Secretary, Department of Transport v Provan's Timber Pty Ltd [2020] VSCA 210

Compulsory acquisition of the Land for freeway link

Negotiations before Notice of Intention to Acquire

Provans' response: claimants not to be treated 'as one'

Did the judge misapply the statutory test for causation? - Ground 1

Should the subsidiary proceeding have been dismissed against Joinery? - Ground 3

Was the market value agreed if Hardware received relocation costs? - Ground 4

Did the judge order double recovery? - Ground 5

1 On 16 October 2014, the Linking Melbourne Authority ('the Authority') compulsorily acquired land in Clifton Hill ('the Land') occupied by a hardware store for the construction of a proposed 18 kilometre tollway road linking the Eastern Freeway to the Western Ring Road ('the East West Link'). The retail hardware and timber business was run by Provan's Timber and Hardware Pty Ltd ('Hardware'). Provan's Timber Pty Ltd ('Timber') was the registered proprietor of the Land and held the estate in fee simple. There was no formal lease between Hardware and Timber but Hardware paid rent to Timber. Provan's Timber (Joinery) Pty Ltd ('Joinery') employed the staff of the retail hardware and timber business.

2 There were extensive negotiations between the parties before the compulsory acquisition and offers of compensation were made. The acquisition of the Land led to a dispute about the amount of compensation to be paid, the manner in which it should be assessed, and the precise parties to whom compensation was owed. In particular, there was a dispute about whether an initial offer had been directed to all three relevant companies of the Provans Group, Timber, Hardware, and Joinery, or to those companies individually. The question arose whether the initial offer was capable of disaggregation and acceptance by Hardware but not by Timber.

3 Proceedings were brought in the Supreme Court by Timber against the Authority and by the Authority against Hardware and Joinery. The two proceedings were heard together and the judge ordered that Timber was entitled to an award of compensation for market value assessed on the basis of highest and best use, assuming vacant possession, in the sum of $12.2 million.[1] The judge also held that Hardware was entitled to compensation for its relocation costs, by way of 'disturbance loss', in the amount of $2.871 million. This was despite a finding that Hardware's interest in the Land was as a tenant at will and an undisputed assessment of the valuation of Hardware's occupancy interest as having 'nil' value.[2] The judge dismissed the proceeding brought by the Authority for a declaration that neither Hardware nor Joinery was entitled to compensation.

4 The Secretary to the Department of Transport[3] applies for leave to appeal against the orders made on the basis that, as Hardware's interest was as a tenant at will, any pecuniary loss it suffered as the natural, direct and reasonable consequence of the divestment of its interest could only have been of a limited nature and not warranting compensation of $2.871 million for relocation costs. The Authority also submits that the judge erred in finding that it had made a binding offer that was capable of acceptance by Hardware alone.

5 For the reasons below, we would grant leave to appeal[4] and allow the appeal.

6 In our view, the compensation awarded to Hardware does not faithfully reflect the divestment or diminution of its insubstantial leasehold interest as a tenant at will. Compensation afforded for disturbance loss cannot be divorced from the interest in land that is divested or diminished. We do not consider that the relocation costs incurred by Hardware can be viewed as the natural, direct and reasonable consequence of the divestment of its interest in the Land.

7 Furthermore, we consider that the initial offer is properly to be construed as comprising three offers, one to each relevant Provans company. It was an offer in writing to each claimant of whom the Authority was aware, and it thus satisfied the requirements of the Act. It was not a global or 'joint' offer addressed to all three claimants 'as one'. However, because the claimants had multiple interests in the Land and due to the manner in which the initial offer was formulated, the offers to the claimants were intertwined; that is, an acceptance of the offer to one claimant was dependent upon the acceptance of the offer made to the other claimants. The rejection of the offer by Timber precluded separate acceptance by Hardware and the Authority was not bound by Hardware's purported acceptance.

Compulsory acquisition of the Land for freeway link

8 The Land compulsorily acquired by the Authority is at 62-64 and 88-92 Alexandra Parade, Clifton Hill.

9 The Authority acquired the Land under the Land Acquisition and Compensation Act 1986 ('the Act'), which provides for compensation to be paid to persons whose interest in acquired land is divested or diminished by reason of compulsory acquisition. The Authority compulsorily acquired all interests in the Land by notice of acquisition published in the Government Gazette on 16 October 2014 ('the Notice of Acquisition') for the purpose of the East West Link, which was a road project ('the project') that has since been abandoned.[5]

10 Timber, Hardware and Joinery form part of the Provans Group of companies.[6] The Provans Group operates the businesses of the Rosenberg family. The Rosenberg family had operated the hardware business on the Land for several decades. The sole shareholder of Timber was Barry Rosenberg ('Rosenberg'), and he was a director alongside his wife Sara Rosenberg. The shareholders of Hardware and Joinery were Rosenberg and Mrs Rosenberg, and in each case the sole director was Rosenberg.

Negotiations before Notice of Intention to Acquire

11 On 15 July 2013, the Authority notified the Provans Group by letter that the Land would be likely to be required for the construction of the project. The letter included a map of the project corridor to illustrate the likely need for the Land. It also advised that the design had not yet been finalised and that it might be amended following consultations that were to occur over the coming months. The Authority stated that while its letter was not a formal notice of acquisition, it would be in a position to advise if a formal acquisition was to occur by mid-2014.

12 Between mid-2013 and August 2014, Rosenberg, Gregory Heverin ('Heverin'), the General Manager of the Provans Group, and Robert Proctor, the financial controller of the Provans Group, met and communicated regularly with representatives of and consultants retained by the Authority, including Nicole Glynn ('Glynn'), the Authority's land acquisition consultant, Piera Murone of Pitcher Partners ('Murone'), the Authority's accounting advisor and business valuation specialist, and Gab Aghion ('Aghion') of Business Relocation Management, the Authority's relocation consultant. The discussions centred around the relocation of the business to new premises further down Alexandra Parade, specifically to buildings owned by another company controlled by Rosenberg and Mrs Rosenberg, of which Mrs Rosenberg was the sole shareholder, Lysteron Pty Ltd ('the replacement premises'). Hardware's business relocated to the replacement premises in September 2015.

13 On 16 July 2013, Glynn had two telephone conversations with Heverin. This was the day that the reference design for the project was released. The reference design showed the properties likely to be required for compulsory acquisition, and included the Land. Heverin informed Glynn that the business conducted upon the Land had operated for 110 years. He also indicated that 'Provans' owned the replacement premises.

14 Glynn deposed that, based on her discussions with Heverin, at that time she believed Timber was the owner/occupier of the Land. Her file note of the first telephone conversation records that Heverin advised that it would be impossible to find land of a sufficient size for relocation in the inner city, but that the replacement premises might provide a solution. In the second conversation, Glynn advised Heverin that the reference design for the project did not require the acquisition of any land east of a shot tower on Alexandra Parade, and therefore that the replacement premises were not on the likely acquisition list.

15 On 15 August 2013, the solicitors for the Provans Group, Aitken Partners ('AP'), responded to the Authority's 15 July 2013 letter to advise that Timber was the registered proprietor of the Land and that Hardware conducted a retail hardware and timber business from the Land. The letter stated that Timber and Hardware were considering their position in light of the likely acquisition of the Land 'and business', including the possible relocation of the business. AP advised that relocating the business would involve months of detailed planning and implementation, and requested urgent advice as to whether any of the three properties comprising the replacement premises was likely to be acquired or otherwise affected by the project.

16 On 23 August 2013, Glynn, along with her colleague Ian Clarke ('Clarke') and Marianne Stoettrup of Matters More, a business impact consultant retained by the Authority, met with Rosenberg and Paul Calleya, the systems manager for the Provans Group, to discuss the Authority's 15 July 2013 letter. Glynn and Clarke advised that, following completion of the planning process, the Authority would commence the formal acquisition process and serve a 'notice of intention to acquire' under the Act. It was expected that the notice would be served around mid-2014. The Authority would obtain a business valuation and relocation assessment and, on the basis that the cost of relocation to 'reasonably suitable' premises did not exceed the value of the business, it would make an offer of compensation to relocate. The Authority's valuer would assess the unaffected market value of the Land, not taking into account the impact of the project. The valuation would be assessed either on the basis of the business as a going concern (an 'in use' assessment, where additional compensation would be paid for relocation costs and loss of profits) or, alternatively, on the basis of the highest and best use of the Land, in which case compensation for relocation costs would not be payable. It was the Authority's 'core proposition' that these assessments of compensation were alternative methods. The Authority's core proposition was never accepted by Provans.

17 Before the 23 August 2013 meeting concluded, Rosenberg explained that there was a lease between Timber and Hardware, with Hardware paying rent to Timber, although he was sure it was below market rate. Glynn asked for a copy of the lease.

18 On 20 September 2013, there was a further meeting between Glynn, Clarke and Greg Holland, Director of Property Services, on behalf of the Authority, and Rosenberg and Heverin of the Provans Group. Rosenberg and Heverin raised concerns over the impact of the project design and construction works on the replacement premises, and Rosenberg indicated that he would like to commence the acquisition process immediately. Glynn said that the 'government' would consider 'requests to purchase' on grounds of financial and personal hardship, and that the Authority was willing to seek approval to commence early negotiations to purchase the Land.

19 On 21 October 2013, Heverin emailed Glynn and advised that the Provans Group had been provided with access to the buildings located at the replacement premises. He indicated that there were issues to be worked through regarding the viability of the site of the replacement premises for running a hardware and timber business. Glynn subsequently met with Rosenberg, Heverin and Marc Dixon, the architect for the Provans Group, on 25 October 2013. The meeting was held at the corner of Hoddle Street and Alexandra Parade, at the site of the replacement premises, and issues concerning access to those premises were discussed.

20 On 28 October 2013, Heverin wrote to Ken Mathers, the Chief Executive Officer of the Authority, advising that the Provans Group was investigating whether it was feasible to relocate the business to the replacement premises corner, and setting out a number of concerns. Heverin sought an opportunity to discuss the issues in more detail.

21 On 6 November 2013, Glynn and Clarke met with Rosenberg and Heverin. Glynn advised that the Authority would commence its investigations and make an offer, but explained that this process would take a reasonable period of time. She indicated she did not expect to settle the matter before the commencement of the formal acquisition process in July/August 2014. However, she hoped that an offer would be made before then so that 'Provans' would have a 'ballpark figure' of what the Authority was prepared to offer, which would provide some degree of comfort or indicate a minimum level of compensation. Glynn referred to company searches that she had undertaken, and requested precise information about the business structure of the Provans Group, including which company occupied the Land and on what terms. Rosenberg indicated that there was a lease in place that had been prepared by his solicitors. Glynn again requested a copy of the lease.

22 On 11 November 2013, the Authority replied to Heverin's 28 October letter seeking agreement to conduct early investigations into the possible relocation of the business. The Authority's letter stated:

Acknowledging the size of Provans Timber and Hardware and the challenges that Provans will face in securing a suitable replacement property and relocating its business successfully, [the Authority] is able to engage in business relocation investigations with Provans now, rather than waiting until July/August 2014 which would be normal practice.

23 However, the Provans Group indicated that it wanted to wait until the question of the suitability of the replacement premises had been resolved.

24 On 13 December 2013, the Provans Group lodged an application with the Yarra City Council for a planning permit in relation to the replacement premises.

25 On 11 April 2014, Heverin telephoned Glynn and advised that the Provans Group was now agreeable to the Authority commencing early investigations as he was confident the planning permit for the replacement premises would be approved.

26 On 29 April 2014, Glynn and her colleague, David Willmott ('Willmott'), met with Rosenberg, Heverin and the lawyers for the Provans Group, Andrew Blogg ('Blogg') and Sebastian Greenway of AP. They discussed when the Land would be required, which Glynn advised would most likely be July-August 2015. The Authority indicated that it wanted to commence early investigations with affected businesses in order to be in a position to make offers as soon as possible after the service of notices of intention to acquire. This would involve the Authority engaging a valuer to assess the market value of the Land, an accountant to assess the value of the business and estimate loss of profits, and a relocation consultant to assess the cost of relocating to another property. This information would then be used to consider the basis on which the Authority would assess compensation and formulate an offer.

27 At this meeting, Glynn reiterated the Authority's core proposition. She said that if the highest and best use of the Land was found to be an alternative use to its current use as a retail hardware and timber business, an assessment of market value on the basis of the highest and best use would be compared to an assessment of market value on an 'in use' basis, plus an allowance for relocation expenses or business value. If the highest and best use valuation was a higher valuation, an offer would be made on that basis. However, a highest and best use valuation would exclude any allowance for relocation costs or business value. If a combination of 'in use' market value plus an allowance for relocation expenses (or business value) was the higher sum, the offer would be made on that basis. It was agreed that the Authority would conduct early investigations regarding the possible relocation of the business. Glynn again asked for details of all parties with an interest in the Land and an explanation of the relationship between the parties, along with copies of any leases that might exist for the Land.

28 On 5 May 2014, the Authority wrote to AP confirming that the Provans Group had agreed to commence early investigations and setting out the steps that the Authority would undertake with respect to assessing compensation and requesting documentation. The Authority's letter stated:

Having received your client's approval to commence early investigations in our meeting on 29 April 2014, [the Authority] will now:

1. Instruct the Valuer-General Victoria to obtain a certified and check valuation of the unaffected market value of your client's property. If there is a lease pertaining to the property, then a leasehold valuation will also be requested. It would be appreciated if you would provide copies of any leases for the property;
2. Engage an accountant to assess the value of the business operating from the property, and loss of profits (if any) which may be incurred during the relocation and re-establishment of the business. To assist this assessment can you please provide:

1. Documents that establish any other interests in the subject property that [the Authority] may be required to acquire; 2. An outline as to the relationship between the entities, particularly freehold and leasehold interests, should they differ; and

1. Financial documents (tax returns and profit and loss statements) for the past three financial years, for the occupant(s) of the property.
2. Engage a relocation consultant to assess the cost to relocate to your client's potential replacement property. To assist in this assessment, any additional design/site layout work which has been completed by your client would be appreciated together with any quotations already received for proposed works, such as racking.

29 On 29 May 2014, Aghion emailed Heverin requesting that he arrange a number of site visits with professional designers, removalists and quantity surveyors, as well as identify some of the interior requirements for the replacement premises. On the same day, Heverin emailed Glynn to inform her that the Provans Group had received an approved planning permit in relation to the replacement premises.

30 On 3 June 2014, Glynn again requested a copy of any lease documentation for the Land. AP responded on behalf of the Provans Group on 11 June 2014, advising that there was no formal lease documentation but that Hardware paid rent of $32,400 per annum to Timber. Hardware was also responsible for the payment of all outgoings associated with the Land, including council rates and land tax, which had totalled $87,018.03 in the most recent financial year.

31 On 30 June 2014, the project was approved by the Minister for Planning, pursuant to s 77 of the Major Transport Projects Facilitation Act 2009.[7] The Minister designated what land was required for the project on 30 July 2014.[8]

32 Heverin and Glynn met on 17 July 2014 to discuss the progress of the relocation and the likely timing of an offer of compensation from the Authority. According to Heverin, in a telephone call on 24 July 2014, Glynn advised him that she had to have a 'lump sum offer' on the table by the end of August of that year.

33 On 6 August 2014, the Authority served a Notice of Intention to Acquire ('the Notice of Intention to Acquire') addressed to Timber, Hardware, Joinery, Westpac Banking Corporation (as mortgagee) and 'all other parties holding an interest in [the Land]'. The Notice of Intention to Acquire was sent under separate covering letters to the directors of Timber (Rosenberg and Mrs Rosenberg), the director of Hardware (Rosenberg), and the director of Joinery (Rosenberg).

34 On 11 August 2014, Heverin spoke to Glynn about the replacement premises. He advised that a longstanding family dispute about those premises had been resolved, but there remained issues to be dealt with regarding administrator's fees. Heverin emphasised the importance of the timing of the compensation payment, as it would assist in meeting some of the relocation costs.

35 In August and October 2014, the Authority went through its internal processes to formulate an offer of compensation based on two options - option 1, the highest and best use assessment, with no additional compensation for the business including no compensation for any disturbance loss, and option 2, the existing use valuation, which would include relocation expenses. In practical terms, the Authority sought to have the Provans Group elect which of these two options would form the basis of the claim.

36 On 15 August 2014, AP provided the information requested in the Notice of Intention to Acquire, stating that it was not aware of any person having an interest in the Land apart from the directors of Timber, Hardware and Joinery.[9]

37 By email dated 26 August 2014, Glynn sought a meeting with the Provans Group to discuss 'the way forward' in relation to anticipated offers and claims for compensation. She explained that she understood there were several interests in the Land, namely Timber as proprietor, and Hardware and Joinery each as occupiers. The email stated:

As discussed, I wish to arrange a meeting with legal advisers and representatives of both [the Authority] and your clients in order to discuss issues associated with the manner in which compensation should be assessed in relation to the interests of each of those named above.

[The Authority] recognises that [Hardware] (and no doubt [Joinery]) is currently [taking] steps to relocate its business to new premises.

[The Authority's] representatives wish to discuss the manner in which valuations should be undertaken both in relation to the freehold interest and also the interests of the occupiers, particularly in circumstances where the occupiers pay rent of approximately $30,000 per annum for the present premises.

38 On 17 September 2014, a meeting was held between Glynn and David McQuilton ('McQuilton') on behalf of the Authority, the Victorian Government Land Monitor, David Brahe ('Brahe') and Celene Ramanathan ('Ramanathan') of the Authority's lawyers, Russell Kennedy ('RK'), and Blogg, Rosenberg and Heverin. A contemporaneous file note taken at that meeting by Ramanathan confirmed the structure and relationships between the companies in the Provans Group and noted that Timber owned the land and Hardware leased the land and paid rent of $32,000 per annum, although there was no formal lease.[10]

39 The file note of the meeting also recorded that Brahe identified for those present three alternative ways to value the Land, to the following effect:

(1) based on its highest and best use, which would involve the Authority denying any claim for compensation for clearing the Land or relocating the business, as the highest and best use was different from the (then) current use;

(2) based on its existing use, with the Authority to pay relocation costs; and

(3) on the basis that all three claimants were treated as one and the property was treated as owner-occupied, in which case compensation would 'presumably' result in an assessment based on the existing use and relocation costs.[11]

40 Brahe told those at the meeting that the Authority had received confirmation that the highest and best use of the Land was for residential development, specifically for a medium-rise building of three to four levels. (Amendments to the Yarra Planning Scheme had been prepared placing the Land in a Residential Growth Zone providing for apartment scale development of up to four storeys.) Brahe said that putting the Land to its highest and best use would require the existing building to be demolished and would thus remove any requirement for the Authority to pay relocation costs.

41 The file note records that Blogg (AP) 'disagreed and formed the view that a claim could be made for the highest and best use with a deduction for the costs to demolish the improvements but also a claim for relocation costs. ... Brahe (RK) indicated that this will result in an overpayment of compensation'. It might be observed that this tension, as expressed in the views of Blogg and Brahe, has continued throughout the dispute between the parties, both at trial and on appeal, namely, a reluctance on behalf of Provans to accept that compensation based on highest and best use of the land (that is, based on potential use and not existing use) excluded compensation for relocation. As mentioned, Provans never acceded to the Authority's core proposition.[12]

42 On 24 September 2014, RK wrote to AP setting out the Authority's understanding of what had occurred at the 17 September 2014 meeting, and confirming that the Authority did not expect to receive both a claim from Timber for the value of the Land based on its highest and best use as well as a claim from Hardware for relocation costs or in relation to the benefit of profit rent. The letter stated:

As was discussed at the meeting, it is our view that if the market value of the property were to be assessed at its highest and best use (that is for residential development) it would be necessary for the land to be cleared to enable the property to be developed for its highest and best use thus removing (for the purposes of assessing compensation payable by [the Authority]) the concept of the costs of relocation of the business enterprises conducted upon the property.

...

At the present time, it seems to us that an appropriate approach to this matter would be as follows -

• [Timber] be paid for the market value of the land acquired, that value to be assessed on the basis of a continuing use of the property for its current use.
• It be agreed that [Hardware] makes no claim for the value of its interest in the property.
• [Hardware] be paid compensation based upon the reasonable cost of relocation of that business to reasonably comparable premises. The relocation costs to be assessed having regard to that required to place the company in a similar operation condition to that which it now enjoys. This proposal is however, subject to the costs of relocation not being far greater than the value of the business conducted by [Hardware] as a going concern.
• An allowance for costs (of advisers) in relation to relocation.
• An allowance for expenses associated with the acquisition.

43 On 10 October 2014, AP responded to RK's 24 September 2014 letter seeking to reserve Timber and Hardware's rights in relation to the manner in which compensation would be assessed, and warning that if the 'in use' value of the Land was arrived at on the basis of the current rather than the market rent, Hardware would reserve its right to make a claim in relation to profit rent. In other words, it was made clear that compensation was not to be based on the peppercorn rent Hardware was paying Timber but rent at market value. The letter confirmed that Hardware was seeking to relocate the business to the replacement premises and emphasised that 'our clients are understandably concerned about the time constraints relating to the relocating and establishing of its business at [the replacement premises]'. The letter noted that Joinery was unlikely to have a claim by reason of the acquisition and proposed relocation of the business. AP requested that an offer be made as close to, if not in conjunction with, the Notice of Acquisition.

44 AP acknowledged that the manner in which the Authority assessed compensation was entirely a matter for it but added: 'Nonetheless in this instance there may be some utility in providing a breakdown as to how any compensation offered to our clients is calculated by [the Authority]'.

45 On 16 October 2014, the Notice of Acquisition was published in the Government Gazette identifying the interests acquired to include Timber's estate in fee simple and the interests of Hardware and Joinery respectively as occupiers.[13] The Notice of Acquisition was served on the companies in the Provans Group under a single covering letter, dated 22 October 2014, addressed to the directors of each of them.

46 RK gave the Authority legal advice about the form of offer that should be made. On 15 October 2014 Brahe advised:

I am of the view that at the present time, having regard to the various options that [Glynn] has drafted, that option 2 is the one to address. This option contemplates assessing compensation on the basis that Provan's will in fact relocate. If it transpires that Provan's decide at some time in the near future that it is not economically in its interests to relocate its business, the issue of the amount of compensation to be offered can be reconsidered.

It is my view, therefore, that, having regard to the advice that [the Authority] has received from its advisors, the offer of compensation should, at this stage, be in the sum of $8,706,279 ...

...

In making its first offer of compensation, I confirm our discussion to the effect that the offer should make it clear as to its components and the appropriate member of the Provan's group to which a particular item of compensation applies.

47 The letter included a table with items for market value based on existing use, solatium, relocation expenses, and professional expenses, with a dollar value next to each item.

48 Between 16 and 22 October 2014, the Authority went through its internal processes to obtain approval to make an offer of compensation based on 'option 2',[14] being the market value of the Land based on its existing use and relocation costs. During this process the Valuer-General Victoria ('VGV') queried the request for a valuation based on existing use. RK wrote to the VGV explaining why the request was made, saying that Provans had indicated an intention to relocate the business to the replacement premises in which case it would be inappropriate to pay Provans compensation based on the highest and best use of the Land. Summaries of the offer to be made were prepared. RK advised the Authority, on 22 October 2014, that it would be sensible to make a statutory offer in accordance with s 31 of the Act[15] based upon option 2, which, it thought, would be unlikely to be accepted. It advised that, in addition, the Authority should make a 'without prejudice' offer based on highest and best use for all of Provans' interests in the Land and subject to the execution of a deed of release and indemnity by all of the Provans companies. RK attached a draft 'without prejudice' offer letter but it was never used.

49 Glynn proposed that, due to the related nature of the companies in the Provans Group and the advice from RK, one offer should be made to Timber, Hardware and Joinery for their combined interests in the Land, clearly outlining the components of the offer and to which company each component related.

50 On 24 October 2014, the Authority served the Initial Offer of Compensation pursuant to s 31 of the Act ('the initial offer'). The initial offer was expressed as an offer addressed to the directors of each of Hardware, Timber and Joinery. The components of the offer were expressed in a table. The interpretation of the initial offer, including its table, is one of the issues at the heart of this appeal. The initial offer reads:

Offer of Compensation

[The Authority] has obtained independent advice as to the value of all three companies' interests in the property and, based upon this advice, [the Authority] offers a total sum of $8,706,000 (less monies paid) as compensation for the compulsory acquisition of the companies' interests in the property.

This offer is made pursuant to section 31 of [the Act] and is the amount of compensation [the Authority] has assessed as being the amount payable to the companies, based on information currently available to [the Authority].

The offer is comprised of several components and attributed to a specific interest as follows:

51 The initial offer was expressed to be made subject to a number of conditions including, relevantly, the following:

1. The sum offered is for the compulsory acquisition of the companies' interests in the whole of the property and for all loss or damage which may be sustained as a natural and direct consequence of the acquisition, including any impact to businesses, and is made in full and final settlement of all claims that the companies may have.
2. The sum offered includes an allowance to relocate [Hardware] and [Joinery] from the property to the replacement property at 168-174 and 176-182 Alexandra Parade and 477 Hoddle Street, Clifton Hill.

1. If the offer is accepted, the companies will be required to release and indemnify [the Authority] from any further claims arising from the acquisition. In the event that [the Authority] is required to pay compensation for any further interest in the property, [the Authority] may require reimbursement of the compensation paid. The companies will be required to sign a Release and Indemnity agreement at settlement to this effect.[16]

52 The initial offer was accompanied by three certificates of valuation issued by the VGV. Each recorded Timber as the sole proprietor of the Land. The first certificate recorded that the valuation of Timber's interest was based upon the 'in use' value of the Land as a timberyard and like business and assessed compensation at $5.675 million. The second certificate referred to the lessee/occupier as Hardware and assessed the amount of compensation for '[a]ll interests in the land' as 'nil'. Likewise, the third certificate, which referred to the lessee/occupier as Joinery, assessed the amount of compensation for '[a]ll interests in the land' as 'nil'. There was no dispute by Hardware or Joinery in respect of the 'nil' value assessment made with respect to their respective interests in the Land.

53 The initial offer attached a 'Form 10' as prescribed under the Land Acquisition and Compensation Regulations 2010 ('the Regulations'). Form 10 is a pro forma statement to the effect that the recipient could accept the offer in full, accept the offer in part, or reject the offer. This was required by s 31(4)(c) of the Act to accompany an initial offer of compensation.[17] The attached Form 10 provided:

STATEMENT TO ACCOMPANY INITIAL OFFER OF COMPENSATION

1 What this statement is about

This statement comes to you with an offer of compensation by the ... Authority because you had an interest in land which was compulsorily acquired.

You should refer also to the statement which came with the notice of acquisition which was given to you on 22 October 2014.

(a) accept the offer in full (complete Part A of Form 11); or

(b) accept the offer in part (complete Part B of Form 11); or

(c) reject the offer (complete Part C of Form 11).

Within 3 months after service of the offer (unless the time is extended by agreement or by the Minister) you must give the ... Authority a notice of acceptance or claim.

If you do not reply within time, the ... Authority may assume that you reject the offer and dispute it. A dispute is determined by the Victorian Civil and Administrative Tribunal or by the Supreme Court.

If you need more time to decide what to do, ask the ... Authority, or if the ... Authority will not let you have more time, you can ask the Minister for more time.

You may have the full amount of the offer paid to you within 30 days of making a written request to the ... Authority even if you are claiming more than the offer.

An advance is not payable unless the offer is for $5000 or more. If the advance paid is greater than the compensation finally determined, you will have to repay the difference.

If you think the information which you have been given with the offer is incorrect, you should consider consulting a solicitor, valuer or other professional adviser.[18]

54 Also attached to the initial offer was a partially completed 'Response to Offer' (Form 11 under the Regulations) that referred to the 'Person(s) accepting offer or making claim' as Timber, Hardware and Joinery '(collectively "the Claimants")'. It recorded that the offer was for '$8.706 million comprised of several components and attributed in the letter from the Authority to the Claimants of 24 October 2014 to specific interests as follows'. The partially completed Form 11 reproduced the table from the initial offer, numbered item by item, and included, as item 7, the reimbursement of stamp duty, transfer fees and conveyancing costs incurred by Timber:

Provans Timber & Hardware Pty Ltd and Provan's Timber (Joinery) Pty Ltd

Provan's Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan's Timber (Joinery) Pty Ltd

Provan's Timber Pty Ltd and Provan's Timber & Hardware Pty Ltd

Provan's Timber Pty Ltd and Provan's Timber & Hardware Pty Ltd

7. Reimburse stamp duty, transfer fees and conveyancing costs incurred by Provan's Timber Pty Ltd payable on a property up to $5,675,000

55 The partially completed Form 11 named the persons who were to respond to the initial offer in the following way:

The interest in the land of the

persons responding to offer: Provan's Timber Pty Ltd (sole proprietor),

Provans Timber & Hardware Pty Ltd (lessee/occupier) and Provan's Timber (Joinery) Pty Ltd (lessee/occupier)

56 On 17 December 2015, Provans Group served a Response to Offer. By then Hardware had relocated, in September 2015, to the replacement premises. At the time of the relocation, the owner, Lysteron Pty Ltd, did not have the funds to undertake any refurbishment of the premises to make it suitable for the operation of the hardware business. Because of the urgency of the need to relocate the business, it was decided that the Provans Group would fund the relocation and cover the refurbishment costs. In return, Hardware entered into a lease with Lysteron Pty Ltd commencing on 1 August 2015, for an initial 10-year period, with two five-year options. Hardware was to pay rent at the market rate.[19]

57 In the Response to Offer, Timber claimed compensation for market value in the sum of $12.7 million and Hardware and Joinery claimed relocation costs (in effect rejecting the Authority's core proposition):

Provan's Timber Pty Ltd claims the sum of $12,700,000 for market value in response to Item 1 of the offer of compensation plus costs associated with a replacement property in response to item 7 of the offer of compensation.

Provans Timber & Hardware Pty Ltd and Provan's Timber (Joinery) Pty Ltd accept item 3 of the offer of compensation for the Relocation Expenses in the sum of $2,871,000 offered by the Authority.

Each of Provan's Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan's Timber (Joinery) Pty Ltd accept the offer made for submission expenses of $20,000 and claim legal, valuation and other professional expenses and interest pursuant to [the Act].[20]

58 The Response to Offer also addressed each of the components of the initial offer, item by item, by the particular Provans company with the relevant interest, as follows:

The responses to the several components in the 24 October 2014 offer by the persons to whom each such offer was made are as follows;

Market value: Provan's Timber Pty Ltd:

62-64 Alexandra Parade, Clifton Hill

88-92 Alexandra Parade, Clifton Hill

$10,000,000

$2,700,000

$12,700,000

Relocation expenses: Provans Timber & Hardware Pty Ltd and Provan's Timber (Joinery) Pty Ltd: Agreed at

(a) Legal expenses (ongoing): Provan's Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan's Timber (Joinery) Pty Ltd

(b) Other professional expenses pursuant to section 41(1)(f) of the Act (to date and continuing): Provan's Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan's Timber (Joinery) Pty Ltd:

- accounting fees

- architectural fees

- heritage architects

- planning

$35,277

$20,930.25

$880

$7,001.50

Submission expenses: Provan's Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan's Timber (Joinery) Pty Ltd: Agreed at

Valuation fees to date and ongoing: Provan's Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan's Timber (Joinery) Pty Ltd

(a) Stamp Duty assessed on purchase price of replacement property (up to value of $12,700,000): Provan's Timber Pty Ltd

(b) Registration fee payable on replacement property (up to a value of $12,700,000): Provan's Timber Pty Ltd

(c) Legal and conveyancing expenses in relation to the acquisition of a replacement property: Provan's Timber Pty Ltd

(d) Agent's fees in locating a replacement property: Provan's Timber Pty Ltd

(e) In the event that a replacement property is not acquired by Provan's Timber Pty Ltd within the prescribed time limit an indemnity in relation to the Capital Gains Tax incurred by reasons of the acquisition

Interest pursuant to the Act: Provan's Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan's Timber (Joinery) Pty Ltd

59 At the end of the Response to Offer, Provans disputed the Authority's valuation of the Land stating:

The Claimants dispute the value of the land by the Authority and attached is a copy of the certificate of valuation which has been provided by a Valuer in respect of his valuation of the land together with a statement advising how that valuation is calculated.

60 Provans provided its own certificate of valuation that adopted a valuation approach described as a 'Direct Comparison with consideration given to the value of the enterprise as a going concern'. The 'compensation assessment' was valued at $12.7 million excluding GST.

61 On 6 April 2016, the Authority provided its statutory Reply to the Response to Offer, pursuant to s 36 of the Act,[21] in the form of a revised offer. By 17 February 2016 there had been an agreement on the valuation of the Land at the date of the acquisition assessed on the basis of its highest and best use, namely, $12.2 million. The agreed valuation had been reached by the four valuers engaged by the parties at that time.[22]

62 The Authority addressed its Reply to Timber, Hardware and Joinery, and defined and referred to them jointly as 'the Claimants'. The Reply referred to what it described as 'an agreement' between the parties that all claimants were to be treated 'as one'. Provans later responded that there was no such agreement. The Reply stated:

This Reply is made to the Claimants' claim for compensation pursuant to the provisions of s 36 of [the Act]. The Claimants have agreed that the time for the delivery of this Reply is extended to 22 April 2016.

By this Reply, the Authority offers to vary the amount of compensation previously proposed by it in its Offer of Compensation dated 24 October 2014.

In this Reply, the Authority makes two Offers of Compensation placed in the alternative for the Claimants' consideration (only one of the offers may be accepted by the Claimants). Any acceptance is on the basis of settlement of the Claimants' claim for expenses in full and final settlement.

In making its Reply, the Authority acknowledges agreement between the parties that all Claimants be treated as one (despite the fact that they are separate corporate entities but noting that each Claimant operates in conjunction one with the other).[23]

63 The Authority then made two offers in the alternative. The first, described as the 'primary offer', included an allowance of compensation for market value of the Land at its highest and best use (for residential development), as agreed by the valuers representing the claimants and the Authority, in the amount of $12.2 million. The primary offer also included an allowance for $100,000 solatium,[24] $20,000 for submission expenses and $170,000 for costs and expenses as contemplated by s 41(1)(f) of the Act.[25] The total value of the primary offer was $12.49 million.

64 The second, described as the 'alternative offer', assessed the market value of Timber's interest in the Land based on an 'existing use' or 'in use' assessment, but made allowance for compensation for relocation expenses. The alternative offer reiterated the Authority's core proposition and made plain that compensation would not be provided for both relocation costs and a valuation based on highest and best use of the Land. The Authority addressed Timber, Hardware, and Joinery collectively as 'the Claimants', and said, in relation to the alternative offer:

This alternative offer is based upon the fact that the Claimants have sought (as part of the compensation payable) relocation expenses in the sum of $2,871,000. The Authority agrees that relocation expenses incurred by the Claimants may amount to the sum of $2,871,000 but say that the Claimants cannot recover compensation based upon the highest and best use of [the Land] ... and at the same time make a claim for relocation expenses.[26]

65 The Authority further said that, if the claimants sought to 'persist' with a claim for relocation expenses, it offered $5.675 million for the market value of the Land on the basis of its existing use, in accordance with the certificate of valuation previously provided. The compensation for relocation expenses ($2.871 million), solatium ($100,000), submission expenses ($20,000) and costs and expenses as contemplated by s 41(1)(f) of the Act ($170,000) were the same as those in the primary offer. The total value of the alternative offer was $8.836 million.

Provans' response: claimants not to be treated 'as one'

66 On 29 April 2016, AP responded to the Authority's Reply noting that the agreement that had been reached relating to market valuation 'relates to the interest in land of Provan's Timber Pty Ltd as registered proprietor of the land'. In the context of asserting its entitlement to an advance of the compensation payable, the letter went on to emphasise the distinct interests of Timber, Hardware and Joinery, saying:

As you know, the initial letter from the Authority offering compensation on 24 October 2014 was careful to distinguish between the amounts assessed as compensation in favour of and payable to [Timber] and amounts assessed as compensation in favour of and payable to either [Hardware] and/or [Joinery].

The Response to Offer served by our client on 17 December 2015 similarly responded discretely in relation to each offer made to each company. In particular, the Response to Offer included a separate response on behalf of [Timber] in respect to its claim for market value.

67 AP's letter observed that the Authority had recognised that neither Hardware nor Joinery had any compensable interest with respect to the market value of the Land and that Hardware and Joinery had accepted this:

As set out in the Certificates of Valuation dated 20 October 2014 the initial offer made for market value offered '$nil' compensation for the interest in land of [Hardware] as lessee/occupier and '$nil' compensation for the interest in land of [Joinery]. Neither of these companies disputed the 'nil' offer made to them for market value in the Response to Offer.[27]

68 The letter unequivocally rejected the existence of an agreement that Timber, Hardware, and Joinery were all to be treated 'as one' for the purposes of compensation under the Act:

So that the position is clear, contrary to the assertion made in the Reply dated 6 April 2016, at no time has there been any agreement that 'all claimants be treated as one'. The course of communications and in particular the formal offer and Response to Offer process has been very much to the contrary.

We invited you to advise as to the basis of the assertion in the Reply dated 6 April 2016 that all claimants were agreed to be treated as one. No response has yet been received. There is no basis for the assertion.

69 On 31 May 2016, RK sent a letter to AP accepting that the Authority might have been mistaken in assuming that 'all claimants be treated as one'. It stated that the initial offer was made on the basis that the Provans Group would be relocating and the compensation offered by the Authority reflected the market value of the existing use of the Land and all claims that could be made by the Provans Group as a whole. It reiterated that it was on that basis, and that basis alone, that an allowance was made for disturbance to the business interests of the Provans Group.

70 RK's letter went on to say that Hardware's interest in the Land was no greater than that of a tenant at will. Timber, considered as a separate entity, could at any time have exercised its right to terminate the tenancy leaving Hardware in exactly the same position as under the compulsory acquisition. There was therefore no causal connection between the compulsory acquisition of the Land and any loss suffered by Hardware. Had its interest been considered separately from that of Timber there would have been no offer made for its relocation costs. If the table in the initial offer[28] indicated that Hardware, Timber, and Joinery were being offered compensation as separate entities, this was to be regretted. RK's letter stated:

If the Authority had proceeded on the basis that each entity was to be treated separately then no offer for relocation costs would have been made at all to [Hardware] because that entity has not demonstrated a basis upon which to make a claim of that type or in that amount given the nature of its interest in the land. The original offer was made on what may have been a mistaken assumption that the companies would be treated as one entity and that the entity would move its existing business to a new location.

It is regrettable that the table might be read as treating the entity separately. That said, rather than the table being conclusive evidence of the Authority treating the entities separately, the form and content of the original offer is no more than a manifestation of and a compounding of a possible error made by the Authority in formalising its position.[29]

71 The letter went on to say that the Authority considered the initial offer not to be a binding offer as some of the information contained in it may have been incorrect. Rather, it recognised Timber's entitlement to market value assessed on the highest and best use of the Land. It therefore offered Timber $12.49 million and, on the basis of Hardware's 'nil' interest in the land, it offered Hardware nothing.

72 On 21 June 2016, AP provided its clients' response to the revised offer. It asserted that at no time had there been any agreement that 'all Claimants be treated as one' and both the initial offer and the Form 11 response to the initial offer dealt individually with claims made by each of Timber, Hardware and Joinery. As a result of that response, the only 'disputed claims' between the Authority and an individual claimant were the claims by Timber for the market value of the land ($12.7 million) and solatium ($350,000) (with the legal expenses and professional expenses claimed jointly by Timber, Hardware and Joinery to be advised).[30] The response to the revised offer agreed that the market value of the land was $12.2 million and claimed stamp duty, registration fees, legal and conveyancing expenses and agent's fees in locating a replacement property, as well as compensation for any capital gains tax payable by reason of the loss of the capital gains tax-free status of the land.

73 The alternative offer, being premised on a single claimant, was to be treated as irrelevant. The response to the revised offer said:

The premise of the alternative offer by way of reply is false. It assumes an agreement that the Claimants be treated as one. There is not and never was any such agreement.

The alternative offer is irrelevant.

74 Timber referred the 'disputed claims' to the Supreme Court for determination, pursuant to s 80 of the Act. The 'disputed claims'[31] include the amount that Timber said remained outstanding on the agreed compensation for the market value of the Land, after the payment of several advances. On 19 December 2014, the Authority made an advance of $8,693,310 and on 10 May 2016 it made a further advance of $3.784 million,[32] a total of $12,477,310. The Authority claimed that the payments were made to Timber as the registered proprietor of the Land in accordance with s 51 of the Act.[33] It claimed that Timber had been compensated for the market value of the Land, based on its highest and best use, and that no further amounts were payable to Timber. This was disputed as the claimants said that $2.871 million was owed to Hardware for its relocation costs and that $2.871 million of the advance of $8,693,310 made on 19 December 2014 was paid to Hardware to discharge that obligation.[34] On this understanding, the advances paid to the claimants left $2.871 million outstanding to Timber.

75 The Authority commenced proceedings against Hardware and Joinery for a declaration that Hardware and Joinery were not entitled to any compensation arising from the acquisition of the Land. The Authority denied that the payment on 19 December 2014 included a payment of $2.871 million to Hardware. The judge referred to this as the 'subsidiary proceeding'.

76 Section 30 of the Act confers a right to compensation on anyone whose interest in land has been divested or diminished by the compulsory acquisition of that interest:

30 Right to compensation on acquisition

Subject to this Act, every person who, immediately before the publication of a notice of acquisition, had an interest in land that is divested or diminished by the acquisition of the interest to which that notice relates has a claim for compensation.[35]

77 An 'interest in land' is defined, under s 3, as 'a legal or equitable estate or interest in the land' or 'an easement, right, charge, power or privilege in, under, over, affecting or in connexion with land'.

78 Section 31 regulates the making of an initial offer of compensation by the Authority:

31 Initial offer of compensation

(1) After the notice of acquisition has been published in the Government Gazette the Authority must make an offer in writing to each claimant of whose entitlement to compensation it is aware.

(2) An offer under this section must be made -

(a) within fourteen days after the date of acquisition; or

(b) within such further period as -

(i) may be agreed upon in writing between the Authority and the claimant; or

(ii) the Minister administering the special Act may certify.

(3) The offer must set out the amount that the Authority, on the information available to it, has assessed as a fair and reasonable estimate of the amount of compensation payable to the claimant under this Act on the assumption that the claimant held the interest in respect of which the offer is made.

(4) An offer under this section must be accompanied by -

(a) a copy of the certificate of valuation to which the Authority has had regard in making its offer; and

(b) a statement explaining the difference between its offer and the valuation referred to in paragraph (a) if these differ; and

(c) a statement in the prescribed form setting out the principal rights and obligations of persons whose interests in land have been acquired under this Act.

(5) In making its offer the Authority must have regard to a valuation of the land carried out by the Valuer-General or a person who holds the qualifications or experience specified under section 13DA(2) of the Valuation of Land Act 1960.

(6) A valuation under subsection (5) may be made in respect of the specific interest acquired or in respect of the freehold interest in the land whichever appears to the Authority to be appropriate in the circumstances.

(7) If an offer of compensation is made under this section in respect of an acquired interest and immediately prior to the date of acquisition -

(a) the interest was affected by another interest in the land; or

(b) rates, taxes or other charges were charged upon the land in which the interest subsists -

the Authority may reduce the amount of its offer by an amount equal to the amount that it considers is necessary to provide for that other interest or to pay those rates, taxes or other charges.

(8) To the extent that an amount of compensation offered under this section, or any part thereof, is not disputed, the amount offered is binding upon the Authority unless the Authority can demonstrate that the information contained in the offer and relied upon by the Authority in making the offer was incorrect.[36]

79 Section 33(1) provides that before the expiration of three months after the date of service on a claimant under s 31 the claimant must '(a) serve a notice of acceptance on the Authority stating that the claimant accepts the amount of compensation offered in respect of the acquisition; or (b) serve a notice of claim upon the Authority'. Section 34 provides that the notice of acceptance must be in the prescribed form and identify the interest and the claimant's entitlement to that interest. Section 34(3) provides: 'The claimant may accept the offer in part and leave specified matters as being subject to negotiation or claim.'

80 The claimant may also accept the amount of compensation offered but can 'claim ... to be entitled to a further amount of compensation' and those amounts must be separately identified in the notice of claim served under s 33(1)(b), pursuant to s 35(1)(c). The 'notice of claim may [also] specify any further matter which the claimant regards as being subject to negotiation', pursuant to s 35(2).

81 The Authority, pursuant to s 36, must serve upon the claimant a statement in writing replying to the notice of claim and may, in that statement, pursuant to s 36(2), '(a) admit the claim as to whole or to part' or '(b) offer to vary the amount of the compensation previously proposed...' or '(c) reject the claim and repeat its offer under section 31'.

82 Section 41 relevantly governs the assessment of compensation:

41 General principles on which compensation is to be based

(1) Except as otherwise provided in this Part, in assessing the amount of compensation payable to a claimant in respect of an interest in land which is acquired under this Act, regard must be had to the following factors -

(a) the market value of the interest on the date of acquisition;

(b) any special value to the claimant on the date of acquisition;

(c) any loss attributable to severance;

(d) any loss attributable to disturbance;

(e) the enhancement or depreciation in value of the interest of the claimant, at the date of acquisition, in other land adjoining or severed from the acquired land by reason of the implementation of the purpose for which the land was acquired;

(f) any legal, valuation and other professional expenses necessarily incurred by the claimant by reason of the acquisition of the interest.

(2) If the market value of an interest in land is assessed on the basis that the land had potential to be used for a purpose other than the purpose for which it was used on the date of acquisition, compensation must not be allowed for -

(a) any special value in respect of any pecuniary advantage that would necessarily have been forgone in realizing that potential; and

(b) any loss attributable to disturbance that would necessarily have been incurred in realizing that potential.

(3) If less than the whole of the land in which a claimant's interest subsists is acquired or less than the whole of that interest is acquired, the market value of the acquired interest is the difference between the market value of the interest before the acquisition and the market value of the interest after the acquisition.

(4) The expenses referred to in subsection (1)(f) do not include any costs incurred by a claimant in the course of prosecuting any proceedings [in] the Tribunal or the Court under Part 10.

(5) If compensation has previously been paid in respect of the land pursuant to Part 5 of the Planning and Environment Act 1987, the amount of compensation payable under this Part in respect of an acquired interest in land or in respect of land in which an acquired interest subsists must be reduced by the prescribed amount.

(6) If the claimant's interest in the acquired land was liable to expire or to be determined, the assessment of compensation payable under this Part in respect of that interest must take account of any reasonable prospect of renewal or continuation of the interest.[37]

83 What amounts to 'disturbance loss' is defined by s 40 as follows:

loss attributable to disturbance means any pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of -

(a) the service upon the claimant of a notice of intention to acquire, where the Authority has refused or failed to give consent to the carrying out of improvements to the land in respect of which that notice has been served or the effecting or obtaining of any sales, transactions, licences or approvals in respect of that land; and

(b) the fact that an interest of the claimant in that land has been divested or diminished, being a pecuniary loss for which provision is not otherwise made in this Part;[38]

84 Section 5A(3) of the Valuation of Land Act 1960 ('the VL Act') requires that the interest in land of an individual claimant is to be valued in accordance with the highest and best use of that interest:

(1) Unless otherwise expressly provided where pursuant to the provisions of any Act a court board tribunal valuer or other person is required to determine the value of any land, every matter or thing which such court board tribunal valuer or person considers relevant to such determination shall be taken into account.

(2) In considering the weight to be given to the evidence of sales of other lands when determining such value, regard shall be given to the time at which such sales took place, the terms of such sales, the degree of comparability of the lands in question and any other relevant circumstances.

(3) Without limiting the generality of the foregoing provisions of this section when determining such value there shall, where it is relevant, be taken into account -

(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use;

(b) the effect of any Act, regulation, local law, planning scheme or other such instrument which affects or may affect the use or development of such land;

(c) the shape size topography soil quality situation and aspect of the land;

(d) the situation of the land in respect to natural resources and to transport and other facilities and amenities;

(e) the extent condition and suitability of any improvements on the land; and

(f) the actual and potential capacity of the land to yield a monetary return.

85 The judge noted that a number of issues had been resolved. Joinery did not continue to assert that it was entitled to compensation.[39] The parties had, in substance, agreed the amounts of compensation in issue for both relocation costs and the market value of the Land. At the direction of the Court, a conference of valuers was held on 19 June 2018, following an exchange of valuation reports. The valuers prepared a joint statement setting out areas of agreement and disagreement. The judge referred (at [149] of the Reasons)[40] to the principal area of agreement between the valuers as being the market value of the Land based on its highest and best use, namely, the underlying residential development value that was agreed at $12.2 million. An issue on the appeal is the extent to which this agreed valuation applied if Hardware also recovered compensation for its relocation costs.[41]

86 Provans did not dispute the amount of recoverable relocation costs as at least $2.871 million.[42]

87 It was not in dispute that there was no lease or other written agreement between Timber and Hardware. On this basis, the judge found (at [151]) that Hardware's interest in the Land was as a tenant at will. She said:

It is not disputed that there was no formal lease between Timber and Hardware, and it was not asserted that there was any other form of agreement governing Hardware's occupancy of the Land relating to anything other than the payment of annual rent and outgoings by Hardware. It is tolerably clear, therefore, that Hardware occupied the Land as a tenant at will and I so find.

88 This is a critical finding by the judge and there is no challenge to it.

89 A primary issue in dispute was whether Hardware's relocation costs were a natural, direct and reasonable consequence of the divestment of its interest in the Land as a tenant at will and amounted to 'disturbance loss' within the meaning of s 40(b).[43] The judge accepted, on the basis of Secretary, Department of Economic Development, Jobs, Transport & Resources v Manor Lakes (Werribee) Pty Ltd,[44] that the phrase 'natural, direct and reasonable consequence' requires a very close and limited causal connection within the context of the Act and that it would not be sufficient for the compulsory acquisition to have been no more than the genesis, or a necessary condition, for the incurring of the relocation costs. She observed that there was no dispute that Hardware's interest in the Land had a value of 'nil'. She said (at [225]):

Hardware's interest in the Land was a tenancy terminable at will. This interest was so attenuated as to not have any market value: the value of Hardware's leasehold interest was given by the Authority's valuer as 'nil' and Hardware did not dispute this valuation. Hardware had no ongoing legal entitlement to occupy the Land - it did so only with the consent of Timber, which was and would be freely given for so long as their interests were aligned. On one view, the real detriment to Hardware was caused by the Authority taking away Timber's interest in the Land, resulting in the constructive withdrawal of consent to Hardware's occupation of the Land.[45]

90 The judge noted that the need for Hardware to relocate occurred immediately upon the divestment of Hardware's interest in the Land. She considered Roads and Maritime Services v United Petroleum Pty Ltd[46] where the New South Wales Court of Appeal held that loss of future income from a business carried on under a lease terminable on one month's notice was not a loss attributable to disturbance because it was not reasonably incurred as a direct and natural consequence of the acquisition; rather, it was incurred by reason of the attenuated tenure held by the lessee. The judge distinguished United Petroleum on the basis that loss of profits is a different form of loss from relocation costs; by contrast with the unsuccessful claimant in United Petroleum, Hardware's claim 'was not a claim for losses arising after its leasehold interest would have expired'.[47] The judge said:

the need to relocate arose immediately upon the divestment of Hardware's interest in the Land, that is, upon the service of the Notice of Acquisition. Although Hardware was given some time to vacate the Land, it was required to take steps to do so straight away. As a result, Hardware's claim for relocation costs was not a claim for losses arising after its leasehold interest would have expired. Hardware had an interest in the Land when it was required to relocate_._ Unlike in United Petroleum, compensation paid to Hardware for relocation costs is for disturbance of Hardware's interest in the Land, not for disturbance of the continued operation of the business unsupported by an interest in the Land. Nor could it be fairly said that the relocation costs were a function of Hardware's decision 'to conduct a business intended to operate in the long term under a lease which could be terminated at any time on very short notice'. It was not the limited term of the Lease that generated the need to incur relocation costs but the acquisition of the Land.[48]

91 The judge observed that s 41(6) of the Act[49] required that, relevantly, the assessment of compensation of interests that are 'liable to expire' or 'be determined', quintessentially leasehold interests, must take account of 'any reasonable prospect of renewal or continuation of that interest'. She noted[50] that s 41(6) was introduced into the Act in response to the High Court's decision in Minister v New South Wales Aerated Water & Confectionary Co Ltd[51] that held that where there was a current leasehold interest on compulsorily acquired land it was not permissible to consider the probability of renewal of the lease based on the personal relations of the lessor and lessee to one another.

92 Although the judge was doubtful of how long Hardware would have been permitted by Timber to operate its business on the Land, because of the uplift in value of the Land due to its rezoning, she found that Hardware would have continued its operation there after the date of acquisition. She said (at [242]):

I accept the claimants' submission that s 41(6) requires the interest of the claimant to be considered in its context, that is, the context in which it actually exists as an interest in land. Whether there is a 'reasonable prospect' of the continuation of the interest depends both on the nature of the interest and on the surrounding circumstances. In this case, Hardware's occupancy depended on a number of factors: Timber's good will; Timber retaining its interest in the Land as landlord; and, in the future, Timber foregoing the opportunity to realise the potential of the Land. That does not, however, require Hardware's tenancy to be viewed through the eyes of the hypothetical purchaser of the Land. That is the paradigm for the assessment of the market value of the Land; it is not the paradigm within which losses attributable to disturbance must be assessed. The evidence was that, absent the compulsory acquisition of the Land, Timber would have permitted Hardware to continue to operate the business on the Land beyond the date of acquisition. While I have some doubts about how long this would have persisted given the significant uplift in land value resulting from its rezoning, I am satisfied that it would have continued beyond the acquisition date. That is enough for the compulsory acquisition of Hardware's leasehold interest in the Land to be the 'natural, direct and reasonable' cause of Hardware's need to relocate the business and thereby incur relocation costs. The imperative to relocate occurred during the term of Hardware's leasehold interest in the Land or during its very likely continuation absent the compulsory acquisition, namely, upon or very shortly after the service of the Notice of Acquisition.[52]

93 She went on to say (at [247], [248] and [276]):

I observe that on the causal analysis above, it was not necessary to find that, but for the divestment of its interest, Hardware intended to occupy the Land 'indefinitely'. It was necessary to be satisfied that the divestment of Hardware's interest in the Land was the natural, direct and reasonable cause of Hardware incurring the relocation costs. I have so found. Hardware occupied the Land at the time of its acquisition and the acquisition, involving the divestment of Hardware's interest and that of Timber, meant that it either had to close the business or move to new premises.

In any event, I reject the proposition that Hardware was set to move to the replacement premises regardless of the ... Project. Messrs Heverin and Rosenberg only started to look for new premises once they were on notice of the prospect of the East West Link proceeding. Mr Rosenberg did not have control of the replacement premises until February 2014. Mr Rosenberg also gave evidence that if Hardware had not moved to the replacement premises, they would most likely have been developed into units. I accept that evidence.

...

[A]s I have endeavoured to explain, Hardware's entitlement to relocation costs does not depend on it establishing a right to occupy the Land 'indefinitely' or for any substantial period of time. Its right to be compensated arose on the acquisition of the Land, which gave rise to the need to relocate the business.[53]

94 The judge accepted that Hardware's relocation costs were losses attributable to disturbance it suffered, resulting from the divestment of its interest, and its entitlement to compensation for that disturbance loss was not inconsistent with Timber's claim for compensation on the basis of the highest and best use of the Land. She said (at [299]):

In the usual course, the existence of a leasehold interest of any substance will be reflected in the market value of the land. The entitlements of the owner claimant and the tenant claimant will be broadly aligned in that the existence of the lease will affect the land value. In this case, for the reasons given, it is unnecessary for Hardware to establish a leasehold interest of any durability in order to qualify for relocation costs and it is unlikely that its 'ephemeral' leasehold interest would affect the market value of the Land. Because of the arrangements in [the Act], Hardware's entitlement to relocation costs is not limited by reason of any inconsistency with the basis upon which the market value of the Land is assessed.[54]

95 The judge's conclusion on causation is challenged on the appeal.[55]

96 The Authority submitted that the initial offer was a single indivisible offer made to all three claimants that was not capable of partial acceptance, that is, not capable of acceptance by Hardware (or Hardware and Joinery) alone in the absence of acceptance by Timber. Alternatively, it submitted that it was not bound by the initial offer because it contained incorrect information upon which the Authority relied. Reliance upon 'incorrect' information contained in an offer precludes the offer from becoming binding.[56]

97 The judge accepted the submission of Provans that the initial offer is to be construed as three separate offers made to each of Timber, Hardware and Joinery in relation to their respective entitlement to compensation under the Act. She noted that the initial offer was expressed to be an offer of compensation for the purposes of s 31(1) of the Act.[57] This required the Authority to make an offer in writing to each claimant of whose entitlement to compensation it was aware and to set out the amounts that the Authority assessed as fair and reasonable, taking into account the factors identified in s 41, market value, disturbance loss, professional expenses and so on.[58] At the time the Authority made the initial offer, it was aware that each of Timber, Hardware and Joinery had an interest in the Land and claimed an entitlement to some form of compensation because of the compulsory acquisition of the Land. However, the initial offer purported to be a form of 'joint' offer identifying specific amounts of compensation reflecting the relevant factors in s 41 that the Authority submitted had to be accepted in whole or rejected in whole.

98 In rejecting the Authority's submissions, the judge said (at [168]) that the offer to Hardware for its relocation costs, contained in the initial offer, must be construed as the offer in writing the Authority made, and was obliged to make, to Hardware:

The Initial Offer must be construed objectively in the light of the legislative requirements. Given the requirement under [the Act] to make an offer to each claimant of whose entitlement to compensation the Authority was aware, the offer attributed to Hardware and Joinery for relocation costs must be taken to be a separate offer made to them in respect of the loss they suffered as a result of having to relocate the business. It flows from this conclusion that, as the claimants submitted, the Initial Offer must be construed as separate offers made to each of [the] complainants in respect of the loss that they suffered as a consequence of the compulsory acquisition of the Land.[59]

99 The judge observed that the indemnity and release component (in item 8 of the conditions of the initial offer)[60] could be executed by a single claimant in respect of its particular interest and that, even if the initial offer were to be construed as a single indivisible offer to all three claimants, it must have been capable of partial acceptance. This was reflected in the Form 10 that was attached to the initial offer[61] that was required to accompany the initial offer as provided for under s 31(4)(c) of the Act.[62]

100 She identified (at [171]) what she considered were the flaws in the Authority's position:

In my view, the submission that the Initial Offer was a single offer made to the complainants jointly that could not be disaggregated to allow separate acceptance of different components cannot be accepted having regard to its language and the statutory context within which it was made. By the inclusion of the Table, the Initial Offer is quite specific as to its parts and as to the persons to whom the component parts are offered. Furthermore, the Authority does not contend that it was not open to the claimants to accept some of the components and not others - it was plainly open to them, for example, to accept the offers for legal, valuation and submission expenses, but reject the offers for the other components. Similarly, it cannot be the case that it was not open to Timber to accept the amount offered for solatium when the other two interest holders - Hardware and Joinery - were given a valuation of nil in the certificates of valuation attached to the Initial Offer and solatium was therefore irrelevant to them. In fact, the Authority's true position is that only the offers for the value of the Land and for relocation costs were interdependent and incapable of separate acceptance or rejection. This is not reflected in the text of the Initial Offer and is not consistent with the statutory scheme for the assessment of compensation.

101 The judge accepted that the construction of the initial offer should be informed by its status as a statutory offer. She accepted that there were signposts in the initial offer that favoured the Authority's interpretation. She recognised that it was not unambiguous, being 'a mongrel of an offer'.[63] She said:

The Initial Offer was a statutory offer made pursuant to [the Act]. It was not a conventional commercial contract. It was made pursuant to a statutory obligation imposed on an agency authorised to compulsorily acquire land for public purposes to set out and make an offer of amounts that it assessed to be 'a fair and reasonable estimate' of the amount of compensation payable to each claimant of whose entitlement to compensation it was aware and in the context of the procedures for making and responding to offers and claims set out in [the Act]. These are plainly matters outside the four corners of the offer document itself that must influence its construction.

Moreover, the Initial Offer is not free of ambiguity or susceptible of only one meaning. Although I have found it to contain separate offers to the three separate claimants, its written terms also contain some signposts pointing to it being a single offer made to all three claimants jointly. It is, in short, a mongrel of an offer.[64]

102 The judge considered that the intentions of Glynn and McQuilton, as to the relationship between the offers made (either compensation for Timber based on market value assessed as highest and best use or market value for Timber assessed on existing use plus relocation costs for Hardware) were nevertheless irrelevant to the construction of the initial offer, even if communicated to Provans. Those intentions could not affect the meaning of the initial offer where they 'were not consistent with the scheme for the assessment of compensation'[65] under the Act. She found (at [180]) that the Authority's intention was in conflict with the terms of the initial offer because it 'was broken into components and it attributed different components to different entities in the Provans Group. It said nothing about one component or offer being available only on the acceptance of another. It said nothing about the Provans entities being treated as "one".'

103 She observed (at [182]) that there was no acceptance by Provans of what we have described as the Authority's core proposition[66] and observed that an 'in use' assessment was unusual, if not controversial, in light of the legislative requirements, although she accepted it was generated by the Authority's willingness to accommodate Provans to ensure that funds for relocation became available.[67] She found (at [186]) that the 'form of the Initial Offer did not preclude Hardware from accepting the offer for relocation costs' and that '[t]he amount offered for relocation costs was "not disputed"' within the meaning of s 31(8).

104 Furthermore, the judge rejected a submission of the Authority that the initial offer was based on 'incorrect' information and was therefore not binding, pursuant to s 31(8) of the Act.[68] The Authority had submitted that the offer was made on the basis of incorrect information because of: (1) the mischaracterisation, as it saw it, of the claimants' respective interests in the Land (in particular, McQuilton gave evidence that the Authority made the offer of compensation on the assumption that Hardware had an interest in the Land greater than a monthly tenancy at will and would not have made an offer of compensation for relocation costs had it correctly understood the character of Hardware's interest); (2) the mistaken understanding it had that the Provans Group agreed to being treated 'as one' for the purposes of the assessment of compensation; and (3) its adoption of an 'in use' assessment of Timber's entitlement to compensation. The judge found that there was force in the submission made by Provans that the information relating to Hardware was straightforward and any mistaken understanding about an 'in use' assessment related to Timber not to Hardware. She said:

The claimants submit no incorrect information was relied upon or infected any part of the offer for relocation costs that was made to Hardware. It was known and anticipated that Hardware was intending to relocate, the costs of relocating were assessed and it was always intended that Hardware would be offered its relocation costs. If there was any incorrect information, it was a belief that the market value of the Land could be assessed and should be assessed on an 'in use' basis rather than on the highest and best use of the Land. That mistaken belief may have infected the offer made to Timber but not the offer made to Hardware. Furthermore, if there was a mistake in relation to the offer made to Timber, then the Authority had the opportunity to deal with it when it came to make its reply.[69]

105 She noted that there was no suggestion that the estimate of the costs of relocation from the Authority's relocation consultant, Aghion, was incorrect or in any way flawed.[70]

106 The judge held that the evidence unequivocally demonstrated that the Authority, before making the initial offer, was well aware of the precise role and interest held by Timber, Hardware and Joinery in their distinct spheres of commercial activity. In particular, Glynn knew there was no formal lease between Hardware and Timber. The Authority knew that Hardware paid Timber a non-market rent and outgoings and that it had conducted the business from the Land for a very long time (50 years).[71] The judge noted that, insofar as Hardware's interest in the Land was in issue, it 'could have taken steps to better inform itself ... [i]t would seem, however, that the Authority decided that the most convenient way to deal with uncertainties of this kind was to treat the Provans entities as one'.[72]

107 She went on to say that the Authority knew, in effect, that Hardware was a tenant at will and that the components of the initial offer were selected as a result of a deliberate decision:

I am not persuaded that the Authority was misinformed about Hardware's interest in the Land such that it proceeded on a mistaken assumption about the nature of its obligations when it made the Initial Offer. The Authority knew that Hardware occupied the Land pursuant to an informal lease arrangement. It knew, in effect, that Hardware was a tenant at will. The offer made to Hardware in the Initial Offer did not contain information that was incorrect in this regard.

Nor am I persuaded that the offer of an 'in use' value for the Land involved 'information' that was 'incorrect'. The Initial Offer contains no 'information' that states, expressly or impliedly, that the relocation expenses come with an 'in use' value of the Land and not otherwise, or that one component cannot be accepted without the other. Nothing 'contained in the offer' in that respect was 'incorrect'. The Authority made a deliberate decision to value the Land on an 'in use' basis in order, so it was thought, to align land value with the offer for disturbance losses and thereby prevent 'double dipping'. The Authority had legal advice supporting this course of action. It proceeded in the full knowledge of what it was doing.[73]

108 She concluded (at [202]) that the Authority may have proceeded on a mistaken conceptual basis, namely, that the appropriate assessment was an 'in use' value, but not on the basis of information that was incorrect:

In my view, the fact that the Initial Offer was predicated on the value of the Land being assessed on the basis of its existing use does not mean that the Initial Offer as a whole, or the offer for relocation costs considered independently, contained information that was incorrect. If the Authority was mistaken about its ability to make an offer based on the 'in use' value of the Land, it made the offer for relocation costs specifically and the Initial Offer generally on a flawed conceptual basis, not an incorrect factual basis.

109 The judge also rejected the submission that the initial offer was based on a misunderstanding that Provans had agreed that Timber, Hardware and Joinery should be treated 'as one'. When Glynn left the 17 September 2014 meeting she was aware that Provans had not accepted the core proposition.[74] The Authority had legal advice that, under the Act, it was necessary to identify separately each component of the offer and the entity to whom it was being offered.[75] There was no advice that acceptance of part of an offer was to be understood as conditional on the acceptance of other parts. RK had given advice that a 'without prejudice' offer could be made to all three claimants globally but this was not done.[76] The judge concluded that the evidence did not demonstrate an understanding by the Authority that the claimants had agreed that they were to be treated as one entity for the purpose of an offer to be made on a consolidated basis.[77]

110 On the appeal, the Authority challenges the judge's conclusion that the initial offer was capable of disaggregation into offers to Timber, Hardware, and Joinery, respectively, that could be accepted separately and/or was a single joint offer capable of partial acceptance. It also challenges the conclusion that the initial offer was not based on incorrect information.[78]

111 The judge observed that Joinery did not persist with any claim for compensation. She noted (at [193]) that '[a]lthough the [initial] offer was made to both Hardware and Joinery and accepted by both of them, the expenses were incurred by Hardware only and Joinery makes no claim in respect of them'. She accepted that Joinery had an interest in the Land as an occupier but, as Hardware alone paid the relocation costs, Joinery did not assert an entitlement to compensation.[79]

112 In the subsidiary proceeding the relief sought by the Authority included a declaration that Hardware and Joinery were not entitled to compensation. Despite recognising that Joinery no longer claimed that it was entitled to compensation, the judge dismissed the subsidiary proceeding. The Authority challenges this disposition on the appeal.[80]

113 The judge repeatedly observed that there was agreement between the parties, on the basis of expert opinion, that the market value of the Land, based on its highest and best use, being the underlying residential development value, was $12.2 million.[81] She accepted this valuation.[82] She rejected the submission made by Provans that it would not have been necessary for Timber to vacate the Land to achieve that market value. This submission was based on an indicative 'enterprise' valuation of the business whereby Hardware could pay an annual rent of $671,000 and the business could continue to operate on the Land until some date in the future when the value of the Land for redevelopment exceeded its 'enterprise value'. She noted that by 17 February 2016 the agreed valuation of $12.2 million[83] proceeded on the assumption 'of vacant possession on the basis that the occupier was a related entity, giving Timber flexibility as to what it could do with the Land'.[84] She also noted that the approach to market value based on an 'enterprise' valuation

is not confined, as it must be under [the Act], to Timber's interest in the Land, but combines interests. ...

The claimants have not suffered any loss associated with the 'enterprise value' of the business. Hardware did not claim any loss for the market value of its interest in the Land and, as a matter of fact, the business was not divested or diminished by the compulsory acquisition of the Land and no claim has been made for loss of profits. At no stage in the process of offer and response required in Part 3 of [the Act] did the claimants claim an entitlement to compensation for the enterprise value of the business.

Ferrier Hodgson's valuation of the business, upon which the 'enterprise' valuation rests, was based on Hardware having relatively long term security of tenure, which is not the basis upon which the Provans valuers assessed market value of the Land. The market value of Timber's interest based on an assessment of the highest and best use of the Land for residential development assumes vacant possession or at least possession within a short timeframe.[85]

114 The judge considered that 'the premise upon which "enterprise value" is based, namely, Hardware's ability to pay rental of $671,000 per annum, is utterly divorced from commercial reality'.[86] She also observed that while the existence of a leasehold interest will usually be reflected in the market value of land, this was not the case in respect of Hardware's 'ephemeral' interest in the circumstances where the interests of the claimants did not perfectly align:

I am not persuaded that expert opinion concerning the 'enterprise value' of the Land is of any assistance in this case. It is artificial and confusing. It is also unnecessary, as [the Act] ... gives each person with an interest in the land that is divested or diminished by the compulsory acquisition a statutory right to compensation. It provides for separate offers to be made to each person of whose interest the Authority is aware and for the individual assessment of compensation in respect of each claimant in accordance with Part 4 of [the Act]. Loss attributable to disturbance is a separate and distinct head of compensation under s 41(1) ... being compensation for loss sustained by the individual claimant for which provision is not otherwise made. It is therefore possible and permissible for compensation to be paid to different interest holders in circumstances where their entitlements do not perfectly align.[87]

115 On the appeal, the Authority claims that the market value of the Land could not be treated as agreed if the effect of s 41(6) of the Act[88] was to treat Hardware's leasehold interest as ongoing, that is, of a greater duration than a tenancy at will.[89] (Ultimately, the Authority submits that, in any event, the judge placed no reliance on s 41(6).)[90]

116 The judge held that s 41(2)[91] did not preclude a court from awarding compensation for disturbance loss to a claimant at the same time as awarding compensation for market value based on the highest and best use of the land to another claimant. She acknowledged[92] that in Manor Lakes this Court recognised that it would be inconsistent to award compensation to a claimant for disturbance loss as well as awarding to that same claimant compensation for market value based on potential use when it said:

The apparent purpose of s 41(2) is to prevent double recovery of compensation. If a claimant recovers compensation on the basis of market value assessed by reference to the potential of the land to be used for a purpose other than the existing use, it would be logically inconsistent to allow claims for loss attributable to disturbance arising out of that existing use.[93]

117 The Authority had submitted that there should be no 'double recovery'[94] even if the interests are separate interests; that is, it submitted that s 41(2) precludes different persons receiving compensation where there may be some overlap in the basis for the receipt of compensation. The judge rejected that submission and held that the prohibition in s 41(2) applies only in respect of a single claimant who is entitled to compensation for market value and seeks to obtain the benefit of the potential use as well as compensation for disturbance assessed by reference to existing use. She considered that interpretation to be consistent with the statutory language while acknowledging that s 41(2) contains no express reference to the various forms of compensation being available only 'in respect of the same interest':

This construction is consistent with the words of s 41(2), read in the context of ss 40 and 41 and the provisions for the assessment of compensation in [the Act] more generally. The chapeau to s 41(2) refers to 'an interest in land' being assessed for a purpose other than [that] for which the land was used. It does not expressly say that compensation for the matters in paras (a) and (b) must not be allowed 'in respect of that interest'. However, para (a) concerns 'special value', which means the value of any pecuniary advantage, in addition to market value, to a claimant which is incidental to his or her ownership or occupation of that land. In other words, the claimant for whom the land has special value is the same claimant who is entitled to market value in the chapeau. In both cases it is the owner of the freehold estate in the land. It is therefore unnecessary for the words 'in respect of that interest' to be inserted in the chapeau for the purposes of para (a) in order to clarify that the person in para (a) is the same as the person in para (b).

That it should be inferred that para (b) also applies to the same claimant is reinforced by the language of s 41(1), which refers to the payment of compensation to 'a claimant' in respect of 'an interest' in land. In assessing the compensation payable to that claimant, regard must be had to a number of factors, including the market value of 'the interest', any special value to 'the claimant', the enhancement or depreciation of the value of 'the interest' of 'the claimant', and so on. Even where there is an effect on other land, the interest in question is the interest of the particular claimant: the definition of 'loss attributable to severance' refers to 'any other interest of the claimant in the acquired land' and to 'any interest of the claimant to other land used in conjunction with the acquired land'. Section 41 deals with the entitlement to compensation of a claimant in respect of that claimant's interest in the land that has been compulsorily acquired, unless otherwise specified. This reflects the more general position, repeatedly referred to in this judgment, that [the Act] provides for separate offers to be made to each person of whose interest the Authority is aware and for the individual assessment of compensation in respect of each claimant in accordance with Part 4 of [the Act].[95]

118 This passage reflects the fundamental premise of the judge's approach, namely that the Act provides for compensation to be made to each individual interest-holder in respect of its respective interest. This was also emphasised in the following remarks:

The applicable statutory scheme deals with individual interests in land and provides compensation for the divestment or diminishment of individual interests. Properly construed, [the Act] provides for each person with an interest in land that is divested or diminished by the compulsory acquisition of the land to have their interest separately treated. Section 30 gives to each person who had an interest in land that was divested or diminished by the compulsory acquisition a claim for compensation. Section 31 is directed to individual claimants and individual interests and contemplates that separate offers be made to each claimant. Section 41(1) refers to compensation payable to 'a claimant' in respect of 'an interest in land' and specifies the matters to which regard must be had in assessing compensation. In substance, it requires and provides that compensation is to be assessed on a claimant by claimant basis.

[The Act] contains no legislative cap on compensation which might otherwise require an aggregated assessment of compensation, payable to different interest holders who hold interests in the same land. Each claimant is entitled to full compensation for their interest. Each interest is to be assessed in accordance with Part 4 of the Act. There is nothing in the text of [the Act] that provides for or suggests that multiple interest holders in a parcel of land have a single claim or that their claims are to be treated as one.[96]

119 In respect of a multiplicity of interests, the judge acknowledged that the value of one interest may affect the compensable value of another interest and that a leasehold interest for a substantial duration would likely reduce the market value of the freehold for the purposes of compensation. She observed, however, that no party had sought to reduce the compensation to Timber for the market value of the Land and Hardware's entitlement was not substantial and did not depend upon an ongoing right to occupy the Land. She said:

It is true that [the Act] recognises that there may be a multiplicity of different interests in land and that the existence of one interest may affect the value of another. In the normal course, the existence of a leasehold interest will affect the market value of land, either positively or negatively, depending on the term of the lease and what the hypothetical buyer would choose to do with the land in order to realise its value based on its highest and best use. In this case, if Hardware had a leasehold interest entitling it to remain on the Land for any substantial period of time, this would be taken into account in assessing the market value of the Land. It would reduce the amount that the hypothetical purchaser would be prepared to pay for the Land.

None of the parties has asked the Court to reduce the compensation payable to Timber for the market value of the Land and none of the valuers has undertaken the exercise that might have permitted the Court to do so.

In any event, as I have endeavoured to explain, Hardware's entitlement to relocation costs does not depend on it establishing a right to occupy the Land 'indefinitely' or for any substantial period of time. Its right to be compensated arose on the acquisition of the Land, which gave rise to the need to relocate the business.[97]

120 On the appeal, the Authority claims that the judge misconstrued the prohibition imposed by s 41(2) on double recovery and that it should be interpreted as applicable in respect of the compensation to be awarded to distinct interest-holders in the same land.[98]

121 The judge ordered that there be an award of compensation to Timber of $12.49 million (made up of market value of $12.2 million, solatium of $100,000, submission expenses of $20,000 and professional expenses of $170,000). She acknowledged that the Authority had made advances to Timber but held that $2.871 million remained outstanding.[99] She made orders that the Authority pay Timber $1,517,136.41 being the sum of $12.49 million plus interest on the $2.781 million outstanding less the amount of compensation previously paid by way of advances of compensation and a payment made, after judgment was delivered, on 25 June 2019 (collectively, $12.49 million) together with costs (including indemnity costs from 8 April 2017).[100] She determined that Hardware was entitled to its relocation costs, within the statutory category of 'disturbance loss',[101] in the amount of $2.871 million and could retain the compensation she held it had received.[102] She dismissed the subsidiary proceeding and ordered the Authority to pay Hardware's costs, calculated on an indemnity basis.[103] Joinery was not awarded its costs.

122 The Authority relies upon a number of inter-related grounds of appeal:

1. The trial judge erred in finding that Hardware was entitled to compensation for disturbance loss in the amount of $2,871,000 (at [247], [276], [299])[[104]] by misapplying:

(a) the test for causation in ss 40 and 41(1)(d) of the Act, having found that Hardware's interest in the Land was a tenancy terminable at will (at [151][[105]] and [225][[106]]); and

(b) s 41(6) of the Act to the facts (at [242][[107]]), in finding that Hardware's reasonable prospect of renewal or continuation of its interest in the Land as a tenant at will (at [151]), satisfied the test for causation in ss 40 and 41(1)(d) of the Act.

1. The trial judge erred in finding that the Authority was bound by its offer made on 24 October 2014 on the basis that:

(a) the Authority's offer was capable of disaggregation (at [168],[[108]] [171],[[109]] [180],[[110]] [182],[[111]] [186],[[112]] [191]) such that it was capable of partial acceptance; and/or

(b) the Authority's offer was not based on 'incorrect information' under s 31(8) of the Act (at [202][[113]]).

1. The trial judge erred in dismissing [the subsidiary] proceeding despite having found that Joinery was not entitled to compensation for loss attributable to disturbance (at [193]).[[114]]
2. The trial judge erred in finding (at [11], [39], [127], [147], [149], [286], [318])[[115]] that Timber was entitled to compensation for the market value of its interest in the Land in the amount of $12,200,000, and such amount was agreed, if the application of s 41(6) conferred on Hardware an occupancy right of greater duration than a monthly tenancy terminable at will.
3. The trial judge erred in misapplying s 41(2) of the Act (at [250]-[277]),[[116]] namely finding that s 41(2) did not operate to deny Hardware compensation for disturbance loss in circumstances where the market value of Timber's interest in the Land was assessed on the basis that the Land had potential to be used for a purpose other than the purpose for which it was used on the date of acquisition, being residential development (at [318]-[320]).[[117]]

Did the judge misapply the statutory test for causation? - Ground 1

123 The Authority submits that the interest of Hardware in the Land was, as found by the judge,[118] the limited interest of a tenancy terminable at will. It submits that Hardware failed to establish that it suffered pecuniary loss of $2.871 million as a 'natural, direct and reasonable' consequence of its tenancy at will being divested or diminished by the compulsory acquisition of the Land. Hardware's occupation was not regulated by any form of written lease and the Authority submits that Hardware had no right of tenure over the Land.[119]

124 In this context, the Authority relies on two important features of the assessment of compensation in the context of compulsory land acquisition. The first is the principle of equivalence and the second is the recognition that where there are multiple interests in land, one interest may qualify another for the purpose of compensation.

125 The principle of equivalence is directed at compensating the dispossessed interest. In Roads Corporation v Love,[120] Osborn J referred to s 41 of the Act, that provides the general principles on which compensation is based, and s 5A of the VL Act,[121] that provides the underlying framework for the valuation of land, and said:

The notion of compensation envisages that an owner is entitled to be compensated fairly and fully for his loss, but is not entitled to receive more than fair compensation. Quoting from Scott LJ in Horn v Sunderland Corporation in Transport for London v Spirerose, Lord Neuberger referred to the underlying concept in the following terms:

'the principle of equivalence which is at the root of statutory compensation, the principle that the owner shall be paid neither less nor more than his loss', save, I should add, where the legislation otherwise provides.[122]

126 The Authority submits that the nature of a claimant's 'interest' is thus the most important and defining feature of the law of compulsory acquisition of land. This is reflected in the repeated references to an 'interest in land' in the Act; for example, s 30, the threshold section of the Act, provides that 'every person who ... had an interest in land that is divested or diminished by the acquisition of the interest ... has a claim for compensation'.[123] The requirement for the Authority, under s 31(3),[124] is to make an offer assessed as a fair and reasonable estimate of compensation on the assumption the claimant held 'the interest' claimed. Assessment of the amount of compensation payable must take into account 'disturbance loss',[125] defined in s 40(b)[126] by reference to an 'interest' in land in respect of which the claimant has been divested or diminished. Where a claimant seeks compensation it is thus compensation that arises from the acquisition of the claimant's specific interest in land.

127 Here, the Authority emphasises, the judge found not only that Hardware's interest was that of a tenant at will[127] but that the interest was so attenuated as not to have any market value, there being no dispute about the 'nil' valuation afforded to Hardware's interest.[128]

128 With respect to the assessment of compensation where there are multiple interests in land, the Authority submits that a complex 'holistic' assessment is warranted to assess the bundle of rights. By 'holistic' it is meant that the assessment must involve a consideration of the extent to which interests in land may qualify each other. The Authority submits that an obvious qualifying interest in land is a possessory interest such as a lease; the leasehold interest qualifies the registered proprietor's interest in the land. (There may be other encumbrances on the use of land, for example, an easement.) Where there is a leasehold interest, the registered proprietor is constrained from using and developing the land in any way it sees fit; its primary entitlement is a right to rent in respect of the current use of the land. The longer the occupying interest, the less able is the registered proprietor to make the land available for development.[129] This, so the Authority submits, is significant for the purpose of assessing compensation because precisely identifying the nature of an interest, including its content and duration, and not merely the existence of the interest, assists in understanding whether one claimant's interest in land has a bearing on the compensation for other interest-holders. Indeed, it was conceded by Hardware and Joinery that if a tenant has a substantial or valuable interest this would be reflected or 'picked up' in the market value of land.

129 The Authority maintains that, in applying the causation test under s 40(a),[130] the judge wrongly considered that, in order for Hardware to prove it had suffered disturbance loss of $2.7 million, it was sufficient for it to show that it had occupied the Land at the time of its acquisition and 'the acquisition, involving the divestment of Hardware's interest and that of Timber, meant that it either had to close the business or move to new premises'.[131] The Authority submits that this reasoning manifests a number of errors, primarily, not placing sufficient weight on the nature of Hardware's interest in the Land, including its content and duration. That is, the judge did not consider that it was relevant whether the interest involved a short-term or long-term right - it was enough that there was a right to occupy the Land at the time of its acquisition.

130 The Authority submits that it cannot be sufficient to ground an entitlement to significant relocation costs that a claimant simply occupies land at the time of its acquisition and is obliged to move because of the divestment. In other words, here, the divestment of the limited interest of a tenancy at will did not justify an award of compensation of $2.7 million as the relocation costs were not the 'direct' consequence of the divestment of the tenancy at will. Instead, the direct cause of Hardware's loss was its decision to conduct a business intended to operate in the long term under an interest which could be terminated at any time on very short notice. In this respect, the Authority submits that the judge ought to have followed United Petroleum[132] because the Court there focused, appropriately, on the limited nature of the interest in the land acquired and not, as the judge considered, on the character of the loss (loss of profits as opposed to relocation costs).

131 The Authority acknowledges that the judge referred to Hardware's 50 years of prior occupation on the Land but submits that she did not rely upon that history, or upon the prospect of renewal or continuation of the interest, in the context of s 41(6) of the Act,[133] in deciding the fundamental question of whether Hardware had an entitlement to disturbance loss. It relies upon the lack of any reference to that history or the prospect of continuation in the critical paragraphs on disturbance loss, specifically, [247] and [276] of the Reasons,[134] in which the judge makes it plain that 'Hardware's entitlement to relocation costs does not depend on it establishing a right to occupy the Land "indefinitely" or for any substantial period of time' but rather on the fact that 'Hardware occupied the Land at the time of its acquisition'.

132 The Authority also relies upon [299][135] in which the judge considered that there was no need for Hardware 'to establish a leasehold interest of any durability in order to qualify for relocation costs' and described Hardware's interest as an '"ephemeral" leasehold interest' that would be unlikely to affect the market value of the Land. Indeed, the premise of the judge's reasoning on the market value of the Land was that Timber would provide vacant possession; that is, it would be entitled to terminate Hardware's interest at any time. Hardware's interest provided no restraint on the use Timber could make of the Land including making it available for development. The Authority submits that it was a necessary part of the judge's reasoning that Hardware's interest was so minimal as not to qualify Timber's interest in the Land which, the judge acknowledged, in [299], would be the ordinary consequence of a leasehold interest. This supported the award of compensation to Timber for the market value of the Land based on its highest and best use. Accordingly, the Authority submits, the judge's conclusion on Hardware's entitlement to relocation costs was not based upon the 50 years of business history, nor on the consideration that Hardware may have had a reasonable prospect of renewal or continuation of its interest, considered under s 41(6), but simply on its enjoyment of a tenancy at will and its occupation of the Land as at the day of acquisition. It submits that such an interest ought command nothing more than the insubstantial or trifling cost of bringing forward relocation from the end of the month to the day of acquisition. That is, the acquisition accelerated the need for the relocation costs to be paid but the reason for the payment of those costs was an ever-present feature of Hardware's ephemeral interest.

133 Hardware and Timber submit that the judge not only articulated the correct test for causation in s 40 and s 41(1)(d) of the Act but applied the test correctly. They submit that it would be wrong to contend that Hardware's relocation of its business was independent of the compulsory acquisition of the Land and was undertaken to secure the long-term future of the business at an alternative location.[136] The judge found that Hardware's interest in the Land would have continued beyond the acquisition date[137] and that is not seriously disputed. They also submit that it would be wrong to contend that Timber would have sold the Land to realise the significant uplift in land value resulting from its rezoning.[138] The judge found that despite the significant uplift in the value of the Land, it could be inferred that Timber would have permitted Hardware to continue occupying the Land beyond the acquisition date.[139]

134 Hardware and Timber emphasise that the judge was careful to distinguish United Petroleum on the basis that there the claim related to a period of time when the claimant would have had no legal entitlement to occupy the relevant land, by contrast with the circumstances facing Hardware and the need for it to take steps to relocate immediately upon the service of the Notice of Acquisition.[140]

135 Furthermore, Hardware and Timber also emphasise that the judge made frequent reference to s 41(6)[141] and it ought be inferred that the context she described, including that Hardware had been occupying the Land and trading for 50 years[142] and would have kept trading there but for the acquisition,[143] were relevant to her assessment under s 41(6).

136 In our view, the Authority is correct to submit that it is the nature and duration of the occupying interest that is critically important to the determination of the compensation to which an occupier is entitled. Occupation on the date of acquisition is insufficient to generate an entitlement to substantial compensation where the occupying interest has no market value. Here, the judge's unchallenged finding was that the interest of Hardware was that of a tenant at will.

137 A tenancy at will has been treated as an interest in land for the purpose of the law of compulsory acquisition although 'such an interest may be of very limited value for compensation purposes'.[144] A tenancy at will is different from a licence because a tenant at will has a right to exclusive possession during the currency of the tenancy.[145] It is a form of leasehold interest because exclusive possession is the essential characteristic of a leasehold interest.[146] The right of a tenant at will is possessory.[147] At common law either the tenant or the landlord may terminate the tenancy at any time. It is terminable by the landlord by demand of possession, express or implied.[148] However, 'it does not come to an end merely by reason of the acquisition of the property'.[149] The judge also referred to the Authority's description of Hardware's interest as a 'monthly tenancy terminable at will'.[150]

138 In United Petroleum the occupier of land, United Petroleum Pty Ltd ('United'), had a leasehold interest terminable on one month's notice. It operated a service station and restaurant on the land. The Roads and Maritime Services ('RMS') compulsorily acquired the land for an upgrade to an existing highway. The registered proprietors of the land were two special purpose companies of which United was a related corporation. The registered proprietors accepted the determination of compensation from the Valuer-General. United sought compensation for disturbance loss due to the loss of its business calculated as a capital sum based on maintainable earnings for an indefinite period. United did not relocate. United was awarded about $2 million pursuant to s 59(f) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) ('the Just Terms Act').[151] It was also awarded $83,000 for the additional rental paid to RMS for the continued possession of the land between the date of acquisition and vacant possession.

139 The New South Wales Court of Appeal[152] set aside the orders for compensation and determined that the claim by United for compensation should be dismissed. The principal basis on which the claim was dismissed was that the nature of the interest did not sustain the loss that was asserted.

140 There is no equivalent to s 41(6) of the Act in the Just Terms Act.

141 Section 59 of the Just Terms Act distinguishes between various forms of disturbance loss, relevantly:

59 Loss attributable to disturbance

In this Act:

loss attributable to disturbance of land means any of the following:

...

(c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs),

...

(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.[153]

142 While relocation costs are dealt with in a separate paragraph of the definition in s 59 of the Just Terms Act from other financial costs, in contrast with the more general definition of 'loss attributable to disturbance' in s 40 of the Act,[154] it is the Court's analysis of the test for causation under para (f) that is most relevant. That test - 'a direct and natural consequence' - is formulated in substantially the same words as that applicable in the Act, namely, 'the natural, direct and reasonable consequence'. It is noteworthy that this test, which carries the requirement for a very close and limited causal connection,[155] applies in respect of 'any other financial costs' under para (f) but does not apply to para (c), in respect of relocation costs, which is governed by the 'reasonably incurred ... in connection with' test.[156] Here the judge noted that the Just Terms Act contains quite a different formulation from the Act in respect of relocation costs.[157]

143 It was not in doubt that United had a relevant 'interest' in the land that was acquired.[158] That interest was found to be a monthly tenancy, terminable at will. The question was whether 'United's claim for compensation extended to its inability to use the land for its business operations over a period beyond its terminable interest in the land at the date of the compulsory acquisition'.[159] Basten JA[160] answered that question negatively, observing that the viability of the land to support a commercial operation is usually fully reflected in the market value of the land and does not yield additional compensation for loss of an occupant's business:

There was no authority relied upon by United which involved compensation for the acquisition of land used for commercial purposes in which some additional amount had been allowed on account of 'disturbance' to reflect the loss of a commercial business operation being conducted on the land. Rather, the capacity of the land to support a profitable commercial operation has always been understood to be reflected in the market value of the land, which is compensable as such. Furthermore, the market value of an interest in land is limited to the value of the legal interest vested in the claimant which was terminated by the compulsory acquisition. ... [161]

144 More generally, he observed that United's claim was not viable because loss of an interest in land that is so meagre it has no market value cannot be redescribed as disturbance loss to obtain full recovery:

United did not seek to deny the proposition that its leasehold, terminable at will by the lessor, had no market value. Rather, it sought to avoid the conclusion that the land had no commercial value for it by claiming the full commercial value of the business operation undertaken by it on the land. However, as a matter of principle that which may be described as the basis of calculation of market value of an interest in land cannot be recharacterised as a form of consequential loss, known as disturbance, so as to be fully recoverable, in circumstances where the interest in land is so attenuated as not to enjoy any relevant market value.[162]

145 Basten JA went on to conclude that what is compensable by way of disturbance loss is disturbance to the claimant's interest in the land and not disturbance to the continued operation of the claimant's business on the land. He said that to accept United's claim would be:

to allow the tenant compensation for disturbance based on the assumption that the interest in land had value beyond the termination of the lease, being a value not reflected in the market value of the lease. What would then be compensated would not be disturbance of the tenant's interest in land but disturbance of the continued operation of the business, unsupported by an interest in land. That would not fit the description of 'loss attributable to disturbance of land', as defined in s 59.[163]

146 The circumstances in United Petroleum involve both similarities and differences to the circumstances here. As the judge noted, United was seeking compensation for future profits it would likely have made if the acquisition had not occurred whereas Hardware sought compensation for its relocation costs. However, the essential similarity is that United had an attenuated interest in land, a monthly tenancy at will, much as Hardware's interest was held to be, an interest that had no value reflected in the market value of the land. Basten JA considered that such an interest cannot support a claim for disturbance loss under s 59(f) of the Just Terms Act because, the interest having no value, the disturbance of that interest can have no compensable value. Any loss arising as a consequence of the acquisition, or divestment of the interest, must be due to other non-compensable factors. In the case of United, there was an effect on the ongoing operation of its business on the land, and in the case of Hardware, there was an effect on the location of its business. But in either case, the pecuniary loss suffered does not arise as a 'direct and natural', or 'natural, direct and reasonable' consequence of the divestment of the particular interest the claimant had in the land and so was not a loss attributable to disturbance of that interest.

147 Hardware and Joinery emphasise that United Petroleum did not involve a claim for relocation costs, which, as noted, is dealt with separately under s 59(c) of the Just Terms Act, but only a claim for disturbance loss under s 59(f), being 'any other financial costs'. They submit that Basten JA acknowledged that a tenant at will would be entitled to its relocation costs. The comments of Basten JA were made in the context of reciting the manner in which Aerated Water was distinguished in the New South Wales Court of Appeal decision in Health Administration Corporation v George D Angus Pty Ltd.[164] The first point of distinction identified in George D Angus was that Aerated Water was concerned with a fixed term lease whereas the leasehold interest in George D Angus was a tenancy at will. Basten JA went on to say:

The second basis upon which Aerated Water was distinguished may be found in the following passage in George D Angus:

[69] the appellant's argument proceeds on the assumption that the terms and limitations of the respondent's interest in the Yabtree Street land govern, as a matter of law, the question of whether the respondent reasonably incurred a loss of income and/or profits as a direct and natural consequence of the acquisition. Herein lies the fallacy of its contention. Those terms and limitations were relevant to the assessment of the market value of the interest acquired but not to the assessment of any loss attributable to post-acquisition disturbance.

The error in this passage lies in reading 'any other financial costs ... relating to the actual use of the land' as equivalent to the loss of any profit which might flow from the continued operation of the business on the basis that the business would have continued for an indeterminate period regardless of the absence of any secure interest in land. That approach was justified on the ground that the interest in land was irrelevant - it 'mattered not for the purpose of s 59(f).' That was because 'the fact that it [the interest in land] was compulsorily acquired thereby converted the relevant interest into an entitlement to claim compensation in accordance with, relevantly, Pt 3, Div 4 of the Just Terms Act: see s 37.' Thus the final limb of the definition of 'loss attributable to disturbance of land' was identified as giving rise to a right of compensation divorced from the interest in land which had been acquired.

This approach was erroneous because it sought to read the relevant words in par (f) out of their statutory context. As already noted, adopting a purposive or contextual approach supports the conclusion that the costs associated with the termination of the actual use of the land are properly limited to such costs as those of relocation of the business to other premises.[165]

148 Hardware and Timber submit that, although the passage does not reflect a lengthy discussion of whether a tenant at will is entitled to relocation costs, nevertheless it amounts to a recognition by Basten JA of that entitlement. In our view, the obiter observations made by Basten JA, which were not relied upon by the primary judge here, do not readily translate to the different statutory scheme under the Act. The focus must be on the statutory language.[166] The entitlement to compensation by way of relocation costs under the Just Terms Act is an express and distinctive entitlement made out upon proof that they were 'reasonably incurred in connection with' the relocation; the entitlement is not subject to the more stringent test applied under the Act. Moreover, Basten JA's observations were made in the context of reinforcing the proposition that the assessment of compensation ought reflect, and not be divorced from, the interest in land which has been acquired and did not specifically address the insubstantial nature of a tenancy at will.

149 Sackville AJA did not discuss the issue of whether a tenant at will would have an entitlement to compensation under s 59(c) of the Just Terms Act. He, like Basten JA, treated the nature and duration of the occupying interest as fundamental to the determination of compensation. He considered the relationship between ss 59(c) and 59(f) of the Just Terms Act[167] and said:

The construction of s 59(c) of the Just Terms Act has a strong bearing on the interpretation of s 59(f). There is little doubt that if s 59(f) is read in isolation it is capable of a wide application. The loss of a stream of profits from a business forced to close down because the land on which the business is conducted has been compulsorily acquired can plausibly be described as a 'financial cost'. As Preston CJ of the LEC noted in George D Angus Pty Ltd v Health Administration Corporation ..., a decision upheld by this court, the word 'costs' is not necessarily restricted to actual expenditure or liabilities but can include unrealised losses and loss of profits. Similarly as a matter of English usage a person suffering such losses can be said to have 'incurred' them.[168]

150 He went on to say that he considered the reasoning in George D Angus, which accepted that loss of future profits that would have been earned by the business conducted on acquired land over a two-year period was compensable as a financial cost reasonably incurred by an acquisition, was plainly wrong and should not be followed.[169] He also sought to give effect to the decision in Aerated Water. He said:

The analysis in Aerated Water suggests that, subject to any applicable legislation, the interest compulsorily acquired is the legal or equitable estate held by the person entitled to compensation. Any advantages a lessee might enjoy by reason of 'personal matters', such as a cooperative lessor, are to be ignored.

In the present case the interest acquired by RMS was United Petroleum's tenancy at will terminable on one month's notice. The fact that United Petroleum's lessor was unlikely in the foreseeable future to give notice terminating the lease is to be ignored for the purposes of assessing compensation, unless legislation provides otherwise.

Section 59(f) of the Just Terms Act relevantly provides for compensation for financial costs reasonably incurred 'as a direct and natural consequence of the acquisition'. Acquisition is defined in s 4(1) to mean 'an acquisition of land or of any interest in land'. Thus compensation for lost profits or income by reason of the closure of a business in the acquired land can only be awarded if the loss is a direct and natural consequence of the acquisition of United Petroleum's tenancy at will. As a matter of law the lessor was entitled at any time to give the one month's notice required to terminate the tenancy.

...

United Petroleum's interest at the date of the acquisition was terminable on one month's notice. The lessor was entitled to give that notice at any time. In these circumstances, it cannot be said that United Petroleum's long-term loss of profits by reason of the closure of its business is a 'direct and natural consequence' of the acquisition of its interest in the land on which the business was conducted.

It is one thing to say (as RMS conceded) that the closure of the business was a direct and natural consequence of the compulsory acquisition. It is quite another to say that United Petroleum's loss of profits from the business was a direct and natural consequence of the compulsory acquisition. The principal cause of United Petroleum's loss of profits was its decision to conduct a business intended to operate in the long term under a lease which could be terminated at any time on very short notice. No doubt United Petroleum took into account in conducting and investing in the business the likelihood that the lessor, a related company, would choose not to terminate the lease, at least in the short term. But that likelihood is irrelevant to the question of whether United Petroleum's loss was a direct and natural consequence of RMS' acquisition of the tenancy at will.

Since one month's notice was required to terminate the tenancy at will, it is only the loss of one month's profits that can fairly be said to be the 'direct and natural consequence of the acquisition'. I do not consider that the loss of profits in respect of a longer period satisfies the requirements of s 59(f) of the Just Terms Act. ...

The fact that the tenant at will would not have incurred the losses had the acquisition not taken place does not establish that the claimed losses were a direct and natural consequence of the acquisition. The inquiry needs to go further.[170]

151 Ultimately, Sackville AJA, in rejecting United Petroleum's argument, concluded that, for the purposes of assessing compensation, it is not appropriate to assess the market value of a registered proprietor's interest on the basis of vacant possession while simultaneously assessing a tenant at will's interest on that land as though it was an enduring interest. This in effect reflects an acceptance of the Authority's core proposition:

I note that the conclusion I have reached limits the opportunities for related companies to order their affairs so that each is entitled to claim compensation for what is essentially the same economic detriment. It may be accepted that a loss sustained by two different entities as a consequence of the acquisition of their respective interests in the land must be assessed separately for the purposes of determining compensation, even if the entities are related. But if United Petroleum's argument is correct, in a case such as the present the interest of a lessor may be valued taking into account its entitlement to terminate the tenancy at will on one month's notice (for example, by assessing the value of the fee simple by reference to the stream of profits from a business similar to that conducted by a tenant at will). _Yet the tenant at will's interest is to be valued without reference to the fragility of that interes_t.[171]

152 The nub of the conclusion is that, where there are multiple interests in land, while it is necessary to assess those interests separately for the purposes of compensation, it may also be necessary to take into account how those interests relate to each other and, in particular, to consider how one interest might qualify another. This reflects to some extent the 'holistic' approach urged by the Authority (which must of course yield to provisions such as s 41(6) where they apply). If a tenancy is more than something fragile, it will likely qualify the fee simple; the registered proprietor will probably not be entitled to market value assessed on the basis of vacant possession. On the other hand, if the tenancy is fragile, as is the interest of a tenant at will, then that interest will likely not qualify the interest of the registered proprietor. The judge accepted both those propositions.[172] However, the fragility of a tenancy at will, its 'ephemeral' quality,[173] must also mean that the causation test cannot be applied to it as though it were an enduring or robust interest in land. The judge did not accept that proposition and, in our view, with great respect, that was an error.

153 What United Petroleum stands for is the proposition that a tenancy at will cannot be treated as tantamount to a substantial leasehold interest for the purpose of disturbance loss. In other words, an interest that is so fragile that it does not qualify the fee simple cannot command compensation. In our view, although the particular character of the loss claimed in United Petroleum was loss of future profits, the Court's reasoning should not be confined to that type of loss. The focus of the Court was clearly on the nature of the interest in land enjoyed by United. Moreover, both loss of profits and relocation costs are concerned with losses derived in respect of the future operation of the business that was carried out on the land (in United's case, hypothetically) and, in that respect, both forms of loss are similar. We consider that the reasoning in United Petroleum is not distinguishable on the basis of the loss with which it was concerned.

154 As is apparent from the passages quoted above, the New South Wales Court of Appeal qualified the statements it made by saying 'unless legislation provides otherwise'.[174] As noted,[175] unlike the Just Terms Act, s 41(6) of the Act provides the mechanism by which it is permissible for a court, in assessing compensation, to take into account any reasonable prospect of renewal or continuation of the interest including on the basis that the lessor and lessee are related corporations. However, we agree with the Authority that the judge in the present matter did not rely on s 41(6) in assessing Hardware's compensation. At the critical points in her Honour's reasoning supporting the payment of Hardware's relocation costs as compensation for its interest in the Land, the judge focused on its occupation of the Land on the date of the acquisition and not the prospect of renewal or the likely continuation of its interest. Although she accepted that Hardware's interest was likely to continue at least beyond the day of acquisition,[176] it was the date on which Hardware's interest in the Land was divested that the judge viewed as determinative. Hardware suffered disturbance loss because 'Hardware occupied the Land at the time of its acquisition and the acquisition, involving the divestment of Hardware's interest and that of Timber, meant that it either had to close the business or move to new premises'.[177] Occupation on the acquisition date was enough.[178] It was because Hardware occupied the Land on the day of its acquisition that it had an imperative to move;[179] there was no need to consider whether Hardware had 'a right to occupy the Land "indefinitely" or for any substantial period of time'. [180]

155 The judge appears to have treated disturbance loss as solely concerned with the practical consequences of divestment rather than related to the nature of the interest divested. However, as United Petroleum demonstrates, an assessment of disturbance loss must ultimately reflect the nature of the interest in land that was divested or diminished; for a loss to be viewed as the natural, direct and reasonable consequence of the fact that an interest in land has been divested it is necessary to consider precisely what is the character of the interest that has been divested. It may be accepted, as the judge observed, that the paradigm for the assessment of compensation of market value is not the paradigm applicable to the assessment of compensation for loss attributable to disturbance.[181] Nevertheless, compensation for disturbance loss cannot be divorced from, or wholly fail to reflect, the nature of the interest in land that is divested or diminished by the acquisition. The general principle governing the basis upon which compensation is to be based, as expressed in s 41 of the Act,[182] is that the amount of compensation payable to a claimant, including that payable due to 'any loss attributable to disturbance' (s 41(1)(f)) is compensation 'in respect of an interest in land which is acquired'. Subject to the Act, compensation must be equivalent,[183] or proportionate, to the loss of the interest in the land acquired, albeit that the loss can have many dimensions (market value, special value, loss attributable to severance, disturbance loss, enhancement or depreciation of other land adjoining or severed from the acquired land, or legal, valuation or professional expenses incurred by reason of the acquisition).

156 Here, the cause of Hardware's vulnerability to the ever-present need to relocate, and thereby to incur relocation costs, was its decision to conduct a business operating over the long term under a lease which could be terminated at any time on very short notice. Analogously to United's circumstances, the principal or direct cause of Hardware's relocation costs was the insecure tenancy on which it based its business.

157 In our view, while the closure of Hardware's business on the Land might be a natural, direct and reasonable consequence of the fact that Hardware's interest in the Land had been divested, the costs of its relocation are not so because the direct cause of those costs is the exposure of its business to relocation at any time. Analogously to United's circumstances, there is only 'an indirect relationship, rather than the required direct relationship, between the acquisition and the incurring of the financial costs'.[184]

159 It is unnecessary to determine Ground 1(b) as it is premised on the judge having relied on s 41(6) in applying the test for causation in ss 40 and 41(1)(d). As explained above, we accept the Authority's oral submission on the appeal that the judge did not rely on s 41(6) to support her findings.

160 However, if our interpretation of the judge's reasons is wrong, we consider that the result would be no different. Nothing in s 41(6) denies the need to establish, in a claim for loss attributable to disturbance, that there is a direct relationship between the acquisition of the relevant interest in the land and the incurring of the loss. Without that relationship, s 41(6) has no foundation upon which to operate because there was no 'interest' to the disturbance of which the loss was attributable. Section 41(6) provides for assessment of a loss, attributable to the disturbance of an interest in land, by reference to the reasonable prospect of renewal or continuation of that interest. It does not apply the causation test to some interest more extensive than that which was acquired. Section 41(6) could not, therefore, have availed Provans in this case.

161 Ground 2 raises the question of whether the Authority entered into a binding agreement with Hardware for $2.871 million for disturbance loss on the basis that the initial offer was capable of disaggregation, that Hardware did not dispute the offer, and the Authority was therefore bound by its offer under s 31(8).[185] The Authority recognised that for the appeal to be allowed, it is necessary for it to succeed on both Grounds 1 and 2.[186] Success on Ground 1 means there is no liability on the Authority under the Act to pay the claimants any further compensation because none of the advances it had made were attributable to an entitlement by Hardware for its relocation costs. All of the advances, considered cumulatively, discharged its obligation to Timber. However, Ground 2 is directed to the circumstance that there may nevertheless have been a contractual obligation on the Authority to pay Hardware its relocation costs. If so, this would leave $2.871 million outstanding to Timber from the advances it paid.

162 The Authority submits that the initial offer was not capable of disaggregation (Ground 2(a)) but that, even if it was, the amount offered did not become binding on the Authority as it was based on incorrect information (Ground 2(b)).

163 In support of Ground 2(a), the Authority submits that the initial offer consisted of 'intertwined' or inter-dependent offers in that, relevantly, the offer for relocation costs was conditional on the acceptance of the offer in respect of market value. It put its argument on two bases - primarily, that there was a single offer to the claimants jointly or, in the alternative, that there were three separate offers but that they were inter-related or intertwined offers. It also submits that the ambiguity, or, more precisely, the lack of unambiguity, that the judge recognised[187] ought to have been resolved against a finding of binding consequences. The ambiguity also permits reference to the surrounding circumstances which, it submits, objectively construed, reveal the intertwined nature of the offer and demonstrate that there was no meeting of minds.

164 The Authority submits that the mere reference in the table in the initial offer[188] to the different claimants in respect of different forms of compensation cannot be sufficient in itself to indicate that the offer was capable of acceptance by Hardware alone. It emphasised that it is only the table that differentiates between the claimants. It submits that there were numerous indicia that the initial offer was made to all three claimants or, at least, that in that respect it was ambiguous. It points to the reference to all three claimants as addressees and the reference in the first paragraph to the Notice of Acquisition having been made 'for all three companies' interests'. It records that the Authority had obtained independent advice 'as to the value of all three companies' interests in the property'. The offer is for a single amount of compensation, a 'total sum of $8,706,000', that is expressed as directed to the claimants in the plural as 'compensation for the compulsory acquisition of the companies' interests in the property'.[189] The presence of a single figure of compensation, indicates, the Authority argues, that the initial offer was not capable of disaggregation, or acceptance by one claimant and not the others.

165 The Authority also points to the conditions of the initial offer,[190] in particular, the description of the sum of compensation being offered 'for the compulsory acquisition of the companies' interests in the whole of the property and for all loss and damage'.[191] It submits that this reveals that the initial offer was to be accepted, if at all, in its entirety. It recognises that the Act allows for partial acceptance but submits that this can only be so where partial acceptance is consistent with the offer made; neither s 31(4)(c) nor Form 10[192] can override the terms of an offer that is inconsistent with partial acceptance. It points also to item 8 of the conditions that requires, upon acceptance of the initial offer, a release and indemnity from 'the companies' in the plural.

166 The response to the initial offer from the claimants (Form 11)[193] also reveals the inseparability of the offers made, submits the Authority, particularly the description of all three claimants as having signed the response.

167 The Authority submits that the judge recognised that the construction of the initial offer could be informed by matters beyond its four corners.[194] She was also aware that the Authority's approach reflected the core proposition and that had been communicated to the claimants. However, the judge discounted those communications by observing that Provans never accepted that approach.[195] The Authority submits that the judge asked the wrong question; she ought to have regarded the dispute between the Authority and the claimants with respect to the core proposition as evidence that there was never a meeting of minds - that the parties never reached an agreement that could have binding consequences.

168 Hardware and Joinery submit that the initial offer, properly construed, comprised a number of separate and distinct offers capable individually of being accepted or rejected. They accept that there were aspects of the initial offer that are inconsistent with the statutory scheme; for example, the statement in condition 1 that the offer is made 'in full and final settlement of all claims that the companies may have', if read literally, is inconsistent with s 35(1)(c)[196] that allows for a claimant to accept the amount of compensation offered under s 31 but nevertheless claim to be entitled to a further amount of compensation. So too, Hardware and Timber submit that the release and indemnity proposed in item 8 of the conditions is inconsistent with the statutory scheme. They urge that the initial offer ought be read down, or those conditions severed. They further submit that, despite the deficiencies of the initial offer, every effort should be made to construe the initial offer as a valid offer made under s 31 of the Act, as it is expressed to be,[197] because of the importance of giving effect to the statutory scheme when an owner is dispossessed of its interest in land. This Court ought reject any submission that the initial offer was not an offer made under the Act or was so vague or ambiguous as not to be binding in any event.

169 Hardware and Timber emphasise the manner in which the Act allows for partial acceptance of an offer. The statutory requirement under s 31 mandates that an offer set out a fair and reasonable estimate of the compensation payable to each claimant in respect of that claimant's interest by reference to which the offer is made. Each offer must be accompanied by various documents, including a copy of the certificate of valuation of the respective interest. Here, the initial offer was accompanied by three separate certificates of valuation, one in respect of each of the three claimants. An offer must also be accompanied by a statement in the prescribed form under the regulations (Form 10) setting out a claimant's principal rights and obligations. As noted, Form 10 expressly provides that a claimant can accept an offer in full or in part.[198] The Act also acknowledges, under s 31(8), that where 'an' amount of compensation that is part of an offer is not disputed, the amount offered becomes binding on the Authority. Here, for example, the initial offer included as a component part an allowance for solatium of $100,000. If that amount had been undisputed, that component part of the offer would have been binding. This would allow for other component parts of the offer to become a disputed claim under s 33(2). Only disputed claims are referable, under s 80 of the Act, to the Victorian Civil and Administrative Tribunal or the Supreme Court for determination. The capacity of a claimant to accept an offer in part only is reinforced by s 34(3),[199] s 35(2)[200] and s 36(2).[201]

170 In support of the construction of the initial offer as containing individual offers to each of the three claimants, and not treating the claimants 'as one', Hardware and Timber also point to the fact that the table is comprised of items and the appropriate claimant is identified in respect of each item that relates to it, for example, market value is only relevant to Timber (given that the certificates of valuation for each of Hardware and Joinery's interests were 'nil') and so only Timber's name appears opposite the offer for market value in the table. Similarly, with respect to the conditions imposed, item 10 of the conditions, relating to costs incurred in purchasing a replacement property, is only relevant to Timber and so only Timber is referred to in that item.[202]

171 In our view, the judge was correct to observe that the initial offer was not free of ambiguity and contained a variety of 'signposts' supporting alternative and inconsistent constructions of what it meant.[203] We also agree that the judge was correct to construe the initial offer as comprising offers in writing to each of the three claimants. Although the initial offer referred to a 'total sum' of $8,706,000, the table served to differentiate the particular offers made to each claimant. The initial offer was thus not a singular 'global' offer that treated the three claimants 'as one'. It was not an offer of a total sum addressed to all three claimants without distinguishing between them. That type of offer is available under s 32 but that did not occur here.[204] The initial offer distinguished between the three claimants and precisely addressed the particular type of loss that each claimant would suffer, respectively. It thereby satisfied the requirements of s 31(1) because it was an offer in writing to each claimant of whose entitlement to compensation the Authority was aware.

172 Nevertheless, again with great respect, we do not agree with the judge that the offers made to the claimants were separate and independent of each other. In our view, the initial offer made it sufficiently clear that the Authority was offering a 'package' of proposals with multiple components. The components were inter-dependent - each component was tied to the other components. The initial offer was thus an intertwined offer - the acceptance by one claimant was dependent upon acceptance by the other claimants. More particularly, the acceptance of the offer made to Hardware for relocation costs was contingent upon the acceptance of the offer made to Timber for market value based on an 'in use' assessment (as reflected in Timber's certification of valuation).

173 The inter-dependent nature of the offers made to the claimants is apparent first from the reference to all three claimants as the addressees and, secondly, to the existence of joint expenses, for example, legal expenses (where all three claimants are identified as the recipients), submission expenses (where Timber and Hardware are both identified) and valuation fees (where Timber and Hardware are both identified). In respect of those joint expenses, it was not possible for one of the three claimants to accept and the others to refuse. There was no indication of how the compensation for those expenses might be apportioned. Those expenses were not further differentiated as having been incurred by one claimant and not another. The claimants could jointly ask for more compensation but there would be no basis for one claimant to suggest that its 'share' did not adequately cover the costs it had incurred.

174 Thirdly, the presence of a total sum, although, as mentioned, not creating a 'global' offer, does serve to link the offers and indicates that the Authority has assessed the aggregate compensation payable to the three claimants, for their respective interests considered individually, as not rising above that sum.

175 Fourthly, condition 1 emphasises that the sum being offered is for 'the whole of the property and for all loss or damage which may be sustained as a natural and direct consequence of the acquisition' which suggests that the initial offer is being made to acquire all of the separate interests in the Land.

176 Fifthly, the certificate of valuation for Timber's interest, as registered proprietor, is expressly based on its 'in use' value 'as a timber yard and like business' thereby linking the value of Timber's interest, in respect of which compensation for market value is offered, with the business conducted by Hardware, in respect of which compensation for disturbance loss is offered.

177 While there are various indicia in the Act and in the prescribed forms supporting the availability of partial acceptance of an offer as an aspect of the statutory scheme, the application of those provisions must be informed by the nature of the particular offer and the terms in which it is drawn. The Act is directed at ensuring that, when an offer is made, there can be scope for further negotiation. The iterative nature of the process of an initial offer, the service of a notice of claim, and the Authority's reply to a claim all support the gradual narrowing of issues in dispute with the result that, over time, amounts offered will become 'not disputed' and ultimately binding. Where, as here, the initial offer is drafted as an inter-dependent or intertwined offer, the capacity for partial acceptance must be limited; it cannot mean that one component of the 'package' can be singled out for acceptance without reference to the other components upon which its acceptance was premised. That would mean that partial acceptance had the effect of fundamentally changing the substance of what remained of the offer. Instead, consistently with the iterative process, a partial acceptance which maintained the inter-dependence of the offers would leave scope for negotiation on, say, the market value based on an 'in use' assessment. Such a response would have been consistent with the underlying premise of the initial offer and been part of a coherent exchange. If the Authority rejected the claim for further compensation all the offers would fall.

178 In any event, although in our view the initial offer was a statutory offer under s 31, there was no acceptance of that offer by the claimants. To respond in the manner the claimants did, by rejecting the inter-dependence and purporting to accept a component of the initial offer, for relocation expenses, as though it bore no relationship to the other components of the offer, particularly market value, was, in our view, not consistent with the manner in which the initial offer was framed. It underscored the fact that there was no meeting of minds between the Authority and the claimants and no agreement between them.

179 This conclusion is reinforced by matters beyond the text of the initial offer. Insofar as the ambiguity inherent in the initial offer permits reference to the surrounding circumstances,[205] we consider that its construction must be informed by the Authority's core proposition as reflecting the approach it adopted. The core proposition underscores the inter-dependence of the offer to Hardware in respect of relocation expenses and the basis for the assessment of compensation for the market value of Timber's interest.[206] It is sufficient that the core proposition was communicated by the Authority to the claimants repeatedly. The claimants were well aware at the time of the initial offer of the position adopted by the Authority. The initial offer represented a statement of the Authority's position. It was to be expected that it would reflect the core proposition. In our view, the fact that the claimants never agreed with the core proposition is irrelevant. They were at liberty to express their disagreement with the Authority's approach (and did so). However, their refusal to accept the core proposition cannot affect what the initial offer was objectively understood to convey.

180 For these reasons, we would uphold Ground 2(a).

181 In support of Ground 2(b), the Authority submits that the judge should have accepted that what she described, at [202],[207] as a 'flawed conceptual basis' for the Authority's understanding of Timber's entitlement to compensation, namely, that it could make an offer based on the 'in use' value of the Land rather than its highest and best use, should have been understood as incorrect information. It relies on observations made in Longo v Roads Corporation[208] to the effect that 'information' in s 31(8) should not be read restrictively; that a 'mistaken understanding of planning evidence' and an 'error in a valuation report' are sufficient to establish 'incorrect information'; that it is sufficient that incorrect information is 'embedded' in the offer rather than expressly recited; and that whether incorrect information has been relied upon by the Authority is a question of fact.

182 The Authority points to the evidence of McQuilton that the Authority misunderstood the nature of Hardware's interest in the Land and would not have offered compensation for Hardware's relocation costs had it appreciated that Hardware only had the limited interest of a monthly tenancy at will.[209] It submits that, despite knowing that there was no formal lease between Timber and Hardware,[210] the Authority incorrectly considered that s 41(6) would have the effect that Hardware enjoyed a substantial leasehold interest which might qualify the registered proprietor's interest and facilitate compensation being paid to Timber for market value assessed on an 'in use' basis. In this it was mistaken.

183 Hardware and Timber emphasise that for s 31(8) to apply it must be the 'information contained in the offer' that is incorrect. It is not sufficient that there is an assumption upon which an offer is based that is mistaken. Here, what was contained in the offer reflected the legal advice the Authority had received[211] and it was deliberate in the manner in which it treated each of the claimants.

184 We agree. There is nothing identifiable within the initial offer that amounts to incorrect information. While the initial offer may have other flaws, as described above, containing incorrect information is not one of them. The Authority was unable to demonstrate, as it was obliged to do in order to succeed in relying on s 31(8), that the initial offer contained information that was not correct.

Should the subsidiary proceeding have been dismissed against Joinery? - Ground 3

186 Ground 3 is a stand-alone ground that does not depend on Grounds 1 or 2. It rests on the concession made by Joinery during the proceeding before the primary judge that it did not have an entitlement to compensation.[212] In those circumstances, the Authority submits the judge ought not have dismissed the subsidiary proceeding in respect to Joinery. The Authority had sought a declaration that Joinery was not entitled to any compensation. Given Joinery's concession, the Authority submits that it ought to have succeeded in obtaining such a declaration and this would have had implications for costs. The question was live in the proceeding because the judge treated the initial offer as binding and it was directed at Joinery as well as the other claimants. This was reflected in the table in the initial offer to which the judge afforded significant weight on the question of construction.

187 However, in our view, if the declaration sought had been granted, it is unlikely this would have had any, or any significant, implications for the costs orders (including the order for indemnity costs) the judge made in the subsidiary proceeding. The Authority was not ordered to pay Joinery's costs.[213] The judge might have ordered Joinery to pay the Authority's costs of the subsidiary proceeding insofar as they related to Joinery. These may have been slight and/or difficult to distinguish from the costs incurred by the Authority in respect of Hardware. Moreover, the basis of the order for indemnity costs in favour of Hardware was that the issues in the subsidiary proceeding were inextricably intertwined with those in the proceeding brought by Timber against the Authority and, had the Authority not unreasonably refused a Calderbank offer[214] made by Timber, the subsidiary proceeding would have been unnecessary.[215] This reasoning would have applied even if the judge had made a declaration that Joinery had no entitlement to compensation.

188 Nevertheless, we consider that, in the circumstances, the judge ought to have granted a declaration that Joinery was not entitled to any compensation. However, as explained below, we also consider that the judge ought to have made a declaration that Hardware was not entitled to compensation under the Act. The orders made by the judge in the subsidiary proceeding ought be set aside.[216]

Was the market value agreed if Hardware received relocation costs? - Ground 4

190 Ground 4 impugns any reliance on s 41(6) to confer on Hardware an occupancy right of greater duration than a monthly tenancy terminable at will. It calls into question whether the market value of Timber's interest was agreed at $12.2 million if Hardware was treated as having a substantial interest by the operation of s 41(6).

191 As described above, ultimately the Authority submits, and we agree, that a close analysis of the reasoning of the judge reveals that she did not rely on s 41(6) to expand Hardware's interest. That conclusion removes the premise of Ground 4 and renders it unnecessary to determine this ground. However, we draw attention to the observations we made about s 41(6) above.[217]

Did the judge order double recovery? - Ground 5

192 Ground 5 alleges that the judge misapplied s 41(2)[218] of the Act and permitted the claimants to recover in respect of claims that were inconsistent with each other. The claimants therefore recovered twice. It was accepted by the parties that the error identified in Ground 5 is not a vitiating error unless the Authority also succeeded on Ground 2 and showed that the initial offer did not give rise to a binding agreement. The Authority has been successful on Ground 2(a). Ground 5 is in effect an alternative to Ground 1. It is therefore unnecessary for Ground 5 to be decided given that the Authority has succeeded on Ground 1. Nevertheless, it may be useful to make some brief observations.

193 The critical question depends on whether the judge was correct to consider that the prohibition in s 41(2)(b) applies only in respect of a single claimant who is entitled to compensation for market value and seeks also to obtain disturbance loss. In Peter Croke Holdings Pty Ltd v Roads and Traffic Authority (NSW)[219] Bignold J held that the analogous provision to s 41(2) in the Just Terms Act (s 61) operates to bar inconsistent claims whether they are made by a single interest holder or by different interest holders. Section 61 provides:

If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:

(a) any financial advantage that would necessarily have been foregone in realising that potential, and

(b) any financial loss that would necessarily have been incurred in realising that potential.

194 In Peter Croke, the first applicant was the registered proprietor of the compulsorily acquired land that was used by the second applicant, as the lessee and occupier of the land, for a mobile home display and sale business. The first applicant held the majority of shares in the second applicant. Bignold J held that the claimants could not make inconsistent claims based on market value of the land acquired as well as disturbance loss by way of relocation costs and loss of profits. He said:

The question now arises as to how s 61 is to be applied in the present case, where the court is required to determine two separate claims for compensation - one by the first applicant as the owner of the acquired land at the date of acquisition and the other by the second applicant, as the lessee or tenant of the acquired land at that date.

In my judgment, if the first applicant's claim to compensation ... founded on the entitlement to the 'market value' of the land ... were to lead to an assessment of compensation on the basis of a higher and more valuable use of the acquired land than on the basis of its existing use (being the use made by the second applicant, as lessee or tenant, in the conduct of its business), and that assessment on the basis of the higher use was predicated upon the termination of the second applicant's tenancy of the land and the cessation of conducting its business thereon, the second applicant would not be entitled to compensation in respect of 'loss attributable to disturbance' because (i) the financial advantage of continuing in occupation and in the conduct of the business would necessarily have been foregone in realising that (higher) potential and (ii) the financial loss to the second applicant of ceasing to conduct the business, or of having to relocate the business, would necessarily have been incurred in realising that (higher) potential.

...

This conclusion does not deny that each claimant, having an interest in the acquired land, is entitled to have his or her claim for compensation separately determined. Rather, it gives proper recognition to the apparent effect of s 61 of the Just Terms Act namely to deny recovery of compensation for disturbance loss where a claim to such compensation is inconsistent with another claim to compensation based upon the market value of the land, where that value is assessed on the basis of a potential higher use of the land than the existing use and where the realisation of that potential necessarily terminates (or postulates the termination of) that existing use. In my opinion, s 61 so operates, whether the inconsistent claims are made by a single 'interest' holder ... or, as in the present case, by different interest holders, one being the owner and the other being the lessee.[220]

195 The Authority commends the reasoning of Bignold J to this Court while recognising that s 61 is different from s 41(2). Moreover, it submits that even if here the judge was correct to construe the prohibition in s 41(2) strictly so as to apply only in respect of a single interest-holder, nevertheless, the objective of s 41(2) to prohibit inconsistent claims, should be kept in mind in the construction of the other provisions, including ss 31(8), 41(1)(d) and 40.

196 Timber and Hardware emphasise again that the Just Terms Act is a different piece of legislation from the Act, drafted in different terms, and that statutory construction begins and ends with the text.[221] They submit that s 41(2)(b) should be construed in the manner adopted by the judge so as to treat individual claims separately. A claimant ought not be financially penalised in its assessment of compensation because of the need to take account of other claimants' interests.

197 They submit that this approach reflects the position before the enactment of the Act; for example, as Barwick CJ said in Rosenbaum v Minister for Public Works, 'each person having any estate or interest in the land, including a ... tenant, has a separate and independent claim to compensation for the value of the interest which is taken from him by the acquisition of the land'.[222]

198 Hardware and Joinery further submit that the construction of s 41(2)(b) must align with the construction of s 41(2)(a). Section 41(2)(a) precludes the recovery of compensation for the 'special value' of land, in respect of pecuniary advantage, where market value is assessed on the basis of potential use. Hardware and Joinery submit that 'special value' will be specific to a particular claimant who must be the same claimant as the recipient of compensation for the market value of the land based on potential use. To construe s 41(2)(b) as applicable where there are multiple claimants would be at odds with the manner in which s 41(2)(a) is construed. They also submit that to adopt the Authority's construction would be contrary to the policy of the Act which, as expressed in s 30, is concerned with the consequence of divestment of every person's interest in land. Finally, they contend that the approach in Peter Croke ought not be adopted and note that it was considered by Biscoe J to be wrongly decided in the subsequent case of Attard v Transport for New South Wales[223] on the ground that no inconsistency arises where 'a tenant claims relocation costs without the market value of its interest in the land being assessed on the higher potential use'.[224]

199 For our part we find it difficult to see why the legislature's concern to prohibit inconsistent claims should not extend to circumstances where those claims are made by distinct interest holders. There appears to us to be a fundamental contradiction between the assessment of compensation of market value based on potential use where the realisation of that potential necessarily terminates the existing use and yet compensation also being provided for the termination of that existing use.

200 It is also not apparent why the fact that s 41(2)(a) may be confined to cases where there is a single claimant should warrant reading down the plain words of s 41(2)(b) which are expressed in general terms, in the passive voice, and without any express or necessarily implied reference to any claimant or claimants.

201 The view expressed in Peter Croke is reinforced by the potential application of s 41(2) to offers made under s 32 of the Act, which provides for a global or aggregate offer to be made by way of a 'total amount of compensation that the Authority proposes to pay in respect of the value of all interests in the acquired land'.[225] If s 41(2) applies to offers made under s 32 then it must have been intended to apply in circumstances where there are multiple different interest-holders. An offer can only be made under s 32 when the relevant Minister certifies that it is not appropriate to set out in an offer under s 31 the information referred to in s 31(3). It was not relied upon here but the possibility of its application may inform the construction of s 41(2).

202 In any event, as mentioned, it is unnecessary to decide Ground 5.

203 The Authority denied that any advances it made were paid to Hardware. It claimed that it had paid all of the advances to Timber and so paid the agreed market value of $12.2 million in full.[226]

204 We have concluded that Hardware was not entitled to its relocation costs. We accept that all of the advances made by the Authority were advances to Timber in respect of the market value of the Land, assessed on the basis of its highest and best use, together with legal expenses, solatium, and so on. In other words, the advances that have been made by the Authority discharged its obligation to Timber under the Act. There is no payment to Timber that is outstanding. There is no obligation on the Authority to pay Hardware any compensation.

205 Orders will be made to give effect to this conclusion.

206 Leave to appeal will be granted and the appeal allowed. We would uphold Grounds 1(a), 2(a), and 3. We reject Ground 2(b). It is unnecessary to decide Grounds 1(b), 4, and 5.

207 On 14 August 2019 the judge ordered that there be an award of compensation for Timber in the sum of $12.49 million (paragraph 1).[227] This order remains undisturbed.

208 Paragraphs 2 to 4 of the orders of 14 August 2019 should be set aside. Paragraph 2 indicated that there was $2.871 million payable on the balance of the compensation payable pursuant to paragraph 1. Paragraph 3 directed that the Authority pay Timber the sum of $1,517,136.41 within 14 days, being interest payable on the balance of $2.871 million outstanding. Paragraph 4 directed the Authority to pay Timber's costs (including indemnity costs from 8 April 2017). In their place there will be a declaration that the award of compensation referred to in paragraph 1 has been paid and no amount remains outstanding.

209 With respect to the subsidiary proceeding, paragraphs 1 and 2 of the orders made on 14 August 2019 ought be set aside. These orders were to the effect that the subsidiary proceeding be dismissed (paragraph 1) and that the Authority pay Hardware's costs, calculated on an indemnity basis (paragraph 2). In their place there will be declarations that neither Hardware nor Joinery is entitled to an award of compensation under the Act.

210 The parties will be given an opportunity to be heard on the costs of the appeal and the costs of the two proceedings below.

PROVANS TIMBER AND HARDWARE PTY LTD (ACN 005 257 705)

PROVAN'S TIMBER (JOINERY) PTY LTD (ACN 004 419 667)

[1] Provans Timber Pty Ltd v Secretary, Dept of Economic Development, Jobs, Transport and Resources [2019] VSC 390 ('Reasons'). The award was for a total of $12.49 million including solatium, submission expenses and professional expenses.

[2] Reasons [151], [225] respectively.

[3] It is convenient to refer to 'the Authority' as subsuming a reference to the applicant. In May 2015 the Secretary to the Department of Economic Development, Jobs, Transport and Resources was appointed as the successor to the Authority: Victoria, Government Gazette, No S 112, 19 May 2015. That Department has since been divided into two separate departments, one of which is the Department of Transport. The Secretary to the Department of Transport is now the officer authorised from 1 January 2019 to complete transactions including legal proceedings in connection with a transaction that happened in relation to the Secretary to the Department of Economic Development, Jobs, Transport and Resources under the Major Transport Projects Facilitation Act 2009 prior to 1 January 2019: Victoria, Government Gazette, No S 579, 21 December 2018, clause 6 and Table 2, Item 42.

[4] In what follows, for convenience, we refer simply to 'the appeal'.

[5] In March 2015 the Authority made an offer to re-convey the Land to Timber and to give Hardware and Joinery the opportunity to remain in occupation. The claimants did not accept that offer: see Reasons [119].

[6] There are discrepancies in the spelling of the companies' names. For convenience, the primary judge chose to use the spelling 'Provans'. The same approach is adopted here. We use the expression 'Provans', or 'the Provans Group', to refer to Timber, Hardware and Joinery, unless the context shows otherwise. We also refer to those companies as 'the claimants'.

[7] Victoria, Government Gazette, No S 222, 30 June 2014.

[8] Victoria, Government Gazette, No S 257, 30 July 2014.

[12] See [16] above.

[13] Victoria, Government Gazette, No S 371, 16 October 2014.

[14] See [35] above.

[15] See [78] below.

[16] Item 10 also has some relevance. It provides: '[The Authority] will reimburse the stamp duty, transfer fees and reasonable conveyancing costs should [Timber] purchase a replacement property'.

[17] See [78] below.

[21] See [81] below.

[24] The Authority reserved the right to argue that the allowance for solatium should be less than that offered.

[25] See [82] below.

[28] See [50] above.

[30] Pursuant to s 41(1)(f) of the Act.

[31] The judge described this as an 'amount [that] corresponds with the amount that Hardware and Timber say was offered to them and accepted by them for relocation expenses': Reasons [144].

[33] Section 51 provides for a claimant, upon service of an offer, to require the Authority to advance an amount equal to the amount of compensation offered.

[40] We have set out the paragraph numbers of the Reasons that are specifically referred to in the grounds of appeal.

[41] Ground 4. See [122] below.

[43] See [83] above. The issues are considered here in the order in which they are raised in the grounds of appeal.

[44] [2017] VSCA 114, [76] (Warren CJ, Osborn and Ferguson JJA) ('Manor Lakes'). See also Melbourne City Link Authority v Teford Pty Ltd [2001] VSCA 54, [24], [28] (Batt JA, Tadgell JA agreeing at [1], Chernov JA agreeing at [31]); Halwood Corporation Ltd v Roads Corporation (1995) 89 LGERA 280, 302-3(Batt J).

[46] (2019) 99 NSWLR 279; [2019] NSWCA 41 ('United Petroleum'). United Petroleum is discussed further below at [138]-[153].

[48] Reasons [235] (emphasis added) (citations omitted)

[49] See [82] above.

[51] (1916) 22 CLR 56; [1916] HCA 48 ('Aerated Water').

[54] Emphasis added. See also Reasons [274]-[275]. See [119] below.

[55] See Ground 1 at [122] below.

[56] By reason of s 31(8) of the Act. See [78] above.

[57] See [50] and [78] above.

[58] See [82] above.

[60] See [51] above.

[61] See [53] above.

[62] See [78] above.

[64] Reasons [178]-[179] (emphasis added).

[66] See [16] above.

[67] Glynn gave evidence that she had formed the view that an offer based on highest and best use with nothing for relocation expenses would provide a higher amount of compensation whereas McQuilton gave evidence that he considered an assessment based on existing use plus relocation costs would provide the highest compensation to Provans: Reasons [183].

[68] See [78] above.

[74] See [41] above.

[75] See [46] above.

[76] See [48] above.

[78] See Ground 2 at [122] below.

[80] See Ground 3 at [122] below.

[81] Reasons [11], [39], [127], [147], [149], [286], [318].

[83] See [61] above.

[87] Reasons [298] (emphasis added). See also [89], [93], [94] above.

[88] See [82] above.

[89] Ground 4. See [122] below.

[90] See [131] below.

[91] See [82] above.

[93] Manor Lakes [2017] VSCA 114, [90] (Warren CJ, Osborn and Ferguson JJA).

[94] The judge distinguished this from the conventional understanding of 'double dipping' where the same person recovers twice in respect of the same interest: Reasons [259].

[95] Reasons [269]-[270] (emphasis in original underlined) (emphasis added italicised).

[97] Reasons [274]-[276] (emphasis added).

[98] Ground 5. See [122] below.

[100] Judgment was delivered on 14 June 2019. Orders were made on 14 August 2019.

[101] Section 40 of the Act. See [83] above.

[103] Separate orders were made on 14 August 2019 in relation to the subsidiary proceeding.

[104] See [93]-[94] above.

[105] See [87] above.

[106] See [89] above.

[107] See [92] above.

[108] See [98] above.

[109] See [100] above.

[110] See [102] above.

[111] See [103] above.

[112] See [103] above. The trial judge also emphasised that the initial offer contained an offer to each of the claimants: see Reasons [191].

[113] See [108] above.

[114] See [111] above.

[115] See [113] above.

[116] See [116]-[117] and [119] above.

[117] See [113] above.

[118] Reasons [151]. See [87] above.

[120] (2010) 31 VR 451, [2010] VSC 32 ('Love').

[121] See [82] and [84] above.

[122] Love [2010] VSC 32; (2010) 31 VR 451, 470-1 [83]; [2010] VSC 32, [83] (citations omitted).

[123] See [76] above.

[124] See [78] above.

[125] Section 41(1)(d). See [82] above.

[126] See [83] above.

[127] Reasons [151]. See [87] above.

[128] Reasons [242]. See [92] above.

[129] See, eg, Commonwealth v Essendon Airport Pty Ltd [2019] FCA 1411 (in effect a 99 year lease).

[130] See [83] above.

[132] See [90] above.

[133] See [82] above.

[134] See [93] above.

[135] See [94] above.

[136] This contention was made by the Authority in its written case but it was not repeated in the Authority's oral submissions on the hearing of the appeal.

[137] Reasons [242]. See [92] above. See also Reasons [248].

[138] This contention was also made by the Authority in its written case but it was not repeated in the Authority's oral submissions on the hearing of the appeal.

[139] Reasons [242] See [92] above.

[140] Reasons [235]. See [90] above.

[141] See, eg, Reasons [242]. See [92] above. See also Reasons [238]-[241] where the judge records the submissions of the parties.

[142] Reasons [198], [241]. See [106] above.

[143] Reasons [242], [248]. See [91]-[93] above.

[144] See Greco v Swinburne Ltd [1991] VicRp 23; [1991] 1 VR 304, 312 (Gobbo J) ('Greco') and the reference to CM Collins, The Valuation of Property Compensation and Land Tax (Law Book Co, 3rd ed, 1949) and to Halsbury's Statutes in the context of entitlements to compensation under statute.

[145] Radaich v Smith [1959] HCA 45; (1959) 101 CLR 209, 218; [1959] HCA 45 (Taylor J): 'If he was let into exclusive possession, he was said to be a tenant, albeit only a tenant at will'.

[146] Commonwealth Life (Amalgamated) Assurance Ltd v Anderson [1945] NSWStRp 31; (1946) 46 SR (NSW) 47, 49 (Jordan CJ) ('Anderson'): '[T]he only essential characteristic of any lease is that it should give the right of exclusive possession of premises to a tenant'. See also Greco [1991] VicRp 23; [1991] 1 VR 304, 312. A tenant at will can also bring an action against third parties but a licensee cannot: Brendan Edgeworth et al, Sackville & Neave: Australian Property Law (LexisNexis Butterworths, 10th ed, 2016), 172 [3.19].

[147] EH Burn and J Cartwright, Cheshire and Burn's Modern Law of Real Property (Oxford University Press, 18th ed, 2011) 201-3.

[148] In Anderson [1945] NSWStRp 31; (1946) 46 SR (NSW) 47, Jordan CJ said of tenancies at will: 'A tenancy at will exists whenever, by virtue of an express or implied agreement between the land-owner and another person, the other is in exclusive possession of the land, otherwise than as servant or agent of the owner, for an estate which is not of freehold or for a term. A tenancy at will is subject to many inconveniences. It is necessarily terminable at the will of either party by demand of possession, express or implied. It differs in this respect, as in others, from a licence': at 49-50.

[149] See Greco [1991] VicRp 23; [1991] 1 VR 304, 312 (Gobbo J)

[151] The award was made by the Land and Environment Court of New South Wales ('the LEC').

[152] Comprised of Basten, Macfarlan and Payne JJA, Sackville AJA and Preston CJ of the LEC.

[154] See [83] above.

[155] See [89] above.

[156] All the categories of disturbance loss under s 59 are governed by the 'reasonably incurred ...in connection' test except s 59(f) that employs the 'reasonably incurred ... as a direct and natural consequence' test. See United Petroleum [2019] NSWCA 41; (2019) 99 NSWLR 279, 283-4 [7]; [2019] NSWCA 41.

[157] Reasons [37]. This is not to deny that the construction of one paragraph of s 59 is influenced by the construction of other paragraphs.

[158] The Just Terms Act contains a similar definition of 'interest' to the Act: see [77] above.

[159] United Petroleum [2019] NSWCA 41; (2019) 99 NSWLR 279, 284 [8]; [2019] NSWCA 41.

[160] With whom Macfarlan and Payne JJA agreed. Payne JA also agreed with the reasons of Sackville AJA.

[161] United Petroleum [2019] NSWCA 41; (2019) 99 NSWLR 279, 287 [21]; [2019] NSWCA 41.

[162] United Petroleum [2019] NSWCA 41; (2019) 99 NSWLR 279, 287 [22]; [2019] NSWCA 41 (emphasis added).

[163] United Petroleum [2019] NSWCA 41; (2019) 99 NSWLR 279, 288 [26]; [2019] NSWCA 41 (emphasis added).

[164] (2014) 88 NSWLR 752; [2014] NSWCA 352 ('George D Angus'), upholding the decision of Preston CJ of the LEC in George D Angus Pty Ltd v Health Administration Corporation [2013] NSWLEC 212.

[165] United Petroleum [2019] NSWCA 41; (2019) 99 NSWLR 279, 292 [46]-[48]; [2019] NSWCA 41 (emphasis added) (citations omitted). Basten JA concluded (at [54]) that the result in George D Angus was reached in error and should not be followed. So too did Sackville AJA (at [119]-[120]). The New South Wales Court of Appeal constituted a bench of five in United Petroleum to consider whether George D Angus was wrongly decided.

1. [166] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) (2009) 239 CLR 27; [2019] HCA 41 ('Alcan').

[167] See [141] above.

[168] United Petroleum [2019] NSWCA 41; (2019) 99 NSWLR 279, 302 [94]; [2019] NSWCA 41 (citations omitted).

[169] United Petroleum [2019] NSWCA 41; (2019) 99 NSWLR 279, 307 [120]; [2019] NSWCA 41.

[170] United Petroleum [2019] NSWCA 41; (2019) 99 NSWLR 279, 305 [111]-[113], [116]-[119]; [2019] NSWCA 41 (emphasis in original underlined) (emphasis added in italics) (citations omitted). Preston CJ of the LEC (at 315 [161]) agreed with Sackville AJA on this issue.

[171] United Petroleum [2019] NSWCA 41; (2019) 99 NSWLR 279, 307 [121]; [2019] NSWCA 41 (emphasis added).

[172] Reasons [299], [296], respectively, at [94] and [113] above.

[173] Reasons [299]. See [94] above.

[174] See [150] above.

[175] See [140] above.

[176] Reasons [242]. See [92] above.

[177] Reasons [247]. See [93] above.

[178] Reasons [242]. See [92] above.

[179] Reasons [235]. See [90] above.

[180] Reasons [276]. See [93] above.

[181] Reasons [242]. See [92] above.

[182] See [82] above.

[183] See [125] above.

[184] United Petroleum [2019] NSWCA 41; (2019) 99 NSWLR 279, 315 [161]; [2019] NSWCA 41 (Preston CJ of LEC).

[185] See [78] above.

[186] As explained at [192] below, the Authority could also have succeeded on the appeal if grounds 2 and 5 were upheld, but not ground 1.

[187] See [101] above.

[188] See [50] above.

[190] See [51] above.

[192] See [53] above.

[193] See [54] above.

[194] Reasons [178]. See [101] above.

[195] Reasons [182]. See [103] above.

[196] See [80] above.

[197] See [50] above.

[198] See [53] above.

[199] See [79] above.

[200] See [80] above.

[201] See [81] above.

[202] See n 16 above.

[203] Reasons [179]. See [101] above.

[204] See [201] below.

1. [205] See, eg, Adaz Nominees Pty Ltd v Castleway Pty ltd [2020] VSCA 201 [70], [254]; Apple & Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37.

[206] See [16] above.

[207] See [108] above.

[208] [2013] VSC 636 (Emerton J).

[209] See [104] above.

[210] Reasons [198]. See [106] above.

[211] See [46] above.

[213] Provans Timber Pty Ltd v Secretary, Dept of Transport (Costs Judgment) [2019] VSC 537, [27]-[28] ('Costs reasons').

[214] Calderbank v Calderbank [1975] 3 All ER 333.

[216] See [209] below.

[217] See [160] above.

[218] See [82] above.

[219] (1998) 101 LGERA 30 ('Peter Croke'). See more generally Horn v Sunderland Corporation [1941] 2 KB 26, 35 (Sir Wilfrid Greene MR); Commonwealth v Milledge [1953] HCA 6; (1953) 90 CLR 157, 164; [1953] HCA 6.

[220] Peter Croke (1998) 101 LGERA 30, 43-4.

1. [221] Alcan [2009] HCA 41; (2009) 239 CLR 27, 46-7 [47]; [2009] HCA 41.

[222] [1965] HCA 65; (1965) 114 CLR 424, 425; [1965] HCA 65 ('Rosenbaum'). See also SJR Investments Co Pty Ltd v Housing Commission of Victoria [1971] VicRp 24; [1971] VR 211, 214 (Lush J).

[223] [2014] NSWLEC 44 ('Attard').

[224] Attard [2014] NSWLEC 44, [158]. See also [159]-[160].

[226] See [74] above.

[227] See [121] above.