Home Care Services of New South Wales v Albury City Council

IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

Matter No . . 30205 of 2003 Coram : Bignold J Insert Date of Judgment

This is an objection pursuant to the Land Acquisition (Just Terms) Compensation Act 1991, s 66 (Just Terms Act) in respect of the compulsory acquisition by the Respondent Council of land situate in Keira Street Albury. The Claimant being Home Care Service of New South Wales was a tenant of part of the building situate upon the compulsorily acquired land. The compulsory acquisition took effect on 1 November 2002 although the Claimant had been given notice on or about 11 July 2002 of the intention of the Council to compulsorily acquire the leasehold interest in the premises by dint of the decision to acquire the premises in toto. That notice was received a little more than one week only after the lease of the premises had commenced. The lease was for a term of five years commencing on 1 July 2002.

The Claimant's claim for compensation led to a determination of compensation by the Valuer-General in the sum of $67,000 and this amount was offered by the Council to the Claimant in the notice of compulsory acquisition furnished to it. The offer was rejected and hence the requirement for the Court to determine the amount of compensation. Valuation reports on behalf of the parties were tendered in the case. The valuation of Mr Mannix on behalf of the Claimant being in the sum of $130,000 comprising market value of $30,000 (I speak in round figures) and disturbance component $100,000. Mr Mannix's valuation report is Exhibit 6.

The competing valuation is that of Mr Cosgrave called by the Council. His valuation contained in his report, Exhibit A, was for the sum of $51,000, made up of market value $17,000 and disturbance $34,000. (It is to be noted in passing that Mr Cosgrave's evaluation is significantly less than the amount of compensation determined by the Valuer-General in the sum of $67,000.)

As a result of obtaining advice from the Council on 11 July 2002 of the Council's intention to compulsorily acquire the subject premises, of which the Claimant was a lessee as to part, the Claimant's property officer, a Mr Colton, immediately commenced inquiries in the Albury area to find alternative premises. He quickly learned that there were no Government premises available for lease in the Albury business district and he made inquiries of several real estate agents practicing in Albury. The only responses to his inquiries was from a real estate agent who suggested there might be two premises suitable for the Claimant's needs, namely St Patrick's School and premises 520 Swift Street Albury.

I interpose that the Claimant is a statutory corporation created by the Home Care Service Act 1988. Its statutory functions are to provide home care services to persons who are ill, disabled, who are affected by personal family problems and who are incapable of carrying out domestic work or home maintenance without assistance. The Claimant carries out these functions via a number of offices located through metropolitan and country New South Wales. Its head office is located at Liverpool in Sydney.

Mr Colton, the property officer (whose statement of evidence is Exhibit 2) indicates that he negotiated the lease for the Claimant of the premises compulsorily acquired by the Council. Those premises comprised a floor area of 101 m2. According to par 6 of his statement, following up the advice of the real estate agent in Albury he inspected the two potentially available premises. The previous St Patrick's School premises were 200 m2 in area and were too large for the needs of the Claimant. Additionally, that building required refurbishment and Mr Colton came to the view that the premises were unsuitable for the Claimant's needs. The premises at 520 Swift Street Albury contained an area of 150 m2. He inspected them, found them to be partially fitted out and in good condition. He considered that they were the only suitable premises for the Claimant to lease in Albury. The Claimant had been seeking replacement premises in Albury following the vacation of premises it had occupied in Albury for some 15 years, brought about by the dilapidated state of the premises, because it is the city in that part of the state containing most of the Claimant's clients and to use his words "it is the hub of the Claimant's clients within the surrounding areas of Albury".

Mr Colton arranged for the Swift Street premises to be inspected by the State Valuation Office and was informed by an officer of that office that the rental being sought by the landlord was fair and reasonable. Mr Colton goes on to say, par 6 of his statement, that in order to secure the premises on 15 October the Claimant entered into a lease for a period of five years with an option to renew for another five years. The rent payable was sizeably more than the rent being paid at the premises which were compulsorily acquired. In par 7 of his statement he details the costs and expenses incurred in relocating the office of the Claimant from the Keira Street premises to the new leased premises in Swift Street.

Paragraph 8 of his statement is important and I should recite it in full. It says: The above costs and expenses were only incurred by the Claimant because Albury City Council compulsorily acquired the Claimant's leasehold interest in the premises at Keira Street. The Claimant intended to remain as a tenant of those premises until its lease of the premises expired on 30 June 2007. The Claimant did not require any area for its purposes additional to that which it had leased at Keira Street nor did it require premises of superior quality for its purposes than that which it leased at Keira Street. The Claimant only leased a greater area in a superior building, namely 520 Swift Street, than it had leased in Keira Street because the former site was the only suitable place available for leasing by the Claimant at the time that it had to vacate the later site.

Mr Colton was made available for cross-examination and was cross-examined but none of the relevant material from his statement that I have recited was in any way qualified or diminished in the process of cross-examination.

I have been considerably assisted in its task of determining the amount of compensation payable in the present case by virtue of the joint statement prepared by the valuers Mr Mannix and Mr Cosgrave. As a result of their conference in accordance with directions given by Talbot J earlier this week, the joint statement was tendered as Exhibit 1 in the proceedings. In the joint statement, the Valuers agreed that the market value should be valued at $17,000. So far as concerned disturbance, the Valuers adopted for the purpose of their estimation of compensation recoverable by way of disturbance a figure of $98,000 representing the costs of relocation from the Keira Street premises to the Swift Street premises, including fit-out costs of $61,000. (I simply interpose that the figures adopted by the Valuers appear to reflect the details provided in Mr Colton's statement of evidence, Exhibit 2.) The Valuers having agreed on a round figure of $98,000 in respect of relocation expenses, valuation and legal fees for preparing the claim, and additional rent factor, express their opposing views on the quantum of compensation recoverable by way of disturbance.

It was Mr Mannix's opinion that the full amount of $98,000 was compensable under the heading of disturbance in accordance with s 55 par (d) and s 59 par (c) (or (a), (b) and (c), especially (c), and perhaps (f)) of the Just Terms Act. Mr Cosgrave was of a different opinion. He estimated the compensation recoverable by way of disturbance in the sum of $34,000. That amount reflected the interest that would have been payable on the outlay of the relocation costs of $98,000. The rationale for such an approach to quantifying compensation by way of disturbance for Mr Cosgrave's view is expressed in the joint statement Exhibit 1 and I quote: The acquisition has brought forward the need to incur costs to relocate, not caused the costs. On the expiry of the lease in fifty-six months time (a reference to the lease that was terminated soon after it was granted by dint of the compulsory acquisition, I interpose) the above relocation costs would have been incurred in any case.

The joint statement goes on to say what is already now apparent, that the Valuers did not disagree on the amount of costs incurred in relocation, namely $98,000, but they disagreed on the methodology to value or assess the compensation by way of disturbance and the joint statement goes on to say that the difference of opinion was considered to be a matter of law and not valuation.

In support of Mr Mannix's opinion, Counsel for the Claimant relies upon the plain terms and meaning of the Just Terms Act, s 59. It relevantly defines the expression "loss attributable to disturbance of land" means any of the following and I quote par (c): Financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs).

The relocation costs claimed by the Claimant in the present case are principally founded upon that provision. To the extent necessary, reliance is also placed upon par (f) of the same s 59 which reads: 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 .

The Council's competing argument and case seeks to support the valuation approach adopted by Mr Cosgrave, not so much directly but indirectly by reference to some of the decided cases, a number of which were cited and discussed in the course of argument. None of the cases referred to is precisely in point but a number of them cast helpful light on the meaning and application of s 59 par (c) and s 59 par (f). The Just Terms Act, s 59 of is obviously similar to and derives from common law conceptions of "disturbance" compensation. However it is not necessarily confined to the common law understanding of the concept of disturbance in land compensation law, a point extensively discussed in my judgment in Peter Croke Holdings Pty Limited v Roads and Traffic Authority (1998) 101 LGERA 30. That judgment contains a detailed discussion of claims to compensation for disturbance pursuant to s 59 par (c) and (f) on the particular facts of that case which need not be noted, but in the course of determining that aspect of the claim in that case, reference was made at pp 64, 65 and 66 to a number of decided cases which do cast some considerable light on the common law basis for recovery of disturbance claims, which as I point out at p 66 of the judgment assist in the interpretation and application of the Just Terms Act, s 59(c). In the present case, Counsel for the Council has particularly drawn attention to the citation of the extract of the judgment of Sir Owen Dixon in Minister for Army v Parbury Henty (1945) 70 CLR at 459 which suggests that in some circumstances deductions must be made to reflect residual value or enhancement to a Claimant. I will not quote the extract from the judgment of Sir Owen Dixon, it is there set out at pp 65 and 65 in the volume cited. I also cited an extract from the judgment of Williams J in that case where he said that Claimants were entitled: not only for the value of the proprietary interests so acquired but also for what can be compendiously called expenses of removal into premises at least as commodious and congenial, taking a broad view of the matter, as those of which they were dispossessed .

I interpose that that case involved a tenant and not an owner. Counsel for the Council also relied upon the extract from the judgment of Wells J in the South Australian Supreme Court in Commissioner of Highways v Shipp Brothers (1978) 43 LGRA 355 but as I pointed out in Peter Croke at 65 and 66, these cases dealing with the common law of disturbance in land compensation claims and the principle of valuation of reinstatement do not dictate the answer to the question posed in that or the present case which is simply this, and I quote this at 66 of Peter Croke: Whether the claim based upon costs of relocation of the disturbed business where the only relevant limitation is that imposed by s 59(c) of the Act, namely that the financial costs must be reasonably incurred.

In the course of argument I fastened upon the decision of Gobbo J in the Victorian Supreme Court in Kazaris v Roads Corporation (1991) 1 VR at 237 cited in Peter Croke at p 66 where his Honour emphasised that the question in hand was to be resolved by reference to the provisions of the statute and not by exploring the limits of the valuation doctrine of reinstatement, a view that I respectfully adopted at par 66. in Peter Croke The passage that I quoted from Kazaris is worthy of repetition here where Gobbo J said: But as has been said in the disturbance cases the owner of a business who is compelled to relocate into more expensive premises that bring him no extra profit gains no benefit from the enforced relocation and should not have to bring into credit as a deduction or as a form of enhancement unknown to the law the amount of the theoretical addition in value represented by the extra amount he has had to spend over the value of his previous premises.

In my judgment, the amount of compensation recoverable pursuant to s 59(c) in the present case includes all of the relocation costs incurred by the Claimant in re-establishing its business premises in the Swift Street premises. There is no suggestion in the evidence other than the fact that that relocation was reasonable and that the expenses were reasonably incurred. In this respect, I recall the evidence of Mr Colton that these were the only available premises. The fact that they were offering more space than the existing premises provided no inducement or benefit or advantage to the Claimant. It was those premises or no other available premises. In those circumstances, the fact that the premises were larger and the fit-out was therefore of larger premises conferred no benefit on the Claimant such that it would be required to bring that notional benefit into account by way of deduction from the amount of disturbance costs otherwise to which it is reasonably entitled.

Council sought to extract from another decision of mine, namely Matcam Pty Limited v Kogarah Council (1999) 105 LGERA at 266, the principle that the Claimant was not entitled to be compensated for its relocation expenses. This submission, of course, was not consistent with the valuation opinion of Mr Cosgrave who, it is to be recalled, allowed as reasonable the relocation expenses in the agreed sum of $98,000 but was prepared only to allow as recoverable compensation interest on the borrowing of such an amount upon the basis that in five years time, had the compulsory acquisition not taken place, the Claimant would be faced with similar expenditure. In this respect, I accept the submissions advanced by Counsel for the Claimant that Mr Cosgrave's opinions on that matter were based upon speculations and not upon facts and were in other respects unsupported in valuation practice or law. It is significant that the principal argument advanced by the Council in this case based on my decision in Matcam would, if accepted, undermine not only the claim to disturbance but the Council's valuer's acknowledgment that some $34,000 of the $98,000 would be recoverable as disturbance. Nonetheless, the Council is entitled to put the argument but the argument in my respectful opinion fails at the threshold, the case of Matcam being entirely distinguishable on the facts from the present case. In that case, the Claimant was the owner of premises which were used and fitted out as doctor's surgery from which he practiced. As a result of the compulsory acquisition of those premises and in order to continue his practice in the St George area, the Claimant acquired new medical suites in the St George Private Hospital which were fully fitted out as medical suites. In addition to market value, the Claimant in Matcam claimed the sum of $300,000 for fitting out the medical suites in the medical centre and the case was only concerned with that disputed claim. For the reasons given at pp 272 and 273 of the judgment in the reported decision, I held that that disputed claim was not recoverable. Five reasons were given for that decision. The first reason was that the Claimant was already receiving full compensation by dint of the agreed value of market value which reflected its existing use as a medical practice with all its medical fit-out and accoutrements. That reason in itself would have been sufficient to have rejected the claim, however other reasons were given, some of which were ancillary but nonetheless important. A consequence of the receiving of the full amount of market value meant, and this was reflected in the second reason that to award another $300,000 for medical fit-out of the newly acquired premises would involve a double recovery of compensation. Particular reliance was placed on the third and fourth reasons for the decision in Matcam which invoked a decision of the English Court of Appeal in Service Welding v Tyne and Wear County Council (1979) 38 Property and Compensation Reports at 352. A relevant extract from the judgment of Lord Justice Bridge, as he then was, is set out at pp 272 and 273. Reliance was placed upon that passage. At 273 I also quote a briefer extract from the judgment of Lord Justice Templeman, as he then was. It needs to be borne in mind that the disputed claim in that case concerned bank interest charges payable in respect of the acquisition of the replacement premises. Lord Justice Templeman put the matter succinctly when he said that:

those charges were not the costs of being disturbed from the old factory getting into the new factory, they were costs of acquiring the new factory.

In the light of the facts of that case and the statements of principle I there quote, it is apparent that neither the case nor the statements of principle have any bearing on the present case.

As I pointed out in the course of argument in the Council's case, the reasoning of Gubbo J in Kazaris' case stands in the way upon the facts as found in this case of there being any requirement or justification to reduce the amount of fit-out costs by dint of the fact that the relocated premises were larger by 50 per cent than the premises the lease of which was terminated soon after it commenced by dint of the compulsory acquisition of the Keira Street property.

For all of the foregoing reasons, I therefore would uphold the claim to disturbance made by the Claimant in the present case and adopt the agreed figure of $98,000 as set forth in the joint statement of the valuers, Exhibit 1. Accordingly, I determine the market value of the compulsorily acquired interest of the Claimant in the agreed sum of $17,000 and I determine the amount of compensation for disturbance in the sum of $98,000. The exhibits may be returned and I assume Mr Henry you ask for costs in the proceedings? HENRY: Yes, there's one further thing your Honour. There's a requirement under s 49 of the Act that there be interest payable, statutory interest so I'd ask that the Court order that statutory interest be payable on the sum of $115,000 and I do ask for costs of the proceedings which would include the costs of the motion I referred to at the commencement of the day.

HIS HONOUR: Thank you Mr Henry. Mr Fraser, anything to be said against the order for costs?

FRASER: I don't think so your Honour. No I've got nothing I wish to say your Honour.

HENRY: I'm sorry your Honour could I correct one thing. My instructing solicitor has just informed me that the full $115,000 shouldn't be the subject of a statutory interest because there has been a part payment.

HIS HONOUR: I think most probably there's no need to order the payment of interest, that's payable by force of the statute itself. I don't think one normally orders--

HENRY: I've noticed it in some of the cases that's why I raised it but I agree with you, there shouldn't be a need for it.

HIS HONOUR: No, I think we simply note for the present purposes that any statutory interest payable in the case in accordance with s 49 is payable and the third order I make therefore is that the Respondent pay the Claimant's costs in the proceedings in the sum agreed or failing agreement as assessed. The exhibits can be returned gentlemen when the written form of judgment, which will be transcribed, is made available.

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