Sydney Metro v C & P Automotive Engineers Pty Ltd

] NSWLEC 115 McDonald v Roads & Traffic Authority of NSW [2009] NSWLEC 105 Melino v Roads and Maritime Services (2018) 98 NSWLR 625; [2018] NSWCA 251 Minister for Army v Parbury Henty & Co (1945) 70 CLR 459 Moloney v Roads and Maritime Services (2018) 98 NSWLR 651; [2018] NSWCA 252 National Australia Bank Ltd v Blacker (2000) 104 FCR 288; [2000] FCA 1458 Nelungaloo v Commonwealth (1947) 75 CLR 495 Olde English Tiles Australia Pty Ltd v Transport for New South Wales (2022) 108 NSWLR 503; [2022] NSWCA 108 Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW (1998) 101 LGERA 30 R v Khazaal (2012) 246 CLR 601; [2012] HCA 26 Richardson v Roads and Traffic Authority of New South Wales (1996) 90 LGERA 294 Road and Maritime Services (NSW) v United Petroleum Pty Ltd (2019) 99 NSWLR 279; [2019] NSWCA 41 Roads & Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236 Roads and Maritime Services v Allandale Blue Metal Pty Ltd [2015] NSWCA 167 Roads and Traffic Authority v Peak [2007] NSWCA 66 Rocco Fraietta v Roads and Maritime Services [2017] NSWLEC 11 Speter v Roads and Maritime Services [2016] NSWLEC 128 TEC Desert Pty Ltd v Commissioner of State Revenue (Western Australia) (2010) 241 CLR 576; [2010] HCA 49 The Trustee for Whitcurt Unit Trust v Transport for NSW [2021] NSWLEC 82 Tolson v Roads and Maritime Services (2014) 201 LGERA 367; [2014] NSWCA 161 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5 Texts Cited: C Harpum, S Bridge and M Dixon, Megarry & Wade, The Law of Real Property (7th ed, 2008, Sweet & Maxwell) Category: Principal judgment Parties: Sydney Metro (appellant) C & P Automotive Engineers Pty Ltd (respondent) Representation: Counsel: G Sirtes SC; M Astill (appellant) R Lancaster SC; T Poisel (respondent)

Solicitors: Bick & Steele (appellant) Addisons (respondent) File Number(s): 2023/323415 Publication restriction: Nil Decision under appeal Court or tribunal: NSW Land and Environment Court Jurisdiction: Class 3 Citation: [2023] NSWLEC 95 Date of Decision: 15 September 2023 Before: Pain J File Number(s): 2022/40915 2022/40567

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the judgment] On 19 March 2021, the appellant, Sydney Metro, compulsorily acquired land in Clyde, New South Wales. The respondent, C&P Automotive Engineers Pty Ltd, had a lease over the acquired land for a term of five years from 1 April 2020, with an option to renew for five years. The respondent relocated its hire, storage, sale and repair business from the acquired land, first to three temporary rental premises and then to rental premises in Granville. On 15 September 2023, the primary judge awarded the respondent compensation in the amount of $2,418,759.99 (plus statutory interest and costs) pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) ("Just Terms Act"). The appeal concerns a portion of the compensation awarded, namely $2,187,759.99 awarded for disturbance under s 55(d) of the Just Terms Act. The primary judge found, relevantly, that the respondent was entitled to compensation for two categories of costs incurred in relation to relocation within the meaning of s 59(1)(c) of the Just Terms Act: 1. $1,914,404 (GST exclusive) for costs of constructing new landlord's fixtures at the replacement permanent lease site under s 59(1)(c); and 2. $88,173 (GST exclusive) for the difference in rent between the acquired property and the new site for the remainder of the term under the lease (i.e. four years). The issues on appeal were: (i) What was the correct construction of s 59(1)(c) of the Just Terms Act? (ii) Was the respondent entitled to compensation under s 59(1)(c) of the Just Terms Act for the costs incurred in constructing new landlord's fixtures at the replacement premises? (iii) Was the respondent entitled to compensation for disturbance in constructing new landlord's fixtures, given that the respondent had been compensated for the loss of the right to use the landlord's fixtures as part of the market value of the acquired leasehold right? (iv) Was the respondent entitled to compensation under s 59(1)(c) of the Just Terms Act for the increased rent at the replacement premises? The Court (Payne JA, Meagher JA and Kirk JA agreeing at [1] and [154] respectively) held, allowing the appeal:

On issue (i) (1) "Relocation" in s 59(1)(c) means the act of moving something or someone from one place to another: at [85]. Building new capital works does not involve the act of moving something or someone from one place to another: at [71]-[72]. The Just Terms Act is neutral about the quality of the replacement premises: at [73]-[75], [84], [115]. The Just Terms Act does not import the "value to the owner" principle: at [56]-[57], [88], [97], [113]. "Relocation", "replacement", "reinstatement" and "reestablishment" are different concepts and connote different things: at [54], [81], [96], [100]. Nelungaloo v Commonwealth (1947) 75 CLR 495; Leichhardt Council v Roads and Traffic Authority (NSW) (2006) 149 LGERA 439; [2006] NSWCA 353; El Boustani v The Minster administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33 applied. Minister for Army v Parbury Henty & Co (1945) 70 CLR 459; Commissioner of Highways v Shipp Bros Pty Ltd (1978) 19 SASR 215; Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111; [1995] 1 All ER 846 distinguished.

On issue (ii) (2) The words "financial costs reasonably incurred in connection with the relocation" cannot be read as permitting compensation to construct landlord's fixtures on the new landlord's property: at [59]-[63], [70], [89]-[100], [107]-[110] [114]-[116]. The Just Terms Act does not permit compensation to be paid for financial costs of replacing the physical characteristics of the leasehold premises, belonging to the landlord, which were available for use as an incident of a lease of leased premises: at [72], [77]-[78], [85], [102]-[105], [111]-[112], [150]. TEC Desert Pty Ltd v Commissioner of State Revenue (Western Australia) (2010) 241 CLR 576; [2010] HCA 49; National Australia Bank Ltd v Blacker (2000) 104 FCR 288; [2000] FCA 1458 applied. George D Angus v Health Administration Corporation (2013) 205 LGERA 357; [2013] NSWLEC 212; The Trustee for Whitcurt Unit Trust v Transport for NSW [2021] NSWLEC 82; Speter v Roads and Maritime Services [2016] NSWLEC 128; Rocco Fraietta v Roads and Maritime Services [2017] NSWLEC 11; Konduru v Roads and Maritime Services (2017) 224 LGERA 262; [2017] NSWLEC 36 considered. McDonald v Roads & Traffic Authority of NSW [2009] NSWLEC 105; Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW (1998) 101 LGERA 30; Home Care Services (NSW) v Albury City Council (2003) 136 LGERA 117; [2003] NSWLEC 433; Mathew Massasso t/as Five Dock Pharmacy v Sydney Metro [2023] NSWLEC 115 not followed. Hua v Hurstville City Council [2010] NSWLEC 61 doubted.

On issue (iii) (3) The tenant's loss was of the right to use fixtures pursuant to, and for the term of, the lease. That loss was compensated as market value of the lease under s 55(a). Awarding compensation for relocation costs, including constructing equivalent buildings and hardstands at another site, effectively compensates for the loss of the same thing twice: at [124]-[140]. Tolson v Roads and Maritime Services (2014) 201 LGERA 367; [2014] NSWCA 161; Roads & Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236; Moloney v Roads and Maritime Services (2018) 98 NSWLR 651; [2018] NSWCA 252; Olde English Tiles Australia Pty Ltd v Transport for New South Wales (2022) 108 NSWLR 503; [2022] NSWCA 108; Road and Maritime Services (NSW) v United Petroleum Pty Ltd (2019) 99 NSWLR 279; [2019] NSWCA 41; Roads and Traffic Authority v Peak [2007] NSWCA 66; Roads and Maritime Services v Allandale Blue Metal Pty Ltd [2015] NSWCA 167 applied.

On issue (iv) (4) Where rent for a leasehold interest in a property is greater than the rent payable under the acquired leasehold interest, compensation for disturbance under s 55(d) of the Just Terms Act is not payable for the additional cost: at [147]-[152]. Moloney v Roads and Maritime Services (2018) 98 NSWLR 651; [2018] NSWCA 252; Road and Maritime Services (NSW) v United Petroleum Pty Ltd (2019) 99 NSWLR 279; [2019] NSWCA 41 applied.

Judgment

1. MEAGHER JA: I have had the benefit of reading Payne JA's judgment in draft and agree with his Honour's reasons and proposed orders.
2. PAYNE JA: On 19 March 2021, the appellant, Sydney Metro, compulsorily acquired land in Clyde, New South Wales. The respondent, C&P Automotive Engineers Pty Ltd, had a lease over the acquired land for a term of five years from 1 April 2020, with an option to renew for five years. The respondent operated a hire, storage, sales and repair business from the site which included a large fleet of heavy machinery.
3. No appeal is brought against the award of $231,000 to the respondent for the market value of the leasehold interest. The appeal concerns the award of $2,187,759.99 for disturbance of the leasehold interest under s 55(d) of the Land Acquisition (Just Terms Compensation) Act 1991 ("Just Terms Act").
4. The freehold of the acquired land was owned by Ms Nohra and Ms Carpenter. Ms Nohra's husband, Mr Nohra, was the director and general manager of the respondent. The primary judge awarded Ms Nohra and Ms Carpenter compensation of $6,974,472.98 (plus statutory interest and costs) pursuant to the Just Terms Act comprising: 1. $6,920,000 for market value under s 55(a); and 2. $54,472.98 for disturbance losses under s 55(d) comprising: 1. $35,222.98 (GST inclusive) for legal costs under s 59(1)(a); and 2. $19,250 (GST inclusive) for valuation fees under s 59(1)(b).
5. No appeal is brought against any aspect of the award of compensation in relation to the compulsory acquisition of the freehold interest in the land.
6. The primary judge awarded the respondent compensation in the amount of $2,418,759.99 (plus statutory interest and costs) pursuant to the Just Terms Act comprising: 1. $231,000 for market value under s 55(a); 2. $2,187,759.99 for disturbance losses under s 55(d) comprising: 1. $145,600 (GST exclusive) for relocation costs involving relocating to temporary sites under s 59(1)(c); 2. $1,914,404 (GST exclusive) for "relocation" costs involving construction of new landlord's fixtures at a new permanent site under s 59(1)(c); 3. $88,173 (GST exclusive) for relocation costs involving the difference in rent between the acquired property and the new site for the remainder of the term under the lease (i.e. four years) under s 59(1)(c) of the Just Terms Act); and 4. $39,582.99 (GST exclusive) for legal costs under s 59(1)(a).

Primary judgment

1. There were two proceedings before the primary judge. The first related to claims by the owners of the freehold. As I have said, there is no appeal in relation to that part of the case.
2. The respondent, the lessee of the property, made a claim for compensation that comprised: 1. a sum for the market value of its lease under ss 55(a) and 56 of the Just Terms Act; and 2. a sum for disturbance under s 55(d) of the Just Terms Act, being: 1. an amount for legal costs under s 59(1)(a) (which was agreed); 2. an amount for the physical relocation of its assets from the acquired land to the new property under s 59(1)(c) (which was agreed); 3. an amount for proposed construction works at the new leased premises under s 59(1)(c) (which is the principal subject of this appeal); and 4. an amount representing the difference between the rent it was paying under the lease and the rent that it was to pay under the leases at the relocation premises under s 59(1)(c) (which is also the subject of this appeal).
3. The respondent claimed compensation under ss 55(d) and 59(1)(c) of the Just Terms Act for financial costs involving construction costs of what it called the proposed "fit out" at the relocation site. Despite obtaining compensation for the market value of its leasehold interest under ss 55(a) and 56 of the Just Terms Act, the respondent's case was that significant construction was required to render the new premises fit for the respondent's business, given that no suitable like-for-like replacement premises could be found.
4. The interest in land which had been acquired was, relevantly, the leasehold interest held by the respondent. The Lease was in evidence. The property leased by the respondent was defined in cl 3 to include the property leased as described on page 1 of the lease, which is just the real property Torrens title description "23/733500". Clause 3.2 provides that "The lessor's fixtures are included in the property leased". The additional leased property was "none".
5. All of the financial costs here sought by the respondent were for construction costs for replacement landlord's fixtures. The landlord's fixtures were not capable of being relocated as they were part of the landlord's property.
6. Before the primary judge, the respondent's claim for $1,914,404 (GST exclusive) comprised the following construction costs at the new site: 1. Office building - $138,564; 2. Awning replacement - $352,165; 3. New hardstand and miscellaneous works - $266,660; 4. New warehouse - $428,840; 5. Preliminaries/site management/labour - $201,659; 6. Design, professional fees and management - $166,546; 7. Authority or planning approval/council fees, permits and charges - $27,980; 8. Contingency (15%) - $237,362; and 9. Escalation allowance (5.2%) - $94,628.

Grounds of appeal

1. The appeal is brought pursuant to s 57 of the Land and Environment Court Act 1979 ("LEC Act"). Appeals are limited to questions of law: LEC Act s 57(1).
2. At the outset of the hearing leave was granted, by consent, to the appellant to rely upon the following grounds of appeal: 1 The court below erred on a question of law in finding that the respondent was entitled to compensation under s 59(1)(c) of the Just Terms Act for fit-out works at a new site. 2 The court below should have found there was no such entitlement in circumstances where the respondent did not own the relevant fixtures at the acquired premises, but merely had the right of use [of] them pursuant to its lease for the term thereof. 3 Further or in the alternative to 2. The court below should have found there was no such entitlement in circumstances where the respondent had already been compensated for its loss of right to use of the relevant fixtures (as part of its compensation for loss of the right of the use of the acquired premises), pursuant to its lease for the term thereof. 4 The Court below erred on a question of law by: (a) granting the respondent's claim for rent differential under s59(1)(c) of the Just Terms Act, when that provision does not encompass a claim of that nature, and (b) If such a claim can be legally made under that provision, by failing to assess the respondent's claim for rent differential under s 59(1)(c) of the Just Terms Act to take into account the additional per metre space leased by the respondent and, accordingly, making an adjustment, in the appellant's favour, on account of such additional space.
3. The appellant sought the following orders: 1 Appeal allowed. 2 Order at [126] and [129(1)] of the Judgment of the court below be set aside. 3 In lieu of [126] the following: C&P is awarded compensation in the amount of $416,182.99 (plus statutory interest and costs) pursuant to the Just Terms Act comprising: (1) $231,000 for market value under s 55(a); (2) $185,182.99 for disturbance losses under s 55(d) comprising: (a) $145,600 (GST exclusive) for relocation costs involving relocating to temporary sites under s 59(1)(c); (d) $39,582.99 (GST exclusive) for legal costs under s 59(1)(a). 4 In lieu of [129(1)] of the Judgment in the Court below, the following: Compensation pursuant to Part 3 Division 4 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) for the compulsory acquisition of the Applicant's leasehold interest in Lot 23 in DP 733500, known as ….Street, Clyde and disturbance losses is determined in the sum of $416,182.99 (plus statutory interest) 5 The respondent pay the appellant's costs of the appeal.

Whether construction costs claimed by the respondent were incurred in connection with relocation within the meaning of s 59(1)(c) of the Just Terms Act

Submissions

1. The appellant submitted that the respondent was not entitled to an award of compensation under s 59(1)(c) of the Just Terms Act for amounts incurred in respect of "relocation" because the respondent was not relocating any of its property but was seeking compensation for constructing new fixtures, belonging to the landlord of the new premises. Compensation for relocation under s 59(1)(c) does not involve a guarantee of equivalent accommodation or reinstatement of business premises. As Mr Sirtes SC submitted: We say that this notion of equivalence of reinstatement, when it comes to disturbance costs, does not apply and that providing compensation for the cost of construction or purchasing the amenities leased at the acquired premises does not fall or fit within the notion of relocation.
2. The appellant submitted that s 59(1)(c) of the Just Terms Act does not contemplate the construction of replacement landlord's fixtures at new premises to replicate those which had been used at the acquired premises. The claimed compensation for construction costs at the new premises could not constitute a claim for "relocation" of the business from the acquired premises, because the respondent had no right to remove or relocate the fixtures it was intending to construct at the new premises.
3. Although ground 2 was put in terms of compensation only being payable for relocation of chattels and fixtures "owned" by the dispossessed lessee, the appellant clarified in oral submissions that the only point necessary to be decided was whether as a matter of construction of s 59(1)(c) of the Just Terms Act, compensation was payable for the construction by a lessee of landlord's fixtures at new leased premises. Thus, to take an example, no issue is raised in this case about whether compensation would be payable under s 59(1)(c) for the financial costs incurred in relocating a tenant's fixture from the acquired premises to the new premises, even if the lessee did not own the tenant's fixture but rather used it as part of its business under a hire-purchase agreement. Conversely, the appellant submitted, if the fixture in question was a landlord's fixture at the acquired premises, and thus owned by the landlord, the lessee could not receive compensation under s 59(1)(c) for financial costs incurred in constructing replica landlord's fixtures at the new premises.
4. The respondent submitted that in order to make the new permanent site fit to conduct the respondent's business, construction works, which it described as "fit out" works, estimated to cost almost $2 million were required. The respondent contended that Mr and Ms Nohra gave uncontested evidence that extensive searches for suitable alternative sites were unsuccessful. The respondent eventually made a decision to move to a permanent site that was deficient compared to the acquired site and proposed to undertake "fit out" works to replace the essential features of the acquired land in the new location. The respondent submitted that without the "fit out" works, the new site would be unsuitable for the respondent's business. The respondent submitted that the question of equivalence of the new site to that which had been acquired fell within the statutory notion of expenditure reasonably incurred in connection with the relocation.

Consideration of grounds 1 and 2

1. Part 1 of the Just Terms Act relevantly contains the objects of the Act and critical definitions. It is convenient to delay reference to the definitions until the operative provisions have been set out. The primary objects may be identified here: 3 Objects of Act (1) The objects of this Act are - (a) to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and (b) to ensure compensation on just terms for the owners of land that is acquired by an authority of the State when the land is not available for public sale, and (c) to establish new procedures for the compulsory acquisition of land by authorities of the State to simplify and expedite the acquisition process, and (d) to require an authority of the State to acquire land designated for acquisition for a public purpose where hardship is demonstrated, and (e) to encourage the acquisition of land by agreement instead of compulsory process. (2) Nothing in this section gives rise to, or can be taken into account in, any civil cause of action.
2. Part 2 deals with acquisition of land by compulsory process. It provides that an authority may not acquire land unless it has given the owners of the land written notice of its intention to do so: s 11(1). Those to whom notice must be given are identified in s 12(1): 12 Owners to be given notice (1) A proposed acquisition notice need only be given to all the owners of the land who - (a) have a registered interest in the land, or (b) are in lawful occupation of the land, or (c) have, to the actual knowledge of the authority of the State, an interest in the land. …
3. Acquisition is provided for in Part 2, Div 2 and is effected by publication of a notice in the Government Gazette describing the land being acquired: s 19. The effect of such a notice is set out in s 20: 20 Effect of acquisition notice (1) On the date of publication in the Gazette of an acquisition notice, the land described in the notice is, by force of this Act - (a) vested in the authority of the State acquiring the land, and (b) freed and discharged from all estates, interests, trusts, restrictions, dedications, reservations, easements, rights, charges, rates and contracts in, over or in connection with the land. (1A) Subsection (1) is subject to any express provision of an Act that authorises the acquisition of land by compulsory process but preserves the operation of any trusts, restrictions, dedications, reservations, declarations, setting apart of or other matters relating to the land concerned. (2) If - (a) the acquisition notice excepted an easement from acquisition, and (b) immediately before the vesting, the benefit of a restriction as to user was annexed to the easement, then (unless otherwise specified in the acquisition notice) the restriction continues to have effect as if the acquisition had not taken place. Note. Examples of express provisions of Acts to which section 20(1A) refers are section 17AB(4)(b) of the Fisheries and Oyster Farms Act 1935, section 15(4C)(b) of the Forestry Act 1916, section 186(3) of the Local Government Act 1993 and section 146(2C)(b) of the National Parks and Wildlife Act 1974.

Construction of s 59(1)(c) of the Just Terms Act

1. I turn now to the correct construction of s 59(1)(c) of the Just Terms Act and, in particular, whether compensation is payable to a dispossessed lessee to replace landlord's fixtures found at the acquired premises by constructing new landlord's fixtures at the new premises. In Commissioner of State Revenue v Placer Dome Inc (2018) 265 CLR 585; [2018] HCA 59 Kiefel CJ, Bell, Nettle and Gordon JJ said: [13] In assessing value, the starting point is the particular statutory scheme. That scheme provides the legal context in which the valuation exercise is to be undertaken and that context determines the relevant principles of valuation to be applied.
2. The Court cited in support of this proposition Federal Commissioner of Taxation v Resource Capital Fund III LP (2014) 225 FCR 290; [2014] FCAFC 37 at [47]; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority and Leichhardt at [35]‑[36].
3. The Just Terms Act must be read as a whole and having regard to the relevant text, its statutory context and its apparent purpose.

Text of s 59

1. The text of s 59(1)(c) requires examination of financial costs reasonably incurred "in connection with" the relocation of those persons (including legal costs but not including stamp duty or mortgage costs).
2. As to the use of the phrase "in connection with", in R v Khazaal (2012) 246 CLR 601; [2012] HCA 26, French CJ described "in respect of" and other "relational terms" such as "connected with", "in relation to" and "in connection with" as follows: [31] They may refer to a relationship between two subjects which may be the same or different and may encompass activities, events, persons or things. They may denote relationships which are causal or temporal or relationships of similarity or difference. The task of construing such terms does not involve the resolution of ambiguity. They are ambulatory words and may be designed to cover a variety of subjects and a variety of relationships between those subjects. The nature and breadth of the relationships they cover will depend upon their statutory context and purpose.
3. The relationship described in s 59(1)(c) is between financial costs reasonably incurred and the relocation of "those persons", being the persons referred to in s 59(1)(a) as entitled to compensation in connection with the compulsory acquisition of the land. The person here entitled to compensation is an artificial person, the respondent.
4. The text of s 59(1)(c) refers to reasonably incurred financial costs of the relocation of the respondent. There is no textual indication in the words of the section that financial costs reasonably incurred in connection with a natural person are to be understood as broader or narrower than financial costs reasonably incurred in connection with an artificial person. In particular, there is no textual support for reading "those persons" as including assets available to be used in the business, whether or not the business has any legal or equitable right to move those assets. Much less is there any textual support for the respondent's claim that a right to relocate "business operations" includes a right to replicate or reinstate business premises, subject only to a limitation that those financial costs be reasonably incurred.
5. The respondent's submission that the extent of compensation is regulated, if at all, by the phrase "reasonably incurred" does not reflect the text of s 59(1)(c). The respondent's construction does not adequately address the concept of "relocation". Unless the meaning of relocation is determined, the consideration of what is "reasonably incurred" in connection with relocation is a difficult, if not impossible exercise. The respondent's interpretation would promote an unpredictable outcome. It is not to read words of limitation into the statutory provision to give meaning to the term used in s 59(1)(c), "relocation".

Context

1. Context is critical in determining the meaning of "relocation" and the connection to which s 59(1)(c) is referring.
2. The relevant provisions are contained within Part 3, Div 4 of the Just Terms Act. Two sections are of primary importance. Section 54 creates an entitlement to just compensation and provides that the amount of compensation to which a person is entitled under this Part is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land. The starting point is and remains that what is payable is just compensation for the acquisition of the interest in land which is acquired. That legislative touchstone tends against a conclusion that compensation is payable for a lessee's financial costs in reestablishing or reinstating its business operations by constructing landlord's fixtures on new land. Those landlord's fixtures were not part of the interest in land acquired from the lessee by the acquiring authority.
3. Section 55 identifies six matters to which regard must be had in determining the amount of compensation to which a person is entitled with respect to an acquisition of land, those being the exclusive matters to which regard may be had. The scheme of s 55 provides, in context, that the value of a lessee's right to use landlord's fixtures in the acquired property is compensated, if at all, in an award of market value (s 55(a)) or special value (s 55(b)).
4. The claims by the respondent the subject of the present appeal are based solely on s 55(d). Section 55(d), relevantly, is concerned with loss attributable to disturbance. That is, loss attributable to use and occupation arising from the acquisition of the property.
5. The meaning of disturbance in the Just Terms Act is explicitly and comprehensively identified in s 59: "loss attributable to disturbance of land means any of the following…[six paragraphs]." The drafting of s 59 is economical, without the use of internal defined terms. Thus, paragraph (a) speaks of legal costs incurred by "the persons entitled to compensation in connection with the compulsory acquisition of the land". Paragraphs (b)-(e) simply refer to "those persons", but the reference is to those persons more fully described in paragraph (a). Each paragraph speaks of costs or fees "reasonably incurred" and, except paragraph (f), the party incurring the costs or fees is identified by reference to "those persons" as described in paragraph (a). The term "interest" in land extends to any legal or equitable estate or interest in the land or any easement, right, charge, power or privilege over, or in connection with, the land. Each of paragraphs (a)-(e) refers to specifically identified costs or fees.

Purposive considerations

1. Section 3(1) sets out the objects of the Just Terms Act and is set out at [36] above. Those objects are consistent with the plain intent of the Just Terms Act, articulated most clearly in s 54, that the Act is directed to awarding just compensation. Compensation is a well understood expression, the purpose of which is to place in the hands of the claimant the monetary equivalent of that which they have been deprived, being the property taken from them. Dixon J in Nelungaloo v Commonwealth (1947) 75 CLR 495 at 571-572 stated: Now "compensation" is a very well understood expression. It is true that its meaning has been developed in relation to the compulsory acquisition of land. But the purpose of compensation is the same, whether the property taken is real or personal. It is to place in the hands of the owner expropriated the full money equivalent of the thing of which he has been deprived. Compensation prima facie means recompense for loss, and when an owner is to receive compensation for being deprived of real or personal property his pecuniary loss must be ascertained by determining the value to him of the property taken from him. As the object is to find the money equivalent for the loss or, in other words, the pecuniary value to the owner contained in the asset, it cannot be less than the money value into which he might have converted his property had the law not deprived him of it. You do not give him any enhanced value that may attach to his property because it has been compulsorily acquired by the governmental authority for its purposes (Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] AC 302 at 318). Equally you exclude any diminution of value arising from the same cause.
2. Dixon J was here describing a notion well understood to the law, which notion is employed in the Just Terms Act. Compensation in the Just Terms Act is intended to provide "compensation ... for loss". In Leichhardt Spigelman CJ at [37] indicated that s 54(1) is "the dominant test". That conclusion is a strong purposive driver for how to construe what follows.
3. As I have earlier explained, the Just Terms Act was a deliberate break with former compensation schemes which applied the "value to the owner" principle which was used in construing earlier legislation. The passage in Leichhardt I have earlier cited contains an important statement about statutory purpose: [28] The [Just Terms Act] was clearly influenced by the Lands Acquisition Act 1989 (Cth), which was based on the Report of the Australian Law Reform Commission. That Report recommended the replacement of the "value to the owner" approach by a statutory list, subject to a "just compensation override". (See ALRC Report No 14 Lands Acquisition and Compensation (Canberra, 1984) at [231]-[237].) This recommendation is clearly reflected in s 54 and s 55. Indeed, the New South Wales Parliament, unconstrained by a Constitutional requirement of just terms, could and did go further by making the list an exhaustive one. (emphasis added)

Relevant case law

1. It is also necessary to address the authorities relied upon by the primary judge to conclude that s 59(1)(c) of the Just Terms Act permits the payment of compensation for financial costs in connection with relocation of a lessee's business for the replacement of business premises of a lessee, subject only to the control that the expenditure incurred, or planned to be incurred, is "reasonable"; that is, that financial costs in connection with relocation of a lessee's business include the costs of constructing replacement infrastructure, even if that infrastructure was a landlord's fixture in the acquired premises and becomes a fixture owned by the landlord in the new premises.
2. None of the cases decided to date have held that financial costs in connection with relocation of a lessee's business include the costs of constructing replacement fixtures owned by the landlord at the new premises. Some cases have suggested that such costs fall outside s 59(1)(c).
3. The primary judge cited as authority for the conclusion that compensation in connection with relocation of a lessee is payable in respect of "the business that needs to be replaced" the decision of Preston CJ of LEC in George D Angus, which I have set out at [18]. Upon analysis, George D Angus and the cases referred in that case do not support the primary judge's conclusion that s 59(1)(c) permits compensation to be paid to a dispossessed lessee for financial costs incurred in constructing replacement landlord's fixtures.
4. In George D Angus itself, it may immediately be acknowledged that it was held that s 59(1)(c) extends to compensation for financial costs reasonably incurred in removing a lessee's furniture and lessee's goods, including tenant's fixtures, from the old premises and moving and installing those things into new premises. I am prepared to assume, without deciding, that compensation is also payable under s 59(1)(c) for financial costs reasonably incurred in setting up the new premises, including reasonably incurred "fit out" costs, as those costs would be incurred in connection with relocation of the business operations. There has been no real examination in the cases of the breadth of the concept of "fit out" costs, beyond Preston CJ of LEC's description of those costs as costs of setting up in the new premises. Typically, it has been assumed that ancillary costs of relocation including carpeting, painting, and office partitioning fall within the concept of compensable "fit out" costs incurred in connection with relocation of those persons. It may also be that costs will be incurred in installing tenants' fixtures relocated from the acquired premises in the new premises. Such costs, if reasonably incurred, are also likely meet the description of financial costs in connection with relocation.

Conclusion on grounds 1 and 2

1. The concept of "compensation" whether termed loss, financial cost or any other term is not apt to extend to compensating a person for something that they did not have and did not lose. The Just Terms Act does not provide compensation for relocating something that a person or a company never had any right to relocate.
2. In granting the monetary equivalent to the cost of reinstatement of all that is necessary to replicate that physical state, including all the costs associated with making the new premises replicate the old, the respondent is not being "compensated" for relocation arising out of its right to occupy, under the lease, the acquired land and improvements. Instead, the respondent is receiving compensation for the purpose of improving new premises for the benefit of the new landlord. This goes far beyond what the respondent has been deprived of, being the right, pursuant to its lease, to occupy and use the premises, including the landlord's fixtures, for its business purposes, for the term of the lease.
3. I reject the respondent's submission that "relocation" within the meaning of s 59(1)(c) imports a qualitative element meaning relocation to suitable premises or premises having particular characteristics. "Relocation", within the meaning of the section is neutral about the premises to which the relocation occurs. Section 59(1)(c) does not import the concept of "reinstatement" or "replacement" derived from the value to the owner cases where disturbance was part of the special value to the owner of the property. As I have explained, the construction of s 59(1)(c) advanced by the respondent, and accepted by the primary judge, is ultimately derived from cases about different schemes in which "value to the owner" was the guiding principle. Under that principle, part of the special value of the land to the owner or occupier comprised the costs which the owner or occupier would incur in moving to other equivalent premises, and which was expressed to be a payment for "reinstatement" or "replacement" of the acquired premises.
4. It is a significant expansion to the Just Terms Act to read "financial costs reasonably incurred in connection with the relocation" as permitting compensation to a lessee who spends money on landlord's fixtures which enhance the value of the new landlord's property.
5. The Just Terms Act does not provide for relocation to "like-for-like" premises. It does not guarantee that the relocation premises will have the same fixtures. The statute is neutral about the quality of the replacement premises.

Ground 3 - The extent to which loss attributable to disturbance has been compensated by receiving the market value of the lease

Submissions

1. The appellant submitted that the respondent had been compensated for the value of the improvements at the acquired premises when it was compensated for the market value of the lease, and so an award of compensation for constructing similar improvements at the new premises would be "double dipping".
2. The parties' respective valuers agreed on the market value of the lease, except for the appropriate market rate for the hardstand area, with the primary judge awarding the respondent's contended amount of $231,000. The market value of the lease was based on the value to the respondent of its interest in the actual state of the land including the respondent's right to use the improvements on the land during the lease.
3. The appellant submitted that the respondent's only loss was the right to use the things under the lease, and that the loss of the lease was compensated as market value. To award further compensation for disturbance in respect of relocation so as to include the cost of construction of similar improvements at the relocation site was submitted to be awarding compensation twice in respect of the same loss.
4. The respondent emphasised the authorities which caution against the use of the non-statutory phrase "double dip". The respondent contended that compensation was appropriately determined in respect of different heads of compensation under the Just Terms Act.
5. The respondent further submitted that this argument was not brought before the primary judge and therefore that this Court is precluded from considering the matter under s 57 of the LEC Act.
6. The authorities that refer to double compensation are referring to compensation that is truly for the same compensable aspect of the interest. By contrast, the respondent submitted, compensation for market value of a lease by a profit rent methodology is entirely distinct from costs reasonably incurred in connection with the relocation, necessarily after acquisition, of the dispossessed tenant. Thus, in that submission s 59(1)(c) does not raise any question of double compensation.

Consideration of ground 3

1. Given my conclusion about grounds 1 and 2, ground 3 does not strictly arise. Nevertheless, it is useful to address ground 3 as it provides an additional reason that compensation to a lessee for constructing landlord's fixtures on new premises is not available under s 59(1)(c) of the Just Terms Act.
2. In Tolson v Roads and Maritime Services (2014) 201 LGERA 367; [2014] NSWCA 161, this Court explained that compensation for disturbance should be assessed independently of compensation for market value, so there should usually be no offset of one against the other. This does not mean that market value on the one hand and disturbance on the other should be assessed totally independently of each other. As Preston CJ of LEC observed in Tolson: [111] In having regard to the relevant matters in s 55, care needs to be taken to identify, in the particular case, if there is any overlap in the quantified amounts of different matters, so as to avoid any double counting. As Spigelman CJ noted in Mir Bros, each of the matters in s 55 does not necessarily operate to the exclusion of each other (at [55]) and a number of the paragraphs in s 55 overlap with each other (at [56)). If there is overlap, an appropriate adjustment needs to be made to remove the amount of the overlap and hence avoid double counting.
3. This Court has cautioned against the use of the term "double dipping", which might be convenient shorthand for conclusions reached by way of statutory construction but is not the language of the statute: Moloney v Roads and Maritime Services (2018) 98 NSWLR 651; [2018] NSWCA 252 at [5], [69]; Melino v Roads and Maritime Services (2018) 98 NSWLR 625; [2018] NSWCA 251 at [58]-[59].
4. In Roads & Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236, Tobias JA (Giles JA and Macfarlan JA agreeing) stated: [44] Relevantly, his Honour [the primary judge] found that the parent land contained the respondent's home and business. The effect of the acquisition was that it was necessary for the respondent to relocate herself by constructing a new residence on the residue land. As she had received compensation that included the value of the improvements on the acquired land, she was only entitled to recover the costs associated with the relocation of her residence to the residue land and not the cost of its construction. She had already been compensated for that. But she had not been compensated for the costs of providing access to the new residence from the boundary of the residue land or for the extension of electricity, telephone and water supply services to that residence as well as other incidental and consequential costs pertaining to her proposed relocation. (emphasis added)

Ground 4 - differential rent payments awarded to the respondent

Submissions

1. The appellant submitted that a claim for the difference in rental payments between the acquired premises and the relocation site is not contemplated by s 59(1)(c) of the Just Terms Act. It was submitted that this Court in United Petroleum had decided that issue. In the alternative, it was submitted that, even if a claim for the difference in rental payments between the acquired premises and the relocation site could properly be made, the respondent elected to rent a larger and more expensive premises, reducing the amount of that expense that was "reasonably incurred".
2. The respondent's case was that it was entitled to compensation for the rent differential in the amount of $88,173, being $319,173 for the present value of the rent increase arising from the relocation to temporary sites less the market value of the lease being $231,000. The respondent submitted that the unchallenged evidence was that Mr and Ms Nohra could not find another suitable site and the practical reality of finding a suitable alternative site justifies compensation for the rent differential. The respondent emphasised the evidence given by Mr Dyson, the respondent's expert. The appellant's expert was submitted not to have engaged with the rent differential assessment.
3. The respondent submitted that a lease involves the tenant agreeing to pay rent for the right to exclusive possession of land. If, as a result of a compulsory acquisition, that right is taken from the tenant, it was submitted that the Just Terms Act provides that the tenant is entitled to the market value of the lease together with compensation for the relocation of the tenant, including its business. The respondent submitted that there is no reason why s 59(1)(c) does not entitle a tenant to compensation for higher rent at a new premises.
4. The respondent further submitted that the principles that the appellant sought to rely upon in United Petroleum were inapplicable because they were directed to s 59(1)(f), not s 59(1)(c), as was accepted by the primary judge.
5. As to the comparatively larger area of the new premises, the respondent submitted that the rent was nonetheless "reasonably incurred". The respondent contends that this involved a question of fact as to whether another site was available. Section 59(1)(c) does not provide for a reduction based on the area of the relocated premises, and an error of law cannot arise from failing to make such a reduction.

Consideration of ground 4

1. The claim upheld by the primary judge for the difference in rent payments is contrary to principle. As Basten JA, who commanded a majority of the Court, said in United Petroleum: [49] ... The cost of new premises, whether purchased or rented, is not reimbursed as loss for disturbance of the acquired land or otherwise: it is covered to the extent of compensation for the market value of the compulsorily acquired land. There is no additional compensation for termination of the cash flow from the prior use. Rather, the best available financial return for the commercial use of the land will form the basis of its market value. It will be compensable as such. As explained in Moloney v Roads and Maritime Services "[t]he market value of the acquired land included the capacity of that land to generate a profit in the future, whether by growing sugar cane or doing anything else.
2. Basten JA in this passage was addressing the principle of construction in relation to disturbance within the meaning of s 55(d) of the Just Terms Act. Basten JA's exposition of principle was not limited to one particular aspect of disturbance within the meaning of s 59(1), let alone limiting his observation only to paragraph (f).
3. The statement is one which accords with the overall scheme of compensation under the Just Terms Act. It is open to a dispossessed owner or lessee to purchase or lease whichever replacement property they wish to acquire in order to relocate their business. That freehold or leasehold property may be of greater or lesser quality than the acquired property, and, in the case of leased premises, the rent payable may be greater or lesser than that paid for the leasehold of the acquired property. But where rent for a leasehold interest in a property is greater than the rent payable under the acquired leasehold interest, compensation for disturbance under s 55(d) of the Just Terms Act is not payable for the additional cost.
4. The lessee is entitled to compensation for the market value of the leasehold interest together with, in some cases, compensation for special value. If the lessee decides to relocate their business to new premises, the choice of premises is in their hands. Compensation is not payable for the difference in market rents between the old premises and new premises. The rental payable at the new premises will reflect the qualities of those premises including location, size, potential use and landlord's fixtures available for use. It may be, depending on the facts of the case, that compensation for special value to a lessee may also be payable, depending on facts of the kind described by Basten JA in Melino and the state of the expert evidence in a particular case.

Conclusion and orders

1. For the foregoing reasons I propose the following orders: 1 Appeal allowed. 2 Order (1) made in LEC proceeding no 2022/40567 on 15 September 2023 be set aside. 3 In lieu of order (1) referred to above the following order be made in LEC proceeding no 2022/40567: Compensation to C & P Automotive Engineers Pty Ltd pursuant to Part 3 Division 4 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) for the compulsory acquisition of its leasehold interest in Lot 23 in DP 733500 and disturbance losses is determined in the sum of $416,182.99 (plus statutory interest), that amount comprising: (1) $231,000 for market value under s 55(a); (2) $185,182.99 for disturbance losses under s 55(d) comprising: (a) $145,600 (GST exclusive) for relocation costs involving relocating to temporary sites under s 59(1)(c); (b) $39,582.99 (GST exclusive) for legal costs under s 59(1)(a). 4 Respondent pay the appellant's costs of the appeal.
2. KIRK JA: I agree with Payne JA.

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