an end in themselves. Further, there is no distinction between an easement that facilitates the carrying out of the public purpose and the carrying out for the public purpose. Marshall v Director - General, Department of Transport [2001] HCA 37; (2001) 205 CLR 603 is authority for the proposition that land acquired for ancillary purposes relating to the broader public purpose is land acquired for that broader public purpose (at [22]). The Court should not distinguish those parts that facilitate the principal objective as they still form part of that principal objective.
2. To contend that the public purpose is limited to the purpose to which the easements themselves relate is also contrary to the "public purpose" identified by Ausgrid's solicitors in correspondence prior to the acquisitions of the easements. None of Ausgrid's functions outlined in s 9 of the Energy Services Corporations Act 1995 (NSW) or the Electricity Supply Act 1995 (NSW) involve Ausgrid simply erecting scaffolding, swinging a crane or installing rock anchors without some broader purpose.

Ausgrid's submissions on the public purpose

1. Ausgrid contends that there are three public purposes one for each of the three separate easements. These public purposes are separate from the public purpose of building the substation on the neighbouring land. No part of 31 Bligh Street is required for the substation. Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259 is authority that the focus of inquiry must be what is the public purpose for which the land was acquired. Identifying a "scheme" is not the appropriate approach any longer, in contrast to Perry the authority relied on by Bligh.

Broad public purpose

1. The statutory scheme must be considered in determining what is the public purpose as a question of fact in the circumstances of this case. Land is defined broadly in s 4 of the JT Act to include any interest in land and therefore includes an easement. Public purpose is defined as "any purpose for which land may by law be acquired by compulsory process under this Act". Cases have identified that the public purpose must not be defined too narrowly or too broadly. It should be determined at a level of particularity beyond reference to the legislation under which the acquiring authority exercises its compulsory acquisition powers per MMTR Pty Ltd v Roads and Maritime Services [2015] NSWLEC 177 at [53], [51] citing Davies v Sydney Water Corporation [2012] NSWLEC 130 at [67]. MMTR at [55] also cites the Court of Appeal in Perry at [100] where Hodgson JA stated that there were no clear rules to determine the level of generality of the public purpose. Relevantly, factors Hodgson JA cited were the degree of continuity and consistency of the elements of what is proposed by the acquiring authority and fairness to the parties, both the claimant and the acquiring authority. At [65] Handley JA stated: …The particular purposes, in the sense of the uses to which particular land will be put, do not exclude the wider public purpose to be served by the acquisition. If so it is this wider public purpose, scheme or project which underlay the acquisition, which governs the operation of s 56(1)(a).
2. In Perry the Court of Appeal held that the resumption of land in the middle of a substantial highway or railway extension was for the public purpose of that scheme or project as a whole, not only for the part constructed on particular land.
3. Ausgrid is correct in submitting that in Walker the High Court emphasised the need to apply legislation as drafted not by applying a judicial gloss from earlier decisions which referred to a "scheme". The High Court was considering Pointe Gourde and other cases which referred to 'the scheme' where the meaning of that word was unclear at [46]-[47]. Walker is primarily authority for the finding at [54] that the proposal, the term used by the High Court, the subject of the public purpose must be that of the acquiring authority and not another entity, there a local council, with an interest in the acquired land. Walker does not have the effect that the reference to a scheme in Perry is overtaken. "Scheme" and "proposal" or "project" (another term referred to by Handley JA in the quote extracted above) are not terms of art but words having ordinary everyday usage. The Court of Appeal in Perry could just as easily have referred to a proposal. Walker does not preclude a finding in favour of a broader public purpose.

Valuation method

1. A finding of broad public purpose to include the three easements which facilitate the demolition, excavation and construction of the substation on neighbouring land and the substation project results in a potential claim for injurious affection in relation to 31 Bligh Street (as provided under s 55(f)) as well as market value (s 55(a)) by Bligh. Bligh contends that in determining the matters required by s 55(a) and (f), using the before and after method of valuation Bligh is notionally replaced by a hypothetical landlord/owner and the Court must assume an arm's length market transaction. The before and after method assesses market value before and after the date of acquisition to determine the adverse impact if any of an acquisition by the difference between the two amounts. Bligh's interests are hypothetically sold in the valuation exercise. The Institute as the tenant is assumed to have no relationship with the landlord/owner. It must be determined as a matter of fact what the Institute would have done acting reasonably and prudently in the before and after scenarios. Ausgrid made a slightly different submission that the Institute's actions must be considered as if it were a reasonable arm's length lessee of a particular kind meaning with the characteristics of the Institute (rather than a general commercial tenant).
2. There are a number of observations to be made at a general level about the challenges posed in this case by Bligh's approach to the evidence of the Institute. The characterisation of the Court's task in the previous paragraph can be accepted on either party's case but its application has proved difficult in relation to the evidence adduced. Bligh relies entirely on the actions or assumed actions of the Institute in the before and after scenarios. Bligh submits that the Institute's actions must be considered on the basis of what the Institute would have done, acting reasonably, absent the public purpose, as if it had no relationship with the landlord/owner.
3. For the ten reasons given by Ausgrid in its closing written submissions at par [119] Bligh and the Institute are not arm's length parties. This is clear from the evidence of Ms Ng and Mr Fanning, documents tendered in the proceedings and the terms under which the Institute occupies the premises. I do not need to refer to all ten matters to establish this point but note several as follows. Bligh bought 31 Bligh Street for the Institute as Dr Fullilove attested in oral evidence. Significant capital works were made after Bligh purchased 31 Bligh Street. Two thirds of the capital improvements were paid for by the Institute as Mr Fanning accepted in oral evidence. The leasing experts agreed the Institute's lease provided for a high rent, in excess of 30% compared to the market (as set out later in the judgment at par 102). The Institute had limited liability for outgoings under the lease. Ms Ng's oral evidence was that the Institute paid in the order of $80,000 in one year in outgoings for which it had no liability, a practice which commenced before she started working there.

After scenario: "But for" or "by reason of" the public purpose

1. A threshold question arises in the application of the before and after method in the after scenario. The parties agree that in the before scenario the Institute would have remained at 31 Bligh Street. There is some potential for disagreement about the terms on which the Institute would have continued but the differences between the parties on this issue reduced during the hearing. A more fundamental (threshold) issue arises in the after scenario. If Bligh cannot establish the inference that the hypothetical parties would consider that the Institute did not renew the option under the existing lease, or enter into a new lease and was likely to or did vacate the premises (putting matters at their highest from Bligh's perspective) by reason of the public purpose resulting in a potential vacancy period then there is no loss to Bligh in the after scenario.
2. The affidavit and oral evidence of Ms Ng and Dr Fullilove the Executive Director of the Institute was relied on by Bligh to support its contention that the Institute did not renew its option under the lease and moved to vacate the premises by reason of the public purpose namely the impact of the three easements and the demolition, excavation and construction of the substation on 31 Bligh Street.
3. Bligh tendered the minutes of the Institute board meeting held on 20 August 2014 (Exhibit C). Under the heading "Premises" the minutes state: Mark Ryan [Director] gave the meeting an update of where the Institute is with negotiation with its neighbour, Ausgrid and the Institute's plans to deal with the development.
4. In the letter dated 29 September 2014 sent shortly after the date of compulsory acquisition to Mr Speed Bligh's solicitor, Ms Ng stated that We confirm that this lease is due to terminate on 30 September 2014. We also confirm that pursuant to this lease the Lowy Institute has an option to renew the lease which it has not exercised and which it is not yet obliged to exercise pursuant to clause 2. The Lowy Institute does not presently intend to exercise its option to renew the lease, given the easements that Ausgrid has purported to acquire so as to enable it to redevelop 33 Bligh Street and given the disturbance likely to be caused by those easements and the redevelopment of 33 Bligh Street more generally - at least not at the minimum rental referred to in item 17 of the schedule to that lease. In light of the easements that Ausgrid has purported to acquire over 31 Bligh Street and the proposed redevelopment of 33 Bligh Street, the Lowy Institute is currently looking at alternative commercial offices to lease, and to relocate to, in the Sydney CBD (at least on an interim basis whilst Ausgrid's easements subsist and the proposed redevelopment of 33 Bligh Street takes place). The Lowy Institute is yet to determine whether, over the longer term, it is then feasible for it to move its operations back to 31 Bligh Street and again lease space at 31 Bligh Street. The Lowy Institute is presently investigating and considering its options in these regards. We confirm that, but for the interference to 31 Bligh Street that the easements that Ausgrid has acquired and its proposed redevelopment of 33 Bligh Street are likely to cause, the Lowy Institute would have exercised its option to renew its lease at 31 Bligh Street (or at least in the circumstances of the "minimum annual rental" referred to in item 17 of schedule to that lease not exceeding $803,174.82). Certainly the Lowy Institute closely associates itself and its image with 31 Bligh Street and is appreciative of the significant amounts incurred (and continuing to be incurred) by Bligh Consulting Pty Ltd/ LFG Investments Pty Ltd in making those premises particularly suited to the Lowy Institute and its operations. In light of all of the above, and given the lease termination date of 30 September 2014 and our expectation that Ausgrid will not be taking possession of the easements that it has purported to acquire nor commencing, in any substantive way, its redevelopment works at 33 Bligh Street until January or February next year, the Lowy Institute proposes, pursuant to and in accordance with clause 3 of the lease, to continue to occupy the premises at 31 Bligh Street beyond 30 September 2014 on a month-to-month basis whilst it finds alternative accommodation and determines what is best for it to do over the longer term.

Occupation health and safety evidence (Crane swing easement)

1. Mr Ricketts was engaged by Bligh to provide an expert opinion on the occupational health and safety ("OHS") risks associated with a crane operating overhead at 31 Bligh Street. His report was tendered in the proceedings as Exhibit Q. He was also requested to provide his opinion on whether the Institute could be satisfied that it would not be in breach of its obligations under the Work Health and Safety Act 2011 (NSW) if it remained in occupation at 31 Bligh Street during the period of the Ausgrid works. Mr Ricketts was then asked in the alternative what steps he would advise the Institute to take to ensure it does not breach these obligations, in light of the fact that Ausgrid would not be providing protective barriers over 31 Bligh Street.
2. Mr Ricketts' opinion is that without protective hoardings over 31 Bligh Street the visitors and occupants would be exposed to a high risk of falling objects from the operations of the crane overhead. Due to this, the report states that the Institute would have a duty of care under the Work Health and Safety Act to remove the occupants from the building during the period of works.
3. Mr Love was engaged by Ausgrid, and his expert report was tendered in the proceedings (Exhibit 7). Mr Love's report addresses specific matters requested in his letter of instruction regarding the OHS risks associated with the crane operating overhead at 31 Bligh Street. On the identification of any risks, Mr Love was requested by Ausgrid to give his opinion on the risk mitigation strategies available, whether the assumptions as to work method set out in the letter of instruction to Mr Ricketts are reasonable and appropriate, and whether it is normal for the operator of a crane to lift and swing loads over an occupied building such as the one at 31 Bligh Street. Mr Love was asked to give his opinion what would be the reasonable response of the Institute and Bligh to the acquisition of the easement for the crane swing through the airspace above 31 Bligh Street.
4. Mr Love concluded in his report that the likely safety risks associated with a crane lifting loads overhead of 31 Bligh Street whilst occupied would be significant enough to likely pose an unacceptable risk to the health and safety of visitors and occupants of the building. The report states that the crane itself does not pose any real risk to adjoining and neighbouring areas including when weathervaning. On risk mitigation strategies, Mr Love's opinion is that save for exceptional circumstances it is possible to operate a tower crane during construction without the need to pass a load over property. If an exceptional circumstance required the lifting of a load over a building, that building would need to be vacated during the lift period. Contrary to Mr Ricketts, Mr Love states that an overhead protective structure above the footpath would only provide minimal protection and therefore pedestrian access would need to be closed at times of a load passing over the footpath. Mr Love concluded that it is not necessary for a building to be vacated for the entire period of construction due to a crane swing easement over the building.

Project management evidence

1. The report of Mr Ging, the project management expert retained by Bligh, was tendered in the proceedings as Exhibit E. Mr Ging's report was prepared on the basis of documentation available at the date of acquisition. He was retained by Bligh to prepare an expert report and give evidence in relation to the compulsory acquisition by Ausgrid of easements over 31 Bligh Street. In his report Mr Ging gave his opinion on the likely impacts that would occur during each of the three phases of the construction works being demolition, excavation and construction.
2. During demolition, Mr Ging's evidence is that there will be intermittent obtrusive noise and possibly vibration from jack hammering which may in turn cause cracking and damage to the interior of 31 Bligh Street, as well as from the dropping of demolished building materials down the rubbish chute. In Mr Ging's opinion dirt or dust will infiltrate 31 Bligh Street, damage to the southern wall of 31 Bligh Street will inevitably occur, the roof may be damaged by falling objects and the erection of hoardings and scaffolding will detract from the appearance of the entrance to 31 Bligh Street.
3. During excavation, Mr Ging's opinion is that underpinning of the foundations of 31 Bligh Street may be required which will involve jack hammering and therefore obtrusive noise, vibration and infiltration of dirt and dust. This vibration may cause cracking and damage to the structure and interior of 31 Bligh Street. The drilling involved in installing the rock anchors will cause obtrusive noise and possibly vibration in 31 Bligh Street. Dump trucks and de-watering equipment will cause intermittent obtrusive noise and vibration through the excavation period, and dirt, dust and possibly exhaust fumes will infiltrate 31 Bligh Street.
4. During the construction phase, Mr Ging anticipates that 31 Bligh Street will need to be vacated when the tower crane is erected and removed. The operation of the crane will mean there is a risk of falling objects penetrating the roof at 31 Bligh Street. Intermittent obtrusive noise and dirt and dust infiltration will occur throughout the whole of the construction phase. The unloading of building materials at 33 Bligh Street will compromise the entrance to 31 Bligh Street and will create access difficulties for staff and visitors at 31 Bligh Street.

Acoustic evidence

1. Dr Tonin was engaged by Bligh to prepare a report assessing potential noise and vibration impacts arising from the demolition of the existing building at 33 Bligh Street, excavation works and the construction of a new 39 level commercial development incorporating an electricity substation on the first 11 levels, 6 levels being underground on the Bligh Street frontage. His report was tendered in the proceedings (Exhibit G). Dr Tonin was asked to advise on the risks a tenant with an expiring lease, or a new tenant coming into a lease of 31 Bligh Street, would likely face with respect to noise and vibration from the construction works. The advice was given on the basis that the tenant would need to appreciate these risks so as to make an informed decision as to whether or not to renew their lease or take up a new lease. In his report Dr Tonin describes the easement and construction works as well as the conditions and applicable noise limits. Dr Tonin describes the building at 31 Bligh Street and the Institute's activities and concludes that due to its structure 31 Bligh Street is particularly sensitive to regenerated noise from the proposed construction works compared to more modern neighbouring buildings. On the basis of that information, Dr Tonin then outlines his opinion of the potential noise and vibration impacts associated with the construction and examines whether impending impacts would have a material effect on the decision by management to stay or a new tenant to come in.
2. Dr Tonin concludes that noise from heavy vehicles using Bligh Street is a likely cause of concern for the Institute or any prospective tenant and that there is an inadequate assessment of this noise. On the issue of noise from heavy equipment and workers, Dr Tonin's opinion is that the project approval controls for the phases of the project do not necessarily guarantee that noise and vibration levels will be complied with nor that the business of the tenant will not be disturbed. Dr Tonin assessed the impact of noise on the ability of the Institute to host events at 31 Bligh Street. His advice to the Institute and to any other commercial tenant using the space for a similar purpose is that regenerated noise caused by the construction works will impede the ability to host events in the building. In his opinion the noise from the construction works will impact on the ability of speakers and guests to make out what is being said, as well as degrading the quality of video recordings or TV broadcasting.

Leasing evidence

1. Mr Tindale, Director of Cadigal Office Leasing Pty Ltd, prepared two reports each dated 14 July 2015 (Exhibits K and L) and gave expert evidence on behalf of Bligh. Mr Messenger, Principal of Independent Corporate Property Oceania Pty Ltd, prepared a report dated 17 November 2015 (Exhibit 4) and gave expert evidence on behalf of Ausgrid. Mr Tindale and Mr Messenger also contributed to a Joint Report dated 10 December 2015 (Exhibit M). Not all the leasing evidence is material to my decision at this point in the judgment. Mr Tindale's primary evidence was prepared on the assumption that the Institute would in the after scenario leave 31 Bligh Street. I am determining the availability of such an assumption in the after scenario in these proceedings.
2. Mr Messenger's evidence is not generally premised on the assumption that the Institute will vacate or have vacated for a temporary period only, noting in his report that "if Bligh were a normal arm's length lessor, it would be seeking to obtain the best possible long-term lease".

Whether a sitting tenant, such as the Institute, would relocate

1. Mr Messenger notes that the Institute had decided not to exercise its option under the lease shortly after the date of acquisition claiming this to be due to the disruption of the development works. In Mr Messenger's opinion the following factors would motivate a tenant, such as the Institute, not to exercise its option: 1. the rental passing under the lease is "substantially above market value"; 2. the rent review provisions are onerous in the event of option exercise, with the revised rent being the higher of the market rent or passing rent increased by 4%, being $835,301 per annum compared to Mr Tindale's assessment of the gross effective market rental at $511,777 per annum; and 3. the problems with the amenity of the property as office space, including an inefficient use of space.
2. Further, Mr Messenger notes that "construction and renovation is an everyday condition of being part of this modern, growing city". While adverse effects are managed by consent authorities, "some inconvenience may occur from development at adjacent or neighbouring sites". Mr Messenger observes that the expiry of the lease gives the Institute a beneficially timed opportunity to relocate to "modern efficient office premises".
3. Concerning the easements, Mr Messenger opines that "a normal tenant would only have regard to the scaffolding easement", which will have a limited impact on building appearance and natural light and would not lead to a tenant vacating the property. He considered the crane swing would not interfere with the tenant's quiet enjoyment and the rock anchors would have minimal impact other than potential vibration at the time of boring holes.

Mr Tindale and Mr Messenger's joint report

1. While Mr Tindale gave evidence based on the assumption that the vacancy at the subject property was temporary and the Institute would return, and Mr Messenger gave evidence based on the assumption of a rational lessor seeking to lease a vacant building, the joint report identified considerable agreement on key issues in the matter.

Market rent for the subject property

1. Mr Tindale and Mr Messenger agreed that the passing rent was above current market value and that the rent on exercise of the option would be 30%-32.6% above open market effective rental, reflecting the special value placed by the Institute on a whole building presence, privacy between levels and building style. Mr Tindale and Mr Messenger were in agreement that there were no properties directly comparable to the subject property and that those comparable leasing transactions cited provided limited guidance as to rental and incentive levels.
2. Mr Tindale and Mr Messenger agreed that the asking rent for the subject property for the limited class of potential tenants for whom the property was especially suited was $650/m2 per annum gross plus GST ($705,900 per annum plus GST). Mr Tindale and Mr Messenger were in agreement that the most likely rental for the subject property for a broader class of tenants was $450/m2 per annum gross plus GST ($487,500 per annum plus GST). Mr Tindale and Mr Messenger agreed that face rental growth of 4% per annum "over coming years" was appropriate.

Whether the adjacent development necessitates relocation for a reasonable tenant from the subject property

1. Mr Tindale and Mr Messenger agreed that construction is common in a modern city and inconvenience is a common experience. Mr Tindale and Mr Messenger agreed that the passing rent and onerous rent review provisions for the option period may motivate a tenant not to exercise the option. Mr Tindale stated that "whilst not all commercial tenants would have relocated", relocation by the Institute was "reasonable" given the "atypical nature of their specific operations".

Impact of the adjacent development

1. Mr Tindale and Mr Messenger agreed that the adjacent development would have an impact on the subject property, providing a further obstacle to while not thwarting leasing, but differed on the quantification of the impact. Mr Tindale anticipated a rental reduction of 50% in addition to the normal market incentive during the demolition and excavation phase only, whereas Mr Messenger anticipated an increased incentive of 3%-5% for the whole of the term (until 75% of construction completed, following demolition and excavation), should a tenant be found in 2016, though the difference was not considered significant.

Impact of scaffolding easement on subject property

1. Mr Tindale and Mr Messenger agreed that the scaffolding has an impact on the subject property, disagree as to the extent of such impact and agree that a motivated lessee would proceed regardless of the scaffolding but may seek compensation.
2. Mr Tindale considers the scaffolding would be likely to result in a tenant requiring a reduction of 12.5% in rental for the duration of the scaffolding easement through to around November 2020. Mr Messenger considers the scaffolding to just be part of the general inconvenience of an adjacent development site.

Impact of crane swing easement on subject property

1. Mr Tindale and Mr Messenger, while differing on their understanding of the nature of the crane swing easement, agreed that if no loads were carried over the subject property then little or no impact would occur but if loads were carried over the subject property and a complete hoarding was required, then significant impact would occur.

Impact of rock anchor easement on subject property

1. Mr Tindale and Mr Messenger agreed that demolition and excavation would be noisy and disruptive, making it more difficult to secure a tenant during this period. The rock anchors would be unlikely to have an additional impact unless causing a time extension to the excavation period and increased vibration of the subject property beyond that expected from excavation in general.

Bligh's submissions on after scenario

1. But for the public purpose the Institute would have stayed at 31 Bligh Street for the foreseeable future. As a matter of fact, the Institute vacated 31 Bligh Street on 11 December 2015 and relocated to 1 Bligh Street. Dr Fullilove gave evidence that in his opinion but for the proposal to carry out the public purpose the Institute would have leased the building for the foreseeable future. On the balance of probabilities, the Court is entitled to conclude that it was the demolition of Kindersley House and the excavation and construction of the substation that caused the Institute to relocate. There is a causal link between the carrying out of the public purpose or the proposal to carry out the public purpose and the vacation of 31 Bligh Street that in turn has a negative impact on the value of the land for Bligh.
2. It is unrealistic for Ausgrid to suggest that a minute from the Institute's Board on the matter of the Institute's move from 31 Bligh Street would be tendered. It is also unrealistic to suggest that such a minute is even likely to exist. At best, it could only be expected that there would be a minute recording the decision to move, not necessarily the reasons why. There is no reason to doubt that the letter sent by Ms Ng to Bligh on 29 September 2014 giving formal notice of the Institute's decision not to exercise the option reflected the position taken by the Board. Ms Ng was not challenged on this.
3. It is clear from the totality of the evidence, the intention expressed by the Institute's management, the Institute correspondence dated 29 September 2014 and the Institute's concerns about possible impacts being well founded, that the Institute decided to relocate from 31 Bligh Street due to the likely disruption to its quiet enjoyment of the premises caused by noise, vibration and dust from the demolition, excavation and construction works associated with the carrying out of the public purpose. In addition, there was a prospect that the occupants of 31 Bligh Street would have to vacate the building to allow loads to be craned over the building for occupational health and safety reasons. The experts retained by Bligh confirm that these concerns were reasonable and well founded. Ausgrid offered to pay the costs of the Institute moving elsewhere for an eighteen month period. Therefore it is open to the Court to infer that the motivating factor behind the Institute's decision to relocate was the substation proposal.

Ausgrid's submissions on after scenario

1. Bligh cannot satisfy the onus of demonstrating the causal connection between any decrease in value of the land and the proposal to carry out the public purpose. There is no satisfactory evidence to demonstrate why the Institute moved out. In the absence of evidence the inference that the Court has been asked to make cannot be drawn.
2. As a corporate entity the Institute is governed by a Board of Directors which meets regularly and makes decisions in the form of resolutions which are noted in the minutes of its meetings. Bligh tendered minutes of the board meeting of 20 August 2014 in the proceedings as Exhibit C. Although the minutes show that some information was given to the directors at that meeting regarding the Institute's negotiations with Ausgrid and the Institute's plans to deal with the development at 33 Bligh Street, apparently no formal report was provided and no resolutions were made on the subject. The evidence of Ms Ng and Dr Fullilove regarding the Institute's decision to leave 31 Bligh Street was only accepted on the basis of identifying their personal opinions. Dr Fullilove identified in oral evidence that some decisions of the Institute are not made by the Board of Directors but rather by Mr Lowy. There is nothing to suggest, nor was it suggested by Bligh, that the personal opinions of Ms Ng or Dr Fullilove were passed on to or relied upon by any individual directors or Mr Lowy. Bligh did not lead any evidence of the decision to relocate or the reasons for the decision. Further, there is no evidence of consideration by the Board, its directors including Mr Lowy of what might have been done in the alternative - in particular whether the option would have been exercised or whether negotiations may have occurred with a view to reducing the effective rental. Ausgrid is entitled to an assumption that, there being no evidence, any evidence that could have been led could not support Bligh's claim.
3. At the time of the Institute's entry into the initial lease on 1 October 2004, a development consent had already been obtained by Investa for the demolition of Kindersley House. Therefore it must be inferred that when entering into the lease the Institute was aware of the potential for the neighbouring building to be demolished and for construction to occur. On 1 October 2009, the Institute entered into its second lease at 31 Bligh Street. By that date, in addition to the 2001 Stage 1 development consent for the demolition of Kindersley House and erection of a new commercial/retail building at 33 Bligh Street, there were several other development consents in place. In May 2005 Stage 2 development consent was granted to Investa for the demolition of Kindersley House and the erection of a new commercial tower, by 2006 Kindersley House was surrounded by hoardings and by July 2007 was vacant. In November 2008 Investa obtained a further development consent for the demolition of Kindersley House and the construction of a 205m tall commercial building, and in September 2009 concept approval was granted for the Sydney CityGrid project. The only inference that can be drawn is that the Institute entered into the lease notwithstanding the potential for demolition, excavation and construction next door.

No loss to Bligh in after scenario

1. As flagged above in par 48, events leading up to and where warranted to confirm a foresight after the date of acquisition inform the application of the before and after valuation method. In the hypothetical scenario I must consider the prudent and reasonable purchaser and vendor are both taken to obtain advice. Bligh did summarise in a separate document handed up during the hearing the type of advice that would be obtained by these hypothetical parties on 8 August 2014 but the inquiries were based on an assumption that the Institute would vacate the premises at some point in the future. At the date of acquisition that can be a possibility at best not a certainty.
2. The Institute's employee Ms Ng wrote on 29 September 2014 to advise Bligh that the Institute would not exercise the option under the lease, would occupy the premises on a month to month basis and would look for new premises. As Ausgrid submitted, there is no other evidence adduced by Bligh which establishes directly why the Institute's controlling body determined not to exercise the option under the lease or to consider vacating the premises. In the absence of advice from the Institute to the contrary, the appropriate decision making body was its board or a director with authority to act on its behalf. The minute of the Board meeting tendered (Exhibit C) does not provide any assistance on why the decision of the Board was made to relocate. The letter of Ms Ng of 29 September 2014 states that the Institute would not exercise the option under the lease for that reason. It is not evidence that the Institute's governing body had determined to move.
3. Has Bligh established on the balance of probabilities the inference that the Institute its tenant did not exercise the option under its lease because of the public purpose at the date of acquisition in the after scenario? Certain events occurred very shortly after the date of acquisition and could be considered in accordance with Falconer. The Institute did not exercise the option under the lease on 30 September 2014 or seek to enter into a new lease. A prudent tenant may well move to a month to month tenancy to experience whether the impact of building work on neighbouring land was acceptable. I consider the inquiries the hypothetical vendor and purchaser would make with the Institute would identify that the Institute did not propose to enter into a further lease and would continue on a hold over month to month tenancy for an unspecified period of time.

Application of s 62 of the Land Acquisition (Just Terms) Act to rock anchor easement

1. Ausgrid contends that s 62 of the JT Act applies to the rock anchor easement and precludes the compensation of Bligh under s 55 in relation to that easement. Section 62 provides: 62 Special provisions relating to acquisition of easements or rights, tunnels etc (1) If the land compulsorily acquired under this Act consists only of an easement, or right to use land, under the surface for the construction and maintenance of works (such as a tunnel, pipe or conduit for the conveyance of water, sewage or electrical cables), compensation is not payable except for actual damage done in the construction of the work or caused by the work. (2) If land under the surface is compulsorily acquired under this Act for the purpose of constructing a tunnel, compensation is not payable (subject to subsection (1)) unless: (a) the surface of the overlying soil is disturbed, or (b) the support of that surface is destroyed or injuriously affected by the construction of the tunnel, or (c) any mines or underground working in or adjacent to the land are thereby rendered unworkable or are injuriously affected. (3) If the land compulsorily acquired under this Act consists of or includes an easement or right to use the surface of any land for the construction and maintenance of works (such as canals, drainage, stormwater channels, electrical cables, openings or ventilators), the easement or right is (unless the acquisition notice otherwise provides) taken to include a power, from time to time, to enter the land for the purpose of inspection and for carrying out of any additions, renewals or repairs. Compensation under this Part is payable accordingly.

Bligh's submissions

1. Bligh submits that s 62 of the JT Act does not apply to the rock anchor easement. Properly construed, the rock anchor easement does not fall within the terms of s 62(1) because the rock anchors are not for the "construction and maintenance of works (such as a tunnel, pipe or conduit for the conveyance of water, sewerage or electrical cables)". The definition of "rock anchors" in the easement notice in the Gazette extracted above in par 17 provides that they are "for the purpose of supporting or protecting works on the Development Site and underpinning and supporting improvements erected on the Burdened Land". This definition indicates that the rock anchors are to serve the purpose of other works and are not an end in themselves. On this basis they may be contrasted with the "works" envisaged by s 62(1). Whilst rock anchors are "constructed" they will only operate for a limited period of time to enable other works to be carried out.
2. Further, although the words in parentheses in s 62(1) do not identify the totality of the works the subject of that subsection, they are descriptive of the types of works contemplated. It is plain that what is contemplated is some kind of conduit, as each thing listed in the parentheses are structures which things (water, sewage, electrical cables) pass through. A rock anchor does not fall within this category. On Ausgrid's interpretation of s 62, no subterranean acquisition would result in compensation unless the surface of the land is disturbed. If this were the correct interpretation the words "for the construction or maintenance of works" would have no purpose. Instead, s 62 deliberately limits the circumstances in which a landholder is not entitled to compensation for subterranean acquisitions. This is the policy reason why the word "works" should be read in a limited way and this reading is supported by the language of the section.
3. Pennant Hills Golf Club Ltd v Roads and Traffic Authority (NSW) [1999] NSWCA 110; (1999) 9 BPR 17,011 is distinguishable. The rock anchors in that case were permanent and acquired to support a retaining wall cutting adjacent to the M2 and the Golf Club. They were not acquired for the purpose of facilitating other works being carried out, except to the extent that the cutting needed to be stable after the excavation for the construction of the M2. Pennant Hills Golf Club did not deal with the question posed in this case, and turned on the construction of the terms of the easement which was very different to that which is under consideration in these proceedings.

Ausgrid's submissions

1. Section 62 of the JT Act applies so that no compensation is payable under s 55 for the rock anchor easement. To read down the words of s 62(1) as contended by Bligh is contrary to Pennant Hills Golf Club. In that case the Court of Appeal rejected a strict and limited reading of s 62.
2. In the context of the whole of the JT Act, and s 62 in particular, s 62(1) evidences a statutory intention to limit compensation where the easement taken is subterranean only, does not intrude above the surface and would generally involve little or no interference with the rights of the dispossessed landholder. The specific exception is for actual damage that occurs during subterranean construction. The focus of the subsection is on the subterranean nature of the rights and works involved. Where entry into the land above the surface is involved, the other subsections may be triggered.
3. Bligh's contention that s 62(1) applies to works that "are an end in themselves" and that "are capable of both construction and maintenance" is not supported by the words of the subsection. The types of works referred to in the parentheses include conduits for electrical cables and pipes for sewage which are not ends in themselves as they must be for the purpose of carrying electricity or sewage from one place to another. All the works referred to in parentheses are works which can facilitate other works.
4. There is no evidence that the rock anchors are not capable of both construction and maintenance. Although their use overall is for a temporary purpose, during the time they are put to use they may well require occasional maintenance such as ongoing tensioning as the development progresses and the stresses placed on the anchors change. Further there is also no warrant for reading down s 62(1) so that the subsection restricts compensation in respect of works which are to remain, but which does not so limit compensation in respect of works of a temporary nature. This would be the effect of Bligh's proposed construction.

Section 62 applies to rock anchor easement

1. The terms of the Gazette notice as extracted above in par 17 for the acquisition of the rock anchors grant Ausgrid the right to use the identified underground area of land "for the purpose of constructing, placing, leaving, inspecting, repairing, maintaining, and de-stressing Rock Anchors". I agree with Ausgrid that this right falls within the terms of s 62(1) and therefore no compensation is payable to Bligh for the acquisition of the rock anchor easement with the exception of compensation for actual damage.
2. Pennant Hills Golf Club involved a preliminary question of law, namely whether the acquired land consisted only of an easement, or right to use land, under the surface for construction and maintenance of works within the meaning of s 62(1) of the JT Act. The terms of the easement in that case included the stipulation that the Roads and Traffic Authority would take all reasonable precautions to ensure as little disturbance as possible to the servient tenement. The primary issue in that case was whether this right to have the soil undisturbed meant that the acquired rights were greater to or different to those of an easement. At both first instance and on appeal the court held that the answer to the preliminary question was yes and that the applicant was not entitled to any compensation for the rock anchor easement. As Bligh submitted, that case did not turn on whether s 62(1) applied to rock anchor easements, however this was because it was not disputed by the applicant golf club that s 62(1) applied to the rock anchor easement. By answering the preliminary question in the affirmative both the Land and Environment Court and the Court of Appeal held that s 62(1) can apply to easements for rock anchors.
3. Bligh's submission that s 62(1) only applies to works that are ends in themselves cannot be supported. That intention cannot be discerned from the words of the subsection nor from the facts of Pennant Hills Golf Club. Contrary to Bligh's submission that the rock anchor easement in that case was not acquired for the purpose of facilitating other work, the Court of Appeal found that the easement was acquired to secure the wall in the road cutting against failure as a part of the complex of rights acquired by the RTA for the public purpose of the construction of the M2 (at [10]). The rock anchors in that case cannot therefore be seen as ends in themselves. I agree with Ausgrid that the focus of s 62(1) is the subterranean nature of the acquisition. The purpose of the section is to disentitle a landholder to compensation when the easement or right acquired would have little to no impact on the landholder's rights on the surface. Pennant Hills Golf Club is clear authority for a conclusion that s 62(1) can apply to rock anchors. Given its mandatory terms it must apply in this case to the rock anchor easement. There is no claim for damages under s 62. Bligh cannot receive compensation under s 55 for the rock anchor easement.

Valuers' evidence on market value of easements

1. Mr Dyson valuer prepared a report dated 8 August 2014 (Exhibit N) and gave expert evidence on behalf of Bligh. Mr Blackall valuer prepared an undated report (Exhibit 5) and gave expert evidence on behalf of Ausgrid. Mr Dyson and Mr Blackall also contributed to two joint reports dated 11 February 2016 (Exhibit O) and 17 March 2016 (Exhibit P) respectively. While both experts provided values for the rock anchor easement I have held that s 62 applies so that no compensation for that is payable.

Mr Dyson's evidence on behalf of Bligh

1. To assess the market value of each of the respective easements, Mr Dyson adopted the direct comparison approach in his report. He identified that there is no specification within the easement terms of when work will be completed. Based on advice from Ausgrid the latest works would be completed in December 2020, 76 months after the date of gazettal. Concerning the crane swing easement, Mr Dyson identified one comparable transaction in 2009 between Westfield Developments and Goddard Nominees Pty Ltd in the form of a licence deed which showed an annual licence fee of $75,000 plus GST. Without adjustment, Mr Dyson applied this transaction to the subject property on an assumed term of 76 months and an interest rate of 5% to assess the market value at $400,000.
2. Mr Dyson stated that the visual and noise impacts of the scaffolding would be included in his before and after approach, and therefore did not require separate assessment.

Mr Blackall's evidence on behalf of Ausgrid

1. Mr Blackall asserts the scaffolding and crane swing easements to be of "nominal value only" at $25,000 each, totalling $50,000 on the assumption of a narrow interpretation of the public purpose and $100,000 for injurious affection. Mr Blackall considered the scaffolding easement would have "minimal impact" and the crane swing easement "negligible" impact.
2. An extract from the valuers' joint report follows, outlining the deeds of agreement entered into by Ausgrid and other adjoining owners to 33 Bligh Street in relation to similar easements supplied to them after the preparation of their primary reports follows: 65. Adjoining Owner's Deeds in relation to the five (5) other adjoining properties, each of which had similar temporary easements acquired by Ausgrid. The Licence fees paid were as follows: (a) 25 Bligh Street, Sydney - Easements for Rock Anchor, Scaffolding and Crane Swing - $150,000 This agreement includes provisions for reimbursement costs associated with any Lessees in the building terminating their existing leases as a result of the presence of scaffolding in the immediate vicinity of the premises. (b) 37 Bligh Street, Sydney - Easements for Rock Anchor, Scaffolding and Crane Swing - $100,000 (c) 16-18 O'Connell Street, Sydney - Easements for Rock Anchor, Scaffolding and Crane Swing - $0 (d) 28-34 O'Connell Street, Sydney - Easements for Rock Anchor, Scaffolding and Crane Swing - $150,000 (e) 48 Hunter Street, Sydney - Easements for Rock Anchor, Scaffolding and Crane Swing - $1,282,225 [Telado]
3. In the joint report Mr Blackall stated that the deeds supported the sum of $150,000 on the basis that the Court accepts the most logical purchaser is an owner-occupier. A hypothetical potential vendor and purchaser would be unlikely to assume that the loss in value of 31 Bligh Street from temporary easements would be a factor of 34%, as reflected in the deed concerning 48 Hunter Street. Mr Dyson identified the deeds had limited periods of operation, generally for 12 months from commencement of the demolition period, may not meet the Spencer test as they cannot be assumed that not without compulsion and 31 Bligh Street as a smaller heritage building set back from the street frontage is more affected by the proposed works.
4. In cross-examination Mr Blackall stated that he adopted the figure of $150,000 as it reflected the maximum amount of compensation given to other surrounding properties with the exception of the Telado property as evidenced in the adjoining owner deeds. The $150,000 is comprised of $25,000 for the temporary blot on title for the scaffolding easement, $25,000 for the temporary blot on title for the crane swing easement, nothing for the rock anchor easement, and $100,000 for injurious affection. He agreed that he acted on the advice of Ausgrid's solicitor that the highest amount paid to a neighbouring property owner was $150,000 at the time he prepared his statement of evidence as he did not then have access to the adjoining owners deeds. He was provided with valuation reports for the easements prepared for Ausgrid. He was aware by the time of preparation of the joint report that Telado had been paid $1.282 million but did not believe he should change his opinion in relation to $150,000. His approach was informed by considering that there was no real diminution in the value of the property in the before and after approach. Mr Blackall was asked about the deed of agreement with 25 Bligh Street for three similar easements and whether the limitation of the scaffolding easement to 26 weeks with payment of $6,900 per week thereafter was a material difference from 31 Bligh Street. Mr Blackall did not take the terms of that deed into account in determining $150,000. He assumed the scaffolding easement would last for two years. Mr Blackall did not consider it was appropriate to focus on one agreement only. Mr Blackall accepted that a tenant in a building might be more concerned than an owner-occupier about the impact of the easements.

Finding on market value of easements

1. It is clear from the valuers' evidence that there is scarce information of a market to aid in the valuation of easements by a comparative method. Mr Dyson identified the difficulties he experienced in seeking to find comparable transactions as most arrangements are private and not transacted in an open market. I accept his view that to find transactions comparable to the circumstances at 31 Bligh Street is difficult.
2. The large amount of $1.282 million paid under the Telado deed concerned other issues between the parties such as settling court proceedings which I infer influenced the deal struck. I am unable to obtain much assistance from that transaction.
3. Considering the crane swing easement, Mr Dyson noted that the crane swing easement is for an indefinite period. In his primary report Mr Dyson referred to Besmaw as supporting a construction of the exercise of the full terms of the easement that would mean that loads could be swung overhead at any time so that any prospective lessee would have to vacate at random times to facilitate the terms of the easement due to OHS issues. I have rejected such a construction of the easement above at pars 131-132. He states in his report that, regardless of his views as I have summarised in the previous sentence, for the purposes of his report he assessed the crane swing easement on the basis that the property could be occupied without disruption by Ausgrid using the direct comparison approach. He applied one transaction which enabled Westfield to operate a crane in the CBD for $75,000 per annum by multiplying that figure by 76 months from the date of gazettal with interest of 5% to arrive at $400,000. He did not provide any information about the terms of that crane swing easement.
4. Mr Blackall's amount of $150,000 for both scaffolding and crane swing is small and is consistent with his view that the impacts of these easements on 31 Bligh Street are minimal or negligible. He was provided with valuation reports when he prepared his primary report and the valuers both had the adjoining owners' deeds by the time of their joint conference. It appeared in cross-examination that Mr Blackall was influenced by the advice of Ausgrid's solicitor that the maximum paid by Ausgrid for easements on neighbouring properties was $150,000 except for the Telado deed. Mr Blackall did not appear to rely on the adjoining owners' deeds to any extent according to his cross-examination but they are identified by both valuers in the joint report and commented on.

Conclusion

1. I determine that compensation consisting of $450,000 for the scaffolding and crane swing easements and disturbance of $232,000 is payable to Bligh. Costs are reserved.

Orders

1. The orders of the Court are: 1. The compensation payable to Bligh under the Land Acquisition (Just Terms Compensation) Act 1991 is determined at $682,000. 2. Exhibits may be returned. 3. The question of costs is reserved.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 June 2016