Konduru T/as Warringah Road Family Medical Centre v Roads and Maritime Services; Konduru v Roads and Maritime Services; Konduru v Roads and Maritime Services

Land and Environment Court (NSW)|2017-02-07|Before: Moore J

TABLE OF CONTENTS Introduction The resumed properties The acquisitions The evidence Agreed basis for property valuation The land value for 449 Warringah Road Introduction Shop 1 Shop 2 Shops 3 and 4 Market rent for 40 and 42 Bantry Bay Road Introduction Singha Thai Ground floor shop - 42 Bantry Bay Road The Konduru's stamp duty claim - 40 and 42 Bantry Bay Road The imputed rent for 40 Bantry Bay Road Claim for lost rent for 40 Bantry Bay Road The mortgage interest claim for 40 and 42 Bantry Bay Road Introduction Section 49(1) of the Acquisition Act and its history Section 50(1) of the Acquisition Act and its history The Kondurus' claim - 40 and 42 Bantry Bay Road The position of the RMS on this claim Consideration Interest on borrowings to fund the 8 Hilmer Street works The disturbance claim for the relocation of the medical practice The rental reimbursement claim The other disbursements claim Conclusion 449 Warringah Road proceedings The 40 and 42 Bantry Bay Road proceedings The medical centre claim proceedings Directions

Introduction

The NSW Government is consolidating Sydney's northern beaches health and hospital services in a new health campus, currently under construction at Frenchs Forest. This major new health campus, located in the north-western quadrant of the intersection of Warringah Road and the Wakehurst Parkway, has necessitated significant upgrades to the road system in its vicinity. This has included, relevant to these proceedings, significant road widening to Warringah Road on its southern side to the west of this major intersection.
Roads and Maritime Services (the RMS), as the authority responsible for construction of these roadworks, has determined that the appropriate design at this location on the southern side of Warringah Road required construction of a road 12 lanes wide. To accommodate this, the RMS has compulsorily acquired properties at this location. Included in these acquisitions has been the entirety of the small suburban shopping complex located at the intersection of Warringah Road and Bantry Bay Road on the western side of that intersection.
Determining the appropriate compensation for such acquisitions when there is no agreement between the RMS, as the acquiring authority, and the owners of the land acquired is a task given to this Court by virtue of the provisions of the Land Acquisition (Just Terms Compensation) Act 1991 (the Acquisition Act).
The three proceedings here requiring determination arise out of the compulsory acquisition, by the RMS, of two properties within the Bantry Bay Road shopping centre. As later discussed, in more detail, two of the proceedings arise out of the lack of agreement concerning the value to be attributed to each of the properties (and ancillary issues), whilst the third proceedings deals with a dispute about the appropriate compensation for the necessity to relocate a medical practice operated by one of the joint owners of these properties, where that practice was conducted in premises comprising two of the four shops located on one of those properties.
Although, ordinarily, it would be expected that the matters subject of the third proceedings (being matters arising out of Dr Konduru's relocation of her medical practice from Shops 3 and 4 at 449 Warringah Road to 8 Hilmer Street) would have been encompassed within the proceedings concerning the acquisition of 449 Warringah Road, the Valuer General issued a separate determination concerning the medical practice disturbance claim, rather than treating it as part of the acquisition of that property. That having occurred, it was necessary for Dr Konduru to commence separate proceedings concerning that notice of determination in order to be able to have her objections to that determination dealt with by this Court.

The resumed properties

Two of the proceedings concern matters arising out of resumption of the properties simpliciter. The two properties were owned by Dr Konduru and her husband as joint tenants. The final set of proceedings arises out of the need for Dr Konduru to relocate her medical practice, a medical practice located, as noted above, in one of the two properties.
The first of the properties acquired by the RMS was 449 Warringah Road. This property faced Warringah Road and contained four shops set back from the road, with forecourt parking between the building and the road. The shop frontages each had an area covered by the awning in front of the building, an area which, for two of the shops, was informally alienated to that shop, as later discussed. The shops were numbered 1 through to 4 (from west to east). Dr Konduru conducted her medical practice from Shops 3 and 4 in this complex. Shops 1 and 2 were each separately used as restaurants. Matters pertaining to each restaurant use require later consideration.
The second property acquired from Dr and Mr Konduru was a two-storey building at 40 and 42 Bantry Bay Road. This building contained three tenancies, separate shops at 40 and 42 Bantry Bay Road, with the third tenancy, at the upper level, spanning both shops and thus being across 40 and 42 Bantry Bay Road. The upper level was occupied by a Thai restaurant, and the ground-level shop at 42 Bantry Bay Road by a Chinese restaurant. At the time of acquisition, the ground-level shop at 40 Bantry Bay Road was vacant and the circumstances giving rise to, and matters relating to, the potential retenanting of that shop are also matters requiring consideration in these proceedings.

The acquisitions

The two properties were acquired as a consequence of acquisition notices published in the New South Wales Government Gazette on 21 August 2015. The compulsory acquisition of each property, for the public purpose of road widening, gave rise to entitlements to compensation pursuant to the Acquisition Act. Compensation can become payable under a number of provisions of the Acquisition Act. Those sections are set out below: 48 Advance payments of compensation etc (1) An authority of the State may, at any time after land is acquired, make an advance payment of compensation to any person who the authority considers is entitled to the compensation. (2) An advance payment may be made on application by the person or without any such application if the person agrees to accept the advance payment. (3) The acceptance by a person of an advance payment of compensation does not constitute an acceptance of any offer of compensation made by the authority of the State. (4) A person who receives an advance payment of compensation which exceeds the amount of compensation to which the person is entitled must repay to the authority of the State the amount of the excess. (5) Any advance or other payment of compensation to a person not entitled to the compensation must be repaid to the authority of the State that made the payment. (6) Any amount due to an authority of the State under this section may be recovered as a debt in any court of competent jurisdiction. 49 Interest on compensation (1) Interest is payable (subject to subsection (2)) on any amount of compensation under this Part from the date the land is acquired until the payment is made. Any such interest becomes part of the amount of compensation payable. (2) Interest under this section is not so payable on any amount of compensation paid into a trust account under this Part or into the Consolidated Fund by the authority of the State. However, money earned from the investment of any such trust account becomes part of the compensation concerned. 50 Rate of interest on compensation (1) The rate of interest payable on any payment of compensation under this Part is such rate as the Treasurer may from time to time determine by notification published in the Gazette. (2) Different rates of interest may be determined under this section. (3) The Treasurer is to have regard to the rates of interest paid by banks when determining rates of interest under this section. (4) Rates of interest determined under this section apply even though the compensation is payable under an order of a court. 55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division): (a) the market value of the land on the date of its acquisition, (b) any special value of the land to the person on the date of its acquisition, (c) any loss attributable to severance, (d) any loss attributable to disturbance, (e) solatium, (f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. 56 Market value (1) In this Act: market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid): any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and any increase in the value of the land caused by its use in a manner or for a purpose contrary to law. (2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition. (3) If: the land is used for a particular purpose and there is no general market for land used for that purpose, and the owner genuinely proposes to continue after the acquisition to use other land for that purpose, the market value of the land is taken, for the purpose of paying compensation, to be the reasonable cost to the owner of equivalent reinstatement in some other location. That cost is to be reduced by any costs for which compensation is payable for loss attributable to disturbance and by any likely improvement in the owner's financial position because of the relocation. 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. (2) …
The claim for compensation for the acquisition of 449 Warringah Road is made pursuant to ss 56 and 59. The claim for compensation for the acquisition of 40 and 42 Bantry Bay Road is made under the same provisions. Dr Konduru's claim for compensation arising from the necessity to relocate her medical practice is made under subss 59(1)(c) and (f). Various matters in the compensation claims are in contest, whilst other claim elements have been accepted by the RMS as to both the validity and quantum. The detailed nature of each of the claims, and of the items in dispute with respect to that claim, is dealt with in this decision.

The evidence

Both Dr and Mr Konduru provided a number of affidavits in the various proceedings, and each of them was required for cross-examination.
Expert evidence was provided by:

Mr M Dyson, expert valuer for the Kondurus;
Mr P Russell, accountant, for the Kondurus;
Mr A Watt, expert valuer for the RMS; and
Dr R Ferrier, accountant for the RMS.

Mr Dyson and Mr Watt each produced an individual expert report in each of the proceedings where the value of the acquired property was in contest. They also produced separate joint reports in each of those proceedings. Finally, during the course of the hearing, they were requested to hold further discussions, with those discussions resulting in a Supplementary Valuation Experts' Joint Report relating to valuation matters concerning both the acquired properties. Mr Dyson and Mr Watt were required to give concurrent oral evidence.
The accountants were not required to give oral evidence.
It was agreed that, to the extent relevant, evidence in any one of these proceedings was to be evidence in all of the three proceedings.

Agreed basis for property valuation

Mr Dyson and Mr Watt agreed that the appropriate valuation methodology to be applied for assessing the market value of 449 Warringah Road and 40 and 42 Bantry Bay Road was to be by capitalisation of rents. As a consequence, two matters require to be determined to derive the valuation to be attributed to each of the acquired properties.
First, it is necessary to determine (given that there were multiple tenancies for each property) the market rent as a rate per square metre per annum for each tenancy for each of the properties. The overall market rent is to be derived by consideration of any actual rents that are agreed or determined to be market rents applied to the relevant floor area, together with such notional market rents as are determined (either where the actual rent is a passing rent held not to be reflective of a proper market rent as at the relevant date or, where the premises are vacant, that would be the notional market rent at the relevant date) and applied to the relevant floor area.
In these proceedings, all three of these elements require consideration to give a complete picture enabling determination of the market rent to be derived for each of the acquired properties.
The second step is to capitalise the relevant aggregated market rent for each property by applying a capitalisation rate for the purposes of that calculation. Although, originally, there was disagreement between Mr Dyson and Mr Watt as to what would be the appropriate capitalisation factor, by the time of the hearing they had agreed that 5.5% was the appropriate capitalisation rate. As a consequence, it is unnecessary for me, as the judicial valuer, to consider that aspect of the valuation process further.

Introduction

As earlier noted, 449 Warringah Road comprised four shops and a forecourt area. Reproduced below is a copy of Exhibit G, a marked-up air photo which shows the premises at 449 Warringah Road and 40 and 42 Bantry Bay Road, together with the four other premises within the Bantry Bay retail precinct relied upon by one or both of the valuation experts for the purpose of their valuation calculations.
Although the northern element of 40 and 42 Bantry Bay Road is not outlined on the air photo, its location and dimensions can clearly be discerned from the air photo.

Shop 1

Shop 1 was, at the date of acquisition, operating as a restaurant known as Forest Thai. As can be seen from the air photo, although each of Shops 1 through to 4 at 449 Warringah Road were of a floor area of 50 square metres, Shop 1 had, in addition, the benefit of a small annexe at its rear, an annexe that did not fall within the boundaries of 449 Warringah Road.
As at the date of acquisition, the rental for Shop 1 was $902 per square metre per annum. The valuers agreed that this rental was the market rental for this shop at the date of acquisition.

Shop 2

Shop 2 was occupied at the time of acquisition by a wood-fired pizza restaurant. As at the date of acquisition, the rent for this restaurant was $789 per square metre per annum.
There was a dispute between Mr Watt and Mr Dyson about whether this rent should be regarded as a market rent and, therefore, simply applied to its floor area (Mr Watt's position) or that it was a passing rent which required adjustment upwards in order to reflect market (Mr Dyson's position). Mr Dyson's position was that the market rent for Shop 2 should be regarded as the same as that for Shop 1 (and, thus, be $900 per square metre per annum rounded) rather than the actual rent being achieved.
Although the reasons advanced by Mr Watt in support of his differentiated position were the subject of a deal of his written and oral evidence, Mr Eastman, counsel for the RMS, conceded (in his closing submissions) that the RMS no longer relied upon the position advanced by Mr Watt with respect to Shop 2 and that the RMS now accepted that the appropriate market rent for this shop should be $900 per square metre per annum.
The concession made by Mr Eastman with respect to Shop 2 as to be assumed to have a market rental equivalent to that of Shop 1 was in the following terms (Transcript 6 February 2016, page 180, lines 38 to 43): So I accept that the applicant's position on that and the approach that was taken in cross‑examination to some of the questions put to Mr Watt in the respondent's is correct, and that the approach a hypothetical purchaser would take would be to say there's a small difference in size, there are a few internal configuration differences, but the rent that I'm going to capitalise in perpetuity will be the same for both.
I am satisfied that that concession was properly made and that the position initially advanced by Mr Dyson with respect to this shop was the correct one. The consequence of this is that, for the purposes of aggregation of market rents for 449 Warringah Road and the subsequent capitalisation calculation, the market rent for Shop 2 is to be $900 per square metre per annum.

Shops 3 and 4

Shops 3 and 4 were, as at the date of acquisition, occupied by Dr Konduru for the operation of her medical practice. In her practice, she was assisted by two other medical practitioners and an audiologist and a psychologist. Each of these other four health professionals utilised space in these shops and had differing financial arrangements with Dr Konduru for these purposes. Although Dr Konduru and Mr Konduru gave oral evidence explaining each of these financial arrangements, it is unnecessary for the purposes of this decision to set them out in detail.
Physically, Shops 3 and 4 were integrated. There was a single access doorway and no dividing wall between the two 50 square metre floor plates. There was a small (and to be disregarded for valuation purposes) step in the floor plate at the location of the formerly existing dividing wall.
The internal fit out operated on an integrated basis to facilitate consultation facilities for the five health professionals operating from within them, together with appropriate reception facilities, storage and other ancillary spaces.
In his written statement of evidence for 449 Warringah Road, Mr Watt said, at [86]: When considering the above issues I consider the existing use to be the highest and best use of the subject property.
Mr Dyson, in his oral evidence, was questioned by Mr Eastman about the highest and best use of the medical centre element of 449 Warringah Road. The exchange was in the following terms (Transcript 2 February 2017, page 91, lines 4 to 25): … What assumption did you make about the medical centre? WITNESS DYSON: I made the assumption that it was owner occupied, and that had the property been sold on the normal open market, that the owner would have taken a lease back or stayed in the property, continued on in the property. EASTMAN: Dr Konduru as the vendor, with her husband, is hypothetical. WITNESS DYSON: Yes. EASTMAN: That Dr Konduru is the actual operator there, as an owner operator, selling her interests but staying in the property is the assumption you made? WITNESS DYSON: Yes. EASTMAN: That's good. That will be a submission I make, is the correct assumption later on.
Although Mr Eastman's questioning continued concerning other relevant aspects, including the valuation process that Mr Dyson had undertaken, Mr Eastman did not revisit the accuracy of the assumption that the highest and best use of Shops 3 and 4 was their present use, namely, combined and operating as a medical centre.
In Mr Eastman's written outline of closing submissions, at [36], he said, inter alia: Accordingly, a purchaser would assume continuing the medical centre use and therefore an adjustment for size when compared to the 900 per metre (for Shops 1 and probably 2) is necessary.
However, it was not contested that, as I understood the evidence, externally they appeared as a single unit with a single entrance but that, had a hypothetical purchaser wished to do so, it would be possible to reinstate the premises as two separate shops with separate entrances from the forecourt area to this small complex.
The valuers remain in dispute about the appropriate market rental to be ascribed to these two shops. The difference between them is that Mr Dyson says that Shops 3 and 4 should be treated as separate premises; they each have a floor plate area identical to that of Shop 1 and Shop 2; the market rent for Shops 1 and 2 should be $902/$900 per square metre per annum and that this rate should be applied to each of Shops 3 and 4.
On the other hand, Mr Watt says that Shops 3 and 4 should be valued as a single unit, with the market rental rate to be determined on this basis. It was his opinion that, as a broad proposition, valuation practice says that the larger the site, the lower the rate per square metre per annum to be derived for that site.
This general proposition was not contested by Mr Dyson. However, Mr Dyson rejected its applicability to the analysis here required to be undertaken.
I accept Mr Dyson's position in that a hypothetical purchaser would be aware that the medical centre premises could be readapted as two separate shops but might also take into account the necessity to undertake internal and external works to give effect to this. Some allowance will, therefore, be necessary to make to reflect this, meaning that a simple transference of the Shop 1 and Shop 2 rates to each of Shop 3 and Shop 4 is inappropriate.
Before turning to consider Mr Watt's approach, it is appropriate to note that, in an accounting treatment undertaken by Dr and Mr Konduru, on the advice of their accountant, Mr Austin, Dr Konduru paid rental of $62,000 per annum gross (by accounting book entry) to herself and her husband as the joint owners of the property. This is a factor taken into account by Mr Watt in both his individual expert report concerning 449 Warringah Road and on this point in the Joint Report on these premises. At [25] in the Joint Report, Mr Watt said, relevantly: [He] considers that the market rent for Shops 3 and 4 (medical centre) is $60,000 per annum net ($600 per square metre per annum). The rationale for the assessment of this rent is detailed within paragraph 75 to 79 of my primary statement, following an analysis of new rentals within the same retail area. It is noted that the land owners' accountant (Mr Brian Austen) had been advised that the market rental of Shop 3 was $62,000 per annum gross.
In his initial report, Mr Watt set out, at [74], a table of relevant information concerning recent new leases and lease renewals within properties in the Bantry Bay Road shops. Mr Watt's analysis then follows, relevantly, at [76] to [79]. This is in the following terms: 76 The evidence in the table appears unclear with respect to different rental rates for size, however, only the first three leases reflect new agreements for vacant shops. The best evidence in the above leases to assist in an adjustment for size is between Shops 5A and 5B, the only real difference being size, with Shop 5A being approximately 44% larger. Allowing for the fixed 4% annual increase in the rental for Shop 5A (to $929 per square metre), the rental rate for Shop A is approximately 16% lower than Shop B. 77 By comparison, the subject Shop 3 is some 61% larger than Shop 1 and 100% larger than Shop 2 in the same building. Shop 3 has a wider frontage than Shops 1 and 2. However, part of this frontage is obscured behind Shop 5B, and Shop 3 has a split floor level, noting that it represents to former shops combined many years ago. 78 In my opinion, an adjustment for size of at least one-third (or 33%) when compared to the range of the smaller lease transactions. This would result in a range of between approximately $523 per square metre (when compared to Shop 2) and $612 per square metre (when compared to Shop 1). I adopted $600 per square metre as the net rental, which derives an annual market lease income of $60,000. 79 It is worth noting that the business valuation undertaken on behalf of the owner-occupier of Shop 3 revealed an annual rental of $62,000 (gross excluding GST) for each financial year between 2012 and 2015. Shop 3 was being occupied as a doctor's surgery (medical centre) during that period.
There are two matters that need to be observed before turning to matters of detail concerning an analysis for Shops 3 and 4. First, Mr Watt agreed that the pool of evidence, for the purposes of valuing the various shops in 449 Warringah Road, was that of the market rents in Shop 1 of 449 Warringah Road, Shops 5A and 5B and 6 of 447 Warringah Road (Transcript, 2 February 2017, page 75, lines 11 to 15).
It is to be observed that in his table, at [74] of his Statement of Evidence, Mr Watt did not include Shop 6 of 447 Warringah Road for the purposes of his analysis of Shops 3 and 4 at 449 Warringah Road.
Second, and more difficult to deal with in the circumstances because of its timing, is the concession Mr Eastman made on behalf of the RMS that the appropriate market rental for Shop 2 of 449 Warringah Road should be $900 per square metre per annum, effectively equating it (after rounding) with the market rental for Shop 1 in the same building. This concession (properly made, in my view, as I earlier indicated) was, self-evidently from its timing, unable to be dealt with during the valuation evidence. However, it does have, for me, as the judicial valuer doing the best I can under the circumstances, an impact on how to consider Shops 3 and 4 as combined premises in circumstances where we now have, as an agreed position, a market rent of ~$900 per square metre per annum for a floor plate area identical to the area of Shops 3 and 4 (this being the now agreed market rentals for Shops 1 and 2).
Mr Eastman criticised Mr Dyson for his simple transposition of the agreed market rent for Shop 1 and the (now conceded) market rent for Shop 2 through to Shops 3 and 4 on the basis that the use of Shops 3 and 4 as a medical centre was the highest and best use of that combined space.
Mr Eastman outlined what he put was the lack of analysis in Mr Dyson's approach. Mr Eastman said (Transcript 6 February 2017, page 182, line 47 to page 183, line 6): Do I get rid of them and convert it into two shops and see if I can get two lots of rent? In doing that, am I going to have to infer all sorts of ‑ well, no. Am I knowing to have to incur costs doing that? If that were to be the case, and I might deal with this when I deal with McDonald in a bit more detail later, but if that were to be the case, then there might be a spectre of the application of s 61, in particular (b), which hasn't yet arisen, but just so I can fully address your Honour on what the different contingencies would be ‑ your Honour doesn't have to otherwise worry about that if your Honour accepts what I'm saying; is that this is the manner in which the value has then proceeded. So that's what a hypothetical purchaser is faced with. Do you then adjust?
Mr Eastman also canvassed, a little later in his closing submissions, why he said that an adjustment for size would be appropriate to be warranted in circumstances where the assumption would be that the present medical centre use would be retained. He put this proposition about the necessity for an adjustment (in circumstances where Mr Dyson said no adjustment for size was warranted, and Mr Watt advocates a ~30% adjustment for size) in the following terms (Transcript 6 February 2017, page 183, line 26 to page 184, line 2): But in terms of doing the best you can, which is what you are required to do as the judicial valuer, in saying that I accept the logic of the fact from ‑ many of these sales that are an adjustment for size may be warranted. What is that adjustment? Is the answer is ‑ I think it's like carton/Seatainers, sometimes there's a little bit of guesswork that needs to go into it if your Honour doesn't adopt the view of one valuer or the other as to what that would necessarily be. Now, Mr Watt' deduction of 30% ‑ in my submission if your Honour was writing a judgment would say the RMS put to me this submission ‑ is that it's warranted from the fact that there is clearly an adjustment for size needed by the two InvoCare transactions, and even if that's only 16%, why would it be larger. One of the other features about an adjustment that needs to be made to the ‑ it's just a straight assumption that it is one shop ‑ I accept absolutely that a purchaser could say if I really wanted to, I could do my own conversion works there and otherwise try and let it out and get rid of these people, but in doing that I'm going to take into account the risk and uncertainty of that happening, the vacancy that I'm going to have to deal with for that. I may even have to negotiate with two different tenants about how to apportion and split up the fit‑outs. I may have to undertake those works myself. I may have to go and see a town planner and see if I require any type of development approval for that. They're all factors that would be taken into account as well. So that would be not just a compelling reason to say I'm going to keep the status quo and see what those ‑ what the medical centre users might pay me, but it is also a feature that should be taken into account when saying when I'm adjusting this, I'm adjusting for size, but also the difficulty of otherwise thinking about letting it up in a different form to that which it's currently occupied in.
As a consequence, I arranged a short mention, attended by Mr Hemmings SC, counsel for the Applicants, and Mr Eastman, at which I raised with them the possibility that I might conclude, given the now agreed position concerning Shops 1 and 2, that that agreement reflected the best evidence as to market rent for Shops 3 and 4 (subject only to my consideration of whether or not some deduction should be made to reflect the fact that the hypothetical purchaser would need to undertake a range of internal and external works in order to reinstate Shops 3 and 4 as separate tenancies).
I indicated I wished to provide the parties an opportunity to address this matter further, either by further valuation evidence or by further submissions. Mr Hemmings indicated that he did not wish to do so, as the position advanced by Mr Dyson was entirely consistent with this approach and Mr Dyson expressly opined that no adjustment for reinstatement of separate tenancies was required.
Mr Eastman indicated that he did not wish to call further evidence or make further submissions as he had dealt with the reason why the RMS said there should be a differential for Shops 3 and 4 as part of his closing submissions.
In the Joint Expert Valuation Report, Mr Dyson and Mr Watt were unable to agree on what should be regarded as the market rental for Shops 3 and 4. Mr Watt adhered to the view set out in his individual report that the market rental for Shops 3 and 4 should be determined to be $600 per square metre per annum.
Mr Dyson also adhered to the position in his individual report, namely, that the market rent for Shops 3 and 4, expressed as a rate per square metre per annum, should be identical with the rate of $900 per square metre per annum that he proposed for each of Shops 1 and 2 (an equal rental for Shops 1 and 2 now being conceded by the RMS as appropriate).
Although Mr Watt initially pressed for allowances to be made for non‑recoverable repairs and maintenance and for management fees when assessing the market rental for Shops 3 and 4, during the course of the joint conferencing, he agreed to adopt Mr Dyson's view that such allowances should not be made (Exhibit B, Tab 20, folio 313).
Although, as noted in the extract below from Mr Watt's individual expert report, Shop 5B in 447 Warringah Road partially obscures portion of the frontage of the combined Shops 3 and 4 of 449 Warringah Road, neither Mr Watt nor Mr Dyson proposed any adjustment for this factor. I concur in that implicit conclusion.
In his individual expert report, Mr Dyson notes, in his market evidence table concerning rentals (Exhibit B, Tab 17, folios 99 and 100), the differences in size between Shops 5A and 5B of 447 Warringah Road, but makes no adjustment for them, nor discusses the question of whether any adjustment might be appropriate. He simply says, in his conclusions on market rental: Based on the Market Rental evidence, it is considered that Market Rental for the premises at 449 Warringah Road, Frenchs Forest is in the order of $875/m2 to $925/m2 p.a. net. As Shop 1 has a passing rent of $902/m2 and is within this range, the passing rent has been adopted as market.
I have concluded, for the purposes of assessing what would have been the market rental for Shops 3 and 4 as at the date of acquisition, that the now agreed position for Shops 1 and 2 as comprising identical comparable floor plate areas is the appropriate basis upon which to commence consideration of market rentals for Shops 3 and 4. I have, for the reasons given later, concluded that Shops 5A and 5B of 447 Warringah do not provide a satisfactory basis for making a size or any other adjustment for deriving a rate per square metre per annum for Shops 3 and 4 of 449 Warringah Road.
The consequence, it seems to me, is that the question needing to be determined, starting at $900 per square metre per annum, is:

What adjustment, if any, should be made for the necessity of an arm's length purchaser to undertake external and internal works in order to reinstate Shops 3 and 4 as separate premises?

I turn first to consider whether or not the hypothetical purchaser would make any deduction to take account of the fact that costs would necessarily be incurred if Shops 3 and 4 were to be reinstated as separate tenancies.
I have concluded that such a deduction is appropriate. However, I am satisfied that it should be a modest one and certainly not of the order proposed by Mr Watt. The factors that lead me to this conclusion are as follows: 1. Mr Dyson and Mr Watt agree that the highest and best use for Shops 3 and 4 would be continuation of their combined use as a medical centre; 2. Dr Konduru had conducted her medical practice as principal of that practice, in Shops 3 and 4, since April 1995; 3. Between April 1995 and November 1996, she had conducted that practice as a tenant; 4. In November 1996, Dr Konduru and her husband had purchased the premises, and she had continued to conduct her practice from the premises (although undertaking a makeover of the fitout, this being irrelevant, in my view, for this purpose) until the acquisition by the RMS; and 5. Prior to her commencement as principal of the practice in 1995, she had been an employee for some time when the practice was operated by another medical practitioner as its principal.
Although the year of purchase of 449 Warringah Road was put to Dr Konduru in cross-examination as 1997 (Transcript 1 February 2017, at pages 30 and 31), nothing turns on which year was the correct one.
The fact that there had been a long-term continuous occupation of the premises, with a tenancy reflecting the highest and best use of Shops 3 and 4 (it mattering not, in my assessment, that that portion of the tenancy after 1996/1997 was subject to the unusual internal accounting regime adopted by Dr Konduru and her husband on the advice of their accountant), leads to the conclusion that there is a proper basis to make only a modest allowance for some notional re-establishment of the two shops as separate premises.
I am further reinforced in this conclusion by the evidence of Dr Konduru concerning the number of patients serviced by her practice and the commercial imperative which arose after the RMS's acquisition to obtain premises in as close proximity to Shops 3 and 4, for the maintenance of her practice, in order to avoid the likelihood of a loss of clientele if she were to need to move to a location significantly removed from the catchment of her patient clientele.
It is appropriate to set out why I have not accepted Mr Watt's proposal that a significant size adjustment to the value of Shops 3 and 4 should be made on the basis of size/rental differentials in the shops to the east.
Mr Watt's written and oral evidence explained why he considered the 16% adjustment factor based on size derived from a comparison between Shops 5A and 5B applied to derive a relevant adjustment factor of 33% when applied the combined Shop 3 and Shop 4.
Mr Watt's reasoning in support of the proposition that the differential in rentals between Shops 5A and 5B was as a result of the difference in area between them. His adjustment factor arising from that was 16%. He then used that as a basis for applying a one-third (33%) adjustment factor to derive an overall rent for Shops 3 and 4 in 449 Warringah Road.

The actual rental for Shop 1 of $902 per square metre per annum as agreed by the valuers is the appropriate market rental coupled with the concession for the RMS that there is no functional differential between Shops 1 and 2 for the purposes of determining the market rental for Shop 2, means that the starting market rental for Shops 3 and 4 is to be $900 per square metre per annum;
and
Adjusting for potential reconversion costs, the market rental for Shops 3 and 4 should be $810 per square metre per annum.

Introduction

I have earlier set out, in outline, the fact that 40 and 42 Bantry Bay Road contained three tenancies. In order to derive a valuation for these premises for the purposes of s 56(1) of the Acquisition Act, it is necessary to determine what was, or was to be regarded as, the market rent for each of the tenancies in these premises. After those three actual or deemed market rents per square metre per annum are determined, application of the agreed capitalisation rate of 5.5% will, Mr Watt and Mr Dyson agree, derive the relevant site value. It is, therefore, necessary to consider each of the three separate tenancies.

Singha Thai

The Singha Thai restaurant occupied the upper level of 40 and 42 Bantry Bay Road as a single combined tenancy. Mr Dyson and Mr Watt agree that the passing rent for Singha Thai is to be regarded as the market rent. It is, therefore, unnecessary to undertake any further rental analysis of this tenancy.
It is, however, necessary to consider Mr Konduru's evidence about his understanding of the recent renewal of this lease in the context of the next analysis - that for 42 Bantry Bay Road.
Mr Konduru gave oral evidence on 1 February. He was cross-examined by Mr Eastman. The cross-examination traversed, amongst tother matters, Mr Konduru's understanding of the outcome of the lease renewal for Singha Thai. The relevant portion of his evidence (Transcript 1 February, page 58, lines 11 to 45) was: Q. The rest of it looks the same, including Singha Thai. You in 2013 they entered into a new lease, do you recall that? A. Yeah. Q. If you're having any difficulty about remembering some of the detail that I'm putting to you, please ask and I can show you the leases or any of the material, do you understand? A. If ‑ in 2013? Q. Yes, 3 May 2013 you entered into a new five year lease with Singha Thai? A. Singha Thai, yeah. Q. You renegotiated the rent there because the rent went down? A. Up. Q. Down? A. Up. The lease, you can have a look. 2013 when they got the new lease the rent's gone up. 100%. Q. That's your recollection, is it, sir? A. Yeah. 100% has gone up. You can ‑ the lease. This is about $7,900 and something a month as a memory. Q. Why? Why did you say you put it up? A. The new tenant and increase the rent‑‑ Q. No, I'm not asking about the new tenant, I'm asking about 2013. Same tenant, new lease? A. New lease, yeah. Q. Rent went down, 2013? A. No, gone up. That's them. Q. That's your memory, is it? A. Yeah.
In his cross-examination of Mr Watt, Mr Hemmings asked about this element of Mr Konduru's evidence. This element of Mr Watt's evidence was in the following terms (Transcript 2 February, page 116, line 29 to page 118, line 48): HEMMINGS: Of course, one of the very important factors you rely upon is the fact that this has been the entry into ‑ of a new lease at a time where there was the ability to go to market. WITNESS WATT: Yes. HEMMINGS: That's probably the most important factor working in your mind to derive the appropriate market rent for shop 1 and 2, 40 to 42 Bantry Bay Road. WITNESS WATT: The fact that there was a market review available and the exercise of an option, yes. HEMMINGS: That's the most important factor. WITNESS WATT: It's a very important factor, yes. HEMMINGS: To the extent I might even potentially by these questions offend my client, Mr Konduru gave his evidence yesterday and you were here for it? WITNESS WATT: Yes. Yes. HEMMINGS: Would you agree with the description, having heard his evidence in relation to the negotiations that he did undertake, or he did describe, would you agree with the description that he not to be considered a sophisticated operator in the marketplace? WITNESS WATT: I couldn't make any judgment call on that. HEMMINGS: You've analysed, for example, the rents for the level 1, Singha Thai. WITNESS WATT: Yes. HEMMINGS: And you were right. It went down. That's right, isn't it? WITNESS WATT: That's correct. HEMMINGS: Mr Konduru was ‑ I don't have a transcript yet, but he was emphatic, he was 100% sure, there was no doubt in his mind the rent went up. That's the take away you had from his evidence yesterday, isn't it? WITNESS WATT: That base rent did go up, but the outgoings were negotiated out. HEMMINGS: It included GST for the first time and before it didn't. WITNESS WATT: I think that's correct, yes. HEMMINGS: He made a mistake clearly between what he thought he was doing and what he did. WITNESS WATT: I can't comment on that. HEMMINGS: You heard his evidence yesterday, unless we're going to say he's lying, he made a mistake when he entered into the new lease for level 1, he thought 100% he told us the rent was going up ‑ he forgot that he was actually losing 10% for GST and he forgot that he was adjusting for outgoings. That's not evidence of a very sophisticated approach, with the greatest of respect to him, of negotiating a market lease, is it? WITNESS WATT: I won't make any comment on that. HEMMINGS: The Forest Chinese lease. Again, Mr Eastman asked him a number of questions about what he thought he was able to do to go to market, and he made it clear that what he thought he could do to go to market was add 3%. You remember that evidence from yesterday, don't you? WITNESS WATT: Yes. HEMMINGS: There are a lot more things you can do to go to market than just add 3%, aren't there? WITNESS WATT: Well, clearly Mr ‑ yes. Clearly Mr Konduru‑‑ HEMMINGS: You might actually do a market review rather than just adding 3% if you were going to market. That's something you could do, isn't it? WITNESS WATT: You could. I agree. You could add 10%. HEMMINGS: That's what the market said you could do? WITNESS WATT: That's right. HEMMINGS: What he did was he added 3%. WITNESS WATT: Yes. HEMMINGS: You've seen that from an analysis of the rent. You see that from the letter that he told us his wife ‑ that the notes that his wife wrote because he's not good at writing English and the tenant signed. WITNESS WATT: Yes. But can I add that he's sophisticated enough‑‑ HEMMINGS: What? Is it not an answer to the‑‑ WITNESS WATT: No. No. It's an ‑ when we're looking at the letter and you were talking about Mr Konduru's nature as a sophisticated lessor‑‑ HEMMINGS: I was calling him an unsophisticated lessor, but, yes. WITNESS WATT: Or either way. But Mr Konduru is clearly sophisticated enough to understand that upon the exercise of this option one of the things it does is trigger the ability to now recover a different subset of outgoings, or outgoings ‑ a different calculation, in addition to getting the market review, and he's identified that within his letter of response. So there's two activities going on here. Subsequent to the option, there's the review to market and then there's a resetting of the outgoings. HEMMINGS: He had the opportunity to review to market and he made a mistake because he added 3% rather than going to market. Do you accept that as the fact of the negotiation, firstly. WITNESS WATT: No. I don't accept that he made a mistake. HEMMINGS: Do you accept that as a summary of the evidence that he gave evidence he gave yesterday? WITNESS WATT: No. I accept that he offered a rental increase of 3%. I don't accept that as a mistake, or that falls in error with respect to the ability to undertake the market review.
In essence, Mr Hemmings has sought to found the proposition that Mr Konduru should not be treated as a person with a sophisticated understanding of property investments and their management. This, it was effectively put from the above evidence, meant that it was not proper to assume that any lease that Mr Konduru negotiated at what he thought was a market rent necessarily did reflect such a rent.
To some extent, I accept that there is some limited validity in that proposition to be derived from the evidence concerning the Singha Thai lease renewal transaction.

Ground floor shop - 42 Bantry Bay Road

As at the date of acquisition, 42 Bantry Bay Road was being operated as a restaurant trading as Frenchs Forest Chinese Restaurant. These premises were initially subject to a lease commencing on 1 July 2011 with the proprietor of the Chinese restaurant. This lease provided a term of four years, expiring on 30 June 2015, but contained a provision granting the tenant an option to renew the lease for a further four years, a period which would, upon exercise, have expired well after the date of the acquisition by the RMS. On 2 January 2015, the tenant wrote to Mr Konduru in the following terms (Exhibit 1): We are writing to inform you that we wish to activate our option to renew the lease term of the abovementioned property for a further four (4) years as per the terms of our lease contract.
Exhibit 1 has other elements relevant to this consideration. There are three of them: 1. Attached were copies of the first and second pages of the lease, pages which confirm the initial starting date; the termination date and the option for renewal, as well as the initial rental and review dates and methods of review; 2. A series of handwritten notations on the letter under the heading "From 1st of July 2015"; and 3. A second signature on behalf of the tenant immediately under this group of handwritten annotations.
Dr Konduru gave evidence (Transcript 1 February 2017, page 37, line 37 to line 39) confirming that she and her husband did not use a commercial agent for the purposes of leasing and managing 40 to 42 Bantry Bay Road. She confirmed (Transcript 1 February 2017, page 38, line 39 to page 39, line 2), that the negotiation for renewal of the lease for the Frenchs Forest Chinese Restaurant was undertaken by her husband.
Dr Konduru's evidence was followed by that of her husband. Relevant to these premises, he confirmed that he managed these properties (Transcript 1 February 2017, page 56, line 27 and following). Mr Konduru's evidence concerning the renewal of the lease for the Frenchs Forest Chinese Restaurant commenced at page 58, line 47 through to page 60, line 47. It was Mr Konduru's evidence that the handwritten notes on Exhibit 1 were written by his wife because he could not properly write English (page 59, line 15). The notes were in the following terms: Outgoings 30%, includes building insurance, land tax, council rates, water rates, trade waste charges, 50% maintenance of shop and equipment will be your responsibility (includes grease trap). Rental increase by 3% every year. If you agree to the above, please sign.
Mr Konduru's name is then reproduced (but in his wife's handwriting) with, below this notation of Mr Konduru's name, the second signature on behalf of the tenant, as earlier indicated.
As with his analysis for 449 Warringah Road, Mr Watt set out, at [70] of his Statement of Evidence for 40 and 42 Bantry Bay Road, a table of leases and lease renewals (in identical terms to that used for 449 Warringah Road). In his commentary on this table, he said, at [72]: 72 The passing rental of 42 Bantry Bay Road of Frenchs Forest Chinese (42 Bantry Bay Road) reflects $443 per square metre gross and is considered reasonable when compared to the lease in 36 Bantry Bay Road, which is for less than 50% of the area and which enjoys a full-width shopfront. I am content to adopt this passing rent as a reflection of the market, particularly as the option was exercised which triggered the market review of the rental with the lessors' rental offer being accepted by the lessee.
For the purposes of his analysis, Mr Dyson relied on the same lease and lease renewals set out in Mr Watt's table but added to it a July 2011 tenancy of a Subway premises in a shopping centre some little distance removed from the Bantry Bay retail precinct. I do not understand that there remained, at the end of the proceedings, any reliance on this geographically removed transaction in light of the spectrum of transactions available in the Bantry Bay Road shopping precinct itself.
In his valuation report, concerning the shops at 40 and 42 Bantry Bay Road, Mr Dyson said: Based on the market rental evidence, it is considered that market rental for the ground floor premises at 40-42 Bantry Bay Road, Frenchs Forest is in the order of $725/square metre to $775/square metre per annum net due to their size and frontage.
As can be seen from the above extracts, there is a significant difference between the starting positions of Mr Watt and Mr Dyson concerning these premises. Their Valuation Experts' Joint Report in these proceedings (dated 22 December 2016) notes, at [28] and [29], that the opined gap between them for the ground-level shops at 40 and 42 Bantry Bay Road narrowed somewhat, but there was certainly no agreement between them on this aspect of the proceedings. As earlier noted, during the course of the proceedings, Mr Watt and Mr Dyson prepared a Supplementary Valuation Experts' Joint Report (Exhibit H). They were asked, as one of the matters for discussion, to provide a schedule of net and gross rentals for 40‑42 Bantry Bay Road. This was provided in a table at [12] of Exhibit H. That table is reproduced below: Tenancy Area sqm AW MD $/sqm Net $/sqm Gross $/sqm Net $/sqm Gross Shop 1 (40) 110 $458 $500 $600 $642 Shop 2 (42) 110 $458 $500 $600 $642 First Floor 285 $265 $307 $265 $307

I turn to address the extent to which Mr Konduru's lack of sophistication as a manager of investment properties (to the extent noted above at [91]) bears on the differences in valuation approach shown above. This is the most difficult to resolve of the issues in these proceedings - not because of the complexity of the issues but more because of the sparsity of evidence upon which to found a conclusion.
Mr Hemmings' closing submissions proposed that I conclude that what Mr Konduru did not do (for Singha Thai and for the shop at 42 Bantry Road) was to strike a rent that was at market. However, to accept Mr Dyson's relevant figure of $600 per square metre per annum when compared to the actual rent on a similar basis would oblige me to assume that Mr Konduru's lack of sophistication would have led him to enter into a non-commercial (not at market) lease at a discount of approximately 25%. Although I accept that there is an appropriate reason to make some modest allowance above Mr Watt's figure (and the passing rent) to derive a market rent, Mr Dyson proposes far too much in this regard.
Under these circumstances, it is appropriate to adopt a position favourable to the dispossessed owner (as per Sydney Water Corporation v Caruso [2009] NSWCA 391) where there is a reasonable range within which such an approach may be adopted. I am satisfied that Mr Watt's assessment of market value defines the bottom of that range.
To strike the top of the range, however, given my unwillingness under the circumstances to accept Mr Dyson's figure, means I must do the best I can as a judicial valuer to strike such a rate myself. Doing so, I have concluded that the reasonable upper rate would be $500 square metre per annum. I adopt that rate as appropriate to be applied to the 42 Bantry Bay Road shop as it incorporates both an allowance for Mr Konduru's lack of sophistication and a Caruso factor in favour of the dispossessed owners.

The Konduru's stamp duty claim - 40 and 42 Bantry Bay Road

Dr and Mr Konduru make a claim that they will be entitled to reimbursement of the stamp duty costs that will be incurred when a new property is purchased to replace 40 and 42 Bantry Bay Road as part of their investment portfolio. No suitable alternative investment had yet been located. The Kondurus' evidence was that the management tasks for their investments were undertaken by Mr Konduru.
This claim is resisted by the RMS on the basis that established authority in the Court of Appeal (see Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259) has established that, in circumstances such as these where it is appropriate to regard Dr and Mr Konduru as passive investors, there is no entitlement to reimbursement of the nature now sought.
I am satisfied that this is the correct approach based on authority. Indeed, the nature of this, and the reasons for adopting it, were recently summarised by Robson J in Speter v Roads and Maritime Services [2016] NSWLEC 12 where his Honour took the approach advocated by the RMS in these proceedings. For the reasons which his Honour set out in Speter, I am satisfied that that approach is appropriate. Indeed, even if I had any lingering doubt as to its correctness, the recent following of this approach by his Honour in Speter and by Pain J in Hatzivasiliou v Roads and Maritime Services [2017] NSWLEC 9 would mean that, even if I had some vestige of doubt as to the correctness of the approach (which I do not), comity would oblige me to follow their reasoning to the same conclusion, unless I felt that there was compelling reason not to do so.
The Kondurus' future stamp duty claim for replacement of 40 and 42 Bantry Bay Road is rejected.

The imputed rent for 40 Bantry Bay Road

It is clear from the above table that the valuers agree that the rate per square metre per annum for the ground-floor shop at 40 Bantry Bay Road should be the same as for that determined above for the ground-floor shop at 42 Bantry Bay Road.

Claim for lost rent for 40 Bantry Bay Road

At the date of acquisition, the ground-floor shop at 40 Bantry Bay Road was unoccupied. In January 2014, the then tenant of this property, Mr Mastroianni, vacated the property. He had, until that date, operated a business from the shop known as "Foodtales".
In her affidavit of 21 November 2016, Dr Konduru set out her evidence concerning the shop on the ground level of 40 Bantry Bay Road. She noted (at [4]) that the vacation of the shop by Foodtales occurred on or about 18 January 2014. Her affidavit, then said: After Foodtales vacated the north shop, I arranged for a notice to be placed on the front of the property advertising that the north shop was vacant and available for rent. I spoke with a number of people who made enquiries about renting the north shop. Annexed to this affidavit and marked "A" is a list of the names and telephone numbers of persons who made enquiries about renting the north shop. I had many conversations by telephone with people making enquiries about renting the north shop.
That portion of Dr Konduru's affidavit was read without objection. Annexure A to her affidavit, being a list of 20 names and mobile telephone numbers (being a list of those with whom Dr Konduru had had the telephone conversations adverted to in [5] of her affidavit), was also admitted without objection.
Her affidavit, then continued, in [5]: They said to me things like (words to the effect): I like the location but I'm not interested in renting the place because the government is going to acquire the land. That'll leave me in a position where I've put a great deal of time and money into building up the business only to lose everything when I'm forced to close up. Then, I'll have to go somewhere else and start again.
This portion of her affidavit was objected to by Mr Eastman and, in response to his objection, I had the following exchange with Mr Hemmings (Transcript 1 February 2017, page 27, line 42 to page 28, line 1): HIS HONOUR: Mr Hemmings, I'm concerned that it's an unqualified amalgam and is therefore potentially prejudicial in its form as to whether all of the 12 or 14 people listed in annexure A said precisely the same thing. HEMMINGS: Yes, and I can't possibly read it in that way and that's what the introductory words have attempted to avoid. It is not and couldn't be accepted as a summary of the actual conversation she had with each of the people, it is to the best of her recollection, the force and effect of the conversations that she had with a variety of people, each of whom were different. HIS HONOUR: Yes, I'll permit it on that limited basis.
A discussion then took place concerning [7] and [8] of the remainder of the extract from her affidavit concerning the ground-floor shop at 40 Bantry Bay Road. These two paragraphs, and paragraphs to similar effect in Mr Dyson's Statement of Evidence concerning 40 and 42 Bantry Bay Road (at folios 101 and 105 of Exhibit A), were read on a similar limited basis.
The remainder of Dr Konduru's affidavit concerning the ground-floor shop at 40 Bantry Bay Road was in the following terms: 6 I was unable to find a tenant for the north shop to replace Foodtales and the north shop was not rented out again before the date RMS acquired the property. 7 Based on my conversations with people (to which I have referred in [5] above) I believe that this was because most people looking for premises where they can run a business looking for continuity and accommodation as an important part of establishing the business and building up profitability and developing goodwill. Based on those conversations, I do not believe people wished to incur the expense of fitting out premises and putting in the effort to get a business up and running knowing RMS, or any other NSW government agency, is going to acquire those premises. 8 During the times I had conversations with people making enquiries about renting the north shop (to which I have referred in [5] and [7] above), I knew, and had known for some time, the proposed Northern Beaches Hospital project was going ahead. I had seen RMS staff visiting the Bantry Bay Road strip-shopping centre. I knew from conversations with them and my neighbours in the strip-shopping centre that RMS had informed people that RMS was intent on acquiring properties making up the strip-shopping centre. Annexed to this affidavit and marked "B" are copies of: � RMS Community Update dated March 2014 in relation to Northern Beaches Hospital connectivity and network enhancements � Front page of Manly Daily dated 30 July 2014 featuring, under the title "Road Rage", an article about that redevelopment including bulldozing the strip-shopping centre in Bantry Bay Road. � Page 8 of Manly Daily dated 8 November 2014 featuring, under the title "Businesses Outraged at Demolition", and � RMS's invitation to briefing dated November 2014 in relation to Northern Beaches Hospital road upgrades.
Although Dr Konduru gave oral evidence that she was Mr Mastroianni's treating physician and was aware that there were medical reasons why Mr Mastroianni had ceased to trade his Foodtales business in January 2014, it was also clear from her oral evidence that Mr Mastroianni had commercial reasons for wishing to vacate the ground-floor shop at 40 Bantry Bay Road. He was, it is to be inferred, clearly in some financial difficulties as he was behind in his rent and only cleared the debt to his landlords, Dr and Mr Konduru, sometime after he vacated (Transcript 1 February 2017, page 44, lines 45 to page 46, line 7). Dr and Mrs Konduru then went through the earlier described process of seeking to use a sign that had been put up in the shop window at 40 Bantry Bay Road to obtain a new tenant.
This element of the compensation sought requires me to determine to what extent Dr and Mrs Konduru are entitled to be reimbursed for lost rental for the period which these premises were vacant (approximately 18 January 2014 to the date of acquisition in August 2015).
There are two aspects of the valuation evidence that bear on my consideration of this point. First, there is a difference between Mr Watt and Dr Konduru as to when it is reasonable to accept that there was a sufficient public awareness of the realistic prospect of acquisition of these premises by the RMS for the purposes of road widening, with this public knowledge acting as a fatal inhibitor on any realistic prospect of finding a new tenant for this shop. Second, in expert valuation terms, how long was it realistically appropriate to allow as a letting-up period after Mr Mastroianni vacated the shop in January 2014 until Dr and Mr Konduru could realistically have had the expectation that a normal rental income stream would have recommenced.
For this latter point, the statutory disregard contained in s 56 of the Acquisition Act comes into play. This provision requires that the public purpose (in this instance, the proposed road widening) is to be ignored and the hypothetical position of an ongoing and normally trading Bantry Bay Road shopping strip is to be envisaged.
The difference between Dr Konduru and Mr Watt on when there would have been sufficiently widespread local knowledge of the proposed public purpose for it to act as an influence on the rental market for a vacant 40 Bantry Bay Road can be resolved simply.
Mr Watt's evidence is, effectively, that of a bystander undertaking a post facto analysis of circumstances.
The final answer given by Dr Konduru when she was cross-examined by Mr Eastman was not shaken in her earlier cross-examination on this point. In particular, she gave evidence of there being an active RMS presence in the Bantry Bay Road shopping precinct from a time earlier than that identified by Mr Watt in his opinion of the effective operative time of the impact of knowledge of the public purpose. Although Dr Konduru's general position on this point was set out in her affidavit of 21 November 2016, there was no evidence on behalf of the RMS seeking to counter what Dr Konduru said about activity by or on behalf of the RMS in the Bantry Bay Road shopping precinct.
I am entitled to draw the inference from the absence of such evidence that such evidence, had it been given, would not have assisted the RMS on this point (Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8). In doing so, I also accept that, from mid-2014, there was sufficient information concerning the likelihood of the public purpose in the relevant public domain marketplace that this had the effect of rendering these premises unable to be let (even on a short-term basis, for the reasons given by Dr Konduru).
Reaching this conclusion means that there is but a limited requirement to consider the difference between Mr Dyson and Mr Watt on how long would have been the reasonable period which should be allowed, from about 18 January 2014, for the hypothetical process of finding a new tenant and the establishment of a new business in this vacant shop.
The remaining difference between the experts is one where Mr Watt says that the period to be allowed should be 12 months (Exhibit A, folio 273) whilst Mr Dyson variously proposed that a longer period of 15 or 17 months should be allowed (Exhibit A, folio 262).
In practical terms, I am satisfied that the approach to be taken does not require any detailed analysis of such evidence as is available from either of these witnesses in support of their competing positions. This arises because of my acceptance of Dr Konduru's evidence as to when the influence of the public purpose impacted on the potential ability to rent the premises. I also accept that the number of enquiries, and the general nature of the responses received by Dr Konduru in her conversations with enquiring potential tenants (despite the evidentiary caution to be taken to portion of [5] and [7] and [8] of her affidavit for the reasons earlier described), mean it is appropriate to conclude that the somewhat constrained marketing process of the sign in the window was drawing a sufficient response in the marketplace to have tested, validly, whether a new tenant could be obtained.
However, I accept that a letting-up period of three months would be appropriate.
In circumstances such as these, it is again appropriate to adopt a position favourable to the dispossessed owner (as per Caruso above). Therefore, I accept that the liability of the RMS to compensate Dr and Mrs Konduru for forgone rent for the ground-floor shop at 40 Bantry Bay Road should run from 18 April 2014 until the date of acquisition.

The mortgage interest claim for 40 and 42 Bantry Bay Road

Introduction

First, it is to be observed that s 55 of the Acquisition Act codifies, exclusively, the six potential heads under which compensation is able to be claimed by a dispossessed holder of an interest in land compulsorily acquired.
Losses attributable to disturbance are identified by s 55(d) as one of these six categories. What can fall within the concept of loss attributable to disturbance is, itself, codified, exhaustively, by s 59(1) of the Acquisition Act where six categories are identified, with s 59(1)(f) reading: 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.
Although the Acquisition Act provides, in s 61, matters of limited exception, that provision is not engaged for the purposes of these proceedings.

Section 49(1) of the Acquisition Act and its history

It is now convenient to set out the terms of s 49(1) of the Acquisition Act, this being the provision that mandates the payment of the statutory interest at the rate applicable. The provision is in the following terms: (1) Interest is payable (subject to subsection (2)) on any amount of compensation under this Part from the date the land is acquired until the payment is made. Any such interest becomes part of the amount of compensation payable.
This provision was contained in these terms in the Land Acquisition (Just Terms Compensation) Bill 1991 (the Bill) when it was introduced into the Parliament by the then Deputy Premier and Minister for Public Works, the Hon W J T Murray MP, on 11 April 1991. An examination of the Minister's Second Reading Speech, on that date, does not disclose any reference to the provision that became s 49 in the enacted legislation.
In the Minister's Second Reading Speech in Reply, on 17 April 1991, there appears in the Hansard of that date, at page 2378, the sole reference to this provision. The reference is in the following terms: Clause 49 is clear about when interest on compensation is payable. The Treasurer must take into account the rates set by banks. [emphasis added]
After the completion of the passage of the Bill through the Legislative Assembly, it was not able to be dealt with prior to the intervention of the 1991 state election.
However, the legislation was reintroduced as an early Bill in the following Parliament. An examination of the Legislative Assembly and Legislative Council Hansard for the Bill when reintroduced discloses that there was no mention of cl 49 (it becoming s 49 in the Acquisition Act) in the second reading or committee stage debates in either the Legislative Assembly or the Legislative Council. The legislation was passed and came into effect as the Acquisition Act. As a consequence, there is nothing in the Hansard that would engage s 34(2)(f) of the Interpretation Act 1987 for the purposes of understanding how s 49(1) of the Acquisition Act should be interpreted.
Similarly, an examination of the Explanatory Notes provided to the Parliament with the Bill (for the Bills in both the 49th and 50th Parliaments) discloses that there is no mention of cl 49 within the commentary on the group of clauses within which it appears. As a consequence, there is nothing in the Explanatory Notes that would engage s 34(2)(e) of the Interpretation Act 1987 for the purposes of understanding how s 49(1) of the Acquisition Act should be interpreted.
The provision has not been amended since its original enactment.

Section 50(1) of the Acquisition Act and its history

It is next convenient to set out the terms of s 50(1) of the Acquisition Act, this being the provision that mandates how the rate of statutory interest is to be set. The provision is in the following terms: (1) The rate of interest payable on any payment of compensation under this Part is such rate as the Treasurer may from time to time determine by notification published in the Gazette.
The Parliamentary process for s 50(1) was the same as for s 49 and need not be repeated. As with s 49, s 50 has not been amended since its original enactment.

The Kondurus' claim - 40 and 42 Bantry Bay Road

Appended to the affidavit of Dr Konduru dated 20 January 2016 is a copy of the compensation claim form lodged by Dr and Mr Konduru with the RMS. At page 7 of that document, there appears the following: In relation to the item "interest on loan", the Applicants borrowed money to purchase the property and are liable to pay interest on these loans. Accordingly, the Applicants claim this interest as part of their claim for compensation for the period commenced on 21 August 2015 (that is, the date of acquisition) to date of settlement. That sum is not included in the claim set out above, because the amounts are not available until settlement occurs.
That this claim for interest on the mortgage on 40 and 42 Bantry Bay Road is in addition to the statutory interest provided for by s 49 of the Acquisition Act is made clear on the previous page of the document from which the above quotation is taken. On that page, there appears the following: The Applicants' claim for compensation does not expressly include the claim for interest on compensation because this is automatically implied and included by virtue of s 49 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Just Terms Act). If doubt is created by that omission, the Applicants' claim for compensation includes interest payable on compensation under the Just Terms Act.
In Mr Hemmings' opening submissions, he described this claim for interest in addition to the statutory interest in the following terms (Transcript 1 February 2017, page 9, line 7 to line 25): As your Honour knows, and if your Honour doesn't know by any judicial knowledge we will put the schedules before your Honour, the interest rates paid on the mortgage is different to the statutory interest rate that one might achieve, statutory interest is paid pursuant to the compulsory acquisition. The simple calculation here is that from the date of acquisition the applicants are no longer owners of the property yet are still incurring interest charges and have not yet received their compensation. What we have calculated is the difference between but when compensation is ultimately paid it includes a payment of statutory interest for that period. Obviously once compensation is paid we can't just say we'll put it in our pocket and so we want to continue claiming interest, it's offset against the mortgage and no continuing claim arises. In that intervening period where we don't have the property and we don't have the money, we're paying interest and statutory interest is less than the interest we are paying. As a s 59(1)(f) claim we seek the difference between those two amounts. I think in the respondent's submissions it's suggested that it's novel. With respect it's not a novel claim, it's just a claim that's not normally litigated.
The amount claimed is $11,897.25 as set out by Dr and Mr Konduru's accountant, Mr Russell, in his expert report in Exhibit A, at paragraphs 3.02 to 3.13. The amount arises as a consequence of the acquisition by the RMS taking effect on 21 August 2015. Whilst payment of the (90%) statutory advance occurs when compensation is contested (see s 48 of the Acquisition Act) that advance payment was made to Dr and Mr Konduru on 4 April 2016.
The claimed amount arises as a consequence of the fact that the statutory interest rate is lower than the actual interest rate charged by the financing bank on the loan by Dr and Mr Konduru for 40 and 42 Bantry Bay Road.
There is, as I understand the evidence and the submissions, no suggestion that Mr Russell's calculation is inaccurate, nor is there any suggestion that the mortgage and its attached actual interest rate are in any way other than an ordinary commercial mortgage offered and accepted in the ordinary course of the financing bank's business.
The claim for reimbursement to Dr and Mr Konduru of this additional interest is made pursuant to s 59(1)(f) of the Acquisition Act as this differential interest liability is said to be an "other financial cost reasonably incurred relating to the actual use of the land, as a direct and natural consequence of the acquisition".

The position of the RMS on this claim

Mr Eastman's outline of opening submissions on behalf of the RMS deals with this interest claim in the following terms: The Applicants make a novel claim for interest on a loan, which exceeded the statutory interest. The Respondent's contention, inter alia, is that is not a direct and natural consequence of the acquisition, but rather, a consequence of the Applicants' choices and not therefore within the scope of s 59(1)(f).
Mr Eastman's written closing submissions on this point were in the following terms: The Applicants' claim for interest on a loan, which exceeded the statutory interest, is not something that has been made before. Claims for interest are expressly dealt with in ss 49 and 50 of the Acquisition Act. A fixed rate is prescribed. That, the Respondent contends, covers the fields and deals with any entitlement to interest that a claimant has. That is sufficient to dispose of the claim. The Respondent's second contention is that the additional interest is also not a direct and natural consequence of the acquisition but, rather, a consequence of the Applicants' choices and therefore not within the scope of s 59(1)(f)). This is what Bignold J expressly refers to in Matcam.
The above reference is to the decision of Bignold J in Matcam Pty Ltd v Kogarah Municipal Council (1999) 105 LGERA 266; [1999] NSWLEC 181 (Matcam). In that decision, his Honour was dealing with, amongst other things, a claim for interest on borrowed money to purchase alternative premises (at [42]). His Honour rejected the claim for interest and, in doing so, referred to a United Kingdom decision - Service Welding Ltd v Tyne and Wear County Council (1979) 38 P&CR 352 (Service Welding). His Honour, in referring to Service Welding, on the point of interest, said, at [45]: In the same case, Templeman LJ, in rejecting the disturbance loss claim for bank interest charges payable in respect of the acquisition of the replacement factory premises, said that such changes "were not the costs of being disturbed from the old factory and getting into the new factory; they were the costs of acquiring the new factory". In my opinion, that is an apt analysis of the cost of the fitout of the replacement premises claimed by the Applicant in the present case.
Whilst this proposition requires separate consideration as potentially relevant to my determination of the second of the interest claims made by Dr and Mr Konduru (discussed below), it does not seem to me to be relevant to this quite confined and specific claim for the interest differential between the dates of acquisition and settlement by the RMS for 40 and 42 Bantry Bay Road.

Consideration

This claim, it seems to me, whether novel or not, thus requires simply to be dealt on a first principles' statutory construction basis by considering: 1. Whether s 50(1), as Mr Eastman submitted, covers the field and deals with any entitlement to interest that a claimant has; and 2. If not, whether the terms of s 59(1)(f) are satisfied to make the interest differential claimable.
I have earlier set out the terms of s 50(1). Its terms are concise and simple. For me to accept this element of the claim advanced for the Kondurus, it would be necessary for me to read s 50(1) as if it read, "The minimum rate of interest payable on any payment of compensation under this Part is such rate as the Treasurer may from time to time determine by notification published in the Gazette".
Whilst such an approach is permissible if the context demands it (see Taylor v The Owners-Strata Plan 11564 (2014) 253 CLR 531; [2014] HCA 9), there is absolutely no contextual imperative to do so. The provision expressly has the Treasurer determine the rate of interest. There is no suggestion that this has not taken place. Mr Eastman's submission is correct - the clear language of s 50(1) makes it clear that, for the purposes of s 49(1), the Treasurer's s 50(1) determination is exhaustive.
The claim for reimbursement of the additional interest, above the statutory interest rate, for the period between acquisition date and the date of payment of the s 48 advance payment is rejected.

Interest on borrowings to fund the 8 Hilmer Street works

The second interest claim is also founded on the difference between the statutory rate arising pursuant to ss 49 and 50 of the Acquisition Act and the rate of interest actually being paid by Dr Konduru. However, the borrowed principal, with respect to which this claim is made, reflect sums advanced to finance the additions and alterations to 8 Hilmer Street that were necessary to permit Dr Konduru's medical practice to relocate from Shops 3 and 4 at 449 Warringah Road to the new address from which she operates.
This claim for additional interest could only have any potential foundation on the assumption that the claim for the cost of rendering 8 Hilmer Street fit for purpose to be used as a medical centre is accepted. As I have held that it is, this claim for interest needs to be determined. The basis of the claim was described in Mr Hemmings' opening submissions, at [79], as: Simply put, it was necessary for Dr Konduru to borrow funds in order to relocate the medical centre. Upon the Court being satisfied that compensation should be paid for that relocation then statutory interest will be paid on that amount of compensation from the date of acquisition until the date of payment. The claim is for the difference between those two amounts.
As a consequence of my determination concerning the validity of the relocation expenses claim, the quantification of the amount to be included in the Court's orders for that purpose will also necessarily include an amount for statutory interest up until the compensatory amount is paid by the RMS. However, the reasoning process set out above (concerning the 40 and 42 Bantry Bay Road interest differential claim) which led to me concluding that there is no proper basis to order the RMS to compensate for the difference between the statutory interest rate and the actual interest rate incurred, should apply equally to this aspect of Dr Konduru's claim.
As a consequence, the second interest rate claim is also rejected.
I also observe, with respect to this second interest claim, that the costs of relocation of the medical practice are ones which I have determined should be reimbursed as a disturbance loss arising pursuant to s 59(1)(c) The provision itself makes it clear that mortgage costs are excluded from relocation costs pursuant to this provision. This means that, in addition to the more general reason for rejecting both interest claims as explained above, the interest differential claim, it seems to me, for the 8 Hilmer Street additions and alterations financing loan, depending on whether it was secured by a mortgage interest over the property, might well have been excluded by this express provision. However, given the general conclusion I have reached on this point, it is unnecessary to contemplate that potential basis for refusal further.

The disturbance claim for the relocation of the medical practice

Although Dr and Mrs Konduru owned 8 Hilmer Street prior to the decision to relocate Dr Konduru's medical practice from Shops 3 and 4 at 449 Warringah Road to the Hilmer Street premises, the Hilmer Street premises had been purchased as a residential investment property and not in anticipation of relocation Dr Konduru's medical practice. As a consequence, significant additions and alterations were necessary to be undertaken to that residential property in order to render it fit for purpose for the operation of Dr Konduru's medical practice.
There is no dispute concerning the appropriateness of the works that have been undertaken, nor as to the cost of those works. The dispute is the fundamental one of whether or not Dr Konduru is entitled to reimbursement of these costs, either pursuant to subss 59(1)(c) or (f), or whether the acquisition value of the operating medical centre premises acted as a bar to this claim.
Equally, for the purposes of a disturbance claim for these additions and alterations costs for 8 Hilmer Street, I do not understand it to be suggested that those costs were not reasonably incurred in the statutory sense.
Dr Konduru's evidence was that she had examined the prospect of relocating her medical practice to a location other than the property at 8 Hilmer Street owned by her and her husband and, for various reasons, particularly relating to her practice catchment, there was no other realistically available premises to which a relocation could viably have been undertaken. This evidence was not contested. In Tolson v Roads and Maritime Services (2014) 201 LGERA 367; [2014] NSWCA 161, Basten JA said, at [83]: Nevertheless, in this aspect of the case, the appellants' point as to statutory construction should be accepted: the conclusion sought by the appellants, that an increase in the value of retained land should not be offset against loss attributable to disturbance, follows from two propositions. First, s 55 requires that "regard must be had" to the identified matters, without specifying how they should be understood to interrelate. Secondly, regard may not be had to other matters (the list being exhaustive). In relation to the present issue, the interrelationship between the different paragraphs can be considered without reference to extraneous factors. Losses attributable to disturbance and solatium fall into a different category from changes in the value of land. Thus, solatium is concerned with "non-financial disadvantage", arising from the necessity of relocating one's home: s 60. Disturbance covers legal costs, valuation fees, financial costs of relocation and other financial costs relating to the actual use of the land: s 59. Such costs are entirely separate from the value of the acquired land or the retained land. It is consistent with the legislative purpose of providing compensation for such amounts that they be allowed or disallowed in accordance with the specific statutory entitlements, without regard to the value of any land involved.
Beasley P expressly concurred in these propositions (at [9]).
On the same point, Preston CJ of LEC said, in [114]: Loss attributable to disturbance is a financial loss but it too is of a different nature to the market value or special value of the acquired land, loss attributable to severance, or the decrease or increase in the value of other land of the person. Loss attributable to disturbance includes legal costs and valuation fees in connection with the compulsory acquisition of the acquired land, financial costs in connection with relocation from the acquired land, stamp duty costs in connection with the purchase of land for relocation, financial costs in connection with the discharge of a mortgage over the acquired land and execution of a new mortgage resulting from the relocation, and any other financial costs as a direct and natural consequence of the acquisition (s 59). These financial costs and losses are of a different nature to the market value or special value of the acquired land, loss attributable to severance, or the decrease or increase in the value of other land of the person.
Although Mr Eastman's closing submissions dealt with the approach taken in Leppington Pastoral Company Pty Ltd v Commonwealth of Australia (1997) 76 FCR 318; (1997) 94 LGERA 68; [1997] FCA 299, it seems to me that all this deals with, relevant to these proceedings, is the proposition of how such compensation for market value might capture the relevant elements of value determined for that purpose.
On the other hand, Tolson confirms that that concept is entirely separate from claims for compensation that properly fall under a relevant head of s 59.
It is clear that s 55 contains an exhaustive codification of the potential heads pursuant to which a claim of compensation may be made. Amongst them, s 55(a) establishes an entitlement to compensation to the market value of the land on the date of its acquisition, with such assessment of market value to be undertaken in the fashion defined by s 56. However, s 55(d) sets a separate head of potential compensation as arising from any loss attributable to disturbance, with the concept of loss attributable to disturbance being, itself, codified in s 59.
In this context, the reliance of the RMS on Matcam is misplaced. Matcam self-evidently predates the decisions of the Court of Appeal in Roads & Traffic Authority of NSW v McDonald (2010) 175 LGERA 276; [2010] NSWCA 236 and Tolson. It is, in my assessment, certainly inconsistent with the approach in Tolson and provides no assistance in the present proceedings. Mr Hemmings' opening submissions proposed that these costs were claimed pursuant to s 59(1)(c), but that it might be necessary also to consider a possible alternative foundation for the claim, that being pursuant to s 59(1)(f).
It is unnecessary to deal with this proposition at length, as I am satisfied that the claim properly falls to be dealt with under s 59(1)(c) as constituting financial costs reasonably incurred in connection with the relocation of Dr Konduru's medical practice.
In McDonald, Tobias JA said, in [88]: It must be remembered that the "before" and "after" approach to the determination of compensation is not a valuation principle which is dictated by the Just Terms Act. It is a convenient and accepted valuation method applicable where only part of a parcel of land is compulsorily acquired in order to determine the market value of the acquired land for the purposes of s 55(a). It is also used to calculate any loss attributable to severance (such as where the land acquired bisects the original parcel) and any increase or decrease in the value of that part of the original parcel which is not acquired by reason of the carrying out of, or the proposal to carry out, the public purpose which was the objective of the compulsory acquisition. Attributable disturbance would rarely, if ever, be captured by the adoption of the "before" and "after" method of valuation. The reason for this is that loss attributable to disturbance relates to losses or costs incurred post-acquisition and as a "direct and natural consequence of the acquisition": see s 59(f). Whether those costs are expended upon the residue land (where only part of a parcel is compulsorily acquired) or on a different parcel of land (where the whole of the parcel is acquired) simply matters not. In a temporal sense, the financial costs here incurred for the relocation of the medical practice occurred post acquisition. This is confirmed by the discussion in [103]) in McDonald where Tobias JA makes it clear that disturbance costs incurred after and as a consequence of the acquisition do not play a role in determining the market value of the acquired land unless the carve out in s 61, was engaged), which is certainly not the position in these proceedings). As a consequence, the claim for reimbursement of costs incurred to render 8 Hilmer Street fit for purpose to be used as a relocated medical Centre should be granted pursuant to s 59(1)(c).
In a temporal sense, the financial costs here incurred for the relocation of the medical practice occurred post acquisition. This is confirmed by the discussion, at [103], in McDonald where Tobias JA makes it clear that disturbance costs incurred after, and as a consequence of, the acquisition do not play a role in determining the market value of the acquired land unless the carve-out in s 61 was engaged (which is certainly not the position in these proceedings).
The consideration of the value of Shops 3 and 4 (being a market value calculation as an element of the overall market value of 449 Warringah Road pursuant to s 56 of the Acquisition Act) is, on the basis of the above discussed settled authority of the Court of Appeal, to be regarded as entirely separate from any of the disturbance elements claimed pursuant to s 59(1) of the Acquisition Act.
The claim for the relocation of Dr Konduru's medical practice from Shops 3 and 4 to 8 Hilmer Street is something that quite clearly falls within the scope of s 59(1)(c).
As a consequence, the claim for reimbursement of costs incurred to render 8 Hilmer Street fit for purpose to be used as a relocated medical centre should be granted pursuant to s 59(1)(c).

The rental reimbursement claim

After the date of acquisition, 21 August 2015, Dr Konduru continued to operate her medical practice out of Shops 3 and 4 of 449 Warringah Road. She continued to do so until works were completed adapting 8 Hilmer Street to make it fit for purpose to relocate her practice. This took place in February 2016. Whilst she remained in occupation of Shops 3 and 4, Dr Konduru was obliged to pay rent to the RMS to permit that occupation. Dr Konduru's period of continuing occupation of Shops 3 and 4, it is to be noted, was also entirely within the time period between acquisition and the payment by the RMS of the 90% of the compensation determined by the Valuer General to be appropriate.
She now seeks reimbursement of that rental cost as a claimable item pursuant to s 59(1)(f) of the Acquisition Act. The claim is resisted by the RMS. This matter can be disposed of shortly.
In the Acquisition Act, lease-back rental occupancy arrangements are provided for in s 34(3) and (4). These provisions read: (3) The terms on which a person remains in occupation of land that has been compulsorily acquired under this Act are, in the absence of agreement, such reasonable terms as are determined by the authority of the State (including terms as to the rental to be paid and the restrictions on the use of the land). The Residential Tenancies Act 2010 does not apply to that continued occupation. (3A) … (4) Any such unpaid rent or other money due to the authority of the State may be set off against the compensation payable under this Act.
Initially, a reading of these provisions would not appear to support such a reimbursement claim as is here made.
However, in Taylor v Roads and Maritime Services [2016] NSWLEC 138, Pain J recently dealt with such a claim for reimbursement of rent that had been payable to RMS. Her Honour said, at [77] and [78]: 77) The Applicant is liable under s 34 of the Just Terms Act for rent payable to the RMS of $19,500. He seeks to claim this as part of the compensation payable under s 59(1)(f). Such a claim was allowed in Attard v Transport for NSW (2014) 205 LGERA 396; [2014] NSWLEC 44 at [124] -129]. 78) As submitted by the Applicant, s 34 is not engaged at the stage of the compensation process I am considering under Pt 3 Div 4. Section 34 in Pt 2 Div 4 concerns an earlier point in time in the acquisition process when a landowner is deciding if he or she will accept the compensation offered. Section 34(4) is a machinery provision directed to that circumstance. It is not a provision which prevents the Applicant claiming that amount as compensation. Further the reasoning in Attard at [124] - [129] does not disclose any error and in the interest of judicial comity I apply that reasoning also. I consider the Applicant's claim for rent is permissible under s 59(1)(f).
As a consequence, I turned to the passage from Attard v Transport for NSW (2014) 205 LGERA 396; [2014] NSWLEC 44 cited by her Honour. In it, in turn, Biscoe J derives his conclusion in support of reimbursement from passages in the judgment of Tobias JA in McDonald at [114] and [117]. Biscoe J's analysis sits comfortably with the Court of Appeal decision in McDonald.
As Pain J observed "… the reasoning in Attard at [124]-[129] does not disclose any error and in the interest of judicial comity I apply that reasoning also". I consider that I should take the same approach.
Whilst this has the apparent effect of rendering ineffectual the terms of s 34(3) and (4) of the Acquisition Act in circumstances where a reimbursement claim is made pursuant to s 59(1)(f), if this be a problem, its resolution does not lie in the hands of this Court.
The rental reimbursement claim is allowed.

The other disbursements claim

Although there was a difference between the parties, at the commencement of the hearing, as to a number of items claimed as disbursements to be reimbursed pursuant to s 59 of the Acquisition Act, negotiations between the legal representatives of the parties, during the course of the hearing, resulted in agreement being reached on all outstanding matters under this head of claim. As a consequence, the agreed outcome position on these matters will be incorporated by the parties in the orders arising from the relevant proceedings when settled to reflect my determination of the contested matters between the parties.

Conclusion

In summary, the outcomes that I have determined are appropriate are:

449 Warringah Road proceedings

The value of this site is determined to be on the basis of market rentals of: 1. Shop 1, $902 per square metre per annum; 2. Shop 2, $900 per square metre per annum; and 3. Shops 3 and 4, $810 per square metre per annum.

The 40 and 42 Bantry Bay Road proceedings

The issues concerning this site are determined on the basis of: 1. For the upstairs space, the agreed market rental per square metre per annum is to be applied; 2. For each downstairs shop, a market rental of $500 per square metre per annum; 3. The vacancy compensation for the ground-floor shop at 40 Bantry Bay Road is to be calculated on the basis of the rental forgone between 18 April 2014 and the date of acquisition; 4. The claim for stamp duty for purchase of a future replacement property for 40 and 42 Bantry Bay Road is rejected; and 5. The interest differential claim for the actual mortgage interest rate on these premises when compared to the statutory interest rate is rejected.

The medical centre claim proceedings

The issues concerning this claim are determined on the basis of: 1. The claim for costs for reimbursement for the additions and alterations to 8 Hilmer Street for its adaptation to be able to be used for the purpose of Dr Konduru's medical practice is granted in the amount claimed; 2. The interest rate differential between the actual interest rate paid on amounts borrowed for the purposes of additions and alterations to 8 Hilmer Street and the statutory interest rate is rejected; and 3. The claim for reimbursement of rental paid to the RMS during holding over period between the date of acquisition and the date of Dr Konduru vacating the medical centre is upheld and Dr Konduru is to be reimbursed the amount so paid.

Directions

The parties are directed: 1. To provide to my Associate by 4:30 pm on Wednesday 19 April 2017 settled terms of orders to give effect to my determinations in each of the three proceedings; 2. The matters are listed for further mention in the LVC List on Friday 21 April 2017; and 3. If direction (1) is complied with, the mention in (2) will be vacated and orders made in chambers to give effect to my determinations in each of the proceedings.

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: 29 March 2017

(2014) 205 LGERA 396

(1999) 105 LGERA 266

(2010) 175 LGERA 276

(2014) 201 LGERA 367

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