BMP Manufacturing Pty Ltd and Ors v Roads and Traffic Authority of New South Wales

(a) a legal or equitable estate or interest in the land,

(b) an easement, right, charge, power or privilege over, or in connection with, the land". 17 Under s.55 of the JTC Act, claims can, relevantly, be made for: (a) market value

(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 ." 18 Section 59 defines "loss attributable to disturbance", relevantly, as "any of the following": (a) legal costs reasonably incurred …

(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 ". What is agreed and what is not 19 The parties have agreed on a market value of $350,220 under s.55(a), on $3,850 for valuation fees under 59(b), and on $25,000 for "disturbance" by way of dislocation during the relocation/replacement of the open-air display space provided by the acquired land, (see s.55(d), s.59(f) and Exhibit A11). 20 However, there is no agreement between the parties on compensation under s.55(f), nor compensation for anything else under s.59(f). In respect of some disputed claims there is agreement on quantum, but no concession of liability. There is a "nil" claim under s.59(a) (legal costs). The Applicants' remaining claims 21 The group's central claims are based on its assertion that its prime open-air display space has been acquired, necessitating a total reorganisation of the business on the residue lands. It is claimed that the dealership needs, in order to operate effectively, to be able to display up to 35-40 cars out the front of any showroom or other buildings on the ELN site, and that the acquisition necessitates the relocation of the showroom to elsewhere on the residue land in order to reinstate an adequate frontal display area, and so avoid a "disastrous" permanent loss of business. 22 The applicants have framed their claim for the relocation of the showroom further back on the retained land as "net" of the quote for the upgrading (as adjusted for desired enlargement) of the original showroom. The claim is for $548,000, being the estimate of $1,196,000 less the estimate of $648,000. 23 The "back-up" element of this claim is for works at the frontage of the residue lands described as "Option 1 refurbish frontage only" totalling $92,400 (a figure agreed in Exhibit A9 at par 4.3.2) plus GST, on a cost base of 23 September 2005. 24 It is further contended that the acquisition has created the necessity for the Applicants to also fill and develop land to the rear of the site to replace the lost car storage/ancillary display space, and to make other physical changes to the configuration of necessary facilities required now to be on the residue land (lighting, signage, landscaping, etc). 25 A claim has also been made for works already done on land to the very rear of the site allegedly to replace the acquired display area. Again the amount is agreed ($113,123.36), but liability is disputed. In addition, the following further claims have been made: Cost of lighting $100,000 Refurbishment of parking area $110,627 Fencing $6,160 Road works and paving $77,330 Landscaping $6,447 $300,564

26 There is substantial confusion, in the evidence and the Applicants' submissions, between the completed work costing $113,123.36 and the quoted work estimated to cost $110,627, both of which projects could be seen to be for the purpose of providing a suitable hard-stand area for display of cars in replacement of the acquired lands. 27 It is claimed that, even if the showroom is moved and the open-air display areas re-established, business losses will be sustained at least until December 2008, when the road widening works directly in front of ELN are due to be completed, and possibly beyond, even to the date when the whole project is due to be completed (December 2010). 28 Major claims are made for loss of profits and loss of business value/goodwill - $333,471 for loss of profits, under s.59(f), and $214,091 for loss of value under s.55(f). The Respondent's contentions 29 The Respondent denies any entitlement to (i) replacement/upgrading of the "Ford Dealership facility", (ii) loss of profits, or (iii) loss of goodwill, measured as any decrease in the market value of any leasehold interest in the residue land. 30 The Respondent denies any entitlement on the part of any of the Applicants to any further compensation under s.59(f). (The Applicants' claim was based alternatively on s.96 of the Public Works Act 1912, but that was not actively pursued at the hearing. In any event, the Respondent submits, on the authority of N Stephenson Pty Ltd v Roads and Traffic Authority of New South Wales (1994) 83 LGERA 248 ("Stephenson") at 265-7, that the s.96 point would not succeed. See also Johnston v The Roads and Traffic Authority [2000] NSWLEC 111 at [64]-[67]). 31 The RTA would allow $30,000 in respect of the loss of profit claim if the Court finds such a claim valid, but $NIL in respect of the goodwill claim. The $30,000 amount was arrived at by the RTA's business valuer, Mr Edmonds (Exhibit R2), and relates to the times when actual roadwork is being carried out on the acquired lands (and, presumably, when restoration work is being carried out on the residue lands); it was later revised down to $25,000 by Mr Edmonds (Exhibit A11 par 6.3). 32 In respect of (iii), the Respondent contends that ELN's leasehold interest in the residue land is only "monthly" by virtue of s.127 of the Conveyancing Act 1919, and that it will actually increase in value by virtue of the carrying out of the public purpose - there will be better and safer access to the residue land, the amenity and appearance of the highway in the vicinity will be improved, street parking arrangements for the public will be "better", there will no longer be dust from vehicle movements on the unsealed shoulder of the road, and footpaths will be constructed. The Court also notes that there is no reduction in ELN's length of frontage to the highway, and that the Respondent also contends that visual exposure of the residue land and any cars displayed on it will be not only equal to the pre-acquisition position, but will rise by 4,000 passing vehicles per day every ten years. 33 In September 2004 the RTA commissioned from Hill PDA a "Business Impact Study" (Exhibit A2 Vol 2 tab 15) which assessed the "potential impact" of the RTA project post-construction on the Ford business as "low", but that assessment was specifically stated to be neither a measure of impact during construction nor a result of land acquisition (fol 719). The impact on the Holden dealership at 170-172 Pacific Highway (between ELN and Johnston Road) was assessed as "medium". The study goes on to state (fol 720): " The impact on the motor dealerships of Ford and Holden will be significantly affected in terms of land acquisition. It will result in a diminished size of property and loss of on-site space for parking display, staff and visitor cars. However the owners will be compensated for the impacts from land acquisition, both in terms of market value of the land acquired and injurious affection on the business. Once those lands have been acquired the impact from the road upgrade works themselves will be far less severe. This is the reason for the moderate rating in the above table ". One of the Applicants' experts, Mr Hartge, "field - tested " some of the Hill PDA predictions in businesses to the south of ELN.

The Ford/ELN relationship 34 The Oven group has had a long relationship with the Ford Motor Company - almost 30 years at the subject site - and the relationship has had at least one other manifestation, on the North Coast. 35 The evidence suggests that Ford's arrangement with ELN is somewhat unusual in that Ford has kept the dealership supplied with far more stock-on-hand than is usual. In the case of both new and used cars, Mr Oven has a "different" philosophy, regarding stock-on-hand, compared with other dealers, apparently believing it to be necessary for him to keep very substantial stocks on display and also available in storage to meet his sales targets. A reduced capacity to do so, manifesting itself in lost sales and profits, is claimed as part of this compensation case. 36 Mr Oven says in his affidavit of 18 April 2008 that Ford began complaining about ELN'S performance in about 1990, when his sales fell while major roadworks were being carried out (till 1995) on nearby Wyong Road; but the evidence certainly shows ELN to be in quite serious conflict with Ford since at least 28 May 2001, more than 12 months before funding was announced for the roadworks on the Straight, about the performance of the dealership, including erratic sales, and especially its "run down" appearance and presentation (see Exhibit A2, fols 958 and 982). 37 The Dealer Agreement (cl.10.1) requires ELN to establish and maintain facilities which, in the opinion of Ford, are "satisfactory", "adequate" and "appropriate" (Exhibit R1, fol 509). On a scale of 1 to 23, with a "pass" mark of 18, the dealership rated only 5 in November 2003 (Exhibit A2, fol 959). In November 2004 (Exhibit A2, fol 1004f), Ford acknowledged ELN had an "ideal location", but complained of the group's "obvious lack of ongoing investment", resulting in a dealership presentation of "significantly lower standard than … most competing motor vehicle dealers in the region". 38 A perusal of the relevant correspondence (in Exhibit A2 at tabs 47ff, and elsewhere in the documentary and affidavit evidence) shows how serious Ford's pressure on ELN was becoming by the time of the acquisition notice in June 2005. On the correspondence before the Court three written threats of dealership termination had been sent to Mr Oven over a period of less than six months prior to the RTA's acquisition notice. 39 The old showroom is 40 years old, predating both the Oven family involvement in the dealership, and the first gazettal of the RTA's plans to widen the highway. It has an area of 252m2 and Ford apparently wants showroom space to increase in floor area to (originally) 382 and (lately) 500m2, not all of which area would be used to display cars. Ford would not agree to mere refurbishment of the existing facility and, at least by October 2004 (Exhibit A2, fol 996ff), was threatening to terminate ELN's dealership (Mr Oven at T29.5.08, p46-47, L10ff). 40 Several deadlines for submission to Ford of final redevelopment plans, or completion of that redevelopment, have come and gone since the earliest one revealed by the evidence, 30 July 2002. For some time one reason for holding off was some liability to Ford, on the part of interests associated with Mr Oven, apparently amounting to some $280,000, in respect of the operations of Border Ford Tweed Heads (see Exhibit A2 at folios 956 and 964), but that had been resolved by October 2004, by which time the RTA had indicated the area of land it was interested to acquire. 41 When the dealership was again threatened with termination in March 2005, when Ford noted the need for a "significant rebuild", Mr Oven responded very aggressively (Exhibit A2, fols 1018-1020) before agreeing to inspect acceptable examples of refurbished dealerships. Ford sent him a further list of "complaints" about the dealership on 30 August 2005, saying it did "not meet minimum facility standards" (Exhibit A2, fol 1041). 42 Mr Oven agrees that if the showroom is relocated further back on the site, the frontal display area will be enhanced and ELN will have a "superior outcome" overall (T29.5.08, p46, L32). At the moment ELN's sales are 50 or less per month when Mr Oven concedes he needs to sell 60-70 plus. 43 Relevant development consents for the refurbishment were obtained earlier in 2008. Consideration of the claims in dispute Showroom and siteworks 44 The only use being made of the acquired land at the date of acquisition was by ELN, as the lessee of it, from the other two applicants, to display vehicles for sale. ELN also relied on substantial public parking, sometimes on the acquired land and sometimes on adjacent public land. 45 The group relies heavily on unusual levels of stock-on-hand and on the availability of substantial space for open-air display of vehicles, especially on the highway frontage, for adequate business returns. Frontal display is seen as crucial to the ELN business (perhaps to any car dealership), but there is, as I noted earlier, conflicting evidence as to how much use was consistently made of the whole of the acquired land for display purposes. The photographic and anecdotal evidence (e.g. T27.5.08, p69, L8ff) do not support the claims that ELN either had or needed room for up to 40 cars on display out the front and will have room for only 8 to 12 post-acquisition. Mr Oven agreed in cross-examination that sometimes he displayed only three, or perhaps up to 12 cars out the front. 46 Nonetheless, it is beyond doubt that post-acquisition there is a serious reduction in frontal open-air display space, if the showroom stays in-situ. The Applicants claim that that space will need to be replaced. They complain that the space left on the residue land in front of the existing showroom has room for only one row of cars to be displayed, and right in front of the showroom only small cars could fit. I note that historically this business has prospered in mainly the small car market, so perhaps that restriction is not such a problem. 47 However, equally important to the ELN business in Ford's eyes is satisfactory presentation of the whole dealership including showroom and service etc. facilities. Moving the showroom as is now proposed will increase the depth of land available for frontal open-air display from 19m pre-acquisition to 25m. 48 ELN claims it delayed its Ford-dictated major refurbishment works on the site until there was clarity about the RTA's plans and timeline for the highway works, but accepts that it cannot claim the whole cost of a completely new showroom, and tailored its claim accordingly. 49 The RTA contends that the need to resite ELN's showroom bears no relationship to the acquisition of the other two Applicants' land - the acquisition reduces the amount of display space forward of the long-time showroom, but the remaining forward space is adequate for displaying "a suitable number of cars in the open on the residue land", and better use can be made of some other residue land near the front of the site in this regard. 50 The need to reconfigure the display component of the operation as a consequence of the acquisition has been used as the basis for a more comprehensive and long overdue redevelopment of the whole site as required by Ford, who dictated the updating/replacement of the showroom. ELN and Ford then agreed on resiting the showroom as the best option, rather than total relocation of the dealership, or refurbishment of the old showroom. 51 I am satisfied that the costs involved in the showroom project (whichever option had been chosen) are wholly attributable to causes other than the acquisition of land by the RTA, notably ELN's obligations under its dealer agreement with Ford, and its own business imperatives. In this respect, I prefer and accept the evidence of Mr Edmonds and the submissions of Mr Maston. No such cost has been proven to be a "direct and natural consequence of the acquisition", as required by s.59(f). 52 To be claimable under s.59(f), costs must relate to the actual use of the acquired land by the dispossessed owner - or of the residue land, if its use "is so intimately connected with the actual use of the acquired land so (sic) that the use of one is dependent on use of the other …" (Roads & Traffic Authority of New South Wales v Peak [2007] NSWCA 66 ("Peak") at [71]). The cost claimed must also relate to the acquisition itself, rather than to the public works which motivated it (Almona Pty Ltd v Roads and Traffic Authority (NSW) (2008) 160 LGERA 375 ("Almona") at [55]-[61]). 53 The public purpose of roadworks in this case is made possible by the acquisition, but that does not mean that the roadworks are a direct and natural consequence of the acquisition. 54 Stephenson has been regarded as authority for two propositions relevant here - (1) that there is no need to differentiate between the acquisition and the public purpose/work, and (2) that the use can be either the use by the dispossessed owner or the use by the acquiring authority (see Talbot J at 261 and 264). 55 Both of these propositions have now been rejected - specifically in this Court by Jagot J in Almona (see [58] and [60]), and inferentially (at least in respect of the first proposition) by the Court of Appeal in Peak ([71]-[74]). However, on rare occasions the Court will find it impossible to differentiate the acquisition from the public works it facilitates. I encountered one such occasion in Dillon, Kevin & Anor v Gosford City Council [2008] NSWLEC 186 ("Dillon") where an easement was taken to "crystallise" the rights of the parties in respect of a levee bank constructed for public purposes ten years earlier, and I applied the principles in Stephenson (see Dillon at [66]ff) to ensure that the Dillons achieved a just result. 56 Counsel for the Applicants submit that Jagot J's proposition in Almona (at [60]), that the Court should have regard to the actual use by only the dispossessed owner, and not the acquiring authority, is either wrong or should be distinguished. On the contrary, I find it to be not only persuasive, but correct, and clearly relevant to the facts in this matter, and I follow it without hesitation. I also note that Pain J recently followed Almona in Mitchell v Roads and Traffic Authority of New South Wales; Beresfield Spares Pty Ltd v Roads and Traffic Authority of New South Wales [2008] NSWLEC 258 ("Mitchell"). 57 I turn now to the claims for other siteworks. 58 The RTA accepts that the Applicants can recover under s.59(f) certain costs: moving the pylon sign ($6,500), relocating signage poles and lighting ($15,000), landscaping ($5,860 - GST), replacing bollards ($4,800), external electrical services ($3,600), and builders work in connection with services ($400) (see par 9 of Mr Maston's "closing submissions", the evidence of Mr Meredith in Exhibit R3, and the particulars in Exhibit R4). The Applicants are taking the opportunity to update the site lighting to a more modern standard of "wash" for display and security reasons (at a total estimated cost of $100,000) and to install better bollards (on insurer advice). Those appear to be sound business decisions, but that additional expenditure cannot be attributed to the acquisition. The fencing claim would appear to result from the need to relocate a compound to allow relocation of the showroom, and that also cannot be attributed to the acquisition. 59 Some of the items claimed are taken up in the claim for frontage refurbishment ($92,400), the amount of which Mr Meredith accepted in joint conference (Exhibit A9). 60 Contrary to Mr Maston's submissions, I consider it reasonable for the Applicants to receive compensation for (i) refurbishing the residue frontage and (ii) developing on the residue land an area of hard-stand to compensate for the loss of hard-stand area formerly provided by the acquired land. As Talbot J said in McBaron and Others v Roads and Traffic Authority of New South Wales (1995) 87 LGERA 238 ("McBaron") (at 245), provided the Court can find a relevant head of compensation under s.55 for the claim made, "any discretion should be exercised in favour of the claimant where practical in order to achieve a just result". 61 While I do not accept that any works on the showroom are necessitated by the acquisition, the costs of the work done to reconfigure the open-air display of vehicles on site (1) flow directly from the acquisition, (2) refer to the actual use of the acquired land by the dispossessed owner, and (3) satisfy the "intimate connection" test articulated by the Court of Appeal in Peak (at [71]) and adopted in Almona (at [58]). 62 The claimed amount for the residue frontage ($92,400) will be allowed, but that still leaves the shortfall from the pre-acquisition display area. There are substantial areas of underused space on the residue land, suitable for the purpose at hand (as there was in Almona - see [66]). There are no grounds made out for the RTA to meet the cost of establishing any area greater than that proportion of the acquired land which was paved, namely 625m2 (Exhibit A12). One amount claimed for other siteworks ($113,123.36) refers to an area of 6400m2 and the other ($110,627) to an area of 2800m2, made suitable for display purposes (Exhibit A12). 63 The larger amount (and the area of land there involved) concerns works at the very rear of the site, well away from any area of high visibility from the highway. The whole case for the Applicants focussed on the need to project the business to the highway, rather than to Tindal Road, and the smaller area appears to be much closer to the location of both new and old showrooms. 64 Accordingly, I will allow the appropriate proportion, namely 22.32% (625 2800), of the lesser amount ($110,627), i.e. $24,670, rounded-up to, say, $25,000, for replacement of hard-stand. Loss of business profits 65 The claim for business loss founders, as the showroom claim did, because it relates to alleged impacts of the public works on the business profits, and not, as s.59(f) requires, to costs relating to actual use of the acquired land (or the residue land if so "intimately connected" - see [52]) by the dispossessed owners (or their lessee), as a direct and natural consequence of the acquisition. 66 The RTA's experts allow a 5% decrease in profits over a three-month period of roadworks adjacent to the dealership, and I accept their revised estimate of $25,000 in this regard (see Exhibit A8 and Exhibit A11), but the Applicants have not simply discharged the onus of establishing that it is compensable, on the facts of this case. 67 ELN's sales had been falling over the three years to 30 June 2006, despite stocking rates, and relevant works in the vicinity commenced only in early 2007 (see Exhibit R2). Ford itself has experienced market decline and the dealership is performing poorly on all comparisons. The correct interpretation of the latest financial results (2006-07, Exhibit R6, and T29.5.08, p24-25, L25ff) is no better than "break-even", and there is really no cogent evidence that any sales will be lost specifically as a consequence of the acquisition, and especially that any will be lost directly as a consequence of reduced frontal display area. As noted above there will be more area available when the showroom is moved, and, in light of my observations on the view, I do not accept Mr Oven's oral evidence that the prominence and visibility of his sales operation will be seriously and permanently damaged by the acquisition.

Loss of business value 68 As the Court acknowledged in McBaron, both s.55(f) and s.59(f) can be engaged by the facts of a case, with different possible outcomes. (See Almona at [63]). 69 Section 55(f) deals with increase or decrease in the value of "any other land", namely the residue land post-acquisition, by reason of the "public purpose" of the acquisition. The "other land" must be "other land of the person". The claim under this section in this case is made by ELN, which had a legal interest in the acquired and residue lands as a lessee, and no s.55(f) claim has been made by either of the owning companies. (See Mitchell at [201]). 70 There is absolutely no evidence that the market value of either the fee simple of the residue land or the leasehold interest in it has declined as a result of the road improvement proposal affecting directly the acquired land (Exhibit A10). Indeed, the value of the leasehold may increase over time, and ELN has also been relieved of any obligation to pay rent for the acquired land. The First and Second Applicants as owners/lessors will receive the full capital value of the land (including its income generating capacity by way of lease) under s.55(a). (T28.5.08, p45, L45ff). As a tenancy effectively "at will", the leasehold interest may have no market value. See McDonald's Australia Limited v Transport Infrastructure Development Corporation [2006] NSWLEC 796. 71 Section 55(f) does not deal with any movement in the value of any business conducted on the land, as distinct from land itself, even though the business may need land in order to operate. It may be that the annual lease rental paid by ELN might be calculated by reference to profitability of the business in any immediately preceding year, but that is an accounting exercise and not a valuation matter, and does not discharge any onus to prove that any of the business profit and business value claims made in this case under either s.55(f) or s.59(f) have been made out in satisfaction of the terms of either or both of those provisions. 72 The full capital value of the acquired land in this case, the highest and best use of which was for the display of motor cars for sale, has been built into the agreed compensation for market value paid to the owners under s.55(a), and the personal or locational goodwill residing in Ford or ELN remain intact. Conclusion 73 In summary, therefore, I determine that compensation is justly payable by the Respondent to the Applicants for the following claims: To the First and Second Applicants: (1) Market Value (agreed) $350,220 (2) Valuation costs (agreed) $3,850 (3) Refurbish frontage (as claimed) $92,400 (4) Cost of replacing hard-stand (as calculated) $25,000 To the Third Applicant: (5) Disturbance during construction (agreed) $25,000 subject to three qualifications to be addressed before final orders:

(a) The figures in items (3) and (4) are based on the acquisition date, 23 September 2005, and I note evidence that building costs have been increasing at 4%pa since that date.

(b) Some figures in the evidence are clearly inclusive of GST, while others may not include it, and should.

(c) The Applicants specifically requested the opportunity to nominate apportionment as between the First and Second Applicants (T29.5.08, p42). (Of the 718.4m2 acquired, 528m2 was acquired from BMP and 190.4m2 from Purmar). 74 The parties are directed to agree upon and bring in within 14 days short minutes of order to give effect to these reasons, and attend to the three qualifications as appropriate. 75 Once final orders are made, all the exhibits may be returned. 76 Costs are reserved.

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