Nohra v Sydney Metro; C & P Automotive Engineers Pty Ltd v Sydney Metro

Nohra v Sydney Metro; C & P Automotive Engineers Pty Ltd v Sydney Metro - [2023] NSWLEC 95 - NSWLEC 2023 case summary — Zoe

[5]

JUDGMENT

In two proceedings heard together two individual applicants and a company seek compensation following the acquisition of 8 Tennyson Street, Clyde (acquired property) by Sydney Metro the Respondent. The freehold interest in the acquired property was compulsorily acquired for the Sydney Metro West Project on 19 March 2021 (acquisition date).
At the acquisition date Mrs Nohra and Ms Carpenter (the owners) were the registered proprietors as tenants in common in half shares of the acquired property (proceeding no 2022/40915) (Nohra proceeding). Immediately prior to the acquisition date the whole of the acquired property was subject to a lease between the owners and C&P Automotive Engineers Pty Ltd (C&P) (proceeding no 2022/40567) (C&P proceeding).
The two proceedings are enabled by s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act). An order was made on 20 July 2023 that evidence in one proceeding is evidence in the other. The compensation claims reflect the different interests in land acquired, namely freehold and leasehold interests.
A site view was undertaken in the course of the hearing of premises leased by C&P at 131 and 133 Railway Parade, Granville where its business will be permanently relocated (relocation site), four temporarily leased premises in Parramatta, Guildford and Lidcombe and one property in Chullora deemed comparable by the expert valuers. The acquired property was not able to be viewed having been incorporated into the Sydney Metro project.
At the acquisition date, the acquired property had an area of 2986m² and was triangular shaped. The acquired property was zoned IN1 General Industrial under the Parramatta Local Environmental Plan 2011 (Parramatta LEP 2011). The acquired property was located approximately 22km north-west of the Sydney CBD and about 8km from Flemington Markets.
C&P is a hire, storage, sales and repair business with a large fleet of heavy machinery such as forklifts and tow trucks operating mostly within the greater Sydney area and at the Flemington Markets.
An industrial building was situated on the acquired property with a total gross lettable area (GLA) of 1102.1m². The improvements included: 1. a main warehouse building (727.3m²) with a gantry crane; 2. ground floor office/amenities (86.2m²); 3. first floor office/amenities (94.5m²); 4. a rear warehouse (194.1m²); 5. a hardstand area (1318m²); and 6. a side awning area (83.2m²).
The acquired property had three driveways with two along the street frontage adjacent to the office/amenities building and one along the street frontage adjacent to the hardstand area as shown in the aerial photograph below:
The key terms of the lease held by C&P were as follows: 1. commencement date - 1 April 2020; 2. terminating date - 31 March 2025; 3. term - five years; 4. option(s) - an option for five years; 5. commencing rent - $215,000 per annum net plus GST; 6. rent review - increased annually by 3% with a market review at the commencement of the option term; 7. outgoings - responsibility of the tenant; 8. permitted use - light industrial uses not prohibited by law; 9. assignment - transfer or sublease is permitted with consent; and 10. free rent period - from 1 April 2020 to 1 March 2021 due to COVID-19, however outgoings remain payable by the tenant during this period.

[6]

Land Acquisition (Just Terms Compensation) Act 1991 (NSW)

The Just Terms Act provides relevantly as follows: Part 1 Preliminary … 4 Definitions (1) In this Act - … interest in land means - (a) a legal or equitable estate or interest in the land, or (b) an easement, right, charge, power or privilege over, or in connection with, the land. … Part 3 Compensation for acquisition of land … Division 4 Determination of amount of compensation … 55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division) - (a) the market value of the land on the date of its acquisition, … (d) any loss attributable to disturbance, … 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) - (a) 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 (b) 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 (c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law. … 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), … Division 5 Objections and appeals to Land and Environment Court 66 Objection against amount of compensation offered (1) A person who has claimed compensation under this Part may, within 90 days after receiving a compensation notice, lodge with the Land and Environment Court an objection to the amount of compensation offered by the authority of the State. (2) If any such objection is duly lodged, the Land and Environment Court is to hear and dispose of the person's claim for compensation. …
The market value of the interests in land acquired are assessed as at the acquisition date pursuant to s 55(a).

[7]

Chronology

The parties agreed the following chronology: Date Events In or about 2018 C&P commenced occupation of part of the land located at 8 Tennyson Street, Clyde, and identified as Lot 23 in DP 733500 (acquired property) 5 March 2020 Sydney Metro made an offer of compensation to C&P and Mrs Nohra and Ms Carpenter (the owners) for the acquisition of their respective interests in the acquired property Soon after 5 March 2020 C&P commenced search for relocation premises 1 April 2020 Commencement date of lease between the owners and C&P for the whole of the acquired property (the lease), commencing 1 April 2020 and terminating 31 March 2025 (a term of 5 years) with an option to renew for a period of 5 years. On or about 15 April 2020 C&P commenced occupation of the whole acquired property pursuant to the Lease 18 November 2020 Sydney Metro issued proposed acquisition notices to the owners and C&P 15 February 2021 Date of the lease 19 March 2021 Sydney Metro compulsorily acquired the acquired property for the purpose of the Sydney Metro West project C&P relocated from the acquired property over a period of 3 months to the following six temporary relocation sites: • 42-46 Rosehill Street, Parramatta • 1 Cann Street, Guildford May 2021 to July 2021 • part of 30 Cann Street, Guildford • 131 Railway Parade, Granville • 133 Railway Parade, Granville • 7 Day Street, South Lidcombe 12 November 2021 Valuer General determination of compensation for C&P (leasehold) in amount of $490,737 15 November 2021 The owners filed a summons in the Supreme Court of NSW against the Valuer General NSW and Sydney Metro seeking an order requiring the Valuer General NSW to determine the amount of compensation payable to the owners in connection with the acquisition of the acquired property 15 November 2021 Compensation notice prepared by Sydney Metro issued to C&P offering the amount of compensation for the leasehold interest as determined by the Valuer General NSW on 2 November 2021 16 November 2021 Valuer General determination of compensation for the owners in amount of $5,721,207 17 November 2021 Sydney Metro issued a compensation notice to the owners offering the amount of compensation as determined by the Valuer General NSW on 16 November 2021 18 November 2021 The owners discontinued the Supreme Court of NSW proceedings against the Valuer General NSW and Sydney Metro Late 2021 C&P decided to permanently relocate its business to 131 and 133 Railway Parade, Granville 11 February 2022 The owners and C&P file Class 3 applications in the Land and Environment Court of NSW objecting to the amount of compensation offered by Sydney Metro 14 March 2022 The owners received an advance payment from Sydney Metro comprising 90% of the amount determined by the Valuer General of NSW 22 March 2022 C&P received an advance payment from Sydney Metro comprising 90% of the amount determined by the Valuer General of NSW

[13]

Affidavit of 27 May 2022

By affidavit affirmed on 27 May 2022 Mr Nohra set out the efforts undertaken by himself and Mrs Nohra in conducting searches for alternative sites to purchase or lease following the compulsory acquisition. Despite their efforts, Mr Nohra attested to being unable to find a location to permanently relocate to within the timeframe required of C&P to vacate the acquired property by Sydney Metro, instead securing six separate sites for temporary relocation to accommodate the business.
C&P operates a fleet of over 1,000 machines including forklifts, boom lifts, scissor lifts, tow trucks and other large machinery. The business operates on a 24 hour, 7 days a week basis.
Mr Nohra stated that C&P was unable to remove the gantry crane within the allocated time for vacating the premises. When Mr Nohra contacted Mr Price of Sydney Metro about the crane, he was advised that this equipment was now the property of Sydney Metro and would have to be purchased to be removed. Mr Nohra attested to the gantry crane being valuable equipment which will be required in order to carry on business in the same way as was previously conducted by C&P at the acquired property.
Mr Nohra's affidavit is relevantly extracted as follows: … Permanent premises 39 When C&P first moved out of 8 Tennyson, we saw the relocation arrangement as temporary. But it has not been possible to purchase or lease a replacement property of the same size and with the same features close to Flemington markets given the rise in market prices since March 2021. 40 C&P need to look to replacing the essential features it had at the Site to other premises and converting them appropriately. 41 That location will be 131 & 133 Railway Parade, Granville which C&P is currently leasing and storing the bulk of its equipment. 42 C&P would make the following adaptations to mimic the facilities It had at the Site: a. Improvements to existing hardstand for reinforced, large hardstand area to enable ease of access into the yard, including excavation and stormwater construction which would cost $103,750. b. Build a lightweight warehouse that includes electrical and plumbing, plus a new gantry crane, would cost $636,100. c. Demolishing and replacing the existing corroded covered area with a new structure and roof, connected to stormwater, would cost $486,000. d. The combined area of the new warehouse and awning is about 820sqm which is less than the warehouse area C&P had at the Site being about 918sqm. e. Fit out the rundown office building by removing internal walls, floor and roof infested with termites to accommodate appropriate office area with kitchenette, bathrooms and toilets would cost $159,000. This proposed office area is about 11Osqm which is less than the office size that C&P had at the Site. …

[14]

Affidavit of 25 July 2022

The affidavit of Mr Nohra affirmed 25 July 2022 is largely extracted below: … Relocation costs 4 C&P is the former lessee of 8 Tennyson Street, Clyde with folio identifier Lot 23/DP 733500 (Site). 5 C&P's leasehold interest in the Site was compulsorily acquired by Sydney Metro on 19 March 2021. 6 As I said in paragraphs 24 - 29 of my May Affidavit, C&P conducted searches for alternative relocation sites, but we were unable to relocate permanently by the time Sydney Metro told us we had to vacate the Site. Accordingly, C&P had no option but to secure 6 sites to temporarily relocate to in order to accommodate the business operations. C&P has continued to look for a permanent relocation premises since that time but has been unable to find a suitable premises. 7 Accordingly, late last year I made the decision as a director of C&P to permanently relocate the business operations to 131 Railway Parade and 133 Railway Parade, Granville NSW 2142 (Relocation Site), which are 2 of the 6 locations C&P is currently partially occupying. Although this is not the ideal scenario, it will, with some modifications to the Relocation Site, allow C&P to eventually operate from 1 site (being 131 Railway Parade and 133 Railway Parade which are situated next to each other) instead of 6, and reduce our rent and outgoings, rather than continuing the search for a more suitable permanent relocation premises. 8 The Relocation Site is deficient in a number of ways compared to the Site. As a result, C&P will need to undertake works to the Relocation Site, to replace the essential features C&P had at the Site which I outlined below. 9 Annexed hereto and marked "A" is a marked-up plan of the Relocation Site demonstrating the approximate location of the additional features C&P require and will implement, with corresponding photos of the existing structures on the Relocation Site. The photographs were taken by Matthew Kritzler, quantity surveyor, earlier this year and are a true representation of the Relocation Site. 10 Firstly, the surface at the Relocation Site will need to be replaced by a large reinforced hardstand area of about 415sqm, to enable ease of access into the yard by trucks, forklifts and other large machinery as the Relocation Site has road base. The replacement will involve excavation and stormwater construction works so that the concrete hardstand can be laid and the stormwater works can form part of the new concrete hardstand. 11 The hardstand at the Site was almost 1,900sqm and covered most of the Site. As such, even once the large hardstand area is replaced, it will still be significantly smaller than at the Site. 12 Secondly, the Relocation Site does not have enough shed space compared to the Site. C&P will need to build a light weight shed of around 320sqm that includes electrical and plumbing. This is necessary to allow enough covered and secured space for the storage and maintenance of the forklifts. The Site had a gross building area of approximately 1,102sqm including the main warehouse, rear warehouse, and office area. 13 The shed will be a light-weight structure compared with what existed at the Site which was mainly brick. The equipment that we store has electrical components and we need to store the equipment under a covered areas so that the equipment does not get damaged. C&P will also need to install a new gantry care in the light - weight warehouse. As mentioned at paragraphs 36 - 38 of my May Affidavit, we did not have enough time to relocate the gantry crane from the Site before vacating and Sydney Metro advised that the crane had to remain on the Site. The gantry crane allows one person operating the crane to sling a load, which will reduce manual labour and costs. The Relocation Site will require a replacement gantry crane, to ensure our business operations are carried out efficiently and in the same manner as the Site. 14 Thirdly, the awning at the Relocation Site is old and corroded, it will need to be demolished and replaced with a new structure and roof, connected to a stormwater drainage system. This will allow for the storage of equipment under the awning, prevent water damage to forklifts and equipment, and allow staff to work under the awning. The Site had an awning of about 83sqm which increased the total warehouse area on the Site to about 1,004sqm (excluding the office). The combined area of the proposed shed and awning at the Relocation Site is about 820sqm compared to 1,004sqm at the Site. The awning at the Relocation Site will need to be upgraded, otherwise there will be a further loss of covered storage and workspace. Again, the awning will protect the equipment from the weather and keep the equipment dry. 15 Finally, the office at the Relocation Site is rundown and the internal walls, floor and roof are visibly infested with termites. The office at the Relocation Site is about 110sqm and is smaller than the office at the Site which was about 180sqm. The office will need to be renovated and fitted out to include staff amenities such as a kitchenette, bathrooms, and shower which are currently missing and were previously available at the Site. A shower is necessary for our staff because they work with chemicals and dirty equipment. 16 These features are considered necessary for the ordinary business operations of C&P. Without these additional works, the Relocation Site would be unsuitable for the business operations. Accordingly, C&P intends to carry out these works upon it being confirmed that it will receive compensation for the works by Sydney Metro or the Court on appeal. 17 Additionally, C&P intends to carry out the following works at the Relocation Site to replicate the features it had at the Site: a. Installing air-conditioning units in the office; b. Upgrading fire and alarm services; c. Constructing a cage area for battery chargers, and installing new electrical outlets for battery chargers; d. Replacing door and window locks for security purposes; e. Installing security fencing for the yard; f. Installing lighting to suit new warehouse layout; and g. Upgrade electrical services. 18 These works are also considered necessary for the business operations of C&P because, as a business, we are required to provide a safe and comfortable working environment and need to also keep our equipment safe from theft. 19 Upon compensation being received, these works will be carried out at the Relocation Premises and will replicate features C&P had at the Site. C&P will be carrying out these works prior to permanently relocating to the Relocation Site. 20 C&P's business operations continue to be disrupted by the subject acquisition and the financial impediments to permanently relocating to the Relocation Site. Without the above works being carried out in full, C&P will be unable to permanently relocate to the Relocation Site and, consequently, return to normal operations at the Relocation Site.

[17]

Mrs Nohra's evidence

Mrs Nohra is the registered proprietor of the acquired property as tenants in common in half shares with Ms Carpenter. Mrs Nohra is also a director of C&P.
Mrs Norah's affidavit of 12 August 2023 was read. The issue addressed in that affidavit was resolved between the parties in the course of the proceedings and the affidavit need not be referred to.
Mrs Norah's evidence in her affidavits of 20 May and 25 July 2022, summarised below, is largely identical. The later affidavit addresses the six temporary relocation sites for C&P (below in [(3)]). 1. The acquired property was located on a cul-de-sac and contained an industrial warehouse divided into two spaces each with separate access, a two-storey office building, hardstand area, open yard space and access driveway with off-street parking and access to the M4 Western Motorway. The acquired property was in close proximity to Flemington Markets where a large portion of C&P's business is conducted. 2. Mrs Norah made daily efforts for over a year to find a suitable alternative site to the acquired property. A list of properties examined for purchase or lease were identified. Sydney Metro made an offer of compensation for the freehold interest of the acquired property on 5 March 2020 for $3,425,000 which she attested was not sufficient to buy an equivalent site. Sydney Metro made an offer of compensation for the leasehold interest of the acquired property on 5 March 2020 for $60,000 which she attested was not sufficient for a deposit to lease or relocation to an equivalent site. 3. As Mrs Norah and Ms Carpenter were unable to purchase an equivalent site to the acquired property that would accommodate C&P as lessee, C&P relocated temporarily to six separate sites (see above in [27]). 4. C&P settled on a permanent basis at the relocation site which is smaller than the acquired property and requires a fit-out to enable C&P to recommence its business operations.
The affidavit evidence provided by Mrs Nohra was unchallenged in the proceedings.

[19]

Valuation evidence

The parties relied on the following valuation expert reports in the course of the proceedings: 1. Statements of evidence of Mr Dyson called by the owners and C&P dated 26 October 2022; 2. Statement of evidence of Mr Bridges called by the Respondent dated 23 November 2022; 3. Valuation joint expert report (Valuation JER) of Mr Dyson and Mr Bridges dated 24 April 2023 (Nohra proceeding) and 9 May 2023 (C&P proceeding); 4. Valuation JER #2 dated 15 August 2023 (Ex G); and 5. Valuation JER #3 dated 16 August 2023 (Ex L).
Mr Dyson and Mr Bridges agreed upon the following matters in the Valuation JER dated 24 April 2023: 1. The acquired property had a site area of approximately 2986m². 2. The acquired property was situated in an industrial area to the north of Parramatta Road and M4 Motorway between Parramatta CBD and Sydney Olympic Park / Homebush. 3. The acquired property was a triangular shaped property with frontage of approximately 101.095 metres to the south-eastern end of Tennyson Street. 4. The acquired property was zoned IN1 General Industrial under Parramatta LEP 2011, had a maximum permitted floor space ratio (FSR) of 1:1 and a maximum permitted building height of 12m. 5. The land had minor flood risk affectation at the Tennyson Street frontage which did not impinge upon the existing use or future redevelopment viability of the acquired property. 6. The acquired property was improved with an industrial building generally broken up into three main components, comprising two storey front office/amenities, clear span main warehouse with gantry crane and newer rear warehouse/shed. To the east of the shed was an area of reinforced concrete hard stand which has perimeter security fencing. 7. The areas of the buildings and hardstand were in accordance with the survey by Mr Brown of Rygate Surveyors dated 31 August 2022 (see above in [7]). 8. The highest and best use of the acquired property was as it was improved immediately prior to the acquisition date with a relatively large hardstand area and the further potential for a larger building pending any future redevelopment. 9. The most appropriate methods of valuation are the capitalisation of net income (capitalisation rate) and direct comparison (summation) approaches. I note that the valuers agreed upon the capitalisation rate as their preferred method in the course of the hearing. The valuers agreed the capitalisation rate is 3.875%.
In Valuation JER #2 the valuers agreed that the market rent for the acquired property (excluding the hardstand) is as follows:
In relation to the hardstand, the valuers agreed that the applicable market rental rate is within the range of $60/m² to $70/m². In reaching such agreement, the valuers had regard to two leases (Ex K), namely: 1. a 20-year lease to Suez of an unimproved yard area comprising 18778m² located at Muir Road, Chullora dated September 2019 at a rate of $32/m²; and 2. a 14-year lease to Australia Post of a hardstand area comprising 6000m² located at the rear of Muir Road, Chullora dated December 2019 at a rate of $88/m². This property was seen on the view during the hearing.
In the course of giving oral evidence there appeared to be little reliance on the first site with a rate of $32/m². Given that rate is well outside the agreed range no assistance is gained from that example. That leaves the Australia Post site with a hardstand rate of $88/m². The issue that appeared to divide the valuers was whether the acquired property should be considered to be integrated or not in terms of the use of the hardstand area. The Australia Post use of the hardstand area while separate required the use of the main entry to the overall much larger site to enter and exit the hardstand area.

[21]

Evidence of Mr Bridges

Mr Bridges considered that the appropriate rate for the hardstand is $62.50/m², opining that: 1. whilst the hardstand on the acquired property is comparatively smaller and therefore more affordable than the hardstand on the Australia Post site, it is essentially intermeshed with the building improvements and thereby detracts from the manoeuvrability that they would normally benefit from based on their size and configuration; and 2. hardstand leasing typically has a size and configuration that would be capable of independent occupation, separate from the remainder of the site and improvements situated thereon. The hardstand on the acquired property could not be separately occupied or rented in isolation.
Mr Bridges agreed that Mr Dyson's attribution of approximately 10% for relevant market movement for hardstand rates from December 2019 to March 2021 was reasonable. He also agreed that Mr Dyson's further 5% adjustment for size was traditional for industrial property, in that the larger the quantum of size the less affordable a site is, as a result of the economies of scale rates typically go down and vice versa.
In Valuation JER #2 the experts agreed that the applicable market rental rate is within the range of $60/m² to $70/m² (above in [36]) and consequently Mr Bridges agreed that Mr Dyson's assessment at $70/m² was within the range agreed.
Mr Bridges stated that the agreed rate range needed to be considered in light of his view that the acquired property was an integrated site, meaning the utilisation of the hardstand area to the extent shown in the aerial photograph (above in [8]) would result in a detrimental effect on the configuration of, and access to the site as a whole. The acquired property is to be contrasted to a site where an area of hardstand can be utilised to its maximum potential for the storage of containers, forklifts or any other items, without lacking manoeuvrability enjoyed with the typical curtilage around the roller doors of a building. Mr Bridges was of the view that in an integrated site the manoeuvring required of a reasonably sized truck within the hardstand area would impinge upon its use. On this basis, Mr Bridges erred towards the lower end of the agreed rate range, noting that he had not applied a specific percentage adjustment, applying a subjective determination based on his experience as a valuer.

[22]

Applicants' submissions

The Applicants submitted that the Court should accept the evidence of Mr Dyson and adopt a rate of $70/m² for the hardstand on the acquired property. Firstly, the adjustments and analysis undertaken by Mr Dyson are well reasoned, transparent and were accepted by Mr Bridges as reasonable. Mr Bridges accepted that Mr Dyson's adopted rate of $70/m² was reasonable. In accepting that the applicable range is $60/m² to $70/m², both valuers are accepting that $70/m² is a reasonable rate.
Secondly, the rationale and methodology adopted by Mr Bridges lacks transparency and was not well reasoned. The area of hardstand on the acquired property has a separate driveway access and the valuers excluded from the total hardstand areas a corridor of access along the warehouse which creates a separation between building and hardstand uses, contrary to Mr Bridge's view that the acquired property is of an integrated nature which would impugn on the use and therefore the value of the hardstand.
Thirdly, even if the Court accepts that both the views of Mr Dyson and Mr Bridges are valid, the Court would then apply the well-established principle of favouring the more liberal estimate suggested by Mr Dyson and adopted by the Applicants ($70/m²) in favour of the dispossessed owner as identified in numerous cases: Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Limited (1947) 74 CLR 358; [1947] HCA 10 at [374] (Dixon J), cited with approval in Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209; [1999] HCA 64 at [356] (Callinan J, Gummow J agreeing at [111], Gaudron J understood to agree at [100]), Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 (Caruso) at [3]-[4] (Allsop P), Qasabian Family Investments Pty Ltd v Roads and Maritime Services; Fishing Station Pty Ltd v Roads and Maritime Services [2017] NSWLEC 73 (Qasabian) at [29]-[30] (Moore J), Barkat v Roads and Maritime Services [2019] NSWCA 240 (Barkat) at [19] (Emmett AJA, Leeming JA and Simpson AJA agreeing), Big Country Developments Pty Ltd v Transport for New South Wales [2021] NSWLEC 86 (Big Country Developments) at [42] (Pain J), cited and applied in Buhach v Transport for New South Wales [2022] NSWLEC 148 at [115] (Pepper J) and G&J Drivas Pty Ltd v Sydney Metro [2023] NSWLEC 20 at [314] (Duggan J).

[24]

Consideration - Nohra issue 1; C&P issue 1

Market value is defined in s 56(1) of the Just Terms Act as the amount that a willing but not anxious seller would pay to a willing but not anxious buyer, disregarding specified matters in subcll (a), (b) and (c), none of which need be considered here. The Court is fulfilling the role of judicial valuer and arrives at its own conclusions, informed where relevant by expert evidence.
The approach to valuation evidence was summarised in the Respondent's submission to the effect that the Court is to assess competing expert valuation evidence in the usual way. The key issue that divides the valuers' respective approaches to the rate to be attributed to the hardstand area is whether the acquired property should be considered as an integrated site in terms of how the site operates or whether the hardstand area can operate separately. As seen in the aerial photograph above in [8], a large industrial building was located on one boundary of the site with a wide driveway from the street frontage. The hardstand area largely occupied the balance of the site and was accessible by two driveways from Tennyson Road.
Having viewed the Australia Post site, considered the aerial photograph of the acquired property and considered the evidence of the respective valuers I prefer the evidence of Mr Dyson. Mr Dyson's approach is to be preferred as his consideration of the use of the hardstand area on the acquired property as able to operate separately from the warehouse building reflects the physical circumstances of that property. His reasoning in applying $70/m2 (as set out above in [38]), the upper end of the agreed range of the valuers, is otherwise well reasoned.
I have been able to resolve the differences between the valuers and reach a conclusion as to which evidence I prefer. The authorities which the Applicants particularly referred to in relation to the correct approach where there is conflicting reasonable expert opinion, namely that resolution can be in favour of the person whose interest in land has been acquired as summarised in [46] above do not need to be referred to at this point in the judgment.
As the Court accepts the rate of $70/m² for the hardstand area, then the market value of the freehold interest in the acquired property in the Nohra proceeding is $6,920,000 as identified in [14] above.
The same rate is also agreed to apply to C&P's leasehold interest, resulting in the market value of $231,000 in the C&P proceeding as identified above in [17].

[26]

Quantity surveying evidence

The parties relied upon the following quantity surveying expert reports in the course of the C&P proceeding: 1. Statement of evidence of Mr Kritzler called by the Applicants dated 12 October 2022, estimating the cost of work at the relocation site at $2,021,816 (GST exclusive); 2. Statement of evidence of Mr Tucker called by the Respondent dated 30 November 2022, estimating the cost of work at the relocation site at $1,213,478.23; 3. Quantity surveying joint expert report (QS JER #1) of Mr Kritzler and Mr Tucker dated 27 April 2023; and 4. Supplementary quantity surveying joint expert report (QS JER #2) dated 15 August 2023.
In QS JER #1 Mr Kritzler revised his estimated cost of the fit-out works in the amount of $1,893,060 (GST exclusive). Mr Tucker revised his estimate to $1,355,416.20 (GST exclusive). QS JER #1 was ultimately not relied upon by either party in the course of the hearing.
In QS JER #2, the experts were instructed to derive cost estimates based on the other expert's scope of work. Based on Mr Kritzler's scope of work, Mr Kritzler derived a cost estimate of $1,914,404 and Mr Tucker $1,780,899. Based on Mr Tucker's reduced scope of work, Mr Kritzler derived a cost estimate of $1,610,638 and Mr Tucker $1,357,989. The divergence between the experts on Mr Kritzler's scope of work is summarised in the table extracted below as this was the focus of evidence and submissions:
The table above identifies that $133,505 is in issue. In the course of the hearing Mr Kritzler's use of Rawlinsons Australian Construction Handbook 2022 (Rawlinsons 2022) resulting in the escalation rate of 5.2% was agreed. The remaining matters in issue are: 1. The amount claimed by Mr Kritzler and disputed by Mr Tucker for the new hardstand and miscellaneous works of $89,275 comprising two electrical work entries estimated at $15,000 for upgrade electrical supply and $25,000 for a new MSB metre, and general waste disposal estimated at $49,275. 2. Mr Kritzler allowed a contingency rate of 15% at $237,362 and Mr Tucker of 12.5% at $182,915, resulting in a difference of $54,447.

[31]

Sub-issue 2(a) application of section

C&P submits that under s 59(1)(c) of the Just Terms Act it is entitled to compensation for its financial costs reasonably incurred in connection with the relocation of its business as claimed. In George D Angus Pty Limited v Health Administration Corporation (2013) 205 LGERA 357; [2013] NSWLEC 212 (George D Angus) at [67]-[78] five requirements for costs to fall under s 59(1)(c) (then s 59(c)) were identified. Of these requirements, the one in dispute is that costs must be 'reasonably incurred'. The use of the word 'reasonably' qualifies the incurring of the costs rather than the costs themselves. No issue has been raised that costs claimed must have been incurred already. Mr Nohra's evidence identifies that he is awaiting the outcome of these proceedings before incurring the costs claimed.
The category of costs that may be reasonably incurred in connection with relocation is wide and setting up the new permanent premises including fit-out costs and replacement of essential equipment not able to be relocated can be awarded: Hua v Hurstville City Council [2010] NSWLEC 61 (Hua) at [59]; Roads and Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236 (McDonald) at [107]-[109]; George D Angus at [77].
In Konduru v Roads and Maritime Services (2017) 224 LGERA 262; [2017] NSWLEC 36 (Konduru) at [162], [165] Moore J found that financial costs reasonably incurred extended to work where strict like-for-like premises were not available. That fitted within the statutory language as being necessary to carry out the operations (there, a doctor's surgery) in new premises which required alteration.
C&P rejects the Respondent's reliance on The Trustee for Whitcurt Unit Trust v Transport for NSW [2021] NSWLEC 82 (Whitcurt) at [17]-[18] as authority for the proposition that a lessee that does not own fixtures or infrastructure on leased premises is not entitled to compensation under s 59(1)(c) below in [87]. No decided case stands for that general proposition and the facts of Whitcurt are distinguishable from the circumstances in this case in that C&P had secure tenure on the acquired property pursuant to a registered lease.
C&P further rejected the Respondent's reliance on the obiter observations of Basten JA in Roads and Maritime Services v United Petroleum Pty Ltd (2019) 99 NSWLR 279; [2019] NSWCA 41 (United Petroleum) at [25], [49] on the basis that these were made in the context of s 59(1)(f) and do not assist in the interpretation of s 59(1)(c).
Section 59(1)(c) does not require essential equipment, infrastructure or the existing fit-out at the old premises to be owned by the dispossessed owner for relocation costs to be compensable. C&P is entitled to claim costs for the fit-out works in full, as appropriately quantified.

[32]

Sub-issue 2(b) amount

The Court should prefer the evidence of Mr Kritzler and determine that C&P is entitled to the cost of Mr Kritzler's scope of works in the amount of $1,914,404 (GST exclusive). C&P claims compensation for its fit-out costs associated with its permanent relocation to the relocation site to render the site suitable for use and generally equivalent to the site and facility from which it was removed by virtue of the acquisition. Specific issues in dispute were contingency approach and amount, electrical costs, general waste disposal costs and the extent of work required on the hardstand.
C&P submits that the Court should award the general waste disposal costs in the amount of $49,275 as a line item in accordance with Mr Kritzler's evidence, not built into the contingency in accordance with Mr Tucker's evidence, as this is a cost that will be incurred.
Further, that the Court should award the electrical costs in the amount of $40,000 in accordance with Mr Kritzler's evidence, which Mr Tucker attested was not within his area of expertise and about which Mr Kritzler would have further knowledge given his background as an electrician.
There is no reason to depart from Mr Kritzler's scope of work, including for the hardstand. The uncontested evidence of Mr Nohra is that C&P requires the fit-out works in order to make the relocation site suitable for the operation of its business. Mr Kritzler saw the acquired property when the business on it was still in operation and has visited the relocation site twice.
Mr Tucker stated that he had received Mr Nohra's affidavits, however it is clear that he gave very little weight to the descriptions of what is required at the relocation site so that it operates on a similar basis to the acquired property. Mr Tucker did not see the acquired property when it was being used for C&P's business, seeing it when it was vacant. He did not see the relocation site until the view taken during the court hearing. The approach adopted by Mr Tucker was not justified and led to an approach in which he preferred his own 'subjective' views rather than the unchallenged views of the director of the relocated business, the operations and needs of which Mr Tucker conceded he had limited knowledge.

[33]

Sub-issue 2(a) application of section

The Respondent submits that the decisions in George D Angus, Konduru and Hua relied upon by C&P do not assist the Court in determining C&P's entitlement to disturbance costs under s 59(1)(c) for the reasons outlined below.
George D Angus did not involve a claim for relocation costs involving construction works at new premises. Rather, it involved a claim for physical relocation from one premises to another not including construction works or fit-out.
Konduru involved a claim for compensation under s 59(1)(c) for costs to relocate a medical practice which included fit-out costs for alterations and additions to a residential house to adapt for medical practice. The applicant owned both the acquired land (and the fit-out at the acquired land) and the premises to which the applicant's business relocated. In contrast, C&P owned neither the acquired property nor the improvements on it.
Hua involved a claim under ss 55(d), s 59(1)(c) where the applicant owned a specialist piece of equipment (a baker's oven) at the acquired site and the business was fitted out at the expense of the applicant pursuant to a fixed term lease. Compensation involved costs for the relocation of the baker's oven on the basis that it was not economically practical to relocate the oven.
Whitcurt considered a claim for compensation under s 59(1)(c) in circumstances where a lessee did not own the land or fixtures at the date of acquisition, and is factually similar to the claim made by C&P. Whitcurt distinguished the facts in Hua and Konduru on the basis that the claimants owned the equipment and fit‐out on which their respective businesses relied, making reliance upon these cases problematic for C&P. The Respondent relies particularly on the reasoning in Whitcurt at [140] that the nature of the interest in land the applicant held at the time of acquisition is central to the assessment of a claim for compensation under the Just Terms Act.
Under the terms of the lease, C&P leased the acquired property including the fixtures, however did not own the improvements for the following reasons: 1. clause 3.1 of the lease does not grant C&P ownership of the buildings, hardstand, fixtures, or improvements; 2. clause 7.1 of the lease provides that the owners were responsible for maintaining the buildings and property including structural works; 3. clause 7.2 of the lease provides that C&P was explicitly not responsible for improving the property, fixing structural defects and repairing fair wear and tear; and 4. the affidavits of Mr Nohra and Mrs Nohra do not establish that C&P was any more than a lessee using the acquired property to conduct its business.
The Respondent concludes that what C&P has been deprived of as lessee is the ability to continue to operate its business from the acquired property for four years, from exercising an option to extend for a further five years and from using fixtures, buildings and improvements owned by the lessors. As C&P did not own the improvements, buildings, hardstand or critical infrastructure (howsoever described) at the acquired property no question of costs reasonably incurred under s 59(1)(c) can arise. The Respondent has appropriately agreed to C&P's claim for compensation under s 59(1)(c) insofar as that claim related to moveable chattels.

[35]

Sub-issue 2(a) application of section

In George D Angus Preston CJ stated at [77]: [77] The category of costs that may reasonably be incurred in connection with relocation is wide, and includes expenses in removing furniture and goods from the old premises, moving to the new premises and setting up in the new premises, including fit out costs: see McDonald v Roads and Traffic Authority (NSW) at [107]-[109]. It can also include replacement of essential equipment not able to be relocated: Hua v Hurstville City Council [2010] NSWLEC 61 at [59].
I do not consider my reasoning in Whitcurt supports the Respondent's approach and my reasoning needs to be looked at in totality. I did not make a general finding that construction costs can never be compensated. The focus in Whitcurt was the nature of the interest acquired and the reasonableness of the compensation claimed in light of that interest. In Whitcurt I stated at [98], [104], [131]: [98] What the Applicant has been deprived of is not the ability to have the construction of a new golf driving range funded and to continue to operate from a new facility for 15 to 30 years but rather the ability to continue to operate its business from Lot 305 pursuant to its leasehold interest that was terminable on two months' notice. The Applicant's submission that replicating this situation at Campbelltown at the Respondent's cost places it in the same position as it was in at Lot 305 simply does not reflect the interest it held. … [104] The costs that are being claimed which involve construction and fit-out of a new driving range are not costs of relocation when one looks at s 59(1)(c). The ordinary meaning of relocation assumes you have something to relocate. Loss attributable to disturbance arises from disturbance of the interest in land that you have at the date of acquisition. … [131] The Applicant's counsel submitted that but for the acquisition the Applicant would have continued to operate the Tempe business on a longer term tenure. Assuming that can be accepted as a fact, a matter I address next, it is not apparent why in a disturbance claim that matter is relevant. At the date of acquisition the Applicant had a very limited tenancy interest. The reliance on Tolson to the effect that compensation is for a loss and that as far as possible any loss should be compensated does not overcome the need to come within the provisions of the Just Terms Act, as has been emphasised by the Court of Appeal on many recent occasions, for example Alexandria Landfill (CA) at [123]. Entitlement to compensation under s 54(1) is for the interest in land compulsorily acquired. Placing a person in the same position as they would have been in if the acquisition had not occurred (Tolson) can be accepted as a broad statement but, as the Respondent emphasised, in Nelungaloo Dixon J at 571 emphasised that compensation is the money equivalent of what interest a claimant has been deprived of…
Whitcurt does not support the Respondent's submission that construction or capital costs can never be payable under subcl (1)(c) as relocation costs. Each case must be considered on its facts as C&P submitted and it is obvious to state that interests in land may vary substantially from case to case and consequently the nature of the disturbance claimable will also vary. The nature of the interest of the lessee in this matter, with an existing lease with four years to run and an option of another five year lease, is far removed from that in Whitcurt, a lease terminable on two months' notice.
In George D Angus the compulsorily acquired site at which a company provided gynaecological and obstetric services was said to be advantageously located in physical proximity to two hospitals. The company claimed compensation for losses attributable to disturbance as well as loss of income or profit for one relocation (and a subsequent relocation). Preston CJ determined that the losses associated with the first relocation were a direct and natural consequence of the acquisition (the losses for the second relocation were not reasonably incurred): at [5], [7], [9], [180], [188].
In Hua a company operating a takeaway sandwich shop had expended in excess of $300,000 for the fit-out costs. The baker's oven, cool rooms and food preparation area necessary for the operation of the bakery had built in facilities such as ducting and piping, rendering it impractical to remove from the existing premises. Compensation was awarded for disturbance loss on the basis of relocation to include reinstatement of the applicants' bakery business including the necessary equipment: at [10], [18], [71].
In Konduru compensation was payable for fit-out described as significant works at [162]. This work was highly likely to include construction work to render it fit for purpose for the operation of the applicant's medical practice.
C&P's business is described without challenge in the evidence of Mr and Mrs Nohra above in [20]-[31].
I consider that C&P's claim for fit-out costs is reasonable given its interest in the land acquired by the Respondent and the nature of the business that needs to be replaced. It now remains to assess what amount is payable for these costs.

[36]

Sub-issue 2(b) amount

The claim for fit-out costs is necessarily at a broad level of assessment given that these costs are yet to be incurred, as identified by Mr Nohra in his affidavit dated 11 August 2023 in [26] above. There is no impediment to awarding fit-out costs in these circumstances. The unchallenged evidence of Mr Nohra was used as a guide by Mr Kritzler in his development of a scope of works and assessment of costs. In closing submissions no reference was made to Mr Tucker's reduced scope of works, the focus was the scope of works of Mr Kritzler.
Where there is competing expert evidence which appears reasonable, a relevant principle was identified in Caruso by Allsop J at [3] as follows (applied in Barkat by Emmett JA at [19]): [3] The general principle that in determining compensation to a dispossessed owner doubts should be resolved in favour of a more liberal estimate is well-known: see generally A Hyam The Law Affecting Valuation of Land in Australia (4th Ed 2009 Federation Press) at 316-318. That does not, however, detract from the need to engage with and evaluate evidence and competing witnesses. If, however, upon engagement and assessment, the judicial valuer finds, for example, as Anderson J did in Cook and Edwards v City of Sterling (1991) 4 WAR 469, that the reasoning of both valuers was not fallacious, that their respective capitalisation rates were open, that none took into account irrelevant considerations and no errors otherwise appeared, the proper conclusion might be that there are simply two open views on the relevant issue - as there can be in ascribing a value: cf Fenton Nominees Pty Ltd v Valuer-General (1981) 47 LGRA 71 at 76-77. In such circumstances, applying the general principle would be uncontentious.
In Big Country Developments I stated at [42]: [42] That principle has developed and cannot be stated without qualification. It has been refined in cases where there is expert evidence before the judicial valuer that might need to be resolved. If the Court can resolve the differences because one valuer can be preferred for their reasoning, then that can be done. But where there are two equally valid valuation methodologies open to the judicial valuer the methodology that favours the dispossessed owner is to be preferred: Caruso at [3]. The Court is not to abandon the task of weighing up the expert evidence. It is only when both methods are equally valid and reasonable minds might differ that the principle set out above can be applied…
In light of this principle, to the extent I am unable to resolve differences between the quantity surveyors I will resolve issues in favour of C&P where the evidence is otherwise reasonable. In resolving the outstanding quantity surveying issues there are few remaining issues in dollar terms between different approaches of the quantity surveyors, principally to the contingency rate and whether electrical works and general waste disposal costs should be costed separately.
While both quantity surveyors are experienced, Mr Kritzler's approach to the delineation of the scope of works is to be preferred given his greater familiarity with the acquired property, which he saw in operation. Mr Tucker saw the acquired property only when vacant. Mr Kritzler also visited the relocation site in the course of preparing his report, unlike Mr Tucker who first saw the relocation site on the view during the hearing.
I will accept the approach of Mr Kritzler to the few remaining contested issues. Mr Kritzler's expertise as an electrician having been accepted by Mr Tucker the estimate for electrical work of $40,000 should be allowed as that was accepted by Mr Tucker to be reasonable. The amount for general waste disposal of $49,275 identified by Mr Kritzler was not challenged in cross-examination and that can be allowed as a separate item. The amount Mr Krizler allocates for the contingency rate is reasoned and appears reasonable.
Accordingly the amount of $1,914,404 should be awarded to C&P for fit-out costs.

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