Sydney Metro v C & P Automotive Engineers Pty Ltd

1. [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. [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. [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. [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. (1)

      $6,920,000 for market value under s 55(a); and

   2. (2)

      $54,472.98 for disturbance losses under s 55(d) comprising:

5. [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. [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. (1)

      $231,000 for market value under s 55(a);

   2. (2)

      $2,187,759.99 for disturbance losses under s 55(d) comprising:

7. [7]

   The appellant appeals from the part of the decision below in relation to part of the respondent’s entitlement to compensation for disturbance of its leasehold interest under s 55(d) of the Just Terms Act, being relocation costs identified at (b) and (c) above.

8. [8]

   After initially moving its business to three separate premises (see the compensation paid described at [6](2)(a) above), the respondent entered into new leases of two adjoining blocks in Railway Parade, Granville. The owners of those premises are, in relation to the first block, Mr Nohra and, in relation to the second, Inta-Parts Pty Ltd, a company of which Mr Nohra is a director.

Primary judgment

1. [9]

   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. [10]

   The respondent, the lessee of the property, made a claim for compensation that comprised:

   1. (1)

      a sum for the market value of its lease under ss 55(a) and 56 of the Just Terms Act; and

   2. (2)

      a sum for disturbance under s 55(d) of the Just Terms Act, being:

3. [11]

   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. [12]

   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. [13]

   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. [14]

   Before the primary judge, the respondent’s claim for $1,914,404 (GST exclusive) comprised the following construction costs at the new site:

7. [15]

   The construction costs were all in respect of costs for new fixtures, replacing those which had been available on the acquired land. They were a main warehouse building (including a large gantry crane), a ground floor office and amenities building, a first floor office and amenities building, a rear warehouse, a large hardstand area, and a side awning area. The respondent’s Senior Counsel, Mr Lancaster SC, accepted that all of these improvements planned to be constructed on the new land would become the property of the owners of the new properties once built.

8. [16]

   The fixtures which existed on the acquired property that the respondent sought to replicate were many years old and pre-dated the respondent’s occupation. All of the fixtures on the acquired land were owned by the holders of the freehold, Ms Nohra and Ms Carpenter. The owners of the freehold received compensation for the market value of the acquired land, including compensation for the ability of the land to generate income using those fixtures. The respondent’s lease, as I have said, included the right to exclusive possession and use of the whole of the acquired land by the respondent, including the fixtures, for the term of the lease.

9. [17]

   The primary judge held that under s 59(1)(c) of the Just Terms Act the respondent was entitled to compensation for its financial costs, being construction costs, in connection with what her Honour described as “the business that needs to be replaced”. Her Honour concluded that these construction costs were reasonably incurred in relation to the relocation of the respondent’s business.

10. [18]

    Her Honour cited the decision of Preston CJ of LEC in George D Angus v Health Administration Corporation (2013) 205 LGERA 357; [2013] NSWLEC 212 as the principal authority for the conclusion she had reached:

11. [19]

    Seemingly, by reference to this passage, the primary judge concluded that the construction costs claimed by the respondent were either “fit out costs” (George D Angus) or replacement costs for essential equipment not able to be relocated (Hua). If those costs met either description, the primary judge apparently concluded that they necessarily fell within s 59(1)(c) as being financial costs incurred in relation to relocation and the only question is whether they were reasonably incurred on behalf of “the business that needs to be replaced”.

12. [20]

    Her Honour also relied on the decision of Moore J in Konduru v Roads and Maritime Services (2017) 224 LGERA 262; [2017] NSWLEC 36 where it was held that compensation payable for “fit-out” included construction work to render the new property fit for purpose for the operation of the applicant’s medical practice.

13. [21]

    The primary judge distinguished her Honour’s previous decision in The Trustee for Whitcurt Unit Trust v Transport for NSW [2021] NSWLEC 82 on the basis that the lease in that matter was terminable on two months’ notice whereas the respondent’s lease in this matter was for five years with an option to renew for five years. The primary judge stated that Whitcurt does not stand for the proposition that construction costs can never be compensated as costs in relation to relocation. Her Honour found that compensation was payable under s 59(1)(c) to a former lessee to construct fixtures on newly leased premises. This was because the primary judge accepted the respondent’s submission that the only issue she needed to determine in relation to the “relocation” claim was whether the “fit out” costs sought were reasonable. Her Honour said:

14. [22]

    Explicit in this conclusion is that s 59(1)(c) of the Just Terms Act permits the payment of compensation 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 becomes a fixture owned by the landlord. Whether s 59(1)(c) should be so construed is the critical question of construction at the heart of this case.

15. [23]

    A subsidiary issue before the primary judge concerned the respondent’s claim for the cost of increased rent arising from its relocation to temporary sites, reduced by the market value of the lease. The claimed rent differential between the acquired property and temporary locations was $88,173. The primary judge found that the appellant’s submission that compensation is only payable for a like-for-like rental, calculated by area of land, ignored the practical reality of finding alternative rental sites. The primary judge distinguished Road and Maritime Services (NSW) v United Petroleum Pty Ltd (2019) 99 NSWLR 279; [2019] NSWCA 41, which her Honour found was directed to s 59(1)(f), not s 59(1)(c). The respondent’s claim for the rental differential of $88,173 (GST exclusive) was allowed.

Grounds of appeal

1. [24]

   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. [25]

   At the outset of the hearing leave was granted, by consent, to the appellant to rely upon the following grounds of appeal:

3. [26]

   The appellant sought the following orders:

4. [27]

   Both parties in their submissions addressed grounds 1-2 together and grounds 3 and 4 separately.

Grounds 1-2

1. [28]

   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:

2. [29]

   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. [30]

   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. [31]

   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.

5. [32]

   The appellant submitted that given the ownership and control of the new premises by Mr Nohra and a company of which he was a director, Mr and Mrs Nohra’s evidence that no suitable alternative sites for lease could be located was of limited weight:

6. [33]

   The respondent submitted that s 59(1)(c) of the Just Terms Act does not specify that it must own essential equipment or infrastructure on the acquired land in order for construction costs to replicate those fixtures to be compensable under s 59(1)(c). It was submitted that there was nothing in the terms of s 54 of the Just Terms Act that confined the scope of s 59(1)(c) to the respondent’s loss as a result of the compulsory acquisition.

7. [34]

   The respondent disputed the proposition that relocation involves moving things from one location to a different location, such that the construction costs were not recoverable as compensation in connection with relocation because there was no transportation or movement involved. The respondent’s submission was that the category of costs that may reasonably be incurred in connection with the “relocation” is wide and includes expenses for setting up the new premises, including fit out costs and the replacement of essential equipment not able to be relocated. It was not relevant, the respondent submitted, that the “essential equipment” comprised landlord’s fixtures which the tenant had no right to remove and relocate. The respondent emphasised that s 59(1) of the Just Terms Act refers to the relocation “of those persons” and does not refer to the relocation of “things”.

8. [35]

   The respondent submitted that s 59(1)(c) should be construed as providing a right to compensation for financial costs incurred in relocating “business operations” of a lessee including constructing landlord’s fixtures which replicate or reinstate the business premises which were acquired, subject only to a limitation that those financial costs be reasonably incurred.

9. [36]

   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:

10. [37]

    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):

11. [38]

    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:

12. [39]

    In certain circumstances, an owner may initiate acquisition of land but, pursuant to s 22, the process is only available to a person who has a fee simple estate in the land or “a person who has become entitled to exercise a power of sale of the land”. A person entitled to exercise a power of sale is a person having an interest in the land.

13. [40]

    There is provision in s 34(1) for a former owner to occupy land until compensation is paid:

14. [41]

    Compensation is provided for in Part 3, which sets out the entitlement to compensation, relevantly in s 37:

15. [42]

    The entitlement, it may be noted, is vested in an “owner of an interest in land”. The meaning of this phrase is found in the relevant definitions in s 4:

16. [43]

    The respondent was the owner of an interest in land, as defined, being a leasehold interest in the acquired land.

17. [44]

    The entitlement to just compensation is provided by s 54(1):

18. [45]

    The amount of compensation is to be determined “having regard to all relevant matters under this Part”. The matters under Part 3 which may be relevant are the matters listed in s 55 (as assessed in accordance with Div 4 of Part 3). The matters identified in s 55 constitute “an exhaustive list to which regard must be had when determining the amount of compensation under s 54”: Leichhardt Council v Roads and Traffic Authority (NSW) (2006) 149 LGERA 439; [2006] NSWCA 353 at [37]; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5 at [13]. The relevant matters from this exhaustive list are those which are relevant to the interest in the land acquired and the owner of that interest.

19. [46]

    Section 55 requires that the assessment is to be undertaken having regard “only” to the matters listed:

20. [47]

    The Land Acquisition (Just Terms Compensation) Amendment Act 2016 (Amendment Act) made one change to s 55, deleting (e) (solatium) and replacing it with “the disadvantage resulting from relocation”: sch 1 [14]. The Amendment Act inserted a definition of “disadvantage resulting from relocation” in s 60(1) of the Just Terms Act being “non-financial disadvantage resulting from the necessity of the person entitled to compensation to relocate the person’s principal place of residence as a result of the acquisition”, and limited the maximum compensation to $75,000. Section 55(e) was also amended to refer to the disadvantage resulting from relocation, and did not address business loss. The change simply replaced an obsolete term.

21. [48]

    The Explanatory Note which accompanied the change said:

22. [49]

    Section 56(3) is an important provision, added in 2016 by the Amendment Act sch 1 [15]. The sub-section relates to reinstatement, which did not form part of the Just Terms Act when enacted:

23. [50]

    Thus, the reinstatement provision found in s 56(3) is subject to two important limitations:

    1. (1)

       the land is used for a particular purpose and there is no general market for land used for that purpose; and

    2. (2)

       the owner genuinely proposes to continue after the acquisition to use other land for that purpose.

24. [51]

    The Explanatory Note said of s 56(3):

25. [52]

    Although the Amendment Act made numerous changes to the Just Terms Act, there were no others with respect to Part 3, Div 4.

26. [53]

    As I have earlier noted, the respondent in the present case sought and obtained compensation for the market value of its leasehold interest. The respondent obtained compensation from the primary judge on the basis that financial costs incurred in connection with “relocation” encompassed replacing elements of the respondent’s business at a new location by building new fixtures. The respondent’s decision not to seek reinstatement under s 56(3) is no doubt because it was able to prove that compensation for the market value of its leasehold interest could be calculated. In the present case the respondent could thus not have shown that the acquired land was used for a particular purpose and that there is no general market for land used for that purpose.

27. [54]

    It is clear that compensation for “reinstatement” and compensation for loss attributable to disturbance under s 55(d) cannot overlap. That is underlined by the terms of s 56(3) which requires any compensation payable for loss attributable to disturbance to be subtracted from an amount payable under s 56(3).

28. [55]

    It is in this context that the terms of s 59 define, exclusively, loss attributable to disturbance in a series of closely identified and confined sub-paragraphs:

29. [56]

    In determining the present matter, the precise terms of the Just Terms Act, and in particular ss 54, 55, 56 and 59 are determinative. The High Court has cautioned that it should not be assumed that the Just Terms Act reproduces or attempts to reproduce an understanding of “principles” derived by way of judicial gloss upon the terms used by similar provisions of earlier legislation: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority at [47]. As I will explain, where cases in the Land and Environment Court have addressed the construction of s 59(1)(c), many, including the critical decisions relied upon by the primary judge in the present case, have imported an impermissible judicial gloss derived from the “value to the owner” principle which was used in construing earlier legislation.

30. [57]

    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. As Spigelman CJ explained in Leichhardt:

31. [58]

    The question squarely to be confronted in this appeal is whether compensation is payable under s 59(1)(c) for financial costs incurred in connection with the relocation of a lessee, where those financial costs are incurred in the construction of new landlord’s fixtures on the new property, replicating landlord’s fixtures which existed at the acquired property.

32. [59]

    Somewhat remarkably, given the subject matter, scope and purpose of the Just Terms Act, and the context of compensation properly payable for the acquisition of a leasehold interest in land, little attention has been paid in the Just Terms Act authorities to the doctrine of fixtures. As I have said, in the Just Terms Act, interest in land means, relevantly, a legal or equitable estate or interest in the land. The leasehold interest here engaged gave the respondent, relevantly, a right to exclusive possession of the acquired land and the right to use the land, including the landlord’s fixtures on the land.

33. [60]

    In TEC Desert Pty Ltd v Commissioner of State Revenue (Western Australia) (2010) 241 CLR 576; [2010] HCA 49, a unanimous High Court explained the application of fundamental principles about the character of chattels affixed to land, particularly by tenants. The Court said:

34. [61]

    The Court quoted with approval (at [24]) the statement by Conti J in National Australia Bank Ltd v Blacker (2000) 104 FCR 288; [2000] FCA 1458 at [10]:

35. [62]

    The High Court in TEC Desert explained at [25] that the law respecting “tenant’s fixtures” concerns the rights of persons who have limited interests (such as leases for a term) to sever and remove from the land what admittedly are fixtures. Unless and until that right of severance and removal is exercised, the fixtures form part of the realty. The Court in TEC Desert quoted C Harpum, S Bridge and M Dixon, Megarry & Wade, The Law of Real Property (7th ed, 2008, Sweet & Maxwell) at p 1072 [23-010] with apparent approval to this effect:

36. [63]

    Although no attention was paid in the case below to this question, it appears clear that the fixtures used by the respondent the subject of this appeal were landlord’s fixtures. All were affixed to the land before the lease was entered. No right to sever the fixtures was granted by the lease. If it were necessary to determine, on the correct construction of s 59(1)(c), proof of this issue was on the respondent and it failed to prove that it was entitled to relocate those fixtures. Both parties approached this case on the assumption that all of the improvements planned to be constructed on the new land by the respondent the subject of grounds 1-3 of the appeal would become landlord’s fixtures and become the property of Mr Nohra and Inta-Parts Pty Ltd, the landlords of the new properties. As I will explain, on the correct construction of s 59(1)(c), proof of this issue was also on the respondent.

37. [64]

    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:

38. [65]

    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].

39. [66]

    The Just Terms Act must be read as a whole and having regard to the relevant text, its statutory context and its apparent purpose.

40. [67]

    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).

41. [68]

    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:

42. [69]

    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.

43. [70]

    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.

44. [71]

    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”.

45. [72]

    “Relocation” as a matter of ordinary usage means the act of moving something or someone from one place to another. Building new capital works, which then accrue to the value of the owner at the new premises, on its face does not involve the act of moving something or someone from one place to another. There is nothing in the text of s 59(1)(c) that permits compensation to be paid for financial costs of replacing assets available for use as an incident of a lease of leased premises if those assets are not available to be moved by the lessee, as is the case in relation to landlord’s fixtures which form part of the leased premises.

46. [73]

    The respondent’s position is that “relocation” means relocation to suitable premises or premises having particular characteristics. As Mr Lancaster SC submitted, “the premises have to be appropriate for the conduct of the enterprise that is moved.” This construction was accepted by the primary judge in finding that the respondent was entitled to compensation for expenditure given the “nature of the business that needs to be replaced”.

47. [74]

    I see no support in the text of s 59(1)(c) for the proposition that “relocation” means relocation to suitable premises or premises having particular characteristics. The concluding words “including legal costs but not including stamp duty or mortgage costs” are words of limitation, as stamp duty and mortgage costs are recoverable, but subject to strict limits, in s 59(1)(d) and 59(1)(e).

48. [75]

    The text of s 59(1)(c) provides no support for the respondent’s basal proposition that “relocation” necessarily imports a requirement that the premises to which relocation occurs has to be appropriate for the conduct of the enterprise that is moved and that compensation is payable to construct new landlord’s fixtures to give effect to that requirement.

49. [76]

    Context is critical in determining the meaning of “relocation” and the connection to which s 59(1)(c) is referring.

50. [77]

    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.

51. [78]

    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)).

52. [79]

    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.

53. [80]

    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.

54. [81]

    As was observed in Leichhardt, to which I have earlier referred, the context in which ss 55 and 59 appear tends strongly against importing judicial glosses from the “value to the owner cases” to the construction of the Just Terms Act in general and s 59(1)(c) in particular. Those glosses, reinstatement and replacement, as purported synonyms for the statutory term, relocation, import notions which are not relevant to the determination of whether compensation may be claimed.

55. [82]

    As Basten JA said in United Petroleum:

56. [83]

    Mr Lancaster SC accepted that s 59(1)(c) could not, in most cases, support a trial judge saying that financial costs were reasonably incurred by a lessee claiming costs of buying an entirely new site for the installation of a warehouse. He accepted that a warehouse with a gantry crane and hardstand are commonplace in industrially zoned areas. Nevertheless, the respondent proposed a construction of s 59(1)(c) as available in the present case:

57. [84]

    I do not accept this submission. The statutory meaning of relocation cannot change depending on whether or not, as a matter of fact, a claimant seeks payment in circumstances where there is nothing on the market for that use. Section 59(1)(c) exists in a legislative structure which provides for a case where there is no market. Section 56(3), subject to the limits in that section, provides for expenditure incurred for reinstatement where “the land is used for a particular purpose and there is no general market for land used for that purpose.”

58. [85]

    In context, “relocation” of business operations refers to movement of the relocated business. The physical characteristics of the leasehold premises, belonging to the landlord, are not aspects of the tenant’s business which are capable of movement by the tenant. The context tends strongly against the respondent’s submission that s 59(1)(c) permits compensation for financial costs incurred in building new landlord’s fixtures at new rental premises.

59. [86]

    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 stated:

60. [87]

    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.

61. [88]

    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:

62. [89]

    Section 55(d) and the exhaustive list provided by s 59 (including s 59(1)(c)) are strong purposive indications that the entitlement to compensation is limited to compensation for what is acquired by the acquiring authority and does not extend to compensation for improving new premises for the benefit of the new landlord. Purposive considerations tend against the conclusion that s 59(1)(c) permits compensation for financial costs incurred in building new landlord’s fixtures at new rental premises.

63. [90]

    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.

64. [91]

    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).

65. [92]

    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 to 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.

66. [93]

    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 to meet the description of financial costs in connection with relocation.

67. [94]

    I am unable to accept that, however broad a concept of “fit out” costs falling within financial costs in connection with relocation is adopted, compensation payable under s 59(1)(c) extends to financial costs of reinstating or replacing landlord’s fixtures which formed part of the old premises in the new premises. Certainly, Preston CJ of LEC in George D Angus did not suggest that a lessee could receive compensation under s 59(1)(c) for construction costs of recreating or replacing landlord’s fixtures. All that was in issue in that case was whether George D Angus was entitled to $16,129.22 in financial costs reasonably incurred in connection with relocation from the acquired property to another property (which was allowed) and $19,721 in costs of relocating a second time (which was rejected).

68. [95]

    The reference in George D Angus to “McDonald” was a reference to McDonald v Roads & Traffic Authority of NSW [2009] NSWLEC 105 where Biscoe J held that:

69. [96]

    “Relocation” and “replacement”, “reinstatement” or “reestablishment” are each quite different concepts and connote different things. The reference by Biscoe J to Minister for Army v Parbury Henty & Co (1945) 70 CLR 459 is not authority about the correct construction of s 59(1)(c). That case was a “value to the owner case”. Under this principle, compensation was payable, as Williams J explained in Parbury Henty & Co, for “removal into premises at least as commodious and congenial taking a broad view of the matter”.

70. [97]

    The concept of “value to the owner” was a unifying concept which encompassed market value, special value, disturbance and severance. “Value to the owner” has no operative function under the Just Terms Act: Leichhardt at [24]-[27]; El Boustani v The Minster administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33 at [76]. It was an error for Biscoe J to import judicial glosses, even eminent judicial glosses, from cases involving another statute as determining the construction of the Just Terms Act, including ss 55(d) and 59(1)(c). In any event, Biscoe J in McDonald did not suggest that a lessee could receive compensation under s 59(1)(c) for construction costs of recreating or constructing landlord’s fixtures.

71. [98]

    As to the remaining cases referred to by Biscoe J in McDonald:

    1. (1)

       In Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW (1998) 101 LGERA 30, the construction of s 59(c) was based on imported judicial glosses and the “value to the owner” concept (at 38) and, at least in part, the “reinstatement” principle (at 65). Bignold J in Peter Croke Holdings allowed $73,255 in costs for “site preparation” for replacement premises being drainage, kerb and guttering and pergola removal. Bignold J refused to follow Talbot J in Richardson v Roads and Traffic Authority of New South Wales (1996) 90 LGERA 294 at 303 who had correctly rejected a claim for disturbance in respect of the cost of installing irrigation and water supply, earth works, wind shelters, electricity connections and soil tests on the basis that these were not costs in connection with relocation at all. Bignold J rejected Talbot J’s decision on the basis (which basis was repeated by the respondent in the present case) that “the only relevant limitation is that imposed by s 59(c) of the Just Terms Act, namely that the financial costs must be reasonably incurred”. This finding, like the respondent’s submission here, begs the question of whether the costs involved were incurred in connection with relocation at all. Having posed the wrong question, Bignold J then determined that meaning of “relocation” by reference to the value to the owner principle in Minister for Army v Parbury Henty & Co. Peter Croke Holdings was, to that extent, wrongly decided and should not be followed.

    2. (2)

       In Home Care Services (NSW) v Albury City Council (2003) 136 LGERA 117; [2003] NSWLEC 433, Bignold J relied in terms on what his Honour called “the common law basis for recovery of disturbance claims”, citing authorities which relied upon the “value to the owner” principle which, as I have said, does not apply to the construction of the Just Terms Act. Home Care Services was wrongly decided and should not be followed.

72. [99]

    Hua v Hurstville City Council [2010] NSWLEC 61, referred to in George D Angus and discussed above, is another decision of the primary judge which perhaps comes a little way towards supporting the respondent’s construction of s 59(1)(c). The evidence was that a shop fit-out conducted by the lessee cost the appellant company in excess of $300,000 and took around 10 weeks to build. Although no express finding was made, it is clear that all of the items the subject of the claim for expenses incurred in connection with relocation were tenant’s fixtures, which had been installed by the lessee company in the acquired property and which were capable of severance from the leased premises. The tenants were unable, economically, to sever the fixtures from the acquired property and Pain J allowed compensation for the costs of installing new tenant’s fixtures in the replacement premises.

73. [100]

    Hua is not authority that financial costs in respect of relocation of “those persons”, in the case of a business, include the costs of constructing replacement landlord’s fixtures. Pain J in Hua found that “The appropriate basis for compensation is the relocation/reinstatement of the business.” That is, although earlier in the judgment noting that the concepts were quite different, the finding was that “reinstatement” of the business was a synonym for the statutory term “relocation” of the business and that reinstatement can be ordered under s 59(c), as it is “essentially” a claim for relocation (at [33]). The basis for allowing compensation for reinstatement as relocation relied upon by Pain J in Hua was Commissioner of Highways v Shipp Bros Pty Ltd (1978) 19 SASR 215 per Wells J at 218-224 and Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 2 AC 111 at 126-127; [1995] 1 All ER 846. Shipp Bros was a case where the applicant sought to compensated under a South Australian statute for the costs of the reinstatement of a business. In my respectful view, Shipp Bros is not helpful in determining the proper construction of s 59(1)(c) of the Just Terms Act. Shun Fung is a decision of the Privy Council based on the “value to the owner” principle: see Lord Nicholls’ speech at 125H. The questions posed in Shun Fung are not helpful in the proper construction of s 59(1)(c) of the Just Terms Act.

74. [101]

    The other case referred to in Hua as supporting the view that compensation for “reinstatement” of a business in new premises is essentially the same as relocation were clearly influenced by the “value to the owner principle”: Brown Bros (Marine) Holdings Pty Ltd v NSW Land and Housing Corporation (1991) 72 LGRA 50. In that case reinstatement costs were awarded, not as disturbance costs but as part of special value to the owner.

75. [102]

    Hua, however, is only authority for the proposition that “relocation costs in s 59(c) can include the replacement of essential equipment in new premises which can be described as reinstatement”: at [59]. The “essential equipment” in Hua was limited to the tenant’s fixtures which the lessee had itself installed. At its highest, Hua recognises that there may be grey areas where it is not economic to remove and reinstall tenant's fixtures, or where to do so would be more expensive than simply buying and installing new tenant's fixtures, in which case that cost may be an appropriate measure of compensation. Hua is not authority for the proposition that a lessee could receive compensation under s 59(1)(c) for construction costs of recreating landlord’s fixtures.

76. [103]

    The final case relied upon by the primary judge in the present case was Konduru. Two properties were owned by Dr Konduru and her husband as joint tenants and compulsorily acquired. Dr Konduru sought to relocate her medical practice, which had been located in one of the two properties, to an investment property owned by Dr Konduru and her husband located nearby. The premises had been purchased as a residential investment property and not in anticipation of relocation of Dr Konduru’s medical practice. As a consequence, significant additions and alterations were necessary to be undertaken to that residential property in order to render it fit for purpose for the operation of Dr Konduru’s medical practice. Moore J recorded that “the dispute is the fundamental one of whether or not Dr Konduru is entitled to reimbursement of these costs, either pursuant to subss 59(1)(c) or (f)”. It is not clear precisely what alterations to the residential property were in issue, nor, with respect, the basis that his Honour was able to conclude that the costs were incurred in connection with relocation within the meaning of s 59(1)(c). What is clear, however, is that Konduru is not authority for the proposition that a lessee could receive compensation under s 59(1)(c) for construction costs of recreating landlord’s fixtures.

77. [104]

    Pain J’s earlier decision in Whitcurt was, at least in respect to the central issue on this appeal, distinguished on an unconvincing basis. Whitcurt, on the central issue in this case, was correct. That was a case where a lessee sought as part of a relocation claim under s 59(1)(c) to be compensated for expenditure for construction of landlord’s fixtures at new premises. The case was determined on the basis of the short period remaining in the acquired leasehold interest. The present case was distinguished on the basis that the lease was for a longer period and subject to a right of renewal. However, in a passage not referred to by the primary judge in the present case, the following remarks were made in Whitcurt about a claim by a lessee for construction costs of landlord’s fixtures at the new premises:

78. [105]

    The emphasised passage was correct and should have guided the decision of the primary judge in the present case.

79. [106]

    For completeness, another case decided by Moore J included in the respondent’s list of authorities but not referred to in submissions, Mathew Massasso t/as Five Dock Pharmacy v Sydney Metro [2023] NSWLEC 115 should be addressed. This was a case where Mr Massasso relocated his pharmacy business from an acquired property to new premises, a building purchased by his wife, Ms Massasso. Like the primary judge in the present case Moore J held that “fit out costs” were essential to restore Mr Massasso’s ability to operate the business and that capital works needed to be done to the landlord’s premises to permit the necessary “fit out” to occur. In determining that the expenses of these capital works and subsequent fit out fell within s 59(1)(c), Moore J principally relied on Peter Croke Holdings, Home Care Services (NSW), McDonald and Konduru. As I have explained, all of those cases were based at their core on the “value to the owner principle”. It follows that Massasso was also incorrectly decided.

80. [107]

    As I have earlier said, the respondent emphasised that s 59(1)(c) of the Just Terms Act refers to the relocation “of those persons” and does not refer to the relocation of “things”. It was argued that a relocation of persons can include the relocation of business operations conducted by those persons on the acquired land. So much may be accepted. The respondent asserted, however, that the business operations of the respondent included that landlord’s fixtures used by the business and that expenditure to construct new landlord’s fixtures at new premises was somehow expenditure in connection with the relocation of the respondent’s business operations. This I am unable to accept.

81. [108]

    In support of this proposition, the respondent cited Speter v Roads and Maritime Services [2016] NSWLEC 128 and Rocco Fraietta v Roads and Maritime Services [2017] NSWLEC 11. In Speter, Robson J held that:

82. [109]

    In Fraietta, Robson J held:

83. [110]

    Neither Speter nor Fraietta support the respondent’s submission that the phrase “relocation of those persons” means a relocation of business operations meaning construction of new landlord’s fixtures at new premises. As Robson J explains, relocation requires something to be relocated. In the case of a business, that includes the assets of the business. That includes chattels belonging to the business and tenant’s fixtures. Speter and Fraietta do not support a conclusion that the respondent is entitled to compensation for construction costs incurred recreating landlord’s fixtures.

84. [111]

    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.

85. [112]

    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.

86. [113]

    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.

87. [114]

    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.

88. [115]

    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.

89. [116]

    On its correct construction, s 59(1)(c) does not permit compensation to be paid to a tenant for the costs of constructing new landlord’s fixtures at new premises. The primary judge erred on a question of law in construing s 59(1)(c) as permitting those construction costs.

90. [117]

    Grounds 1 and 2 should be allowed.

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

1. [118]

   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. [119]

   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. [120]

   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. [121]

   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. [122]

   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. [123]

   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.

7. [124]

   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.

8. [125]

   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:

9. [126]

   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].

10. [127]

    In Roads & Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236, Tobias JA (Giles JA and Macfarlan JA agreeing) stated:

11. [128]

    That is, in the case of the owner of the fee simple, what was compensable under the Just Terms Act was the relocation of the acquired premises and not the construction costs of new premises. Costs of connecting the relocated premises by access and including electricity, telephone and water supply services to that residence were held to be “incidental and consequential costs” pertaining to her proposed relocation, reflecting the statutory language of “in connection with the relocation”. What bears emphasis in the present context, however, is that the owner of the residence was not entitled to construction costs of a new residence and what was payable as the incidental and consequential costs pertaining to the proposed relocation did not include costs of the construction of any new residence.

12. [129]

    Basten JA in Moloney provided further explanation:

13. [130]

    In United Petroleum, Basten JA stated:

14. [131]

    Thus, in Moloney at [99] (Payne JA, Beazley P and Basten JA agreeing), it was held that the market value of the acquired land included the capacity of that land to generate a profit in the future, in that case by growing sugar cane. In that case I stated:

15. [132]

    Mr Lancaster SC submitted that:

16. [133]

    I do not accept the respondent’s submissions. The general submission is inconsistent with authority, in particular United Petroleum. The fallback submission must also be rejected. The only asset of the respondent’s business that was affected by the acquisition was the lease. It was compensated for market value of the lease under s 55(a). The rights under that lease for which the respondent was compensated included the market value of the rights to use the improvements.

17. [134]

    The primary judge allowed the respondent’s claim for the market value of its leasehold interest. No appeal is brought from that determination. The parties’ respective valuers agreed on the market rental for the various areas of the premises, except for the appropriate market rate for the hardstand area, with the primary judge accepting the respondent’s contended market rate for the hardstand area and an amount of $231,000 was awarded for market value of the lease. Because the lease had a market review clause, no compensation was payable for the acquisition of the leasehold in respect of the second 5 year period.

18. [135]

    Pausing there, the basis of the respondent’s case, upon which compensation under s 55(a) of the Just Terms Act was sought and obtained by the respondent, was that there was a leasehold market against which the value of the leasehold interest which was acquired could be compared and that the difference between rent payable under the acquired lease and in the market could be calculated.

19. [136]

    The market value compensation payable under s 55(a) of the Just Terms Act was based on a comparison between the rent payable under the acquired lease and the rent payable upon leases which in the experts’ opinions were sufficiently comparable to the acquired lease to determine market value. That calculation was based on the value to the respondent of its lease of the acquired property in its actual state including its right to use the improvements for the term of the lease.

20. [137]

    This assessment of market value was entirely conventional and was consistent with the observations of Basten JA in United Petroleum:

21. [138]

    In addition to market value of the lease and any special value, a tenant is also entitled to disturbance. Financial costs in connection with relocation, being expenses for moving the tenant’s property such as stock, plant or equipment are also payable.

22. [139]

    The sole loss to the tenant here was the right to use the thing pursuant to, and for the term of, the lease. That loss was compensated as market value. Even if available, which is highly doubtful, no claim for special value under s 55(b) or reinstatement under s 56(3) was made in the present case. In United Petroleum at [77], I held that, “[a]ssuming that what was being valued was the highest and best use of the acquired land, I fail to see as a matter of principle why the market value of the acquired land, correctly identified, would not include the capacity of that land to generate a profit in the future”. That statement was approved in Olde English Tiles Australia Pty Ltd v Transport for New South Wales (2022) 108 NSWLR 503; [2022] NSWCA 108 at [69].

23. [140]

    The primary judge awarded compensation, firstly, for the loss of the right to use the improvements as part of the market value of the lease and, secondly, for disturbance in respect of relocation so as to include the cost of constructing buildings and hardstand equivalent to the improvements at another site. Doing so was to award compensation in respect of the loss of the same thing and contrary to the decisions of this Court in Roads and Traffic Authority v Peak [2007] NSWCA 66; Roads and Maritime Services v Allandale Blue Metal Pty Ltd [2015] NSWCA 167; Melino and United Petroleum.

24. [141]

    Ground 3 should be allowed.

Ground 4 - differential rent payments awarded to the respondent

1. [142]

   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. [143]

   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. [144]

   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. [145]

   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. [146]

   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.

6. [147]

   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:

7. [148]

   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).

8. [149]

   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.

9. [150]

   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.

10. [151]

    To the extent that the right to generate a profit is encompassed within compensation for market value, and the rent payable for the use of premises is a significant component of the right to generate that profit, the award of compensation for a difference in the amount of rental payment would constitute a backdoor attempt to subvert what was said in Moloney at [99] and quoted in United Petroleum at [49], namely that the right to generate a profit is compensated as part of market value.

11. [152]

    Ground 4(a) should be allowed. In the circumstances, it is unnecessary to address ground 4(b).

Conclusion and orders

1. [153]

   For the foregoing reasons I propose the following orders:

2. [154]

   KIRK JA: I agree with Payne JA.