G Capital Corporation Pty Ltd; Gertos Holdings Pty Ltd; Marsden Developments Ltd v Roads and Maritime Services

ak [2007] NSWCA 66 Roads and Traffic Authority of New South Wales v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251 Speter v Roads and Maritime Services [2016] NSWLEC 128 Sydney Water Corporation v Besmaw Pty Ltd [2002] NSWCA 147 United Petroleum Pty Ltd v Roads and Maritime Services (NSW) (No 2) [2018] NSWLEC 35 Category: Principal judgment Parties: 18/207357 G Capital Corporation Pty Ltd (Applicant) Roads and Maritime Services (Respondent)

18/207345 Gertos Holdings Pty Ltd (Applicant) Roads and Maritime Services (Respondent)

18/207366 Marsden Developments Pty Ltd (Applicant) Roads and Maritime Services (Respondent) Representation: COUNSEL: P Tomasetti SC and J Johnson (Applicants) R Lancaster SC and M Astill (Respondent)

SOLICITORS: Mills Lawyers (Applicants) Norton Rose Fullbright (Respondent) File Number(s): 18/207357, 18/207345, 18/207366

Judgment

1. These Class 3 proceedings comprise three objections to the Valuer General's determination of compensation under s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) by G Capital Corporation Pty Ltd (G Capital), Gertos Holdings Pty Ltd (Gertos Holdings) and Marsden Developments Pty Ltd (Marsden Developments) (the Applicants). The Applicants are related corporate entities.
2. The Valuer General's determination followed the compulsory acquisition by the Respondent, the Roads and Maritime Services (RMS), on 9 February 2018 of three adjacent parcels of land owned separately by the three Applicants for the purposes of mid-tunnel access for the WestConnex Stage 3 M4-M5 Link project pursuant to the Roads Act 1993. On 22 June 2018 the Valuer General determined compensation for the Applicants to be $26.5 million in total. The Applicants state that they have received some $25 million from the RMS in accordance with s 68 of the Just Terms Act.
3. The properties and their respective owners were: 1. Lot 2 in DP 72951 and Lot A in DP 359751 (also known as 160-162 Parramatta Road, Camperdown NSW) owned by G Capital since 2001; 2. Lot 1 in DP 82718 and Lot B in DP 359751 (also known as 164 Parramatta Road, Camperdown NSW) owned by Gertos Holdings since 2000; and 3. Lot 1 in DP 776389 (also known as 166-172 Parramatta Road, Camperdown NSW) owned by Marsden Developments since 2004 (the Properties).
4. Two preliminary questions have been listed for determination concerning these appeals: 1. Whether there was any "actual use of land" by any of the Applicants that would entitle any of them to any compensation under s 59(1)(f) of the Just Terms Act? 2. Whether, on the basis of the contracts of sale of the Properties, the compensation to be paid to the Applicants in respect of their interests in land acquired is to be confined to calculation of compensation having regard only to matters arising under s 55(d) and s 59(1)(f) of the Just Terms Act?
5. The Applicants relied on three contracts of the sale of the Properties for a total of $56.5 million which had been exchanged on 28 June 2016 before the Properties were compulsorily acquired by the RMS. The contracts were made between the Applicants (G Capital, Gertos Holdings and Marsden Developments) and three purchasers (Regency Capital Pty Ltd (Regency Capital), London Capital Holdings Pty Ltd (London Capital) and Portman Securities Pty Ltd (Portman Securities)) (the Purchasers). The Applicants state that three deposits of $50,000 were paid to them by the Purchasers, with settlement due on 28 June 2018.

Just Terms Act

1. Relevant sections of the Just Terms Act provide: Part 1 Preliminary … 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) Nothing in this section gives rise to, or can be taken into account in, any civil cause of action. … 4 Definitions (1) In this Act: … land includes any interest in land. … Part 3 Compensation for acquisition of land … Division 4 Determination of amount of compensation … 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) the disadvantage resulting from relocation, (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. … 59 Loss attributable to disturbance (1) In this Act: loss attributable to disturbance of land means any of the following: (a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land, (b) valuation fees of a qualified valuer reasonably incurred by those persons in connection with the compulsory acquisition of the land (but not fees calculated by reference to the value, as assessed by the valuer, of the land), (c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs), (d) stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired), (e) financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage), (f) any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition.

Evidence

1. Exhibit A was the court book and Exhibit 1 was the tender bundle. Documents referred to are listed below.

Mr Savell

1. Mr Savell accountant and registered tax agent for the Applicants swore an affidavit on 28 August 2018. Mr Savell attested that he is the principal of Westwood Accountants and Advisors Pty Ltd (Westwood Accountants), the accounting firm for Gertos Holdings and Marsden Developments. He is also the sole director of Marsden Developments, one of the Applicants. Mr Savell attested that on or about mid 2014 he discussed the sale of the Properties with Mr Gertos (the sole director of Gertos Holdings and G Capital, two of the Applicants). On or about April 2016 Mr Gertos had discussions with Mr Pamboris (consultant at Westwood Accountants and sole director of each of the Purchasers) in relation to the sale. Mr Savell described the events prior to the exchange of the contracts on 28 June 2016. Mr Pamboris advanced three cheques each of $50,000 for the deposits paid under each contract. Trust account receipts for the payment of these deposits were annexed to Mr Savell's affidavit. The deed of agreement between the Applicants and the Purchasers for the sale of the Properties dated 28 June 2016 was also annexed to Mr Savell's affidavit. Mr Gertos signed the deed on behalf of Gertos Holdings and G Capital and Mr Savell signed on behalf of Marsden Developments. Mr Pamboris signed the deed on behalf of the Purchasers. After each name of the Applicants and Purchasers in the deed is "ATF of 164 Parramatta Road, Camperdown NSW", where "ATF" is an abbreviation for "As Trustee For".
2. Mr Savell swore a second affidavit on 14 September 2018. Mr Savell stated that Mr Gertos manages three trusts (the SWJG Unit Trust, the Gertos Holdings Unit Trust and the G Capital Unit Trust) which are the beneficial owners of the Properties. Copies of the ownership structures of the trusts were annexed to the affidavit. These state that the Applicants are individually the trustees of these trusts and Mr Gertos' children are the beneficiaries of family trusts which own the above three trusts. Mr Savell stated that the Properties were leased on commercial terms. Copies of the six leases and one licence agreement the three Properties were subject to were annexed to Mr Savell's affidavit. Mr Savell attested that Mr Gertos engaged Ms Alha a property manager who is involved in carrying out physical inspections (along with Mr Gertos), to maintain the Properties and to collect the Applicants' financial information. The financial statements for each of the Applicants for 2015 and 2016 were annexed to Mr Savell's affidavit. These document the cost of repairs and maintenance, compliance with statutory regulations such as fire compliance and maintenance of car parking and common areas. Mr Savell attested that at various times between 2000 and 2012 the Properties had been renovated, the total cost of which was approximately $5.8 million.

Cross-examination of Mr Savell

1. Mr Savell was cross-examined about the Applicants' decision-making and their relationship to the Purchasers. He confirmed that Marsden Developments (one of the Applicants) is a trustee of a trust for which Mr Gertos' children are beneficiaries. Mr Savell agreed that he, although the sole director of Marsden Developments, is prepared to occasionally act in accordance with Mr Gertos' instructions. Since 2016 Mr Pamboris has been the director and shareholder of the Purchasers (Regency Capital, London Capital and Portman Securities). Mr Savell attested that the Applicants, Purchasers and Westwood Accountants share a GPO box. The registered office of Regency Capital and London Capital was 164 Parramatta Road, Camperdown, Mr Savell's old business address. The Westwood Accountants premises (61 Kingsway, Kingsgrove NSW) is the common hub for the operation and management of the Applicants and the Purchasers.
2. Mr Savell was also cross-examined on the relationships between him, Mr Pamboris and Mr Gertos. He stated that Mr Pamboris works as a consultant at Westwood Accountants. Mr Savell has known Mr Pamboris for approximately 25 years and has worked with him at various times. Prior to working at Westwood Accountants Mr Savell was the principal of a firm called Gertos Savell Katos. This firm occasionally engaged Mr Pamboris' services. Mr Savell denied that there had been common ventures between Mr Gertos and Mr Pamboris.
3. The deed of agreement between the Applicants and the Purchasers for the sale of the Properties dated 28 June 2016 was shown to Mr Savell. Mr Savell stated that the Applicants acted as trustees for the Gertos family trust. Mr Savell was asked who the Purchasers acted as trustee for. Mr Savell replied that he had asked Mr Pamboris about this in 2016. He did not receive an answer. Mr Pamboris told Mr Savell that he had the means to complete the purchase. Mr Savell did not take any steps to verify this. Mr Savell agreed that the Purchasers were specifically incorporated for the purpose of executing the sale. When asked whether he was concerned about the Purchasers' ability to settle the contract, Mr Savell stated that Mr Pamboris had assured him that he had access to overseas funding.
4. Mr Savell stated that there were no written communications between the Applicants and Purchasers prior to the exchange of contracts on 28 June 2016. He confirmed that Mr Pamboris was a former director of Marsden Developments. Mr Savell stated that Mr Pamboris and Mr Gertos decided that there was to be a two year period before settlement. As to whether the $50,000 deposit required for the purchase of each of the Properties was unusually low, Mr Savell attested that in his experience he had dealt with deposits amounting to 2-3% of the purchase price. In relation to whether Mr Savell had investigated the market value of the Properties, he stated that Mr Gertos had received offers similar to the contract price of the Properties from other people two years before the contracts of sale were exchanged. Mr Savell stated that the deal was a favourable transaction for the beneficiaries of the G Capital Family Trust (which owns the G Capital Unit Trust). He denied that the purchase prices were well above the market value of the Properties.

Ms Alha

1. Ms Alha property manager for the Applicants swore an affidavit on 28 November 2018. She attested that she has managed the Properties from 2007 to 2018. Ms Alha stated that she has attended to various tasks including property inspections, liaising with tenants to discuss building issues, maintaining common areas, rent collection, payment of property outgoings and expenses, repair and maintenance of the Properties and arranging for fire safety upgrades.

Mr Wood

1. Mr Wood prepared a report on behalf of the Applicants dated 4 June 2018 in response to the Valuer General's valuation of the Properties. Mr Wood concluded that the market value of the Properties was $58 million. I note that Mr Wood was not called as an expert witness for this hearing.

Mr White

1. Mr White solicitor for the RMS affirmed an affidavit on 9 August 2018. He reviewed the contracts of sale and conducted a current and historic Australian Securities and Investments Corporation (ASIC) "Personal Name Extract" search for Mr Gertos, Mr Savell, Ms Gertos (Mr Gertos' ex-wife) and Mr Pamboris. Mr White conducted an ASIC "Current and Historical Organisation Extracts" for the Applicants and the Purchasers. From the results of these searches Mr White concluded that: 1. G Capital, Gertos Holdings, Marsden Developments, Regency Capital and London Capital shared the same registered office (164 Parramatta Road, Camperdown). The registered office of Portman Securities is 61 Kingsway, Kingsgrove and it was previously 164 Parramatta Road, Camperdown; 2. G Capital, Gertos Holdings, Marsden Developments, Regency Capital and London Capital shared the same principal place of business (164 Parramatta Road, Camperdown). The principal place of business of Portman Securities is 61 Kingsway, Kingsgrove. It was previously 164 Parramatta Road, Camperdown; 3. the company contact address for G Capital, Gertos Holdings, Marsden Developments, Regency Capital, London Capital and Portman Securities is the same (GPO Box 4391, Sydney NSW); 4. Mr Gertos, Mr Savell and Mr Pamboris have had common involvement in other companies.
2. Mr White affirmed a second affidavit on 28 November 2018. He conducted an ASIC "Personal Name Extract" search for Mr Vaggis, the real estate agent who acted for the Applicants in the sale of the Properties. From this search Mr White concluded that Mr Vaggis is currently a director and secretary of Billy Buckle Pty Ltd (Billy Buckle). Mr White conducted an ASIC "Current and Historical Extract" search for Billy Buckle. From this search Mr White concluded that: 1. Mr Gertos owns 100% of the shares in Billy Buckle; 2. Mr Gertos previously held an office as sole director and secretary of Billy Buckle; 3. the current registered office and principal place of business of Billy Buckle is 61 Kingsway, Kingsgrove; and 4. the previous registered office and principal place of business of Billy Buckle was 164 Parramatta Road, Camperdown.
3. Mr White also conducted an ASIC "Current and Historical Extract" search for Westwood Accountants and Westwood Financial Pty Ltd (Westwood Financial), the lending broker that acted for the Purchasers in their purchase of the Properties. From this search Mr White concluded that: 1. Mr Savell is the sole director and secretary of both Westwood Accountants and Westwood Financial; 2. the current registered office and principal place of business of both Westwood Accountants and Westwood Financial is 61 Kingsway, Kingsgrove; and 3. the registered office and principal place of business of both Westwood Accountants and Westwood Financial was previously 164 Parramatta Road, Camperdown.

Mr Green

1. Mr Green chartered accountant prepared an expert report dated 23 November 2018. He was instructed to provide an opinion on the following matters. First, the lending institutions or banks that would have been willing to provide finance to the Purchasers that would have enabled them to complete the contracts of sale by 28 June 2018. Secondly, the terms on which any such finance would have been offered to the Purchasers. Thirdly, the inquiries that a lending institution or bank would have made of the Purchasers before agreeing to provide any such finance. Fourthly, the amount of money that a lender would have been willing to loan the Purchasers.
2. Mr Green concluded that there were ample lenders in the Australian market who would have been willing to provide funding to the Purchasers provided that they were able to demonstrate compliance with the criteria of the relevant lender. He described the terms on which any such finance would have been offered to the Purchasers and found that the funding required to settle the purchases was $59,822,165. He estimated the amount of money that a lender would have been willing to loan the Purchasers as: Bank Investment Non-bank Investment Asset Based Bank Developer Non-bank Developer Maximum Loan ($) 13,997,418 9,331,612 9,331,612 16,550,000 16,550,000

Mr Mylott

1. Mr Mylott valuer prepared an expert report dated 23 November 2018. He was instructed to provide a valuation of the Properties for first mortgage purposes. Mr Mylott assessed the value of the Properties sold "in one line" to be $25.5 million (exclusive of GST).
2. He concluded that the sale price for each of the Properties did not reflect arm's length principles in accordance with the definition of market value adopted by the International Valuation Standards Council and endorsed by the Australian Property Institute.

Dr Ferrier

1. Dr Ferrier forensic accountant prepared an expert report dated 26 November 2018. He was instructed to provide an opinion as to whether but for the compulsory acquisition of the Properties the Purchasers would have been capable of proceeding to settlement of the contracts on 28 June 2018. Dr Ferrier's opinion is based on Mr Mylott's valuations of the Properties and Mr Green's assessment of the level of funding that would have been available to the Purchasers.
2. Dr Ferrier also relied on the documents produced by the Applicants in response to subpoenas and notices to produce issued by the RMS. These subpoenas and notices to produce requested documents comprising inter alia pre-contractual communications concerning the sale of the Properties. Dr Ferrier was instructed by the RMS that no documents were produced in response to these subpoenas and notices to produce that indicated that vendor finance was contemplated by either the Applicants or the Purchasers.
3. A funding offer dated 18 November 2016 addressed to Mr Pamboris from Westwood Financial for $60.5 million was annexed to Dr Ferrier's report. The borrowers of the funding were the Purchasers (London Capital, Portman Securities and Regency Capital) and the security provided for the funding was the Properties. Dr Ferrier attested that the funding offer was not signed and concluded that the offer would have lapsed by 28 June 2018. Therefore the funds under that offer would not have been available to the Purchasers for settlement of the contracts on 28 June 2018.
4. Dr Ferrier concluded that Portman Securities would have been able to complete the purchase of 166-172 Parramatta Road, Camperdown. Regency Capital and London Capital would not have been able to raise the necessary funds to complete the purchase of 160-162 Parramatta Road and 164 Parramatta Road, Camperdown respectively. Further, the Purchasers would not have been able to complete the purchase of the Properties in one line.

Cross-examination of Dr Ferrier

1. Dr Ferrier was cross-examined on the "unusual features" of the contracts as described by the RMS's solicitors in their brief for Dr Ferrier. In relation to the fact that the contracts had a settlement period of two years and the deposit for each was $50,000, Dr Ferrier stated that because of his limited experience with commercial property transactions he was unable to judge whether these features were "unusual".
2. Dr Ferrier was also cross-examined on his conclusions regarding whether the Purchasers would have been capable of proceeding to settlement on 28 June 2018. He acknowledged that he had not made oral inquiries with the office holders of the Purchasers to determine whether they would have been capable of proceeding to settlement. Dr Ferrier attested that making such oral inquiries was not undesirable or inappropriate in determining the capacity of the Purchasers to proceed to settlement. He agreed that funding could have been provided to Mr Pamboris from private international sources rather than through financial institutions. This could include a person from overseas providing funds which are held by a bank as security for advancing a loan.

Question 1 - actual use of land

1. The Applicants submitted that they were actually using the land at the date of acquisition. The RMS disputed this.

Applicants' submissions

1. The Applicants submitted that they were special purpose vehicles actively managing their respective properties pursuing the maximum return from investment possible. The three Properties valued by Mr Wood at $58 million were subject to six leases and one licence agreement and produced a rental income of $1.7 million per annum. Mr Wood's report demonstrates the scale of the businesses that the Applicants were operating on the Properties. The Applicants employed Ms Alha to actively manage the leasing and spent considerable sums ensuring the premises were fit for purpose including maintaining common areas. This was an actual use of the land. Westfield and Stocklands conduct businesses in their shopping centres which is an actual use of land notwithstanding that they lease properties within their shopping centres and are investors in them. Actual use need not be physical: Al Amanah College Inc v Minister for Education and Training (No 2) [2011] NSWLEC 254 (Al Amanah College) at [36]-[37]. The Applicants additionally relied on Newcastle City Council v Royal Newcastle Hospital (1957) 96 CLR 493; [1957] HCA 15 (Royal Newcastle Hospital) and Parramatta City Council v Brickworks Limited (1972) 128 CLR 1; [1972] HCA 21 (Brickworks).
2. Alternatively the definition of land in s 4(1) of the Just Terms Act includes interest in land. As vendors the Applicants have an interest in the Properties as identified by Dean J in Kern Corporation at 191-2 consisting of obligations, rights and interests. The rights include that they can seek specific performance of the contracts of sale by the Purchasers. This is also an actual use of land.

RMS's submissions

1. The RMS submitted that the Court has consistently held that where a person is the lessor of a property for the purposes of an investment that is insufficient to constitute an actual use of the property by that person within the meaning of s 59(1)(f), citing G Suonaf Holdings Pty Ltd v Roads and Maritime Services (2016) 219 LGERA 118; [2016] NSWLEC 116 (Suonaf) at [61], Qasabian Family Investments Pty Ltd v Roads and Maritime Services; Fishing Station Pty Ltd v Roads and Maritime Services [2017] NSWLEC 73 (Qasabian) at [36]-[41] and [179]-[181], Speter v Roads and Maritime Services [2016] NSWLEC 128 (Speter) at [91]-[94], Hatzivasiliou v Roads and Maritime Services [2017] NSWLEC 9 (Hatzivasiliou) at [144], Reysson Pty Ltd v Roads and Maritime Services (No 3) [2016] NSWLEC 69 (Reysson) at [100]-[108] and Dan Wei Zheng v Roads and Maritime Services [2017] NSWLEC 77 (Dan Wei Zheng) at [146]-[166].

Finding on Question 1

1. The Applicants' submission about use was essentially one of scale, namely that very active and engaged landlords who spend money on maintaining premises fully occupied by tenants from which a substantial income is derived are actually using land. The active management relied on was the activities identified in the affidavit of Ms Alha sworn on 28 November 2018, summarised above in [20]. The Applicants sought to contrast their position to a landowner who rents out residential premises and does not actively manage premises.
2. As the Applicants submitted the cases referred to warrant careful consideration. A number concern stamp duty claims for replacement property made under s 59(1)(f) of the Just Terms Act. In Suonaf the applicant claimed stamp duty on the purchase of a replacement residential property to be tenanted and other financial costs of purchasing the property. Preston CJ held at [61] that the applicant failed to establish that these costs were related to the actual use of the acquired land and would be incurred as a direct and natural consequence of the acquisition. The applicant rented the property and received rental income, at [59]. It had not established that it was in the business of acquiring and letting residential properties to earn rental income, or of acquiring land for the purpose of residential development or subdivision and then selling the developments for a profit. Further it had not established that it purchased the acquired land as developable land or that it intended to develop any replacement property.
3. In Speter the applicants leased the acquired property to the Health Administration Corporation for use as medical consulting rooms. In relation to the applicants' disturbance claim for stamp duty for the purchase of a replacement property, the applicants argued that they operated an investment business. The land was not passively held only for capital gain. Robson J found at [87] that operating a business requires some level of engagement with a commercial enterprise. Whilst the applicants derived an income leasing the relevant property, they were not engaged in any enterprise beyond passively receiving that income. The cases reviewed in Speter at [91]-[92] and the finding at [87] suggest the Applicants' case does not give rise to an actual use of the land.
4. In Hatzivasiliou the applicants claimed disturbance for the costs associated with buying a replacement property including stamp duty, new mortgage costs and relocation. I held at [144] that a landlord who personally collected rent and actively managed rented commercial premises was not actually using land for the purposes of making a disturbance claim under s 59(1)(f).

Question 2 - compensation payable as disturbance?

1. The Applicants submitted their interests acquired were the right to payment of the balance of the purchase price. They submit their claims for compensation come within ss 55(d) and 59(1)(f) of the Just Terms Act. Compensation based on the market value of the land as referred to in s 55(a) is irrelevant. The Applicants' claims are supported according to them by Fisher, Kennedy Street Pty Ltd v The Minister (1963) 8 LGRA 221 (Kennedy Street) and Rivers and Rivers v Minister of Education (1975) 12 SASR 321 (Rivers) at 324-5. The contracts of sale were frustrated by the acquisition and the loss of the balance of the purchase price arises as a direct and natural consequence of the acquisition.
2. A number of sub-issues arise for consideration given the terms of s 59(1)(f) and the RMS's case in response to the Applicants' case.

(a) the losses claimed are "other" financial costs (losses) within s 59(1)(f)

Applicants' submissions

1. The Applicants submitted that s 59(1)(f) is a "catch-all provision" and should not be read down, Fitzpatrick Investments Pty Ltd v Blacktown City Council (No 2) (2000) 108 LGERA 417; [2000] NSWLEC 139 at [20] (Lloyd J), affirmed by Blacktown Council v Fitzpatrick Investments Pty Ltd at [2] (Stein JA).
2. The Applicants also relied on George D Angus Pty Ltd v Health Administration Corporation (2013) 205 LGERA 357; [2013] NSWLEC 212 (George D Angus (LEC)) where Preston CJ stated at [100] that the natural and ordinary meanings of the words "financial costs" and "reasonably incurred" in s 59(1)(f) permit a construction that allows compensation for not only financial expenses which the person entitled to compensation by their actions incurs, but also financial losses which the person suffers as a consequence of the acquisition. This was affirmed by the Court of Appeal in Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752; [2014] NSWCA 352 (George D Angus (CA)) at [12] (Emmett JA), [13] (Leeming JA), [61], [63] (Tobias AJA). While there has been recent Court of Appeal consideration of the scope of s 59(1)(f) George D Angus (CA) remains in effect until there is a contrary decision.

RMS's submissions

1. The RMS submitted that in Moloney v Roads and Maritime Services [2018] NSWCA 252 (Moloney) at [20] (Basten JA, Beazley P agreeing at [1]) and Melino v Roads and Maritime Services [2018] NSWCA 251 (Melino) at [12] (Basten JA) and [77] (Payne JA) it was held that any other financial costs where referred to in s 59(1)(f) clearly envisages costs of a similar kind to those in s 59(1)(a)-(e). The RMS also relied on Melino at [18]-[19] (Basten JA) to support this proposition.
2. The RMS contended that the costs claimed by the Applicants in these proceedings are not of a similar kind to those costs specified in s 59(1)(a)-(e). The unpaid amount of a purchase price under a contract of the sale of land, which has been exchanged but not settled at the date of acquisition, is not a "financial cost" of that kind at all. The costs claimed by the Applicants do not properly fall within the scope or ambit of s 59(1)(f) as a matter of statutory construction.

Finding on cost/loss

1. Melino and Moloney were delivered on the same day in the Court of Appeal by the same bench of three judges. In Melino Basten JA was in the minority on his construction of "any other financial costs" as the Applicants correctly submitted. In that case, Payne JA at [77] with whom Beazley JA agreed at [1] stated that "the question of whether s 59(1)(f), like other parts of s 59(1) was restricted to ancillary costs, and does not extend to purchasing or rebuilding structures should be determined in a case where the point has been squarely addressed by the parties". Payne JA at [77] identified that a number of Court of Appeal decisions namely Roads and Traffic Authority (NSW) v Peak [2007] NSWCA 66, Roads and Maritime Services v Allandale Blue Metal Pty Ltd (2016) 212 LGERA 307; [2016] NSWCA 7 and Roads and Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236 are difficult to reconcile with the narrow approach favoured by Basten JA in Moloney and Melino.
2. The Applicants also correctly disputed the RMS's reliance on Basten JA's construction of "other financial costs" in Moloney at [20]. Beazley P at [1] agreed with the observations of Basten JA and otherwise agreed with the reasons and orders proposed by Payne JA. Payne JA did not affirm this approach to construction.
3. I am aware that a five judge bench has been convened by the Court of Appeal to consider the scope of s 59(1)(f) in the appeal from United Petroleum Pty Ltd v Roads and Maritime Services [2018] NSWLEC 35. That decision is reserved. In the absence of a further definitive judgment from the Court of Appeal George D Angus (CA) and George D Angus (LEC) apply as contended for by the Applicants. Theoretically therefore a loss which otherwise satisfies s 59(1)(f) can be claimed. In this case the Applicants allege that they might reasonably incur a loss as a result of the compulsory acquisition.
4. That general conclusion requires the Applicants to establish that they have incurred or might reasonably incur a loss, the issue considered in relation to issue (c) below.

(b) loss not related to actual use of land

1. Given my finding on Question 1 the Applicants' losses cannot relate to any actual use of land. This means the Applicants cannot succeed in their claims relying on s 59(1)(f) and the following finding on issue (c) is not strictly necessary. The circumstances of this case are not similar to any other cases which have considered s 59(1)(f) as I discussed above in relation to Question 1 at [40]-[48].

(c) whether proof of loss as a direct consequence of the acquisition

1. The RMS submitted that the loss is not a direct consequence of the acquisition as the Applicants have not demonstrated that the Purchasers could have completed the contracts. The Applicants submitted that they do not have to prove that matter and can rely on the circumstance that they are entitled to specific performance of the contracts of sale on the due date. The RMS submitted there were two issues arising: 1. Who bears the onus to show that the contracts of sale would have settled as at June 2018? 2. If there is such an onus, has it been discharged, namely what was the likelihood of the contracts settling in June 2018?

RMS's submissions

1. The RMS submitted that in the context of s 59(1)(f) an exorbitant purchase price under an uncompleted contract of sale that could not be paid for cannot be regarded as a financial cost or as a cost that was "reasonably incurred".
2. The RMS contended that the Applicants conducted no due diligence whatsoever on the ability of the Purchasers to fund the purchase of the Properties.
3. The RMS relied on the following to support the proposition that the contracts of sale were not made at arm's length: 1. the purchase prices of the contracts totalled $56.5 million, which is more than double the Valuer General's determination and Mr Mylott's assessment; 2. the contracts of sale were apparently entered into without any marketing by the Applicants. Thus there was no testing of the market in the sale process and the prices cannot be said to reflect the market; 3. the contracts had a long settlement period of two years; 4. a deposit of only $50,000 was paid under each contract, which is much lower than the usual 5-10% for industrial properties; 5. the purchase prices were inflated well above the market value of the Properties and the exorbitant prices cannot be, and have not been, explained; 6. Mr Pamboris, who is a shareholder and director of all the Purchasers, was the former director of Marsden Developments (one of the Applicants); 7. the Purchasers and the Applicants currently share or formerly shared the same registered office, principal place of business and company contact address; 8. Mr Vaggis, the Applicants' real estate agent who acted on the sale of the Properties, is the director of a company of which Mr Gertos was formerly the director. The registered office and principal place of business of this company is the same as both the Applicants' and the Purchasers'; 9. Mr Savell, the director of Westwood Financial (the lending broker who acted for the Purchasers), is also a director of Marsden Developments (one of the Applicants); 10. there was no written communication between the Applicants and the Purchasers regarding the purchase price or any negotiations over the terms of the prospective sale; 11. Mr Pamboris, Mr Gertos, Mr Savell and Mr Vaggis are known to one another and have been involved in previous dealings. Given the relationship between the parties, the transactions were not made at arm's length; and 12. the purchase prices of the contracts of sale do not represent arm's length principles in accordance with the definition of market value under the Just Terms Act nor the definition of market value adopted by the International Valuation Standards Council of Market Value and endorsed by the Australian Property Institute.

Applicants' submissions

1. The Applicants submitted that it does not matter whether the transactions were made at arm's length. Further the Applicants rejected the RMS's submission that the purchase prices of the contracts of sale did not reflect the market value of the Properties as they relied on Mr Wood's valuation of the Properties of $58 million.
2. The Applicants submitted that they did not bear any onus to show that losses were likely to be incurred. It was sufficient that the contracts of sale were binding and capable of specific performance. None of the RMS's experts spoke to the Purchasers to ask how they planned to pay for the Properties. The Applicants submitted that the Purchasers could have gained funding from a variety of sources including family, joint venture partners and offshore investors.

Finding on issue (c) - loss not proved to be direct consequence of the acquisition

1. The Court was not provided with any case where compensation for the same interest in land as that of the Applicants under the Just Terms Act has been considered`. The Applicants submitted that market value is irrelevant to their claim. The cases of Fisher, Kennedy Street and Rivers do not support the Applicants' submission that a similar interest in land was compensated as disturbance.
2. In Fisher the Court was answering questions posed in a special case where the plaintiff was a purchaser of two pieces of land under contracts of sale in Tasmania. The main contract of sale was subject to a condition that subdivision approval be obtained from the relevant council. At the time of compulsory acquisition the purchaser had paid the deposit. The balance of purchase money was unpaid. Subdivision approval had not been sought at that time. At issue was whether the plaintiff was entitled to compensation as the owner in equity of the land under the Lands Resumption Act 1957 (Tas), the provisions of which are not identical to the Just Terms Act. The acquiring authority argued that before the resumption of the land the plaintiff had no estate or interest in it because the contracts were not contracts of which the court would grant specific performance. Nettlefold J rejected that submission at 415, finding that the purchaser being the owner in equity of the land was entitled to compensation because the contracts were capable of specific performance. The fact that the main contract was conditional on subdivision approval by the council did not negative this finding, at 415-16. No further detail of the basis of payment of compensation was identified as that was not required given the nature of the questions posed. The Applicants can obtain no support for their position from that decision.
3. In Kennedy Street the plaintiff purchaser signed a contract for the purchase of land and paid a deposit. Prior to the completion of the sale, the land the subject of the contract was compulsorily acquired and the sale could not be completed. The market value of the land increased between the date of contract exchange and the compulsory acquisition of the land. In the same period development consent for subdivision of the land was granted by the relevant local council. The plaintiff contended that compensation should be assessed under the Public Works Act 1912 using the market value of the land at the date of resumption, or alternatively according to the special value of the land to the plaintiff. Hardie J at 224 held that the plaintiff was entitled to recover either the market value of the property resumed (which was greater than the contract price) or its special value to the plaintiff, whichever was greater. Market value of the land was determined as one undivided parcel of land with the potentiality and prospect of subdivision at a reasonably early date, an amount higher than the contract price. The purchase price owing to the vendor under the contract of sale was deducted. Separately an amount for special value to the plaintiff given particular circumstances concerning preparation of the land for subdivision pending completion of the contract of sale was awarded. No reference to disturbance is made in the judgment.

Finding on Question 2

1. As a result of my finding on issues (b) and (c) the Applicants have not satisfied s 59(1)(f) and their interests are not compensable as disturbance under that subsection of the Just Terms Act.
2. While I have found that the Applicants' interests in the acquired land do not fall within s 59(1)(f) there is no dispute that the Applicants do have compensable interests. The basis for the payment of compensation for that interest under the Just Terms Act remains unresolved. Some case law which may provide assistance in that regard is identified above, namely Fisher, Kennedy Street, Rivers and McMahon. Ultimately that issue remains for determination on another day.
3. The questions posed are answered as follows: Question 1: Whether there was any "actual use of land" by any of the Applicants that would entitle any of them to any compensation under s 59(1)(f) of the Just Terms Act. Answer: No Question 2: Whether, on the basis of the contracts of sale of the Properties, the compensation to be paid to the Applicants in respect of their interests in land acquired is to be confined to calculation of compensation having regard only to matters arising under s 55(d) and s 59(1)(f) of the Just Terms Act. Answer: No

Orders

1. The Court orders that: 1. Costs are reserved. 2. Exhibits are returned.

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: 15 February 2019