Kirela Pty Limited v The Minister administering the Environmental Planning and Assessment Act 1979

Land and Environment Court (NSW)|2004-03-12|Before: Cowdroy J, Mr J

Introduction 1 By Notice of Motion dated 23 September 2003 the applicant seeks an assessment of compensation pursuant to s 55(d) of the Land Acquisition (Just Terms Compensation) Act 1991 ("the Act") in the sum of $62,331 which by the time of the hearing had altered to $314,021. Of this sum an amount of $18,006 is agreed as legal costs pursuant to s 59(a) of the Act. A claim of $150 was made being costs incurred in connection with a discharge of mortgage in respect of which no evidence was led nor no submissions made by either party. 2 The disputed claims relate to consultants' fees including fees paid to a town planner ($25,000), civil engineer ($9,765) and surveyor ($9,460). In addition the applicant claims an amount of $246,740 for stamp duty, most of which may be incurred for the purchase of a substitute parcel of land. The Court will consider each of these matters hereunder.

Applicant's Claims 3 The affidavit of John Wynne, town planner establishes that the applicant paid to Urbis Pty Limited an amount of $260,000 for planning advice in respect of the redevelopment of the former Arnott's site of which the acquired lands formed part. The invoices issued by Urbis Pty Limited do not itemise work which was undertaken solely in connection with the compulsory acquisition of the acquired land and the amount of $25,000 constitutes an estimate only. Mr Wynne states that town planning advice was provided by his company relating to development constraints and opportunities for such land and the likely impact upon the acquired land. He states that such work was performed to enable the applicant to make a determination of the value of such land. 4 The applicant's claim for engineer's fees paid to McMillan Britton & Kell (now Cardno MBK) relates to advice provided between September 1998 and November 1998 in respect of flooding of the acquired land. It concerned the realignment of Powell's Creek and the creation of an artificial lake in the vicinity of the Allen Street bridge. It included a drainage concept for the Arnott's site. It was proposed to use such information for the purposes of a development application for the land which was subsequently acquired. 5 The claim for surveyor's fees relates to a survey, computations, marking and preparation of a plan of survey for a subdivision of the land. Such costs were incurred in September 1999. 6 The claim for stamp duty represents a total amount of stamp duty paid or estimated in respect of the purchase by the applicant of several parcels of land. The applicant is engaged in property development. It intended to use the acquired land for the purpose of parking for the residue of the Arnott's site or as a means of obtaining an increased floor space ratio for the development being carried out by it on that site. To date the applicant has paid $64,140 in respect of its acquisition of land near to the Arnott's site. The applicant estimates that stamp duty in respect of purchases of three additional parcels of land will amount to $167,885. The applicant has entered into a contract to purchase additional lands near Powell's Creek, and is negotiating for the purchase of two other parcels of land from the Roads and Traffic Authority and Canada Bay Council. The applicant claims that the floor space of Building A which is yet to be built on the Arnott's site needs additional site area in order to achieve the maximum floor space area of 15,000m2. It was approved by the consent authority with a floor space area 9,460m2. If the floor space area cannot be increased there will be a significant financial detriment to the applicant since the rental income to be derived from the buildings erected on the Arnott's site would have provided monies required for infrastructure at the site.

Respondent's submissions 7 The respondent submits that the power of the Court to award compensation for disturbance is constrained by s 59 of the Act which provides- In this Act: loss attributable to disturbance of land means any of the following: (a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land, (b) valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land, (c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs), (d) stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired), (e) financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage), (f) any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition.

The respondent contends that the provisions of s 59 do not allow recovery of any of the items claimed by the applicant. 8 With respect to s 59(f) of the Act the respondent submits that the consultant's fees of $25,000 are not recoverable since they relate to general advice given for the development of the land and do not constitute a cost relating to the "actual use" of the land but rather to its potential use. The respondent relies upon the observations of the Court of Appeal in Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259 at par 26 and par 27 which confirmed that the word "actual" limits recovery under s 59(f) to costs incurred relating to the actual use of the land. 9 With regard to the flooding and the survey advice, the respondent submits that such claims must be rejected for the reasons provided in Blacktown Council v Fitzpatrick Investments. The flooding advice related to the whole of the Arnott's site and the survey related to the subdivision of the entire Arnott's site into two lots for the applicant's own purpose and neither was related to the "actual use" nor were a "direct and natural consequence of the acquisition". 10 With regard to the applicant's claim for stamp duty the respondent submits that such claim could only be justified where a corporation is relocated. It submits that the purchase of additional land as a replacement for land which the applicant intended to use does not fall within the scope of s 59(f) of the Act. It relies upon the observations of Lloyd J in Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) (2000) 108 LGERA 417 at p 421-423. The respondent submits that s 59(f) does not permit compensation for the payment of stamp duty where such amount has not been incurred. 11 The respondent additionally contends that the applicant has been compensated upon the basis of the highest and best use of the acquired land namely for residential use. The respondent relies upon s 61 of the Act which provides:- If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of: (a) any financial advantage that would necessarily have been forgone in realising that potential, and (b) any financial loss that would necessarily have been incurred in realising that potential.

Accordingly the respondent submits that the applicant is not entitled to be awarded stamp duty for entirely different and lesser uses: see Horn v Sunderland Corporation [1941] 2 KB 26 and Peter Croke Holdings Pty Limited and Others v Roads and Traffic Authority of NSW (1998) 101 LGERA 30.

Findings 12 It is apparent that the land, at the date of acquisition was not being used for any purpose but rather was awaiting development for some future purpose. However the entitlement to the survey, flooding and planning advice is dependent upon each claim being within s 59(f) of the Act which is predicated upon actual use of the land. Accordingly none of such claims can be held to arise out of the actual use of the land as required by s 59(f). 13 During the course of oral argument the applicant suggested that such claims may be properly recoverable pursuant to s 59(b) of the Act since the advice obtained was necessary to enable the applicant to consider its position. Mr Joseph Raymond Glew, a director of the applicant is also a qualified valuer in New Zealand. Although there is no evidence that Mr Glew has practised as a valuer in Australia it is claimed that he relied upon his own opinion when making property acquisitions for the applicant and that he had only engaged valuers for mortgage purposes, rent reviews and to meet statutory requirements. Despite these facts none of the survey, flooding and planning advice constitutes "valuation fees" which could have been recoverable pursuant to s 59(b) of the Act. 14 Pursuant to s 59(d) of the Act stamp duty costs reasonably incurred "in connection with the purchase of land for relocation" is recoverable. The applicant did not "relocate" its business and is therefore not entitled to recover stamp duty costs pursuant to s 59(d) of the Act. 15 The claim for stamp duty costs was also made pursuant to s59(f) of the Act. The affidavit of Mr Joseph Raymond Glew sworn 3 March 2004 relevantly states:- The Applicant intended to use Lot 2 in Deposited Plan 1002876 … as either open space adjoining the redeveloped commercial precinct on the old Arnott's site or for car parking for the commercial precinct. 16 This evidence establishes that there was no actual use of the acquired lands at the date of acquisition. It also establishes that there was no existing development consent which required the acquired lands be used for the purposes referred to by Mr Grew as a condition of the development of the adjoining lands. 17 In Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) the applicant was a corporation engaged in the acquisition of land for the purpose of subdivision. Lloyd J found that the land was held for the purpose of development for residential subdivision and after payment of compensation it acquired industrial land for the purpose of subdivision. Lloyd J said (at p 423):- The applicant had by reason of the acquisition lost its parcel of developable land. It replaced the developable land which it lost by acquiring other developable land. But for the acquisition, the applicant could have developed the land acquired by the respondent. If it wanted to continue to develop land by way of subdivision it had to purchase other land for that purpose. 18 In Blacktown Council v Fitzpatrick Investments Stein JA said (at par 4 and par 5):- The nature of the respondent's business was that of a land developer and the acquired land was part of its stock-in-trade constituting its 'land bank'. Holding the land in its land bank for subdivision was a use of the land in fact. That is sufficient to make it an 'actual use of the land' within s 59(f) of the Act.

The favoured construction gives the expression 'actual use' work to do. While physical use is not required, something which is only a potential future use would fall short of 'actual use'. 19 The Court finds that the acquired land was not used in the sense referred to in Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2). There is no evidence of actual use of the land as a land bank. The proposal for its use remained only potential therefore the applicant is not entitled to recover compensation for stamp duty pursuant to s 59(f) of the Act. 20 As an entirely separate consideration it should be observed that s 59 of the Act only permits reimbursement for expenses incurred, and no recovery can be made in respect of expenses which are prospective. The applicant's claim relating to stamp duty, save for an amount of $64,140 is made in respect of stamp duty which might be incurred. Accordingly, even if there existed a basis for the claim for stamp duty, it would be limited to a recovery of $64,140. 21 It must also be borne in mind that the applicant's entitlement to compensation was allowed on the basis of the highest and best use of the acquired lands, namely for residential unit development. The applicant is not entitled to an award of compensation in respect of a claim relating to a different use: see Peter Croke Holdings at p 41 and at p 44 where Bignold J at said s 61 of the Act operates: …to deny recovery of compensation for disturbance loss where a claim to such compensation is inconsistent with another claim to compensation based upon the market value of the land, where that value is assessed on the basis of a potential higher use of the land than the existing use and where the realisation of that potential necessarily terminates (or postulates the termination of) that existing use. Orders 22 The Court makes the following orders:-

ORDER that pursuant to s 55(d) of the Land Acquisition (Just Terms Compensation) Act 1991 the respondent pay the applicant the sum of $18,006 for disturbance;
ORDER that the costs of the motion be costs in the proceedings;
ORDER that the exhibits be 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.

CITATION : Kirela Pty Limited v The Minister administering the Environmental Planning and Assessment Act 1979 (No. 2) [2004] NSWLEC 68 APPLICANT Kirela Pty Limited (ACN 079 721 127) PARTIES : RESPONDENT The Minister administering the Environmental Planning and Assessment Act 1979 FILE NUMBER(S) : 30088 of 2002 CORAM: Cowdroy J KEY ISSUES: Compulsory Acquisition of Land :- disturbance - whether claim for disturbance arises from actual use of acquired land - whether stamp duty is recovered. LEGISLATION CITED: Land Acquisition (Just Terms Compensation) Act 1991, s 55, s 59, s 61 Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259; CASES CITED: Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) (2000) 108 LGERA 417; Horn v Sunderland Corporation [1941] 2 KB 26; Peter Croke Holdings Pty Limited and Others v Roads and Traffic Authority of NSW (1998) 101 LGERA 30 DATES OF HEARING: 04/03/2004 DATE OF JUDGMENT: 03/12/2004

(2000) 108 LGERA 417

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