Court of Appeal Supreme Court New South Wales Medium Neutral Citation: oOh!media Fly Pty Ltd v Transport for NSW [2024] NSWCA 200 Hearing dates: 24 May 2024 Date of orders: 15 August 2024 Decision date: 15 August 2024 Before: Leeming JA at [1]; Kirk JA at [2]; Adamson JA at [98] Decision: (1) Appeal dismissed. (2) Appellant to pay the respondent's costs of the appeal. Catchwords: VALUATION – Compensation for compulsory acquisition of strip of land used for road to Sydney Airport – Market value – Procedural fairness in rejecting valuation method proposed – Notice of basis of rejection – Issue raised both in submissions and on the facts – Running commentary on submissions not required VALUATION – Market value – Statutory disregard of change in value caused by public purpose – Challenge partly overtaken by subsequent case law – No disregard for change in value resulting from owner's free choice due to suspected acquisition VALUATION – Special value and disturbance – Tax gross up – Issue not raised – No basis for criticism for failing to give reasons with respect to claim not made APPEALS – Jurisdiction of appellate court – Appeal from Land and Environment Court – Question of law – Claimed constructive failure to exercise jurisdiction to make allowance for potentialities – Matter not put as part of appellant's case below – Complex factual issue necessitating further evidence – No constructive failure – In substance appellant had been seeking to reopen its case Legislation Cited: Land Acquisition (Just Terms Compensation) Act 1991 (NSW), s 4(1), Pt 3 Land and Environment Court Act 1979 (NSW), s 57(1) Roads Act 1993 (NSW) Cases Cited: BBS15 v Minister for Immigration and Border Protection [2017] FCAFC 61; (2017) 248 FCR 159 Coffs Harbour City Council v Noubia Pty Limited [2022] NSWCA 32 Coffs Harbour City Council v Noubia Pty Ltd [2024] NSWCA 19 G & J Drivas Pty Ltd v Sydney Metro [2024] HCASL 162 G&J Drivas Pty Ltd v Sydney Metro [2023] NSWLEC 20 Kudrynski v Orange City Council [2024] NSWCA 33 LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2024] HCA 12; (2024) 98 ALJR 610 Medical Council of New South Wales v Mooney [2024] NSWCA 180 Melino v Roads and Maritime Services [2018] NSWCA 251; (2018) 98 NSWLR 625 Roads and Traffic Authority of New South Wales v Mosca [2006] NSWCA 159; (2006) 146 LGERA 335 Sydney Metro v G&J Drivas Pty Ltd [2024] NSWCA 5; (2024) 258 LGERA 197 Sydney Water Corp v Caruso [2009] NSWCA 391; (2009) 170 LGERA 298 SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; (2006) 228 CLR 152 VAW (Kurri Kurri) Pty Ltd v Scientific Committee [2003] NSWCA 297; (2003) 58 NSWLR 631 Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259 Yates Property Corp Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156 Category: Principal judgment Parties: oOh!media Fly Pty Ltd (Appellant) Transport for NSW (Respondent) Representation: Counsel: I Hemmings SC and J McKelvey (Appellant) N Hutley SC and M Astill (Respondent) Solicitors: Thomson Geer (Appellant) Clayton Utz (Respondent) File Number(s): 2023/363435 Publication restriction: Nil Decision under appeal Court or tribunal: Land and Environment Court of New South Wales Jurisdiction: Class 3 Citation: [2023] NSWLEC 26 Date of Decision: 07 September 2023 Before: Moore J File Number(s): 2021/113184 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the judgment] The appellant, oOh!media Fly Pty Ltd, had a leasehold interest (the Lease) in a strip of land next to Qantas Drive, a much used road in the vicinity of Sydney Airport which had enabled it to erect 18 large billboard signs directed at motorists. The Lease was compulsorily acquired by the respondent, Transport for NSW (TfNSW) for the purpose of facilitating construction, operation and maintenance of the "Sydney Gateway" road project. The dispute here is over the compensation to which the appellant is entitled under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Act) for acquisition of the Lease. The appellant had been planning to digitise some of its signs which would have increased their value, but discontinued those plans upon learning of the potential impact on the Lease of the Sydney Gateway project. The Valuer-General determined the compensation payable to be some $3.8 million. The appellant challenged that determination in the Land and Environment Court, seeking some $52.2 million or alternatively $32.6 million. The primary judge rejected the substance of the appellant's arguments and subsequently quantified the compensation as some $2.7 million. On appeal the issues in dispute were whether the primary judge: 1. denied the appellant procedural fairness by rejecting a "profit rent approach" to market value compensation under s 56(1)(a) of the Act on the basis that there was no relevant market (ground 1); 2. applied the statutory disregard test in s 56(1)(a) incorrectly in rejecting the appellant's claim for compensation on the basis of notionally digitised signs (grounds 2 and 2A, and a notice of contention from TfNSW); 3. erred in not making allowance for the potentiality of the signs to be digitised when assessing the market value of the Lease (ground 3, put in the alternative to grounds 2 and 2A); and 4. failed to give adequate reasons for rejecting the appellant's claim for a "tax gross-up" as a "special value" of the land under s 57 of the Act or a "loss attributable to disturbance" under s 59(1)(f) of the Act (ground 5). The Court (Kirk JA, Leeming and Adamson JJA agreeing) dismissed the appeal and held: Ground 1: 1. Senior counsel appearing for TfNSW below had been clear in saying in closing oral submissions that there was "certainly no evidence" of the type of market activity postulated by the appellant. The appellant is thus incorrect to say that that proposition was not put to the trial judge by either party. The appellant had every chance to respond to it in its oral reply submissions: at [23]. The primary judge did not take the submission out of context: at [24]. It is true that TfNSW's written submissions did not refer to an absence of evidence about investor market participants. Important points should be made in written submissions. Nevertheless, Australian courts continue to operate within an oral tradition. One of the responsibilities of appearing in court is having constantly to be alert to what is being said and being ready to respond: at [28]. 2. There was no requirement that the primary judge spell out what he understood the submission to mean. Procedural fairness does not require a court to give a running commentary upon submissions: at [29]. Given the evidence of the industry experts to which the valuation experts deferred, it was open for the primary judge to reach the conclusion that he did: at [43]. SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; (2006) 228 CLR 152, referred to. Grounds 2 and 2A and the notice of contention: 3. This Court's decision in Sydney Metro v G&J Drivas Pty Ltd [2024] NSWCA 5; (2024) 258 LGERA 197 (Drivas CA) to overturn G&J Drivas Pty Ltd v Sydney Metro [2023] NSWLEC 20 (Drivas LEC) rendered the merits of the primary judge's basis for distinguishing Drivas LEC irrelevant. Correctly declining to follow an erroneous decision would not establish material error, even if the reason given for doing so was ill-founded: at [48]. The primary judge's reasoning on point is consistent with Drivas CA and does not manifest error: at [53]-[54]. Drivas CA; Drivas LEC, referred to. 4. This case is relevantly indistinguishable from Drivas. In each the claimant was asserting that the market value of its interest in land should be assessed on the basis that development which had not been undertaken as at the date of acquisition had been undertaken. The only material factual difference is that in Drivas the claimant was more advanced with its development plans. In cases such as this it is the land as it is on the date of acquisition which is valued, not the land as it would have been if development had been undertaken which was not pursued because of the proposed compulsory acquisition: at [58]-[60]. Paragraph 89 of Drivas CA should not be understood as suggesting that if the claimant establishes a certainty of development consent or rezoning by the date of acquisition but for the public purpose, then the claimant has a right to compensation for undertaking works on the land that had not been done as though they had been done: at [63]. It is clear from the evidence that the decision to put a halt to digitising the signs was in response to being informed of the projected acquisition of the signs and the Lease: at [72]. A putative increase in market value not in fact achieved because of a claimant's own choices made prior to the date of acquisition contemplating the possibility or certainty of its interest in the land being acquired is not required to be disregarded by s 56(1)(a) of the Act. Drivas CA, applied. Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259, referred to. Ground 3: 5. The appellant's submission mixed up the issue of the primary judge's counterfactual finding of what the appellant would have done in digitising its signs by the date of acquisition but for the Sydney Gateway project with the issue of how the market would have viewed the development potential of the site as at that date: at [84]. Assessing the development potential of the signs on the site was a complex factual issue which the appellant had not sought to address at the trial. The primary judge's conclusion, when considering what final orders to make, that addressing these matters would "necessitate a further hearing" with "the necessity for extensive further evidence" was neither surprising nor unreasonable: at [85]. There was no constructive failure by his Honour to exercise jurisdiction. In substance the appellant was applying to reopen its case. No error has been shown in his Honour's discretionary decision to decline to allow that to occur: at [87]. Coffs Harbour City Council v Noubia Pty Limited [2022] NSWCA 32; VAW (Kurri Kurri) Pty Ltd v Scientific Committee [2003] NSWCA 297; (2003) 58 NSWLR 631, referred to. Ground 5: 6. Little attempt was made by the appellant to show why the claimed absence of reasons was material. The appellant's claim raised issues of law which were not developed at any length in this Court: at [90]. In any event, ground 5 is without merit. A tax gross-up was not claimed as special value other than as part of two particular special value claims which the primary judge rejected, which rejection is not challenged: at [92]. A claim for a tax gross-up had not been sought under s 59(1)(f) of the Act: at [91]. The primary judge cannot be criticised for failing to give reasons with respect to a claim not made: at [95]. JUDGMENT 1. LEEMING JA: I agree with Kirk JA. 2. KIRK JA: Qantas Drive is a much used road in the vicinity of Sydney Airport. Next to the road was a strip of land used for rail purposes (the Land). The appellant, oOh!media Fly Pty Ltd, had a leasehold interest in the Land (the Lease) which had enabled it to erect 18 large billboard signs directed at motorists, as part of the outdoor advertising business of its parent company, oOh!media Ltd. On 18 September 2020 the Lease was compulsorily acquired by the respondent, Transport for NSW (TfNSW), for the purpose of facilitating construction, operation and maintenance of the "Sydney Gateway" road project. That project was connected to the broader WestConnex road development. The dispute in these proceedings is the compensation to which the appellant is entitled under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Act) for acquisition of its leasehold interest. 3. The Valuer-General determined the compensation payable to be some $3.8 million. The appellant exercised its right to challenge that determination in the Land and Environment Court. In its amended points of claim it sought the rather larger amounts of some $52.2 million on its preferred scenario or $32.6 million on its alternative scenario. After a seven day hearing the primary judge, Moore J, rejected the substance of the appellant's arguments: oOh!media Fly Pty Limited v Transport for NSW [2023] NSWLEC 26 (J). In a subsequent judgment his Honour quantified the compensation payable under the Act as some $2.7 million, being less than the Valuer-General's determination: oOh!media Fly Pty Limited v Transport for NSW (No 2) [2023] NSWLEC 112 (J2). 4. In this Court the appellant initially raised five grounds of appeal. The respondent raised a point of contention in relation to ground 2. Ground 4 ultimately was not pressed. During the course of the hearing the appellant was granted leave to file an amended notice of appeal in which an additional ground 2A was included, in circumstances explained below. In the end the issues in dispute were whether the primary judge: 1. denied the appellant procedural fairness by rejecting a "profit rent approach" to market value compensation under s 56(1)(a) of the Act on the basis that there was no relevant market (ground 1); 2. applied the statutory disregard test in s 56(1)(a) incorrectly in rejecting the appellant's claim for compensation on the basis of notionally digitised signs (grounds 2 and 2A, and the notice of contention); 3. erred in not making allowance for the potentiality of the signs to be digitised when assessing the market value of the Lease (ground 3, put in the alternative to grounds 2 and 2A); and 4. failed to give adequate reasons for rejecting the appellant's claim for a "tax gross-up" as a "special value" of the land under s 57 of the Act or a "loss attributable to disturbance" under s 59(1)(f) of the Act (ground 5). 1. I will address each issue in turn, after first setting out the factual and legal background. None of the grounds establishes any material error of law by the primary judge. The appeal should therefore be dismissed. Background Facts 1. The Land was owned by Rail Corporation New South Wales and leased to the Australian Rail Track Corporation. That body subleased the land to Manboom Pty Ltd from 1 July 2000 for 10 years, with three 10 year options to renew (taking the Lease potentially to 2040). Shortly thereafter Manboom assigned its sublease to the appellant, which was then named Eye Drive Sydney Pty Limited. That company was acquired by the appellant's parent company in 2012. The appellant had exercised the first option to renew in 2010, giving rise to the Lease. 2. In 2015 the appellant started a project to digitise some of its billboards in the vicinity of the Sydney Airport. Digitisation in this context means to convert static billboards by fitting them with technology enabling them to display and rotate multiple advertising messages over a period of time. This has the potential substantially to increase the earnings a billboard can yield. The process required obtaining development consent from the local council along with significant capital expenditure to adapt the existing signs (see J[29]). Ms Sarah Young, who gave evidence, had run this billboard digitisation project for the appellant. Over the course of 2015 Ms Young prepared and circulated internal briefing materials outlining the digitisation plan including prioritisation among the billboards. The plan was revised a few times before being presented to relevant senior executives for budgetary sign-off, which was given in October 2015. 3. Ms Young and other representatives of the appellant set about beginning the process for seeking the necessary development consent around December 2015. On 4 May 2016, in the course of that process, she met with Mr Joseph Chan of Sydney Airport Corporation Ltd. Mr Chan indicated that the appellant's digitisation plan would be "deeply impact[ed]" by WestConnex. Mr Chan then gave her the contact details for a relevant person at Roads and Maritime Services (a predecessor of TfNSW). Ms Young spoke with that person the next day, and then met with another such representative on 9 May 2016. Following that meeting Ms Young emailed the consultants engaged on the development application process asking them to "halt all work as of today related to the airport signage project", saying "[w]e are currently looking into the WestConnex activity to see how we can manage our project in alignment with it". 4. As noted, on 18 September 2020 TfNSW compulsorily acquired the Lease pursuant to the Roads Act 1993 (NSW). 5. Exactly how many of the 18 billboards on Qantas Drive the appellant planned to digitise had it not learnt of TfNSW's proposal to acquire the land was a matter of dispute in the Court below. The appellant claimed that it would have digitised six of the signs. TfNSW's case was that it would not have digitised any of the signs. The primary judge did not strictly need to resolve that dispute as he concluded that as a matter of law the appellant had no right to claim compensation for "hypothetical signs" (J[45]) – that issue being the focus of ground 2A in this appeal. However, his Honour appropriately did so against the possibility that he was wrong on his legal construction. On that basis he was satisfied that the appellant would have digitised two of the signs by the date of acquisition (J[109]-[122]). That finding is not challenged by either side on appeal. Relevant statutory provisions 1. Part 3 of the Act concerns compensation for acquisition of land. Section 37 provides that an "owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part by the authority of the State which acquired the land". The term "land" is defined in s 4(1) to include any "interest in land", which in turn is defined to include "a legal or equitable estate or interest in the land". There is no dispute that that encompasses the Lease. 2. Section 54(1) of the Act 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". Section 55 then provides: 55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division)— (a) the market value of the land on the date of its acquisition, (b) any special value of the land to the person on the date of its acquisition, (c) any loss attributable to severance, (d) any loss attributable to disturbance, (e) the disadvantage resulting from relocation, (f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. 1. The term "market value" is defined under s 56(1) of the Act as follows: 56 Market value (1) In this Act— market value means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid)— (a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and (b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and (c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law. 1. Section 59(1) spells out the notion of "loss attributable to disturbance" by reference to six paragraphs. Paragraph (f) of that provision is "any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition". Nature of appeals in such matters 1. Section 57(1) of the Land and Environment Court Act 1979 (NSW) (LEC Act) provides that a party to proceedings in Class 3 of the Land and Environment Court's jurisdiction, which encompasses the present case, "may appeal to the Supreme Court against an order or decision … of the Court on a question of law". Such appeals are predicated on the existence of an order or a decision on a question of law, albeit that the decision may be one made implicitly: see the discussion in Kudrynski v Orange City Council [2024] NSWCA 33 at [39]-[50]. Section 57(2) provides that on the hearing of an appeal the Court shall "remit the matter to the Court for determination by the Court in accordance with the decision of the Supreme Court" or "make such other order in relation to the appeal as seems fit". 2. Generally, this Court will only intervene if any error on a question of law is material such as to vitiate the primary decision: Yates Property Corp Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156 at 159 and 176-177; Roads and Traffic Authority of New South Wales v Mosca [2006] NSWCA 159; (2006) 146 LGERA 335 at [22]; Sydney Water Corp v Caruso [2009] NSWCA 391; (2009) 170 LGERA 298; Melino v Roads and Maritime Services [2018] NSWCA 251; (2018) 98 NSWLR 625 at [52]; Kudrynski at [49]. A material error can be understood as involving an assessment of whether there is a realistic possibility that the result could have been different but for the error. Requiring materiality in this context is harmonious with a similar general requirement in establishing jurisdictional error: eg LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2024] HCA 12; (2024) 98 ALJR 610 at [6]-[7]. Ground 1: procedural fairness 1. One issue before the primary judge was what valuation method should be adopted for assessing the market value of the lease pursuant to ss 55(a) and 56 of the Act. The appellant had proposed two possible valuation approaches, as manifest in its two scenarios: first, a discounted cash flow (DCF) method; alternatively, a profit rent method, that is, assessing the net present value of the difference between the rent payable under the lease and market rent. The latter approach produced a lower figure on the appellant's analysis. TfNSW had initially asserted that the profit rent method should be applied. However, by closing submissions it said a DCF approach should be adopted in light of the evidence given in the hearing. The appellant's position in closing was to support the DCF approach based on its analysis of the evidence, but it also said that whichever method would result in a higher value should be applied. 2. The primary judge noted the appellant's position about adopting either method (at J[157]). His Honour held that the profit rent method was not available on the facts, and thus proceeded on a DCF approach, saying: [167] Although s 56(1) mandates consideration of the hypothetical transaction in the terms there set out, such a transaction must be hypothesised as taking place in a market which is known to exist. Just as it would be inappropriate, in a hypothetical real estate transaction to seek to use analysis of the sale of a residential property in suburban Sydney for the purposes of deriving a value to be adopted for a CBD office tower, because such a process would not be one in a s 56(1) real-world, that is also the position which arises with respect to the Company's proposed hypothetical profit rent analysis. There simply is no evidence that supports the proposition that there is or has been any market for outdoor advertising billboard sites involving transactions where the hypothetical purchaser was an investor who was not an existing player in the outdoor advertising market. [168] In these proceedings, the evidence is that there is fierce competition between the major players in the limited pool of active participants in the outdoor advertising industry. There is, however, no evidence of any transaction of the type here hypothesised by the Company. In the absence of evidence demonstrating that such a market exists, and is not merely a concept advanced in the absence of real-world existence of such a market, there is no possible basis to entertain consideration of the claim advanced on this methodology. 1. The appellant does not challenge the nature of this reasoning. It expressly accepts that a "finding that a particular market would value an interest in land in a particular way is a finding of fact and is, therefore, outside the scope of an appeal under s 57 of the LEC Act". Its complaint is that in rejecting the profit rent method for the reasons given at [167] the primary judge denied it procedural fairness. 2. The availability of the profit rent approach in this case was seen to depend upon the existence of a category of potential lessees or purchasers comprised of investors who were not themselves participants in the outdoor advertising market but who would on-lease the sites to outdoor advertising companies such as the appellant. The appellant had submitted below that there was such a class of market participants and that those participants were likely to proceed by a profit rent valuation approach. His Honour concluded that there was no evidence of any market involving such investor transactions. That was a finding of fact. Although the judge spoke in terms of there being no evidence of "such a market", it is apparent (and the appellant accepted) that what he meant was that there was no evidence that there was such a class of investors operating within the market for purchase or lease of outdoor advertising billboard sites. 3. The appellant complained that the proposition that there was no such evidence was not put to the trial judge by either party, was contrary to the evidence, and was a conclusion which could not reasonably have been expected by the appellant. It submitted: The Appellant assumed, incorrectly it would appear, that the trial judge had understood the totality of the available evidence. Had the Appellant been made aware either by the Respondent's submissions or by indication from the trial judge that the Court would proceed on the (incorrect) assumption that there was no investor market for the Acquired Lease, the fact of the prior transaction of the Acquired Lease itself, and the evidence of Mr Lunney, could have been highlighted. 1. Mr David Lunney was one of the valuers who gave evidence. At J[157]-[158] the primary judge referred to, and quoted, submissions put on behalf of the appellant to the effect that whichever methodology produced the higher value should be applied. His Honour then said this (emphasis added): [159] In response, Mr Hutley [for TfNSW] submitted …: Can I turn to the discount rate of [sic – or] the profit rent approach. The experts have agreed that if the market trades these signs on a basis other than profit rents, i.e. by reference to discounted cashflows, then that's the appropriate valuation methodology. The experts have agreed, that is the experts to do with the signage, have agreed that that's the approach in the market. It's telling that there's no suggestion from our learned friend's expert, Mr Whitford, that there's concept of some property trader coming in and buying up precincts, and seeking to market them, so this theory of the property developer seems one which nobody in the industry has ever heard of, and there's no certainly no evidence that they've ever heard of it, and they say that that's how these signs trade, and, in our respectful submission, having regard to what was found in Eureka and supported by the Court of Appeal, that should be the basis of valuation, in this case. That's what the market would pay for it, not what it [sic – this] imagined investigation [sic – investor] would pay for it. So, we say that should be the end of it. Our learned friend seem to have advanced the case in that they get the better of the two analyses, and, in our respectful submission, this is not a game show, this is your Honour determining what the market value is, and there will be a market value, and that's it, and if the market value's in a particular way, in our respectful submission, that's the end of it. Against the possibility that one needs to deal with that. 1. Mr Adam Whitford was an expert witness on the outdoor advertising market called by the appellant. Mr Hutley SC, who appeared with Mr Astill for TfNSW both below and on appeal, was clear in saying that there was "certainly no evidence" of the type of market activity postulated by the appellant. It was that submission which the primary judge accepted in his reasoning at [167]. The appellant is thus incorrect to say that the proposition that there was no such evidence was not put to the trial judge by either party. It is incorrect to say that it was a conclusion which could not reasonably have been expected by the appellant. The issue in question was squarely raised. The appellant had every chance to respond to it in its oral reply submissions. 2. Mr Hemmings SC, who appeared with Ms McKelvey for the appellant at trial and in this Court, said of Mr Hutley's oral submission, as quoted at J[159], "I accept that those words, taken in isolation and out of context, have the possibility to have put us on notice". His Honour did not take the words out of context. As set out in his Honour's quotation at J[159], Mr Hutley had introduced that portion of his oral submissions by saying "Can I turn to the discount rate of [sic – or] the profit rent approach". 3. Mr Hemmings submitted that Mr Hutley's submission "doesn't appropriately deal with the issue that there was a submission plainly made, contrary to the case the parties were otherwise running", and that the "the one-liner wasn't good enough to put us on notice". Senior counsel also complained that Mr Hutley had mentioned one type of evidence – that given by one of the advertising market experts – but not other evidence by the valuers, including a reference to Manboom (the entity from which the appellant had acquired the 2000 iteration of the Lease). That the appellant's representatives do not consider the submission adequate or persuasive is hardly to the point. The submission may have been brief but its meaning was clear. And, as it happens, Mr Hutley repeated the point in his oral submissions a few minutes after the passage quoted at J[159], saying: So, in other words, what we say is – this idea is legally misconceived, and not only is it legally misconceived – my learned friend can shake his head, he probably was, it doesn't impress anyone – this thing is legally misconceived, Your Honour hasn't heard one jot of evidence that any person in the marketplace has ever done this, conceived of it, and it is a thought experiment worked out by our learned friends. 1. To put these submissions in further context, as noted above, TfNSW's opening position had been to prefer a profit rent methodology. In its closing written submissions it said that the "orthodox approach of assessing the market value of a leasehold interest" was the profit rent method. But it then referred to evidence from the outdoor advertising experts in support of the DCF method (which I will come back to) and submitted that: The land valuers agreed that if industry advice was that this was the way in which the market approached pricing of a lease such as this, then the DCF method was appropriate to value the lease. Nevertheless, the Applicant has not abandoned the alternative claim based on a profit rent assessment … 1. TfNSW was thus implicitly suggesting that the DCF methodology was the appropriate one on the facts of this case. It is true that this submission did not refer to an absence of evidence about investor market participants. Important points should be made in written submissions. Nevertheless, this submission did at least put the appellant on notice of the need to justify why a profit rent approach should be adopted. 2. Mr Hemmings took this Court to his oral reply submissions in the Court below, saying he did not "take on a suggestion that there is no class of purchaser that would pay profit rent". The fact that he did not do so indicates that he – and presumably the rest of the appellant's legal team – had not understood Mr Hutley's submission in the way that his Honour later did. That may reflect the absence of the point from TfNSW's written submissions. Although the point should have been put in writing, Australian courts continue to operate within an oral tradition. Sometimes new points are raised by counsel orally; sometimes they are raised from the bench. One of the responsibilities of appearing in court is having constantly to be alert to what is being said and being ready to respond. 3. The fact is that in closing submissions in the Court below Mr Hutley did make the "no evidence" point, clearly and twice. There was no requirement that the primary judge spell out what he understood the submission to mean. The High Court has observed of an administrative tribunal that "[p]rocedural fairness does not require the Tribunal to give an applicant a running commentary upon what it thinks about the evidence that is given": SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; (2006) 228 CLR 152 at [48]. The same is true of a court. And the principle extends to not needing to comment on submissions. 4. The appellant's argument that the "no market" finding was contrary to evidence before his Honour, and its critique of the merits of Mr Hutley's submission below, stray well into a merits review on issues of fact. It is worth recording, however, that his Honour's conclusion was reasonably open to him, and the issue was raised on the facts. 5. There were two relevant pairs of experts. There were the "outdoor advertising experts" (as they described themselves in their joint report), Mr Whitford for the appellant and Mr Richard Herring for TfNSW. And there were the valuers, being Mr Michael Dyson for the appellant and Mr Lunney for TfNSW. The evidence said by the appellant to support the existence of investor participants in the relevant market consisted principally of (1) evidence from its valuer Mr Dyson in the valuers' joint expert report, and (2) a response from TfNSW's valuer Mr Lunney in cross-examination. 6. The valuers' joint expert report recorded the following: Mr Dyson is of the opinion that the profile of the purchaser of the Acquired Lease would be a billboard signage operator or an established corporate investor with significant assets. … Mr Dyson notes that the original Lessee, Manboom Pty Ltd is not a billboard signage operator but an investor in outdoor signage land. His enquiries with Mr Ian Riley, Director of Manboom Pty Ltd are that Manboom acquired the subject interest in 1994/5 and have always subleased the signs to operators. They retain ownership of signs and lease / sublease the signs to operators such [as] oOh! Media and their competitors. Should a corporate investor acquire the Leasehold Interest the subject of this assessment, it would not require a change to the lease but merely a guarantee by the purchaser to the Lessor that the "annually audited gross income" from the operation of the signs would be provided to the Lessor for the purpose of calculating the Turnover Rent under the terms of the lease. 1. Mr Lunney disagreed, saying in the joint report that "I consider that the most likely profile of a purchaser of the Acquired Lease is an operator, within the billboard signage industry, rather than a commercial investor". 2. The joint report of the outdoor advertising experts was prepared subsequently to the valuers' joint report. Those experts agreed as follows: 2. Notwithstanding the position in relation to Question 1, do the experts agree that the hypothetical purchaser would determine the purchase price for the lease by reference to 100% of the future cashflows? Agreed Response: Yes. The HP [ie hypothetical purchaser] would determine the purchase price for the lease on the basis that they would be able to generate 100% of the forecasted future cashflows. The future cashflows would more than likely be estimated/projected by the HP and not just based on historical revenue, if made available, on the Acquired Sites. 1. The outdoor advertising experts – being the experts retained for their industry knowledge – were thus suggesting that "the hypothetical purchaser" would employ a DCF approach. 2. In light of that evidence, Mr Dyson appeared to backtrack from his earlier position under cross-examination: HUTLEY: … Do you, Mr Dyson, agree with Mr Lunney's view that if his Honour takes the view that the evidence of the industry experts as to how these leases change hands, that is on the basis of discounted cash flows, that is an appropriate methodology to apply in determining the value of the leases? WITNESS DYSON: I agree, yes. 1. By referring to DCF as "an" – as opposed to "the" – appropriate methodology, senior counsel for the respondent was not as clear as he might have been in suggesting that the DCF method should be adopted over profit rent. But it was open to understand Mr Dyson's answer as manifesting a preparedness to defer to the view of the advertising experts. That understanding is supported by the fact that the question referred to "Mr Lunney's view", which appears to have been a reference to evidence given earlier by Mr Lunney in the concurrent session where he accepted DCF as "the appropriate valuation method": WITNESS LUNNEY: … What I'm saying there is true, but it is also true that in this matter we have the signage experts said what they said in their joint report and also the benefit of hearing their oral evidence yesterday, on my interpretation of that, I think they're saying that unusually, in this industry, that the broader-based DCF, if I can call it that, would be employed as the appropriate valuation method. If that's the evidence of those experts and if that's the evidence that's accepted by the Court, my view would be that that would be the appropriate way to assess the market value of this lease. HEMMINGS: I was going to take you to paragraph 44, but it's confirmatory of what you just said, you don't profess to have any speciality in the valuation of land for the purposes – that you use for the purposes of advertising laws? WITNESS LUNNEY: No. I say as much in my report. HEMMINGS: You defer to the opinions of the relevant experts, Herring and Whitford on that matter? WITNESS LUNNEY: I do. 1. The second strand of evidence that the appellant invoked was an exchange between Mr Lunney and senior counsel for the appellant, most particularly in the following question and answer: HEMMINGS: And you know that in fact the way that this lease started its life was Manboom who is not someone that sells advertisement, but is in the business of buying sites to erect advertising signs and then lease them; you know that's who was the original lessee? WITNESS LUNNEY: That is right. Yes. 1. The appellant sought to characterise Mr Lunney's response as a confirmation that Manboom, the previous lessee, was a non-operating investor. The question involved three rolled-up propositions. It started with "And you know that in fact the way that this lease started its life was Manboom", which itself is capable of an answer. Then followed a description of Manboom: "who is not someone that sells advertisement, but is in the business of buying sites to erect advertising signs and then lease them". That was the proposition the appellant sought to rely on. The question concluded by an echo of the first part of the question: "you know that's who was the original lessee?" The most natural reading is that Mr Lunney was agreeing with the last proposition, but it could have been any or all of the three. Rolled-up questions "inherently are productive of misunderstanding": BBS15 v Minister for Immigration and Border Protection [2017] FCAFC 61; (2017) 248 FCR 159 at [83]. 2. Mr Lunney was then hesitant to accept a suggestion in the next question as to Manboom's role: HEMMINGS: So, the original set up was State Rail – as it was back then – issued a lease to Manboom. Manboom erected the advertising structures and then sublet it to [Eye Drive]. WITNESS LUNNEY: I'm not sure that that's entirely correct. So, Manboom took over a lease in the 1990s from a previous lessee. I couldn't be certain as to whether it was that previous lessee or Manboom that constructed the signage structures. There's certainly a historical lease that I've seen that dates back to the 1990s on which Manboom occupied the site from about the middle of the 1990s, ascendingly holding over after that lease expired in 1997 until the creation of the new lease that ticked off in the middle of the year 2000. 1. Mr Lunney's uncertainty reflects the fact that his expertise, like that of Mr Dyson, was valuation generally. Neither claimed expertise in the particular market. Mr Lunney expressly said as much in the exchange quoted above at [37]. And Mr Dyson said the following in his curriculum vitae: My expertise extends to the valuation of a diverse range of property types, including vacant and improved stratum, easements, schools, open space lands, biodiversity offsets and portfolios of specialised properties throughout NSW as well as commercial, industrial and residential properties including development sites. 1. The role that Manboom played prior to assigning the lease to the appellant in 2000 was not clear from the evidence. If it was not an advertising operator that does not necessarily mean it was an "investor". Even less does it establish that investors were a significant category of market participants as at the date of acquisition in 2020. 2. In the context outlined, and given the evidence of the industry experts, it was open for the primary judge to reach the conclusion that he did. And given the litigation landscape just outlined, it was quite clear that TfNSW had changed from its initial position and accepted that a DCF and not profit rent approach should be adopted in light of the industry expert evidence, where it said that evidence determined the question. The appellant should have understood it had to address that argument and the evidence just referred to. 3. No breach of procedural fairness has been made out. Grounds 2 and 2A: compensation for putative digitisation 1. Section 56(1)(a) of the Act requires that in assessing the market value of the acquired land one must disregard "any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired" (s 56(1) is quoted in full above at [13]). This is sometimes referred to as the "statutory disregard". Senior counsel for the appellant correctly emphasised in oral submissions that this is a test involving causation, and what the provision requires to be disregarded is relevant increases or decreases in value, not the taking of steps per se which may have led to such an effect. 2. The appellant's case below, relevantly, was as follows. But for it having learned in May 2016 that TfNSW's Sydney Gateway project would likely lead to acquisition of the signs and its Lease, it would have proceeded to digitise six of its 18 signs on Land. That would have increased the market value of its Lease. The putative decrease (or, more accurately, non-increase) in value caused by it not having done so should be disregarded pursuant to s 56(1)(a) because it was caused by TfNSW's proposal to carry out the public purpose of the Sydney Gateway project. As noted, the primary judge found that the appellant would have gone on to digitise two of the signs by the date of acquisition in September 2020 but for learning of the Sydney Gateway project. 3. The case below was argued before, but decided after, Duggan J handed down her decision in G&J Drivas Pty Ltd v Sydney Metro [2023] NSWLEC 20 (Drivas LEC). The claimant in that case had made a similar type of claim as was put to the primary judge here (as explained below), which her Honour upheld. The primary judge did not follow her Honour's decision in that regard, distinguishing it on the following basis: [42] This position is different to, and to be distinguished from, the facts required to be addressed by Duggan J … where the applicant in those proceedings ceased seeking to implement a development consent which had been granted because that applicant became aware of the proposed acquisition of its land. Here, the absence of such an entitlement to develop creates entirely different circumstances from those dealt with by her Honour in Drivas. 1. By ground 2 the appellant complained that the primary judge misapplied the statutory disregard by distinguishing Drivas LEC on this basis. Shortly after the appellant had filed its notice of appeal this Court overturned the decision of Duggan J: Sydney Metro v G&J Drivas Pty Ltd [2024] NSWCA 5; (2024) 258 LGERA 197 (Drivas CA). That decision rendered the merits of his Honour's basis for distinguishing Duggan J's decision irrelevant. As explained above at [16], an appeal under s 57(1) of the LEC Act will not succeed unless any error established on a question of law is material. Correctly declining to follow an erroneous decision would not establish material error, even if the reason given for doing so was ill-founded. TfNSW filed a notice of contention invoking Drivas CA to support the primary judge's conclusion. 2. In this Court the appellant did not seek to challenge Drivas CA. However, it did not withdraw ground 2, even though it accepted that it had "been overtaken by subsequent events". It was perhaps maintained as a formality given that a special leave application against that decision was pending at the time of the hearing of this appeal. That application has since been rejected by the High Court: G & J Drivas Pty Ltd v Sydney Metro [2024] HCASL 162. 3. What the appellant in effect sought to do was to distinguish Drivas CA and submit that it was entitled to rely on the statutory disregard. Yet it had no ground of appeal addressed to that point. When that problem was pointed out in the course of oral argument the appellant belatedly sought leave to file an amended notice of appeal containing a new ground 2A. TfNSW did not oppose the application and leave was granted. The appellant had appeared to assume that the issue was sufficiently raised simply by the respondent's notice of contention. That assumption was incorrect. As already explained, s 57 enables appeals against an order or decision of the Land and Environment Court on a question of law. In that context "it is critical that an appellant clearly identify the question of law which is the subject of the appeal": Kudrynski at [48]; see also the authorities gathered in a similar context in Medical Council of New South Wales v Mooney [2024] NSWCA 180 at [96]-[97]. Insofar as the appellant wished to argue that his Honour erred in a particular way this needed properly to be identified in a ground of appeal. 4. The new ground 2A was as follows: Upon the facts fully found (Judgment at [35], [53], [111], [113], [114]) and the correct application of [Drivas CA], the trial judge erred in the application of the statutory disregard in s 56(1)(a) of the [Act] in making the finding at [45] of the Judgment. 1. The reference to J[45] was apparently meant to refer to his Honour's conclusion that compensation was not payable for "hypothetical signs based on an assumption that those signs (of whatever number) had been installed and were operational as at the date of acquisition". That reflects the fact that the claim at issue was that "but for the Acquisition, [six identified signs] would have been digitised at 1 January 2020" (amended points of claim at [32(b)] and [41(b)]). 2. The finding impugned at J[45] should be understood in the context of his Honour's reasoning on point (after having distinguished Drivas LEC at J[42]): [43] In Roads and Traffic Authority of New South Wales v Mosca (2006) 146 LGERA 335; [2006] NSWCA 159 … Handley JA (Mason P and Bryson JA agreeing) relevantly said, at [15]: 15. … The basic principle of compensation law is that the land must be valued at the relevant date in its existing condition with all its potentialities as potentialities: Yates Property Corporation Pty Ltd v Darling Harbour Authority (1991) 24 NSWLR 156, 175-6 (Yates) citing Raja's case [1939] AC 302, 313 and Turner v Minister for Public Instruction (1956) 95 CLR 245, 268-9. [44] As can be seen from the above quotation, Handley JA relied, by derivation, upon the reasoning of Dixon CJ in Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7 (Turner) where, at 268 and 269, his Honour said: 268. … Whatever else may be true as to the process of valuation employed, it is the entire land which must be valued as at the date of resumption. It is, of course, to be valued in cases of compensation with a view to ensuring that the actual value contained in the land is replaced in the hands of the owner by an equivalent amount of money. The value must therefore be the value to the owner which the land possessed to him in its condition at the date of resumption. That value was necessarily affected by all the advantages which the land possessed and these might be a matter of future or even contingent enjoyment. Future advantages or potentialities must not be excluded. At the same time the value of these things must be assessed according to the condition of the land as it stood at the time of resumption: "it is the present value alone of such advantages that falls to be determined": Cedars Rapids Manufacturing & Power Co. v. Lacoste (1914) AC 569, at p 576. You must not notionally bring what is only potential into actual being and value it as if it existed. 269. In the case of the land in question no steps had been taken for sub-division. It was necessary to survey it, to prepare plans for sub-division, to obtain the consent of the local authority, to make streets or roads and then to place it upon the market. As the land stood it was incapable of sale in sub-division and it was necessary to make improvements or alterations in its physical condition before the sub-divisional prices could be obtained. In those circumstances it could not be sold in sub-division at the time of resumption. It was not therefore possible to ascribe to the owner possession of the present value of its sub-divisional potentialities on the footing that all you should do is to estimate what he would gain if he sub-divided the land at a future date and reduced the result to its then present value. This means too that the conclusion is clearly right which the learned judges of the Supreme Court expressed in the passage already quoted from their judgment, viz.: "... the only sale that could be considered is a sale of the land as it was at the date of resumption, that is un-subdivided, but having the clear potentiality that it was fit for subdivision" (1955) 55 SR (NSW), at p 322; 72 WN, at p 203 . [45] Applying that reasoning in the present circumstances, it is clear that, as at the date of acquisition, the Company had an un-realised potentiality for the digitisation of signs along Qantas Drive but did not have, and cannot be assumed to have had, an entitlement to install such digitised signs – let alone any entitlement to compensation for such hypothetical signs based on an assumption that those signs (of whatever number) had been installed and were operational as at the date of acquisition. [46] Although it could be expected, for reasons later discussed, that the Company was likely to be granted development consent from the Council for two signs, it had not lodged applications to the Council for consent for any signs. However, this likelihood of Council approval for the digitisation of two signs would be an element which, for the purposes of s 56(1)(a), the hypothetical purchaser would have regard as part of the potentialities for the signs forming part of the acquired lease. [47] It is to be observed that this approach of acknowledging a potentiality rather than some hypothetical actuality also disposes of the difficulty of contemplating how, if the Company was entitled to compensation on the basis advanced by Mr Hemmings, the hypothetical costs associated with such hypothetical digitisation would have been brought to account. … [49] As a consequence, for the derivation of market value of a hypothetical sale as required by s 56(1)(a) of the [Act], the Company is only entitled to direct compensation for the lost opportunity of digitisation of signs along Qantas Drive and, for the hypothetical transaction, that is a factor which would be taken into account as part of the hypothetical transaction negotiations. [50] As a result of the foregoing, it necessarily follows that the claim by the Company for compensation for notionally digitised signs as at the acquisition date must be rejected. 1. This reasoning is consistent with this Court's subsequent decision in Drivas CA and does not manifest error. 2. In the Drivas proceedings, the owners of land had obtained development consent in relation to a large building project on the land, and had been in the process of seeking an additional consent. They came to suspect that the land might be compulsorily acquired by Sydney Metro for the Sydney Metro West project, so made a decision to slow the planning and development work. They subsequently decided to cease that work when their suspicions firmed up. Duggan J allowed compensation for a putative increase in market value as though planning and development steps that would have been undertaken by the claimant by the acquisition date but for learning of the proposed acquisition had in fact been undertaken, and did so without setting off the cost of having taken those steps. 3. This Court held that the statutory disregard in s 56(1)(a) involves a causation test, but not one that was necessarily satisfied only by establishing "but for" causation. The owners' decisions to slow down then abandon the development plans were "independent decisions of the owners, in a freely chosen (if entirely rational) response to the possibility that their land would be acquired" (at [40]). The Court construed the causation requirement in s 56(1)(a) as follows (see also Coffs Harbour City Council v Noubia Pty Ltd [2024] NSWCA 19 at [56]-[58] and [76]-[88]): [88] … An increase or decrease in value caused only by choices made by an owner prior to the date of acquisition in relation to the land, being choices made because of the possibility or certainty of the land being acquired, are not the types of effects on value which can be regarded as having been caused by the actual or proposed carrying out of the public purpose for which the relevant authority is acquiring the land. Section 56(1)(a) does not require that the land be valued on a hypothetical basis as if such choices had not been made. … [89] … In general, it is the fact of possible acquisition which is of concern to the owner, not the actual or proposed carrying out of the public purpose itself. That does not mean that the likelihood of a rezoning or development consent being obtained by the date of acquisition but for the actual or proposed carrying out of the public purpose is necessarily to be ignored, even though doing so may have involved taking account of steps that would have been taken by the owner. That is so because a step in the causal analysis in such cases may be that any application for rezoning or for consent would likely have been refused because of the public purpose. Thus the public purpose itself in such a case has causal significance in the analysis beyond steps the owner would or would not have taken because of the proposed acquisition. 1. The Court had earlier explained: [38] … It is the acquiring authority which is carrying out, or will carry out, that public purpose. The first of those possibilities arises where the authority is already carrying out the public purpose when the land is acquired. That was the case here: the public purpose was Sydney Metro's undertaking of the Sydney Metro West project, which extended well beyond the respondents' land and had already commenced. In other cases the authority will only commence carrying out the public purpose at some time after the land in question has been acquired. Either way, attention is directed to the effect that the authority's actions in carrying out the public purpose involving the land (now or in the future) has had on the value of the land as at the date of acquisition. [39] Thus the causal question needs to be directed to the effects on the value of the land of the carrying out or proposal to carry out the public purpose, not to the effects of the proposed acquisition of the particular land. That focus on what has been caused by the actual or proposed carrying out of the public purpose stands in contrast to losses attributable to disturbance, which involve costs or fees of various kinds incurred in connection with the acquisition … 1. This case is relevantly indistinguishable from Drivas. Here, as in that case, the claimant was asserting that the market value of its interest in land should be assessed on the basis that development which had not been undertaken as at the date of acquisition had been undertaken. The only material factual difference is that in Drivas the claimant was more advanced with its development plans: it had obtained one significant development consent when it ceased its development work, where here no development consents had yet been obtained. That the project was even less developed does not provide the appellant here with a stronger claim to apply the statutory disregard. 2. This Court held in Drivas CA that the statutory disregard in s 56(1)(a) does not require that market value be assessed by disregarding any increase or decrease in value of the claimant's interest in land from development steps not taken by the claimant because they suspected or learned that the land was to be compulsorily acquired. To put that proposition affirmatively, by eliminating the double negative, market value is not required to be assessed as though such development steps had been taken. Section 56(1)(a) reflects "a policy to require a disregard only of that increase or decrease … in value for which the resuming authority is responsible": Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259 at [54]. The High Court held in Walker that it does not require disregarding of changes in value caused by decisions of another governmental entity, not acting in pursuit of the resuming authority's actual or proposed public purpose. This Court in Drivas CA held that it does not require the Court to disregard changes in value of the kind at issue for which the claimant is responsible, even where the claimant is acting in rational response to the proposed acquisition of the authority. The fact that "but for" causation is made out in such a case does not suffice to establish the necessary causal link for the purposes of s 56(1)(a) of the Act. 3. In such cases, consistently with the statement in Mosca at [15], "the land must be valued at the relevant date in its existing condition with all its potentialities as potentialities". If the relevant public purpose did not exist at the date of acquisition then a willing but not anxious buyer would have taken all the potentialities of the land, and the highest and best potential use of the land, into account when purchasing it. The potential for development consent to have been obtained to achieve the highest and best use of the land, or the potential for the land to be rezoned or such like, are amongst the matters that a market purchaser would take into account in assessing how much to pay: note Walker at [51]. But it is the land as it is on the date of acquisition which is valued in such cases, not the land as it would have been if development had been undertaken which was not pursued because of the proposed compulsory acquisition. 4. The gravamen of the appellant's argument on appeal had two linked strands. First, it sought to characterise its decision not to pursue the development consent for the two digitised signs as caused by the public purpose and not the proposed acquisition, such as to fall within what was said at [89] of Drivas CA. Secondly, it said that this characterisation was established by the primary judge's alternative findings in relation to digitisation of two signs. The argument is unpersuasive. 5. Drivas CA at [89] indicates that it is possible that in some cases the compensation payable might be assessed on the basis that a rezoning or development consent would have been obtained by the date of acquisition, thus reducing uncertainty as to the development potential of the land and presumptively increasing its potential market value. It might be that such practical certainty would in any event have been factored in by an informed market purchaser. The Court did not need to examine the issue in depth in Drivas CA as the issue did not arise. Nor does it arise in this case because, as will shortly be shown, the appellant's market value claim by reference to the digitised signs was not simply about the claimed certainty that development consent for six (or, on appeal, two) signs would have been obtained by the date of acquisition. Rather, the claim was put on the basis that the signs would have been digitised by that date and that the Lease should be valued accordingly. 6. Paragraph 89 of Drivas CA should not be understood as suggesting that if the claimant establishes a certainty of development consent or rezoning by the date of acquisition but for the public purpose, then the claimant has a right to compensation for undertaking works on the land that had not been done as though they had been done. To accept that proposition would be contrary to the important purposive considerations discussed in Drivas CA at [48]-[64]. Section 56(1)(a) does not provide for compensation as though such work had been done, and doing so without having to offset what it would have cost to undertake that work. Yet that is the effect of applying the statutory disregard in the manner sought. Although the appellant here was in fact prepared to offset the costs involved in its compensation claim, no persuasive argument was made as to how that operated consistently with the statutory disregard in s 56(1)(a). Market value reflects what a willing but not anxious buyer is prepared to pay a willing but not anxious seller. That buyer wishes to pay just enough to obtain the property over rival purchasers. The buyer otherwise has no interest in the sunk costs of the seller incurred in developing the property. 7. The appellant's argument that its decision not to pursue digitising the signs was caused by the public purpose and not because it learned of the likely acquisition involved the elevation of form over substance. And it was not even persuasive as to the form. 8. The claim articulated by the appellant in its amended points of claim was that "but for the Acquisition" six of its signs would have been digitised by 1 January 2020, prior to the acquisition of the signs and the Lease on 18 September 2020. The relevant decision-maker was Ms Young. She learned of the likely effect of the Sydney Gateway aspect of the WestConnex development in the period 5-9 May 2016. She sent an email on 9 May 2016 to the consultants engaged on the development application process asking them to halt all work on the airport signage project as her team was looking into the effects of the WestConnex project. Three days later she prepared a "West Connex Gateway Response Plan" which said amongst other things: Compensation/Valuation approach strategy Optimal outcome: Want to keep as many sites as possible and have as many as possible digital. Meeting with Property valuation person, Thompson Geer, and Internal team to align approach on strategy and approach for compensation (Just Terms Act). 1. In her affidavit, under a heading "Digitisation but for the acquisition", Ms Young explained: [44] If the Company had not been advised that the Acquired Signs would be compulsorily acquired in 2016, the digital strategy for the Sydney Airport precinct would have included the digitisation of [six of the 18 signs]. … [49] … But for the acquisition, I expect that [identified signs would have been developed by particular times in July and the final quarter of 2019]. 1. Thus Ms Young, having learned of the prospect of the Lease being compulsorily acquired, made the unsurprising and rational decision to down tools on proceeding with digitisation of signs affected by the proposed acquisition, and to begin planning to maximise the potential for a claim for compensation. 2. The evidence of Ms Young was confirmed by Mr Robbie Dery, Chief Commercial and Product Officer at the appellant's parent company. He gave the following evidence: I recall that oOh!Fly first learned of the proposed acquisition of the Acquired Signs by the respondent in around May 2016. Upon learning about the proposed acquisition of the Acquired Signs, oOh!Fly ceased preparing development applications for the digitisation of [the two signs] and re-assessed its strategy. I have read the affidavit of my colleague, Sarah Young … and the plans and timing set out in that affidavit accord with my general recollection of the series of events regarding the digitisation strategy that occurred from the time that oOh!Fly learned of the proposed acquisition of the Acquired Signs. 1. The appellant's closing written submissions in the Court below said: [16] It is from that moment forward – that is from 4 May 2006 [sic – 2016] – that oOh!'s digital conversion plans changed as a consequence of the proposal to carry out the public purpose. … [19] Of course, consideration of oOh!'s internal materials from 4 May 2016 onwards no longer disclose any intention to digitise any of the Qantas Drive signs. They were to be compulsorily acquired. It appeared from some of the cross-examination by the Respondent that the absence of strategy documents post May 2016 referring to the digitisation of the Qantas Drive signs might be suggested to tell against any plan by oOh! to carry out that digitisation. That submission, if made, would be rejected. It would be inconsistent with the statutory disregard. [20] Not only is it demonstrable of common sense that there are no further plans for digitisation of the Qantas Drive signs after 4 May 2016, it is also reflected in oOh!'s documents and Ms Young's evidence. 1. These submissions did not seek to draw any distinction between changing plans because of the proposed acquisition and because of the public purpose. Nor did the primary judge do so when addressing the issue. The appellant pointed in particular to the following statements by his Honour (emphasis added): [53] … For the purpose of the determination of the compensation to be paid to the Company arising from this project (on the assumption that such compensation arises), the first significant element arising concerning the digitisation of signs along Qantas Drive is how many of these signs would have been digitised but for the intervention of the public purpose. … [111] On my reading of the evidence before me regarding the Company's strategy prior to learning of the proposal to carry out the public purpose, the Company had planned to digitise two signs on Qantas Drive … [113] On the documentary material available before me, the Company only evinced an intention to reconsider the Sydney Externals Plan 3 digitisation strategy after learning of the public purpose from Mr Joseph Chan of Sydney Airport Corporation Limited on 4 May 2016 and holding discussions about it with Mr Colin Rudd of Roads and Maritime Services on 5 May 2016. … [114] On the basis of Ms Young's "West Connex Gateway Response Plan" … and her answers in cross-examination regarding the Company's strategy after learning of the public purpose, I am not satisfied that evidence post-dating early May 2016 of the Company's intent to digitise more than two signs was not affected by its knowledge of the proposed acquisition and the development of a new digitisation strategy with an eye to maximising potential compensation. 1. The two emphasised phrases at [114] illustrate that his Honour was not seeking to distinguish between what the appellant would have done but for the acquisition and but for the public purpose. He was not asked to do so. 2. It is clear from the evidence that Ms Young's decision to put a halt to digitising the signs on the Land was in response to being informed of the projected acquisition of the signs and the Lease. Thus, for example, she used language of "But for the acquisition …". 3. If Ms Young's affidavit had been prepared after Drivas CA perhaps she would have used different language and have referred to responding to the public purpose. That illustrates why this argument of the appellant involves elevating form over substance. Whatever the precise language, as this Court said in Drivas CA at [89] in general it is the fact of possible acquisition which is of concern to the claimant in such a case, not the actual or proposed carrying out of the public purpose itself. In cases such as this and Drivas the claimant had plans to develop its property, learns that the property will or may be acquired because of some public purpose, and makes a rational choice to delay or end those development plans in response. Seeking to express or characterise that choice as being a response to the public purpose and not the acquisition ignores the practical reality. It also seeks to avoid the conclusion reached in Drivas that such a free choice by the claimant in effect breaks the chain of causation for the purposes of s 56(1)(a). 4. This is a case, like Drivas CA, where the claimant sought compensation for a putative increase in market value not in fact achieved because of its own choices made prior to the date of acquisition, being choices made because of the possibility or certainty of its interest in the land being acquired. The fact that the market value did not actually increase because of that choice is not required to be disregarded by s 56(1)(a) of the Act. The land was to be valued as it was, including all its potentialities for development. 5. Ground 2 establishes no material error. Ground 2A is not made out. Ground 3: allowance for potentiality of digitisation 1. Ground 3 is put in the alternative to grounds 2 and 2A. The context of ground 3 is that the primary judge found that the appellant "had an un-realised potentiality for the digitisation of signs along Qantas Drive" (at J[45]), found that the appellant would have been likely to be granted development consent for digitisation of two signs, and said that "this likelihood … would be an element which, for the purposes of s 56(1)(a), the hypothetical purchaser would have regard[ed] as part of the potentialities for the signs forming part of the acquired lease" (at J[46]). The point was reiterated when the primary judge said that the appellant was entitled to compensation "for the lost opportunity of digitisation of signs along Qantas Drive and, for the hypothetical transaction, that is a factor which would be taken into account as part of the hypothetical transaction negotiations" (at J[49]). The appellant's complaint is that despite this acknowledgement of the appellant's entitlement to claim compensation for the potentiality of digitisation of at least two of the signs along Qantas Drive, his Honour did not end up allowing compensation for any such amount. 2. In his Honour's first judgment he directed the parties to bring in orders to give effect to his conclusions. The parties did not agree on the orders and a further brief hearing was held to resolve that dispute. The appellant took that opportunity to raise this issue. It provided a further affidavit and some calculations, and set out in written submissions an argument for how such compensation could be calculated. Those submissions set out four assumptions that the appellant had made for the purposes of the calculation. It sought to argue that these assumptions were reasonable. It acknowledged that "there is no specific evidence as to the quantum of the risk of the obtaining of consent from any of the experts". 3. The primary judge did not accept the appellant's argument. In an ex tempore judgment he said that the "binary case" presented by the appellant with respect to the signs at Qantas Drive was to choose "whether, as at the date of acquisition by the acquiring authority, there were no signs which had been digitised, or whether there were two or more signs to be regarded as having been digitised" (J2[6]). His Honour said: [10] Whilst I might understand the Applicant's sense of grievance and, without expressing any view on it, understand why the Applicant now seeks to go further (than the matters that were defined by agreement between the parties as those which I should determine), and that I now embark on an exercise which, on the evidence of material provided by Dr Ferrier in Exhibit 3 in the proceedings this morning (being a letter of 16 October 2023 of – not said in any pejorative sense, I expressly note – some nine and a half pages in length), and a response letter from the Applicant's forensic accountant, Mr Halligan, dated 18 October 2023 (of some nine pages in length) which letters between them make it clear that, contrary to the submission that is advanced by Ms McKelvey this morning, it is not a simple proposition for determination (should I be minded to entertain the approach now advanced for the Applicant). It would necessitate a further hearing and, in my assessment of the matters that are raised by Dr Ferrier as responded to by Mr Halligan and set out in tabular form on pages 7 and 8 of Mr Halligan's letter, there would also be the necessity for extensive further evidence to enable me to do so. 1. Ground 3 asserts that: the trial judge erred in his Honour's role as judicial valuer, facilitated by the liberty provided in s 38(2) of the LEC Act and the requirements of s 39(4) of the LEC Act, by not allowing any compensation under s 55(a) … for the likelihood of the two signs being digitised at or around the date of acquisition in circumstances where his Honour otherwise made a contingent finding that two signs would have been digitised at the date of acquisition absent the proposal to carry out the public purpose. 1. Section 38(2) provides that in proceedings in the Court's Class 1-3 jurisdiction it "is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate and as the proper consideration of the matters before the Court permits". Section 39(4) provides that in such matters "the Court shall have regard to this or any other relevant Act, any instrument made under any such Act, the circumstances of the case and the public interest". 2. Mr Hemmings was asked by the Court how this ground articulated a challenge to decision on a question of law, given that it was expressed as a challenge to a conclusion that no relevant compensation was to be included. He responded by seeking to characterise the ground as being that "there was a constructive failure to exercise jurisdiction as the judicial valuer, having concluded that we're entitled to compensation for two signs". 3. These arguments are without merit. As TfNSW submitted, the conventional way to seek to account for the value of the development potential of the Lease was by reference to how the market would have viewed the potentialities of the site as at the date of acquisition. Here the date of acquisition was, in the terms of Mr Hutley, "in the deep dark days of COVID", which may well have created significant uncertainties in the relevant market. Whether because of that fact or otherwise, the appellant eschewed the conventional approach to valuing the land's potentiality. It opted instead to propose the kind of approach put and accepted in Drivas LEC. 4. Mr Hemmings accepted that valuing development potentiality was "simply not one of the matters that the parties asked [the judge] to determine". However, he submitted: we didn't invite his Honour to make the finding that there was an entitlement to two signs being digitised in the future. We didn't take that approach, but his Honour made that finding. 1. There is a confusion of ideas in the appellant's complaint. His Honour's finding was that but for the Sydney Gateway project two of the signs would have been digitised by the date of acquisition. That was an answer to the counterfactual question of what would have happened in fact by the date of acquisition but for the Sydney Gateway project. His Honour was not reaching a conclusion on the development potential of the site in terms of what signs might have been digitised and how the market would have viewed that question. It is not apparent why the development potential would not have extended beyond the two signs his Honour found would have been digitised. The submission mixes up the issue of the judge's counterfactual finding of what the appellant would have done in digitising its signs by the date of acquisition but for the Sydney Gateway project with the issue of how the market would have viewed the development potential of the site as at that date. 2. That confusion leads to the core difficulty with the appellant's complaint. Assessing the development potential of the signs on the site was a complex factual issue. The appellant's own submissions to this Court acknowledged that the following factual questions arose: the time delay to obtain any approvals necessary; the time delay to construct the digitised signs; the risk of achieving development consent or not; and the date from which the development approval application process would commence. These were all contestable matters. His Honour's conclusion that addressing these matters would "necessitate a further hearing" with "the necessity for extensive further evidence" was neither surprising nor unreasonable (J2[10]). The appellant had itself sought to rely on further evidence in the form of two letters from experts. His Honour referred to the appellant having made submissions about ss 38 and 39 of the LEC Act, but said "I am satisfied that it would be entirely inappropriate for me to permit this matter to continue" (J2[12]). 3. It is not to the point to invoke authority to the effect that a trial judge is not obliged to accept or reject the evidence of one or other of the parties' valuers but may reach its own view as judicial valuer: see eg Coffs Harbour City Council v Noubia Pty Limited [2022] NSWCA 32 at [94]. This was not a case of settling on some intermediate position between the cases of the two parties. The appellant was seeking to run a new type of case which it had chosen not to run at trial when the Court was seeking to finalise orders. 4. There was no constructive failure by his Honour to exercise jurisdiction. In substance the appellant was applying to reopen its case. Whether or not to allow that to occur was a discretionary judgment: VAW (Kurri Kurri) Pty Ltd v Scientific Committee [2003] NSWCA 297; (2003) 58 NSWLR 631 at [142]-[145]. No House v The King error – nor, indeed, any error – has been shown in his Honour's decision to decline to allow that to occur. 5. Ground 3 is not made out. Ground 5: inadequate reasons with respect to "tax gross-up" 1. Grounds 4 and 5 were as follows: [4] The trial judge erred in rejecting at [388] of the judgment the "tax gross up" that was included in the discounted cash flow calculation used to determine compensation under s 55(a) of the Just Terms Act. [5] In the alternative to ground 4, in rejecting the claim for compensation for the "tax gross up" the trial judge failed to provide adequate reasons, or any reasons at all, for rejecting the "tax gross up" claim under s 57 or 59(1)(f) of the Just Terms Act. 1. The appellant's position on these grounds was curious. Its written submissions on ground 4 substantially replicated the written submissions it had put to the primary judge below on the tax gross-up issue. Then in oral argument the appellant indicated that it was not pressing ground 4. That left it only with a complaint about the adequacy of reasons directed to the purported rejection by the primary judge of its purported tax gross-up claim made under ss 57 or 59(1)(f) of the Act. Little attempt was made by the appellant to show why the claimed absence of reasons was material in the sense of there being at the least a realistic possibility of a different result if his Honour had properly grappled with these issues. The appellant's claim raised issues of law which were not developed at any length in this Court. Indeed, as regards s 57 the appellant effectively abandoned any complaint by accepting in oral submissions that the argument about special value was "difficult". 2. In any event, ground 5 is without merit. It is unsurprising that his Honour did not separately address an argument that the tax gross-up could be claimed under s 59(1)(f) of the Act because no such issue for determination had been raised before him. The first sentence of the appellant's closing written submissions in the Court below on this issue said: As part of the applicant's claims in relation to market value and special value relating to the Halo Effect, it contends that allowances for tax should be included in the relevant DCF calculations and then a gross up added to account for the results of being discounted at a post-tax discount rate. 1. Thus the tax gross-up was explained to be part of the claims for compensation for market value (under s 55(a)) and special value (under s 55(b)). The sentence contained a footnote referring to parts of the appellant's amended points of claim. Those references confirm that understanding. A tax gross-up was claimed as part of market value on each of the appellant's two scenarios. And a tax gross-up was also claimed as part of the special value claim for what the appellant labelled "the Digital Advantage" and "the Halo Effect" of its signs. The primary judge rejected those two special value claims, and that rejection has not been challenged. Thus any issue relating to a claim for a tax gross-up based upon special value falls away, a point that the primary judge made at J[389]. 2. The remaining tax gross-up claim was put below in terms of the appellant's entitlement to compensation for market value. It was not articulated in the amended points of claim as a claim for disturbance falling within ss 55(d) and 59(1)(f). At the end of its amended points of claim the appellant had set out a useful summary table of the amounts of compensation it claimed under each head. Under a heading of "Section 55(d) – Disturbance" the table set out an amount claimed for legal costs under s 59(1)(a) and an amount claimed for valuation fees under s 59(1)(b). It then had a row for s 59(1)(f), referring to "Other financial costs", against which was written "NIL". The appellant could scarcely have been clearer that it was making no claim under s 59(1)(f). The only special value claim identified in the table related to the Digital Advantage and the Halo Effect. 3. The appellant's complaint to this Court was as follows: having rejected the "tax gross up" being included in any compensation for market value, the Court was obliged to consider the appellant's alternative claims for the sum equivalent to the "tax gross up" under s 57 (special value) and s 59(1)(f) (disturbance). The trial judge records the submissions in respect of these alternative claims at [377] to [379] of the Judgement, however, gives no reasons for the rejection of the "tax gross up" by reference to the language of those sections. 1. The primary judge cannot be criticised for failing to give reasons with respect to a claim not made. The submissions his Honour referred to at J[377]-[379] summarised parts of the appellant's closing written submissions. Those paragraphs of the judgment, and the equivalent parts of the closing written submissions, did refer to first instance case law dealing with claims for a tax gross-up put in terms of special value or disturbance under s 59(1)(f). The appellant argued that those cases were wrong. In the context of the amended points of claim, along with the first sentence of that section of the appellant's closing written submissions (quoted above at [91]), those submissions would naturally be understood as part of an argument that such case law should not preclude the claim now being pursued by the appellant. And that was a claim put in terms of market value as regards the two scenarios and in terms of special value as regards the claimed Digital Advantage and Halo Effect. 2. Ground 5 is not made out. Orders 1. I propose the following orders: 1. Appeal dismissed. 2. Appellant to pay the respondent's costs of the appeal. 1. ADAMSON JA: I agree with Kirk JA. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 August 2024