Bligh Consulting Pty Ltd v Ausgrid

1. [1]

   McCOLL JA: I agree with Sackville AJA’s reasons and the orders his Honour proposes.

2. [2]

   BASTEN JA: I agree that the appeal in this matter must be dismissed with costs, for the reasons given by Sackville AJA. I would add the following observations on two issues of principle.

Scope of appeal

1. [3]

   The Land and Environment Court has jurisdiction to hear and dispose of claims made “for compensation because of the compulsory acquisition of land”, pursuant to s 24 of the Land and Environment Court Act 1979 (NSW) (“the Court Act”). That jurisdiction falls within the “Class 3” jurisdiction of the Court. [1] In determining such a claim, the Court is required to “give effect to any relevant provisions of any Acts that prescribe a basis for, or matters to be considered in, the assessment of compensation.” [2] The proceedings in this matter were heard by Pain J, sitting with a Commissioner. [3]

2. [4]

   The right of appeal from the judgment and orders of the Land and Environment Court lay to this Court “against an order or decision … of the Court on a question of law.” [4] In its notice of appeal, the appellant formulated five grounds, three of which alleged error on a question of law in failing to determine a claim for compensation under s 55(f) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (“Compensation Act”). In ground 2, there was an elision, equating valuation principles with questions of law.

3. [5]

   Section 55 relevantly provides:

4. [6]

   There is an issue as to the operation of s 55(f) which will be addressed below. The appellant argued that it was entitled to compensation resulting from a decrease in the value of its freehold estate, being an interest diminished by the easements acquired by the respondent. Each of the grounds relating to s 55(f) identified alleged errors in the manner in which the valuation exercise was undertaken. Ground 2 alleged that the judge misdirected herself as to the factors to be taken into account, “or alternatively, made an error in valuation principle that constitutes an error of law”.

5. [7]

   In Mir Bros Unit Constructions Pty Ltd v Roads & Traffic Authority of New South Wales [5] Spigelman CJ stated: [6]

6. [8]

   Whether that is an important distinction may be doubted; unless there is a power to refer a question of law for decision by an appellate court, an appeal will usually involve an alleged error on the part of the primary judge, which will be an error in deciding a question of law. A second distinction has been noted, namely that it is “the decision”, and not “the appeal”, which must be on a question of law; [7] again, it is not clear that the distinction has practical significance.

7. [9]

   The language used in s 57, not referring to “a question of law alone”, [8] may allow a degree of flexibility in identifying what constitutes a question of law in circumstances where “[q]uestions of law, fact and opinion do not always readily and neatly divide themselves into discrete matters in valuation cases and practice.” [9] However, the approach adopted by the High Court in Maurici did not suggest that the distinction between such questions could be disregarded. Maurici referred to the judgment of the Privy Council in Melwood Units Pty Ltd v Commissioner of Main Roads [10] which discussed the failure of a judicial valuer to apply “the Pointe Gourde principle”, which required the valuer, in assessing compensation, to disregard the effect of carrying out the public purpose for which the acquisition was effected. It might be thought that that involved a principle of law conditioning the exercise of the function of valuation. The Privy Council also stated that there might be error in law if the court had “rejected as wholly irrelevant to assessment of compensation a transaction which prima facie afforded some evidence of value and rejected it for reasons which were not rational”. [11]

8. [10]

   In applying these principles in Maurici, the High Court stated: [12]

9. [11]

   The language adopted in these cases is language consistent with intervention where the judicial valuer has failed to observe the legal limits on its statutory power. In each case it is possible to identify an express or implicit decision as to how to proceed and to identify error in failing to comply with the legal limits of the power. This approach has long been accepted. As explained by Leeming JA in Sydney Water Corporation v Marrickville Council, [14] the limitation on jurisdiction, on an appeal by stated case, was discussed by Dixon CJ in Turner v Minister of Public Instruction. [15] The Chief Justice stated: [16]

10. [12]

    Importantly for present purposes, one constraint imposed by the terminology of s 57(1) is the need for an appellant to identify how a question of law arose, if that does not appear expressly from the terms of the judgment. If a party’s case had been conducted at trial in a way which did not require the court to address a particular question of law, that party cannot appeal on the basis that the court failed to address the question. That will also be true where the appellant’s case at trial was conducted, as here, by reference to a number of necessary steps to a conclusion. If the appellant failed, for unappellable reasons, at the first step, it cannot complain that the judge did not address subsequent steps.

Severance of land

1. [13]

   As appears from the terms of s 55, set out at [5] above, it is clear that the section distinguishes between “the land”, namely the acquired land, (referred to in (a)) and “any other land”, being land which was not acquired but remains in the ownership of the claimant (referred to in (f)).

2. [14]

   As noted by Sackville AJA at [57] below, although “land” is defined to include “any interest in land”, [20] and “interest in land” is defined to mean “a legal or equitable estate or interest in the land, or an easement … over, or in connection with, the land”, [21] it does not follow that the term “land” is exclusively used as referring to interests in land. Indeed, the phrase “interest in land” uses the word “land” in a different, non-metaphysical, sense. That sense involves a reference to a physical part of the earth’s surface; it may include areas permanently covered by water and it may include the space above and below the surface of the earth. In this sense, land is a physical object, not a legal concept. [22]

3. [15]

   The definition of land in the Compensation Act being inclusive, where the inclusions extend the ordinary, non-legal, meaning of the term, would not usually be understood to exclude the ordinary meaning. As explained by Kitto J in YZ Finance Co Pty Ltd v Cummings: [23]

4. [16]

   Even a definition which is not said to be subject to the qualification, “unless the contrary intention appears”, will be impliedly subject to such a qualification. [24] In s 55(f) it is at least arguable that the concept of land “which adjoins or is severed from” the acquired land refers to the physical boundaries of the land, and not to interests in it. [25]

5. [17]

   This view might be strengthened if the term “land” is used in a physical sense in other provisions. That may be so in relation to the reference to a person’s “use of the land” in s 57, dealing with “special value”. Use will arguably depend upon the physical features of the land, rather than a legal interest in it.

6. [18]

   It is not necessary to reach any conclusion on this question in circumstances where the parties approached the issues for determination on the basis that s 55(f) was engaged; it is important, however, that acquiescence in this course not be taken as approbation.

7. [19]

   SACKVILLE AJA: The appellant, Bligh Consulting Pty Ltd (Bligh Consulting), appeals against a decision of the Land and Environment Court (L & E Court). The proceedings in the L & E Court arose as a consequence of the compulsory acquisition by the respondent (Ausgrid) of three easements over Bligh Consulting’s land. Ausgrid is a statutory State owned corporation constituted under the Energy Services Corporations Act 1995 (NSW). [26]

8. [20]

   The proceedings were heard by the L & E Court in its Class 3 jurisdiction. [27] The primary Judge (Pain J) assessed compensation for the acquisition of the three easements at $682,000. [28]

9. [21]

   Bligh Consulting’s appeal is brought pursuant to s 57(1) of the Land and Environment Court Act 1979 (NSW) (L & E Court Act), which permits a party to proceedings in the Class 3 jurisdiction of the L & E Court to appeal to the Supreme Court against an order or decision on a question of law. Bligh Consulting’s major complaint is that the primary Judge erred in law by failing to determine, as required by s 55(f) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act), the decrease in the value of Bligh Consulting’s remaining interest in its land “by reason of the carrying out of, or the proposal to carry out, the public purpose” for which the easements were acquired. Subject to one minor exception, the primary Judge assessed compensation not by reference to s 55(f) (as Bligh Consulting argued at the trial), but by reference to the market value of each easement.

Background

1. [22]

   On 8 August 2014, Ausgrid compulsorily acquired three interests described as easements over land at 31 Bligh Street, Sydney (31 Bligh) of which Bligh Consulting was the registered proprietor. The three easements have been referred to in the proceedings as the crane swing easement, the rock anchor easement and the scaffolding easement. The terms of each easement are set out later. [29]

2. [23]

   Ausgrid’s Notice of Compulsory Acquisition (Notice) in each case stated that the easement described in Schedule 1:

3. [24]

   At the date of acquisition, 31 Bligh was occupied by the Lowy Institute for International Policy (Institute), pursuant to a sub-sub-lease from Bligh Consulting in its capacity as a sub-lessor of 31 Bligh. [30] Both the Institute and Bligh Consulting made claims for compensation by reason of the compulsory acquisition of the easements. The Institute’s claim was ultimately settled. However, Bligh Consulting objected pursuant to s 66(1) of the Just Terms Act to the amount of compensation offered in accordance with a determination made by the Valuer-General.

4. [25]

   In the L & E Court, Bligh Consulting claimed compensation in respect of the acquisition of the easements under three provisions of the Just Terms Act: [31]

5. [26]

   The parties agreed at trial that the amount of compensation payable for disturbance (s 55(d) of the Just Terms Act) was $232,000. The major contest before the primary Judge related to the determination of the public purpose for which Ausgrid had acquired the easements and whether compensation was payable in respect of Bligh Consulting’s injurious affection claim under s 55(f) of the Just Terms Act. In its Points of Claim, Bligh Consulting sought $4.25 million as compensation for injurious affection.

6. [27]

   The primary Judge found that the public purpose of the acquisition of the three easements: [32]

7. [28]

   The primary Judge declined to assess any compensation for injurious affection, other than by awarding a sum of $25,000 in respect of the scaffolding easement. [33] Instead, her Honour decided to determine the value of the individual easements “on a piecemeal basis”. [34] On that basis, her Honour assessed the market value of the crane swing easement at $400,000 and of the scaffolding easement at $25,000. Her Honour determined that Bligh Consulting was precluded from claiming compensation for the rock anchor easement by reason of s 62(1) of the Just Terms Act. [35]

Legislation

1. [29]

   Section 3(1) of the Just Terms Act provides that the objects of the Act include:

2. [30]

   Section 37 of the Just Terms Act provides as follows:

3. [31]

   A claim for compensation must be lodged in accordance with s 39 of the Just Terms Act.

4. [32]

   Division 4 of Part 3 of the Just Terms Act contains provisions governing the determination of compensation. They include the following:

5. [33]

   The expression “public purpose”, which appears in s 55(f) of the Just Terms Act, is defined in s 4(1) to mean:

A brief chronology

1. [34]

   The following chronology is largely taken from the Primary Judgment.

2. [35]

   In April 2003, the Institute was founded. At all material times, the Institute’s activities have included conducting research into and holding public events relating to issues of public or international policy.

3. [36]

   In 2004, Bligh Consulting purchased 31 Bligh to be the home of the Institute. Bligh Consulting purchased the freehold subject to an existing long-term lease of the premises to the National Trust of Australia (NSW) (National Trust). The National Trust’s lease commenced in 1978 and does not expire until 2058.

4. [37]

   Prior to Bligh Consulting’s purchase of the freehold in 2004, the National Trust entered into a long sub-lease of 31 Bligh with a sub-lessee. It appears that Bligh Consulting took an assignment of the sub-lease following its purchase of the freehold. It therefore acquired both the freehold and a long sub-lease of 31 Bligh. Bligh Consulting thus became both the National Trust’s lessor and sub-lessee.

5. [38]

   The building on 31 Bligh is heritage listed and for that reason cannot be demolished. It comprises a basement and four levels above ground. After acquiring the premises, Bligh Consulting undertook capital works to make 31 Bligh suitable for the activities of the Institute.

6. [39]

   On 1 October 2004, Bligh Consulting and the Institute entered into a sub-sub-lease of 31 Bligh, expiring on 30 September 2009. At about the same time, the Institute took possession of the premises. It was common ground in the L & E Court proceedings that the relationship between Bligh Consulting and the Institute has never been at arm’s length.

7. [40]

   In July 2007, the building erected on 33 Bligh became vacant. On 30 October 2008, Investa Properties, the registered proprietor of 33 Bligh, obtained deferred commencement approval for the demolition of the existing commercial building and construction of a 205 metre tall commercial building in its place.

8. [41]

   In June 2009, Investa Properties sold 33 Bligh to Ausgrid. However, Investa Properties retained the right to construct a high rise office tower in the airspace above the proposed Substation. The precise terms of Investa Properties’ entitlement to construct the tower are not material to the present appeal.

9. [42]

   In 2009, Bligh Consulting and the Institute entered into a new sub-sub-lease of 31 Bligh. This sub-sub-lease commenced on 1 October 2009 and was for a term of five years expiring on 30 September 2014, with the Institute having an option to renew for a further five year term.

10. [43]

    In mid-2010, Ausgrid informed Bligh Consulting and the Institute of the proposed project at 33 Bligh. Both Bligh Consulting and the Institute subsequently made representations to Ausgrid and others concerning the project.

11. [44]

    In mid-2011, Ausgrid informed Bligh Consulting and the Institute that it required certain access rights over 31 Bligh. In September 2011, Ausgrid announced the final design of the Substation and the integrated commercial development on 33 Bligh, which it proposed to undertake with Investa Properties.

12. [45]

    On 11 December 2012, the Deputy Director-General of the Department of Planning and Infrastructure approved what was described as Stage 2A(ii) of the Sydney CityGrid Project. The approval was for the construction and operation of the “City East Zone substation” and an integrated commercial tower. The proposed building had a five level basement (including a car park). The Substation was to extend 45.68 metres above Bligh Street, while the commercial tower above the Substation was to be a further 161.73 metres in height.

13. [46]

    According to Ausgrid, the Institute’s option for renewal of the sub-sub-lease expired on 30 March 2014. This was disputed by Bligh Consulting and the primary Judge did not find it necessary to resolve the issue.

14. [47]

    Ausgrid issued proposed acquisition notices to Bligh Consulting on 14 April 2014. Bligh Consulting lodged its claim for compensation under s 39 of the Just Terms Act on 18 July 2014. On 8 August 2014, Ausgrid’s Notices compulsorily acquiring the easements were published in the Government Gazette.

15. [48]

    On 29 September 2014, some seven weeks after publication of the Notices, Ms Ng, the Chief Operating Officer of the Institute, wrote to the solicitor for Bligh Consulting in the following terms:

16. [49]

    The Institute’s sub-sub-lease expired by effluxion of time on 30 September 2014 without the Institute exercising its option to renew. Thereafter the Institute remained in possession as a monthly tenant on the terms of the sub-sub-lease.

17. [50]

    Ausgrid advised Bligh Consulting on 4 November 2014 of the Valuer-General’s determination of compensation and enclosed a Compensation Notice.

18. [51]

    Bligh Consulting filed its Class 3 application in the L & E Court on 2 February 2015.

19. [52]

    On 16 September 2015, Bligh Consulting entered into a lease of premises at 1 Bligh Street, Sydney for a term of four years commencing on 1 August 2015, with options to renew for a further two years. The Institute relocated from 31 Bligh to 1 Bligh Street, Sydney on 11 December 2015.

The easements

1. [53]

   The Notices stated that each easement was acquired for the purposes of constructing Ausgrid’s Substation. [36] The terms of each of the three easements as set out in the Notices are as follows:

Preliminary matters

1. [54]

   It is necessary to record a number of matters that were not in dispute in the L & E Court proceedings. Each of these matters related to Bligh Consulting’s injurious affection claim under s 55(f) of the Just Terms Act. It will be recalled that s 55(f) required Bligh Consulting to establish that there was a:

2. [55]

   First the parties accepted that the question of whether there had been a decrease in value had to be assessed at the date of acquisition of the easements (8 August 2014). Thus no “temporal” question of the kind identified by Basten JA in Roads and Maritime Services v Allandale Blue Metal Pty Ltd [37] arises in the present case.

3. [56]

   Secondly, Ausgrid accepted that Bligh Consulting’s interest in 31 Bligh at the date of acquisition of the easements “adjoin[ed] or [was] severed from” the acquired land for the purposes of s 55(f) of the Just Terms Act. The parties appear to have assumed that Bligh Consulting’s interest in 31 Bligh adjoined the easements acquired by Ausgrid, presumably because 33 Bligh was the dominant tenement entitled to the benefit of the easements.

4. [57]

   It is perhaps not self-evident that if a statutory authority compulsorily acquires an easement over land (and no other interest) owned by a person, that land (the servient tenement) adjoins or is severed from the “acquired land” for the purposes of s 55(f) of the Just Terms Act. It is true that “land” is defined to include an interest in land. [38] Nonetheless, there may be an issue as to whether the servient tenement “adjoins” the easement appurtenant to the dominant tenement. However, the issue does not arise on this appeal because the parties conducted the proceedings in the L & E Court on the basis that s 55(f) of the Just Terms Act was capable of applying to Bligh Consulting’s compensation claim and they approached the appeal on the same basis.

5. [58]

   Thirdly, the parties accepted at trial that Bligh Consulting’s injurious affection claim had to be assessed by reference to its interest as the holder of the fee simple estate in 31 Bligh. Neither party suggested that anything turned on the fact that the Institute was the sub-sub-lessee of 31 Bligh or that the National Trust was both Bligh Consulting’s lessee and sub-lessor.

6. [59]

   Fourthly, as has been noted, it was common ground at trial that the relationship between Bligh Consulting and the Institute has never been at arm’s length.

7. [60]

   Fifthly, the valuers who gave evidence at the trial agreed that the rental paid by the Institute to Bligh Consulting under the sub-sub-lease of 31 Bligh expiring on 30 September 2014 was at least 30 per cent higher than the market rent. The primary Judge found that the rent payable by the Institute, had it exercised the option to renew the sub-sub-lease, would have been 30 to 32.6 per cent above open market effective rental:

8. [61]

   Sixthly, it was common ground at trial that the easements only permitted Ausgrid to exercise the rights granted for purposes of works associated with the construction of the Substation. To the extent that Investa Properties or any other party required access to 31 Bligh or the airspace above it for the purpose of erecting the tower above the Substation, that party would have to negotiate with Bligh Consulting to acquire the right to do so or rely on other statutory mechanisms available to it. [40]

9. [62]

   It must be said that the evidence did not always distinguish between works associated only with the Substation and works associated with the tower. For example, Ms Ng’s letter of 29 September 2014, on which Bligh Consulting relied in the L & E Court and in this Court, referred to the disturbance “likely to be caused by [the] easements and the redevelopment of 33 Bligh Street more generally”. Similarly, Dr Fullilove, the Executive Director of the Institute, said in an affidavit that he did not believe the Institute would remain at 31 Bligh “by reason of the acquired easements and the activities authorised by the easements including the planned construction works at 33 Bligh Street”. It is not clear from their affidavits whether either Ms Ng or Dr Fullilove intended to distinguish between the disruption caused by works associated exclusively with the Substation or whether they were referring to the totality of the works on 33 Bligh.

The injurious affection claim

1. [63]

   The contest between the parties concerning the primary Judge’s approach to Bligh Consulting’s injurious affection claim under s 55(f) of the Just Terms Act essentially turned on the correct way to read the Primary Judgment. Bligh Consulting contended that the primary Judge erred in law because she failed to grapple with its case and, in any event, misapplied the applicable principles. Ausgrid maintained that her Honour responded to the arguments put by Bligh Consulting and that she rejected Bligh Consulting’s case because it could not satisfy a threshold factual requirement that underpinned its injurious affection claim.

2. [64]

   Mr Walker SC, who appeared with Ms McKelvey for Bligh Consulting, submitted that the primary Judge was asked to apply and did purport to apply what is conventionally referred to as the “before and after approach” when dealing with Bligh Consulting’s injurious affection claim under s 55(f) of the Just Terms Act. Mr Walker contended that the primary Judge, in order to apply s 55(f) of the Just Terms Act correctly, had to assess the market value of the fee simple estate in 31 Bligh at the date of acquisition of the easements on two bases, as follows:

3. [65]

   Mr Walker submitted that there should have been no particular difficulty about the first element of the comparison. This was because (so he argued) the parties had agreed at the trial that if the easements had not been acquired, and no public purpose had been proposed, the Institute would have remained in possession of 31 Bligh and would have exercised its option to renew the sub-sub-lease. Thus it would have continued in possession paying a higher than market rent to Bligh Consulting. However, he submitted that the primary Judge failed to make the findings necessary to value the freehold of 31 Bligh in the before (or hypothetical) scenario. There was ample evidence as to what the Institute would have done had Ausgrid not acquired the easements or proposed to construct the Substation. According to Mr Walker, her Honour erred in law because she did not address Bligh Consulting’s case in accordance with established principle.

4. [66]

   Mr Walker contended that the primary Judge also erred in her approach to the valuation of the freehold of 31 Bligh in the after (or actual) scenario. The question the primary Judge had to address was the price a hypothetical, well-informed purchaser would be prepared to pay for the freehold of 31 Bligh at the date of acquisition, assuming that the purchaser knew of the easements and of the proposed public purpose for which they had been acquired. Consistently with principle, the L & E Court had to consider what a willing hypothetical purchaser would pay and a not unwilling hypothetical vendor would accept for the freehold. To that end, it had to be assumed that the parties to the hypothetical transaction had knowledge of all matters affecting the value of the freehold including the predicted impact of future events.

5. [67]

   Finally, Mr Walker submitted that the primary Judge erred in law because she impermissibly replaced the actual Institute (including its actual intentions and expectations) with a hypothetical tenant in the position of the Institute who was assumed to act reasonably and prudently. The correct approach was to consider what the Institute itself would have done in the circumstances which actually occurred since it was the Institute’s actual position that had to be taken into account in determining the price the hypothetical purchaser would pay. The error led her Honour to ignore or disregard the evidence as to the Institute’s likely course of conduct in view of what it knew at the date of acquisition. Instead, her Honour found that a hypothetical tenant, acting reasonably and prudently, would not have given up possession of 31 Bligh by reason of the easements and the proposed carrying out of the public purpose. Mr Walker submitted that this erroneous approach led her Honour to conclude that Bligh Consulting suffered no loss in the after scenario.

6. [68]

   Ausgrid submitted that Bligh Consulting’s submissions misread the Primary Judgment and ignored the way in which the case had been conducted in the L & E Court. Mr Hemmings SC, who appeared with Mr Norton for Ausgrid, contended that the Primary Judgment had to be read in the context of the arguments put to the primary Judge. When this was done it became apparent, so Mr Hemmings submitted, that her Honour had not committed any error of law.

7. [69]

   According to Mr Hemmings, Bligh Consulting’s injurious affection case at trial rested on a particular factual assumption. This was that a hypothetical purchaser of the freehold of 31 Bligh, in the events which actually occurred (the “after” scenario), would have concluded at the date of acquisition that the Institute would give up possession of the premises at some time in the near future by reason of the proposal to construct the Substation or the actual construction of the Substation. Bligh Consulting’s claim to compensation assumed that a hypothetical purchaser of 31 Bligh would value the freehold in the expectation that the premises would remain vacant for two or three years until a new tenant could be found. Bligh Consulting’s claim for over $4 million for injurious affection therefore depended on its threshold factual claim that a hypothetical purchaser of 31 Bligh would reckon on the Institute giving up possession by reason of the proposed Substation and on the premises remaining vacant thereafter for a lengthy period.

8. [70]

   Mr Hemmings disputed that the primary Judge undertook a detailed analysis of the evidence for the purpose of applying the before and after test to Bligh Consulting’s injurious affection claim. Her Honour undertook the analysis in order to determine whether the evidence supported the threshold assumption underlying Bligh Consulting’s claim. Both parties had urged her Honour, in addressing this question, to consider what a tenant in the Institute’s position would have done, assuming it acted reasonably and prudently. Her Honour’s approach therefore simply reflected the parties’ submissions and could not involve any error of law.

9. [71]

   Mr Hemmings submitted that the primary Judge, having concluded that Bligh Consulting failed to establish that a hypothetical purchaser in the after scenario would conclude that the Institute would vacate 31 Bligh, did not need to address the value of the freehold in the before scenario. In short, her Honour did not purport to apply the before and after methodology; rather she found that Bligh Consulting failed to satisfy the threshold requirement for the application of that methodology. Bligh Consulting did not submit to the primary Judge that an alternative before and after methodology should be used if the threshold requirement was not satisfied. It followed, so Mr Hemmings argued, that her Honour was justified in assessing Bligh Consulting’s compensation claim by reference to the alternative methodology of assessing the market value of the easements acquired by Ausgrid.

10. [72]

    Mr Hemmings further submitted that even if the primary Judge erred in her approach to Bligh Consulting’s injurious affection claim, she had not committed an error of law. Her Honour was acting as a judicial valuer and it was open to her to choose between competing valuation approaches without committing any error of law warranting the intervention of this Court.

11. [73]

    If, as Bligh Consulting submits, the primary Judge ignored or failed to apply a principle governing the assessment of compensation, the appeal is against an order or decision on a question of law for the purposes of s 57(1) of the L & E Court Act. [41] A failure to make a finding on a critical issue of fact which underlies a party’s claim for compensation ordinarily will constitute an error of law justifying the intervention of this Court. Thus I am prepared to accept that if the primary Judge failed to make a finding as to the value of the freehold in the before scenario (that is, in the assumed absence of the acquisition and the proposed public purpose) and if such a finding was critical to the resolution of the case presented by Bligh Consulting, her Honour would have committed an error of law.

12. [74]

    Similarly, I accept that if the primary Judge assessed the value of the freehold of 31 Bligh in the after scenario (that is, in the events which actually occurred) by applying a wrong legal standard, the decision of the L & E Court would be affected by an error of law. Thus if her Honour was not entitled to consider what the Institute, acting reasonably and prudently, would have done in the after scenario the decision based on that approach would be affected by legal error. [42]

13. [75]

    In order to determine whether her Honour committed the errors of law attributed to her it is necessary to consider carefully the way Bligh Consulting put its case in the L & E Court and the manner in which her Honour addressed the case presented.

14. [76]

    Bligh Consulting’s written submissions in the L & E Court dated 30 March 2016 contended that the primary Judge should assess compensation under both s 55(a) and s 55(f) of the Just Terms Act by adopting the “before and after approach”. For the purpose of the “before scenario”, the submissions stated that:

15. [77]

    The written submissions asserted that for the purposes of applying s 55(f) of the Just Terms Act:

16. [78]

    This reference to the Institute “acting reasonably” seems to be directed to the before scenario. However, other passages in Bligh Consulting’s written submissions seem to accept that the primary Judge would need to consider what the Institute would have done in the after scenario if it acted reasonably and prudently. For example, the written submissions cited evidence that “concerns held by the Institute regarding noise and vibration impact were reasonable and well founded”. The submissions also argued that:

17. [79]

    Bligh Consulting adduced extensive evidence quantifying its injurious affection claim. That evidence assumed that if the Institute vacated 31 Bligh, a hypothetical purchaser would require a period of between nine months and three years to find a new tenant. Tables accompanying Bligh Consulting’s closing written submissions calculated compensation on the assumption that 31 Bligh would remain vacant for a period of between two years and three years. The resultant calculations of loss on this account varied from approximately $3 million to $3.5 million, depending on a number of other assumptions.

18. [80]

    A reading of the transcript of the oral argument in the L & E Court shows that the primary Judge and the Acting Commissioner repeatedly requested clarification of the parties’ positions in relation to the assumed actions of the Institute in the before and after scenarios. During the first day of closing oral submissions, the primary Judge asked for assistance on what Mr Clay SC, senior counsel then appearing for Bligh Consulting, meant by the expression “prudent [I]nstitute”. Mr Clay responded that:

19. [81]

    This rather confusing response led to an exchange as follows:

20. [82]

    A little later, Mr Clay assured the primary Judge that:

21. [83]

    There may have been some ambiguity about these comments in that they may have been intended to refer only to the before scenario rather than to both the before and after scenarios. It is clear, however, that senior counsel for Ausgrid interpreted Bligh Consulting as proceeding on the basis that the Institute, acting prudently, would have vacated 31 Bligh by reason of the proposal to carry out the public purpose on 33 Bligh. Mr Clay, in his closing oral submissions, did not suggest that Mr Hemmings had misunderstood Bligh Consulting’s position. Indeed, in the course of his final submissions Mr Clay again stated that, in making predictions as to conduct, it had to be assumed that the relevant entity would act reasonably.

22. [84]

    The primary Judge addressed Bligh Consulting’s claim within the framework presented by the parties. Her Honour identified at the outset two “threshold issues” she was required to determine. [43] The first was the identification of the “public purpose”; a matter as to which there is now no dispute. [44] The second concerned the “assumptions which apply in the after scenario”.

23. [85]

    It is clear enough that at this point her Honour was not yet proposing to undertake the before and after analysis Bligh Consulting had urged her to adopt. She was seeking to identify the assumptions on which Bligh Consulting’s analysis depended, with a view to determining whether the assumptions were made out on the evidence. It was implicit that if Bligh Consulting could not satisfy the “threshold” requirements, the foundation for its before and after approach would be wanting.

24. [86]

    After resolving the public purpose issue her Honour noted that Bligh Consulting had potential claims for injurious affection under s 55(f) as well as for market value under s 55(a). [45] Her Honour continued as follows:

25. [87]

    In the above passage the primary Judge recorded that Bligh Consulting had asserted that in both the before and after scenarios the factual question was “what the Institute would have done acting reasonably and prudently”. In the next paragraph of the Primary Judgment [46] her Honour observed that Bligh Consulting:

26. [88]

    The primary Judge said that expert evidence of the kind that had been adduced in the case was “usually directed to the kind of information a prudent hypothetical purchaser and vendor would obtain when informing themselves about the particular hypothetical market in the before and after scenarios”. [47] The expert evidence:

27. [89]

    Her Honour stated that the Court was required to treat Bligh Consulting as a reasonable and prudent hypothetical vendor. [48] This meant that the behavioural characteristics of an arm’s length vendor had to be assumed. Her Honour then returned [49] to the “threshold question [that] arises … in the after scenario”:

28. [90]

    It must be said that this is not a very easy passage to understand. However, a fair reading is that her Honour was saying that unless the well-informed hypothetical purchaser in the after scenario would conclude that the Institute would be likely to vacate 31 Bligh by reason of the proposed public purpose, Bligh Consulting could not establish any loss. The reason her Honour gave was that unless a hypothetical purchaser would conclude that 31 Bligh would remain vacant for an extended period, as Bligh Consulting maintained, it would not be able to establish that the value of the freehold in the after scenario was substantially lower than in the before scenario. Her Honour seems to have had in mind that if Bligh Consulting could not show that the hypothetical purchaser in the after scenario would conclude that the Institute would leave 31 Bligh, the situation would essentially be the same in both the before and after scenarios. In each case a hypothetical purchaser would perceive that the Institute was likely to remain in possession and that it would act at arm’s length from any lessor or potential lessor. The hypothetical purchaser would assess the value accordingly.

29. [91]

    The primary Judge considered in detail the expert evidence analysing the impact of the easements and the proposed works on the occupants of 31 Bligh. Her Honour concluded that: [50]

30. [92]

    The primary Judge then referred to expert leasing evidence given on behalf of each party. Bligh Consulting’s expert had prepared a report “on the assumption that the Institute would in the after scenario leave 31 Bligh Street”. Her Honour reaffirmed that she was determining the availability of that assumption in the after scenario. [51] To that end, the primary Judge asked herself whether Bligh Consulting had:

31. [93]

    Her Honour noted that on the authority of Housing Commission of New South Wales v Falconer, [53] it was open to consider events occurring shortly after the date of acquisition as confirmation of what the hypothetical purchaser, properly advised at that date, would have foreseen. [54] In this respect, the Institute did not exercise the option under the lease or seek to enter into a new lease. The inquiries made by a hypothetical vendor and purchaser at the date of acquisition would have identified that the Institute did not propose to enter into a further lease and would continue to hold over on a month to month tenancy for an unspecified period of time. A prudent tenant might take this course to experience whether the impact of the proposed works was acceptable. [55]

32. [94]

    The primary Judge stated that Bligh Consulting would suffer loss from the premises being vacant only if it established:

33. [95]

    The primary Judge then examined evidence relevant to whether the Institute, acting prudently and reasonably, would have been reluctant to move from 31 Bligh. Some matters, such as the purpose specific fit out of the premises and the high cost of moving, suggested that the Institute would not wish to relocate, notwithstanding the proposed construction of the Substation. [58]

34. [96]

    Her Honour recognised that the expert evidence was to some extent in conflict. However, the Substation project was subject to the usual controls in place in the Sydney CBD to ameliorate the adverse impact of large scale works. The acoustic evidence indicated that ongoing management of noise levels on the building site would reduce noise to tolerable levels. The impact from dust and vibration would be similar to the impact of any other project of comparable size. In summary, the expert evidence suggested that: [59]

35. [97]

    In her Honour’s view, Ausgrid’s submission that the Institute would not be acting as a reasonable tenant in moving out as at the date of acquisition accorded with “the tenor of the expert evidence”. [60] The proposed project was no different in engineering terms and potential impacts to similar projects in the Sydney CBD.

36. [98]

    The primary Judge concluded as follows: [61]

37. [99]

    Bligh Consulting’s principal claim in the L & E Court was for compensation for injurious affection pursuant to s 55(f) of the Just Terms Act. Bligh Consulting asked the primary Judge to assess the value of the freehold of 31 Bligh on a “before and after basis”.

38. [100]

    Both parties accepted that this task had to be carried out by applying to each hypothesis the principles established over a century ago in Spencer v The Commonwealth. [62] McHugh J in Kenny & Good Pty Ltd v MGICA (1992) Ltd [63] explained those principles as follows:

39. [101]

    It is clear that the primary Judge did not accept that Bligh Consulting had established its injurious affection claim. Contrary to Mr Walker’s submissions, her Honour did not purport to determine the value of the freehold of 31 Bligh as at the date of acquisition on a before and after basis. Her Honour instead addressed what she characterised as a “threshold issue”. By that she meant that Bligh Consulting could not make out its case for several million dollars in compensation for injurious affection unless it could establish that a hypothetical purchaser in the after scenario (that is, in the events which actually occurred) would have valued 31 Bligh on the assumption that the Institute would leave by reason of the proposed or actual construction of the Substation and that the premises would thereafter remain vacant for a considerable period of time until a new tenant could be found.

40. [102]

    The primary Judge resolved the threshold issue by concluding that the hypothetical purchaser would not have approached the purchase of 31 Bligh on the basis suggested by Bligh Consulting. Having reached this conclusion, the factual foundation for Bligh Consulting’s injurious affection claim was removed. Accordingly, her Honour considered that there was no need for her to take the injurious affection claim further (other than in relation to the scaffolding easement). In particular, there was no need to value the freehold of 31 Bligh in the before scenario (that is, in the absence of the proposal to acquire the easements and construct the Substation).

41. [103]

    In my view, the primary Judge did not commit any error of law in approaching Bligh Consulting’s claim in this manner. Bligh Consulting’s case in the L & E Court rested on its contention that in the after scenario the Institute would vacate 31 Bligh and the premises would remain vacant for an extended period. The expert evidence on which Bligh Consulting relied proceeded on this assumption. Mr Walker did not suggest that Bligh Consulting put an alternative injurious affection case to the primary Judge to cover the eventuality that it might fail to satisfy the primary Judge on the threshold issue.

42. [104]

    It is perhaps not altogether surprising that Bligh Consulting did not advance an alternative injurious affection claim. If a hypothetical purchaser in the events which occurred would have valued the freehold of 31 Bligh on the assumption that the Institute would remain in occupation notwithstanding the construction of the Substation, there may not have been a great difference between the before and after valuations. In both cases, a purchaser would assume that the Institute would remain in possession and deal at arm’s length with the new lessor. The difference may have been that in the before scenario the Institute would have elected to renew its lease before the date of expiry (30 September 2014), even though the rental payable under the renewed lease was substantially above fair market value. If a finding to that effect had been made, a hypothetical purchaser in the before scenario presumably would have placed some value on the entitlement to receive an above market rent for five years.

43. [105]

    In any event, the primary Judge was entitled to consider Bligh Consulting’s case as it was presented. Her Honour was therefore entitled to examine the evidence to determine whether Bligh Consulting had made out the factual assumption underpinning its valuation of the freehold of 31 Bligh in the after scenario. Whether her factual finding was correct does not arise on this appeal.

44. [106]

    Mr Walker’s alternative submission was that the primary Judge erroneously considered what a reasonable person in the position of the Institute would do, in the after scenario, rather than what the Institute itself would do. The primary Judge approached the valuation of the freehold of 31 Bligh in the after scenario by considering whether a hypothetical well-informed purchaser would consider, as at the date of acquisition, that the Institute would vacate 31 Bligh. In answering this question her Honour assumed that the hypothetical purchaser would take into account what the Institute would do if it acted reasonably and prudently.

45. [107]

    The primary Judge took this course because the case was conducted, by both parties, on the basis that the hypothetical purchaser would assume that the Institute would act reasonably and prudently. The parties may have taken this course because of the difficulty created by the non-arm’s length relationship between Bligh Consulting and the Institute. Bligh Consulting may also have been influenced by the fact that the Institute, on the date the easements were acquired, remained in possession on a monthly tenancy and had made no decision to vacate the premises. (Ms Ng’s letter of 30 September 2014 was written seven weeks after the acquisition date.) Whatever their motivation, both parties invited her Honour to resolve the factual question by reference to the actions of the Institute and the assumption that it would act reasonably and prudently.

46. [108]

    There was no error of law in the primary Judge addressing the critical issue on the basis adopted by both parties.

The rock anchor easement

1. [109]

   The primary Judge upheld Ausgrid’s submission that s 62(1) of the Just Terms Act precluded Bligh Consulting from obtaining compensation for the acquisition of the rock anchor easement, with the exception of compensation for actual damage. Her Honour considered that the decision of this Court in Pennant Hills Golf Club Ltd v Roads and Traffic Authority (NSW) (Pennant Hills) [64] was authority for the proposition that s 62(1) of the Just Terms Act can apply to easements for rock anchors. [65]

2. [110]

   Bligh Consulting had submitted that s 62(1) of the Just Terms Act did not apply to the easement for rock anchors because the rock anchors were intended to support the works to be carried out on 33 Bligh and to underpin the existing improvements on 31 Bligh. This submission proceeded on the basis that an easement that served the purpose of other works and was not an end in itself was not within s 62(1). In her Honour’s view, however, the focus of s 62(1) is the “subterranean nature of the acquisition” and the purpose of the provision is to disentitle a landholder from claiming compensation when the easement would have little or no impact on the landholder’s rights to the surface of the land. [66]

3. [111]

   Bligh Consulting relied on the words “such as a tunnel, pipe or conduit for the conveyance of water, sewage or electrical cables” in parentheses in s 62(1) of the Just Terms Act. This language informed the interpretation of “works” and demonstrated that the works that are to be constructed and maintained must be works that are ends in themselves rather than works that form part of or support other works. In any event, the words in parentheses, so it was argued, contemplate a genus, being structures that act as a conduit for something to pass through, such as water, electricity or sewage. It was said that a rock anchor does not meet this description.

4. [112]

   In his oral submissions, Mr Walker said that the question of construction is whether the words in parentheses constitute non-exhaustive examples of an “easement, or right to use land, under the surface for the construction and maintenance of works” or whether the words are intended to set a genus which limits the scope of a more general expression. Mr Walker accepted that the language was capable of either interpretation. He submitted, however, that the better approach was to construe s 62(1) so as to expand rather than contract a landowner’s entitlement to compensation.

5. [113]

   The primary Judge did not make precise findings as to what is involved in installing a rock anchor, beyond what appears in the easement for rock anchors itself. The terms of the easement, including the definition of “rock anchors”, have been set out earlier. [67]

6. [114]

   It can be inferred from the terms of the easement that the object of installing rock anchors is to support and protect works on 33 Bligh and to underpin and support the improvements on 31 Bligh. The easement confers on Ausgrid the right to enter designated parts of the sub-rock of 31 Bligh for the purpose of constructing, placing, leaving, inspecting, repairing, maintaining and de-stressing rock anchors. Ausgrid is required to cause as little disturbance as possible to 31 Bligh and to make good any damage at its own cost. Prior to release of the easement Ausgrid must ensure that the rock anchors are de-stressed, but after de-stressing the rock anchors are to remain in situ.

7. [115]

   Mr Wyatt, the Contract Manager for the demolition phase of the Substation project, gave evidence that as the building is progressively demolished to the basement level, the sandstone around the perimeter of 33 Bligh will be exposed. This will require progressive stabilising of the exposed rock and shored face with suitable rock anchors. It is the demolisher’s responsibility to install the rock anchors.

8. [116]

   In Pennant Hills, the Court of Appeal dismissed an appeal from the L & E Court on a preliminary question of law. The issue arose out of the compulsory acquisition by the Roads and Traffic Authority of New South Wales (RTA) of an easement over a golf course adjacent to the M2 tollway. The purpose of the resumption was to install underground rock anchors in a stratum of land below the golf course as part of the work on the M2. The first part of the easement provided that the RTA was entitled to have “the soil and/or other material of the easement within the servient tenement remain undisturbed”. The second part of the easement granted the RTA the right to enter from the dominant tenement underground within the servient tenement and to remain for a reasonable time for the purposes of constructing, repairing, maintaining or removing rock anchors.

9. [117]

   The preliminary question of law was:

10. [118]

    Much of the argument in the Court of Appeal centred on whether the first part of the easement created a free-standing right, or whether the RTA’s right to have the soil remain undisturbed was “limited to and subservient to the purpose of constructing and maintaining rock anchors”. [69] The Court of Appeal favoured the construction that understood the first part of the easement as subservient to the second part. Accordingly, the interest compulsorily acquired was an easement for the construction and maintenance of works.

11. [119]

    The arguments advanced in the present case were not put to the Court of Appeal in Pennant Hills. Nonetheless, it is necessarily implicit in the Court’s decision in that case that an easement for rock anchors is within s 62(1) of the Just Terms Act. It is also necessarily implicit that (as the trial Judge determined) the proprietor over whose land the easement is acquired is not entitled to claim compensation, except to the extent provided in s 62(1) itself.

12. [120]

    The Court in Pennant Hills could not have concluded that s 62(1) of the Just Terms Act applied to the easement compulsorily acquired in that case unless it decided that s 62(1) applies to an easement for rock anchors. This is an issue that had to be resolved in the RTA’s favour for this Court to answer the preliminary question in the affirmative. On my reading of the judgment, the issue was not conceded by the Golf Club. On the contrary, several arguments were advanced by the Golf Club as to why the easement compulsorily acquired by the RTA was not caught by s 62(1). All were rejected by the Court.

13. [121]

    The ratio decidendi of a case is: [70]

14. [122]

    The meaning of s 62(1) of the Just Terms Act was in issue in Pennant Hills. Specifically, the question that had to be resolved was whether an easement for rock anchors that is compulsorily acquired by an authority is within s 62(1). The Court decided that it was. It follows, in my view, that the ratio decidendi of Pennant Hills is that s 62(1) of the Just Terms Act applies to an easement for rock anchors.

15. [123]

    Bligh Consulting has not argued in this Court that the terms of the easement for rock anchors acquired by Ausgrid are materially different from the easement acquired by the RTA in Pennant Hills. It follows that the decision in Pennant Hills is inconsistent with Bligh Consulting’s submissions. In the absence of any contention that Pennant Hills was wrongly decided and should not be followed, s 62(1) of the Just Terms Act precludes Bligh Consulting from claiming compensation in respect of the easement for rock anchors.

16. [124]

    If, contrary to my view, the question of construction of s 62(1) of the Just Terms Act is not foreclosed by Pennant Hills, I would not accept Bligh Consulting’s submissions as to its meaning. Ignoring the words in parentheses, s 62(1) states that if the land compulsorily acquired consists only of an easement under the surface for the construction and maintenance of works, compensation is not payable. There is nothing in this language that warrants reading in a requirement that the works constructed must be “ends in themselves” rather than works that form part of or support other works. Similarly, the language is apt to cover a wider range of subterraneous works than those undertaken for the purpose of passing something through the underground.

17. [125]

    Bligh Consulting’s submissions depend on reading the words in parentheses as limiting the scope of s 62(1). As McColl JA remarked in Cranbrook School v Woollahra Municipal Council (Cranbrook School), [72] there is no rule of construction which requires inclusive words to be read as exclusive of any elements which otherwise fall within the expression being defined. There is also no rule of construction that requires inclusive words in a statutory provision other than a definition to be read as exclusive.

18. [126]

    It is not impossible for words of inclusion or illustrations to be construed as confining or limiting more general words appearing in the same provision. Orthodox principles of interpretation might lean to such a result in a particular case. [73] However, it is “an unusual way to proceed” to limit general words by illustrations rather than specific language. [74] This is particularly the case where the illustrations are contained within parentheses and prefaced by the words “such as”.

19. [127]

    The evident purpose of s 62(1) of the Just Terms Act, derived from its language, is to preclude a landowner from claiming compensation for the compulsory acquisition of an easement that allows land under the surface to be used in a manner likely to cause minimal disruption to the occupiers. Mr Walker did not point to anything in the Just Terms Act, other than the illustrations themselves, suggesting that they should be read as exhaustive of the scope of s 62(1). It is difficult to see a rationale in the text or structure of the Just Terms Act for reading s 62(1) as precluding compensation for works facilitating the carriage of water, electricity, sewage or the like, but not precluding compensation for other works equally essential to the carrying out of the public purpose.

20. [128]

    In my view, s 62(1) of the Just Terms Act should be construed so that the words in parentheses are non-exclusive illustrations of easements caught by the general language of the provision.

The crane swing easement

1. [129]

   Bligh Consulting contended that the primary Judge erred in assessing compensation for the acquisition of the crane swing easement because her Honour failed to apply the principle stated by Sheahan J in Besmaw Pty Ltd v Sydney Water Corporation (Besmaw). [75] The principle is that: [76]

2. [130]

   Bligh Consulting submitted that on its proper construction the crane swing easement permits Ausgrid or its contractors to swing loads over 31 Bligh. While the experts had agreed that normal operations on 33 Bligh would not require a crane to pass loads over 31 Bligh, they also agreed that if loads were carried over 31 Bligh it would be necessary to vacate the property, at least temporarily, for safety reasons. According to Bligh Consulting, the primary Judge erred in failing to value the easement by reference to the full extent of the rights compulsorily acquired by Ausgrid.

3. [131]

   The primary Judge adopted the valuation of Mr Dyson, Bligh Consulting’s valuer. [77] Mr Dyson assessed the market value of the crane swing easement at $400,000 on the basis that there was nothing in the terms of the easement that prevented Ausgrid or its contractors from using a crane to pass loads above 31 Bligh at any time. Mr Dyson’s report expressly referred to Besmaw as authority for the proposition that the threat feared by Bligh Consulting (that is, that it might have to vacate the building on 31 Bligh temporarily for safety reasons to allow a load to pass overhead) existed, although Mr Dyson considered the threat to be “remote”. He took into account the joint report of the Occupational Health and Safety experts who concluded that:

4. [132]

   In accepting Mr Dyson’s approach in preference to that of Ausgrid’s valuer, the primary Judge recognised that: [78]

5. [133]

   I reject Bligh Consulting’s contention that the primary Judge erred in law in assessing compensation for the crane swing easement.

Orders

1. [134]

   The following orders should be made: