New South Wales Court of Appeal CITATION: RTA v Collex Pty Limited [2009] NSWCA 101 HEARING DATE(S): 10 April 2008, 11 April 2008 JUDGMENT DATE: 7 May 2009 JUDGMENT OF: Beazley JA at 1; Hodgson JA at 156; Tobias JA at 1 DECISION: Appeal dismissed with costs CATCHWORDS: REAL PROPERTY – Compulsory acquisition of land – Compensation – Assessment of particular land and interests – Mines and quarries – Airspace – Whether terms of a Deed giving respondent a right to airspace created by quarrying activities on the acquired land for landfill operations in exchange for an airspace creation payment should have been taken into account for the purposes of assessing compensation – Whether respondent suffered loss of airspace – Whether compensation should be reduced on the basis that respondent was able to recover loss from third party under the Deed – Whether respondent's obligation under the Deed to make airspace creation payments was relevant to assessment of compensation – Injurious affection of adjoining property – Before and after method of valuation – Whether compensation to respondent ought to have been reduced due to payment made by appellant to third party – Whether third party had a compensable interest in land within the meaning of s 56(2) of the Land Acquisition (Just Terms Compensation) Act 1991 – Comparable sales and discounted cash flow methodologies – Expert evidence should not outweigh commonsense analysis - APPEAL – Right of Appeal – When appeal lies – Error of law – Failure to give reasons for decision – Whether reasons adequate Environmental Planning & Assessment Act 1979 LEGISLATION CITED: Land Acquisition (Just Terms Compensation) Act 1991 Land and Environment Court Act 1979 Roads Act 1993 Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430 BP Refinery (Westernport) Pty Ltd v Hastings Shire (1977) 180 CLR 266 Collex Pty Limited v Roads and Traffic Authority of New South Wales [2006] NSWLEC 579 Collex Pty Ltd v Roads and Traffic Authority of New South Wales [2005] NSWLEC 601 CASES CITED: Hornsby Council v Roads and Traffic Authority of New South Wales (1997) 41 NSWLR 151 Leichhardt Municipal Council v Roads and Traffic Authority of New South Wales [2006] NSWCA 353; (2006)149 LGERA 439 Roads and Traffic Authority of New South Wales v Muir Properties Pty Ltd [2005] NSWCA 460; (2005) 143 LGERA 192 Roads and Traffic Authority of New South Wales v Damjanovic [2006] NSWCA 166; (2006) 146 LGERA 403 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259 PARTIES: Roads and Traffic Authority of New South Wales Collex Pty Limited FILE NUMBER(S): CA 40802/06 COUNSEL: A: J Griffiths SC / R Lancaster R: J Webster SC / I Hemmings SOLICITORS: A: Corrs chambers Westgarth, Sydney R: Veolia Environmental Services (Australia) Pty Ltd, Pyrmont LOWER COURT JURISDICTION: Land & Environment Court LOWER COURT FILE NUMBER(S): LEC 31775/04 LOWER COURT JUDICIAL OFFICER: Talbot ACJ LOWER COURT DATE OF DECISION: 19 September 2006 LOWER COURT MEDIUM NEUTRAL CITATION: Collex Pty Limited v Roads and Traffic Authority of New South Wales [2006] NSWLEC 579 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40802/06 LEC 31175/04 BEAZLEY JA HODGSON JA TOBIAS JA Thursday 7 May 2009 ROADS & TRAFFIC AUTHORITY OF NEW SOUTH WALES V COLLEX PTY LIMITED Judgment 1 BEAZLEY & TOBIAS JJA: On 28 May 2004, the Roads & Traffic Authority of New South Wales (the RTA) compulsorily acquired an area of 4.512 ha of land at Wallgrove Road, Horsley Park being Lot 9 in DP 1059698 (Lot 9) owned by Collex Pty Limited (Collex) for the purposes of the Roads Act 1993, specifically for the construction of the M7 West Link. Expressly excluded from the compulsory acquisition of Lot 9 was a profit à prendre of Brickworks Ltd (Brickworks) over that land created by dealing 8769304 (the Brickworks profit à prendre). 2 The Valuer-General determined the amount of compensation payable to Collex in respect of the compulsory acquisition to be $747,000, comprising $722,000 being the "market value" of Lot 9 pursuant to s 55(a) of the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act) and an amount of $25,000 for "disturbance" pursuant to s 55(d) of that Act. 3 Collex lodged an objection in the Land and Environment Court pursuant to s 66 of the Just Terms Act to the amount of compensation assessed by the Valuer-General. The objection was heard by Talbot J: Collex Pty Limited v Roads and Traffic Authority of New South Wales [2006] NSWLEC 579. His Honour determined (at [114]) that the compensation to which Collex was entitled pursuant to ss 54 and 55(a) and (f) of the Just Terms Act was: Present [market] value of the land acquired assuming completion of the landfill: $1,997,798.00 Value of lost airspace: $4,887,000.00 Total: $6,884,798.00 together with compensation for disturbance pursuant to ss 55(d) and 59 of the Act as follows: a. Legal costs (including GST): $27,346.50 b. Valuation Fees: $81,562.10 c. Financial costs: $18,957.00 The total compensation thus awarded was $7,012,663.60. 4 The RTA appeals only against his Honour's determination of the compensation payable in respect of the value of the lost airspace. 5 The application in the Land and Environment Court was in Class 3 of the Court's jurisdiction from which an appeal to this Court lies only on a question of law: see s 57(1) of the Land and Environment Court Act 1979. The principal issue on the appeal was whether the terms of a Deed of Licence and Operation dated 2 July 2001 (the Deed) between Collex and Austral Brick Company Pty Limited (Austral), whereby Austral had the right to carry out quarry operations on a large area of land of which Lot 9 formed part and the obligation to provide Collex with airspace for landfill, should have been taken into account for the purposes of assessing the compensation payable for airspace lost as a result of the compulsory acquisition. 6 There were a number of other issues raised on the appeal which, in large measure, devolved from the principal issue as to the relevance of the Deed to the assessment of compensation. In summary those issues were: whether Collex had in fact suffered a loss of airspace as a result of the acquisition; whether, having regard to the terms of the Deed, Austral had an "interest" in Lot 9; whether a payment that the RTA had made to Austral for loss of royalties otherwise payable by Collex for the lost airspace should have been taken into account by way of deduction in the assessment of the compensation payable to Collex; and whether his Honour had failed to give reasons for his adoption of the revised contours of Collex's retained land advanced by Collex rather than those advanced by the RTA. 7 It is necessary to understand the factual background to the proceedings and the reasons for his Honour's assessment of compensation in order to place the issues raised on the appeal in their proper context. Background 8 At the date of acquisition, Collex was the registered proprietor of Lot 1 DP 1052225 (Lot 1). It had a frontage to Wallgrove Road, Eastern Creek, in the local government area of Fairfield City Council (the Council) and an area of 35.22 ha. As we have said, Lot 9 (which was part of Lot 1) had an area of 4.512 ha. The residue land of 30.71 ha retained by Collex became Lot 8 in DP 1059698 (Lot 8). The whole of Lot 1 at the date of acquisition was zoned Regional Parkland under Sydney Regional Environmental Plan No 31 (SREP 31). Lots 8 and 9 retained that zoning. Prior to that date, Lot 1 was zoned Non Urban 1(a) under the Blacktown City Planning Ordinance. 9 Collex purchased Lot 1 from Austral by contract dated 6 May 2002 (the Land Sale Agreement). Lot 1 was part of a larger holding of land, originally owned by Brickworks, a company related to Austral. Lot 1 subsequently came into the ownership of Austral. On 23 June 1961, Blacktown City Council granted development consent to Brickworks for brick manufacturing including the extraction of clay and shale from an area of land which included Lot 1 (the 1961 consent). It also included a condition that required any excavation to be set back 30.48 metres from Wallgrove Road. Lot 1 was subsequently included within the area of the Council. 10 On 8 December 1998, the Council granted development consent (the 1998 consent) to Austral to use a portion of Lot 1 for solid waste landfill for the purpose of remediating the area from which clay and shale had been extracted. The development consent was relevantly subject to the following conditions: "9. Access to and egress from the landfill shall be via the existing access/egress point to Wallgrove Road. Separate access will require separate consent of Council and the Roads and Traffic Authority. 32. A Final Landfill Environmental Management Plan (LEMP) must be prepared and submitted to Council for concurrence prior to commencement of operation … 33. The landfill shall operate as a Solid Waste Landfill – Class 2." 11 The approved LEMP adopted a plan defining the final landform for the site that permitted landfill above the existing ground level up to a level of RL80 Australian Height Datum (AHD). The final landform was designed to accommodate a landscaped open space. However, the Environmental Impact Statement (EIS), with which the LEMP had to comply, permitted fill to a maximum height of RL85AHD. 12 The 1998 consent specified an annual acceptance rate of landfill of 300,000 tonnes per annum of Class 2 solid waste. Pursuant to s 96 of the Environmental Planning & Assessment Act 1979 (the EPA Act) the consent was modified on 18 December 2003 so as to permit an annual acceptance rate of 430,000 tonnes per annum. The RTA's planner witness stated that the effect of this modification was not to increase the overall capacity of the facility but to change the rate at which the land could be filled. 13 Prior to Collex's purchase of Lot 1, Collex and Austral executed the Deed pursuant to which Austral was entitled to quarry Lot 1. The voids or airspace so created by the quarrying activities were then available to Collex for its landfill operations. Although the Deed was entered into prior to Collex's purchase of Lot 1, by cl 3.2 the Land Sale Agreement and the Deed were conditional on and interdependent with the operation of each other. The Deed provided in cl 2.8 that the Land Sale Agreement was to be exchanged within three months of the date of the Deed. It appears that there was some delay in entering into the Land Sale Agreement but neither party exercised its right under cl 2.8 to terminate the Deed as a consequence of that delay. 14 Under cl 7.1 of the Deed, Collex agreed to pay a royalty to Austral for creation of the airspace referred to as the Airspace Creation Payment. Provision was made in the Deed for the adjustment of the Airspace Creation Payment, as well as the adjustment of the purchase price of Lot 1, according to the volume of airspace created by Austral on Lot 1 over the life of the landfill operation. 15 As at the date of acquisition, Lot 9 was in its natural state. That is, it was vacant land with no improvements and as it had not been quarried, no airspace had been created thereon. All quarrying and landfill operations up until that point had taken place on Lot 8, being the retained or residue land, in accordance with the approved plan of excavation. 16 On 23 June 2004 the RTA entered into a Contract for the Sale of Land with Austral (the 2004 Contract) to acquire not only Lot 10 in DP 1059698 but also the Brickworks profit à prendre over Lot 9 (which had been excluded from the compulsory acquisition of Lot 9) as well as Austral's "equitable interest in Lot 9 … by virtue of the Deed … including airspace payment rights" payable under the Deed. 17 On 16 June 2004 the RTA wrote to Austral with respect to compensation for the acquisition of each of those interests. The letter formalised the RTA's offer in the following terms: "… the acquisition by the RTA involves three aspects:- A. The acquisition of the fee simple interest in possession for Lot 10 in Deposited Plan 1059698 from Austral Brick Company Pty Limited; B. The acquisition of the compensable interest that Brickworks Limited has in Lot 9 Deposited Plan 1059698 by virtue of the Profit à Prendre agreement with Collex Pty Limited being land previously owned by Collex Pty Limited and compulsorily acquired by the RTA on 28 May 2004. The interest under the Profit à Prendre agreement was excluded from the compulsory acquisition. See copy of gazettal notice attached. It is understood that Austral Bricks Pty Limited is authorised to deal on behalf of Brickworks Limited. C. The acquisition of Austral Brick Company Pty Limited's equitable interest in Lot 9 in Deposited Plan 1059698, by virtue of the Deed of Licence and Operation Agreement between the Austral Brick Company Pty Limited and Collex Pty Limited, which was partially extinguished by the compulsory acquisition. It is proposed in this letter to simply state the agreed compensation as one figure, accommodating all three interests which can be broken up later if required for legal documentation. … Accordingly, the RTA is prepared to proceed with the acquisition by contract and transfer of all of your company's compensable interests in Lots 9 and 10 in Deposited Plan 1059698, as identified above, on the following terms and conditions:- (a) Purchase price of $9,790,000 in full satisfaction of all claims arising from the acquisition." The purchase price of $9,790,000 comprised a composite market value of all three interests in the amount of $8.9 million plus GST of $890,000. 18 On the same day Austral accepted the RTA's offer in the following terms: "● The acquisition of the fee simple interest in possession for Lot 10 in DP 1059698 ● The acquisition of the compensable interest that Brickworks Limited has in Lot 9 DP 1059698 under the Profit à Prendre ● The acquisition of the Austral Brick Company's equitable interest in Lot 9 in DP 1059698 by virtue of the Deed of Licence and Operation agreement between Austral and Collex Pty Ltd including airspace payment rights but excluding Austral's interest in the residual value of Lot 9. The fee simple interest and Austral's interest in the residual value of Lot 9 do not form part of this agreement with RTA and recovery of the residual interest will be sought from Collex Pty Ltd under the Deed of Licence and Operation." The reference to the profit à prendre in the second dot point is to that of Brickworks created by dealing 8769304. The reference in the third dot point to " Austral's interest in the residual value of Lot 9 " is a reference to Austral's right under cl 14.2 of the Deed to be paid 66 per cent of the net sale proceeds should Collex dispose of Lot 1 or any part thereof. The Court was informed that Collex had paid to Austral 66 per cent of the compensation it had been paid for the market value of Lot 9. 19 A question arose at a preliminary stage of the proceedings as to whether the Deed should be taken into account in the determination of compensation owing to Collex. That matter was determined as a separate question: Collex Pty Ltd v Roads and Traffic Authority of New South Wales [2005] NSWLEC 601. The primary judge held that the Deed should be taken into account. There has been no appeal by Collex from that determination. 20 It became necessary during the course of the hearing of the separate question for that question to be reformulated into a series of questions. We will set out those questions shortly. However, as the determination of those questions required a consideration of the effect of the Deed, it is convenient to first go to its relevant provisions. The relevant provisions of the Deed 21 Pursuant to the Deed, Austral and Collex agreed to the licensing and development of Lot 1 (referred to in the Deed as "the Land") as a Landfill. In addition Austral, as the owner of Lot 1, agreed in cl 2.8 to negotiate and exchange a Land Sale Agreement "in accordance with the terms of this Deed" with respect to Lot 1. Recital A of the Deed recited that Austral had agreed to sell the Land to Collex on the terms to be set out in the Land Sale Agreement including payment by Collex to Austral of (1), the sum of $3.6 million "if and when Collex obtain[ed] all approvals for the development, operation of a solid waste landfill on the Land" and, (2), the further sum of $1.15 million "on the Commencement Date" which sum was "attributed by Collex to the value of the existing airspace on the Land". The volume of the existing airspace so referred to was not disclosed. These two sums totalled $4.75 million. The "Commencement Date" was defined in the Deed in terms not presently relevant. 22 Notwithstanding the foregoing, Austral and Collex entered into the Land Sale Agreement for Lot 1 on 6 May 2002 for a purchase price of $7.2 million rather than $4.75 million: see [9] above. 23 Recital B of the Deed recorded the agreement between the parties as to the "licensing and development of [Lot 1] as a Landfill", including the payment by Collex to Austral of the following: "(1) payments for making available airspace including a one-off payment of $2.5 million on the Commencement Date and a minimum payment of $1 million Indexed per year; and (2) 66% of the net proceeds of any disposal of the Land in the circumstances provided in clause 14.2." (Blue 55) 24 Recital E of the Deed was in the following terms: "Collex has agreed to grant Austral a licence from the Commencement Date to enter the Land and: E.1. do all things necessary to comply with its quarrying and other obligations under this Deed; and E.2. mine for and remove from the Land clay, shale and other brickmaking materials, on the terms set out in this Deed." (Blue 56) 25 "Airspace for Landfilling" was defined to mean "void permitted to be used for Landfill operations in accordance with all applicable Licences". "Dispose of" in respect of an asset was defined to mean "… dispose of, or otherwise create or dispose of, or suffer to be created or disposed of any interest in, the whole or any part of the asset whether absolutely, by way of security or in any other way including by release or surrender, but does not include the granting of any security to a bank or financial institution in the ordinary course of business." (emphasis added) (Blue book 58-59) " Land " was defined to mean " Lot 1 (being 34.73 hectares) " and " Landfill " was defined to mean " a Solid Waste landfill to be operated in the voids on the Land in accordance with all applicable Licences ". 26 Clause 2.9 of the Deed provided for an "Airspace Creation Initial Payment" whereby Collex was required to pay to Austral on the Commencement Date a non-refundable payment of $2.45 million "as an advance on account of Airspace for Landfill to be created" under the Deed. It is not clear whether the non-refundable payment of $2.45 million under this clause was in addition to the payment of $2.5 million referred to in Recital B(1) as being a "one-off" payment for "making available airspace". Only cl 2.9, being an operative provision of the Deed, created an obligation to pay $2.45 million and it may be that that was intended to reflect Recital B(1) with a small reduction in the amount from $2.5 million to $2.45 million as a "one-off" non-refundable advance payment on account of airspace "to be created". In addition Recital B(1) contemplated a further minimum payment of $1 million per year indexed. 27 The only additional payment at the Commencement Date was the $1.45 million referred to in Recital A(2) as being attributable to the value of existing, as distinct from future, airspace, that is, airspace which had already been created by quarrying but was unfilled as at that date. This would seem to make sense as according to Recital A the sale price of Lot 1 included (1) $3.6 million if and when Collex obtained all approvals to operate a solid waste landfill on Lot 1; and (2) the $1.15 million referred to at [21] above. It is understandable that the value of the land being sold would include both those elements, particularly as the value of the available but unused airspace would constitute part of the market value of Lot 1 in its then condition. 28 However, we interpolate that the foregoing analysis is not consistent with the purchase price of $7.2 million provided in the Land Sale Agreement which was apportioned under cl 46 thereof as follows: "(a) $4,750,000 as to the land; (b) $2,450,000 as to the airspace already existing on the land created by previous quarrying activity (which amount is identical with the amount of $2,450,000 payable under clause 2.9 of the Deed …" 29 The inconsistencies appear to be the following. First, Recital A(2) of the Deed refers to only $1.15 million as attributable to the value of existing airspace whereas cl 46(b) of the Land Sale Agreement refers to $2.45 million as attributable to such airspace. Second, whereas cl 46(b) refers to the $2.45 million as being identical with the amount payable under cl 2.9 of the Deed, the latter provision refers to the $2.45 million as an advance on account of airspace for landfill "to be created" under the Deed – not, as does cl 46(b), to airspace "already existing" on the land created by previous quarrying activity. 30 On the other hand, although Recital A(2) refers to the payment of $1.15 million as attributable to the value of existing airspace, there is no operative provision of the Deed which mandates its payment. It may be that the reason for this is that Recital A is reciting the payments to be made under the Land Sale Agreement and not the Deed. It seems to us that the figures changed between 2 July 2001, being the date of the Deed, and 6 May 2002, being the date of the Land Sale Agreement. The effect of those changes was that the amount of $3.6 million referred to in Recital A(1) of the Deed became the $4.75 million referred to in cl 46(a) of the Land Sale Agreement and the amount of $1.15 million referred to in Recital A(2) of the Deed became the $2.45 million referred to in cl 46(b) of the Land Sale Agreement. 31 Further, the payment of the $2.45 million referred to in cl 2.9 of the Deed as being an advance on account of airspace "to be created" under the Deed seems to have become, some 10 months later, $2.45 million payable as part of the purchase price of Lot 1 for airspace "already created". It would not be unreasonable to assume that in that 10 months further airspace had been created by Austral's (or Brickworks') quarrying activities which the parties may have valued at $1.3 million being the difference between the $2.45 million referred to in cl 46(b) of the Land Sale Agreement and the $1.15 million referred to in Recital A(2) of the Deed. 32 However, the above analysis does not account for the $2.5 million referred to in Recital B(1) as a one-off payment on the Commencement Date for making available airspace – meaning thereby, presumably, future airspace. There is no operative provision of the Deed that created an obligation on Collex to pay that amount unless it was intended that it be reflected in cl 2.9 albeit in a slightly reduced amount. However, senior counsel for Collex stated from the Bar table that it had been paid in addition to the purchase price of $7.2 million payable under the Land Sale Agreement. 33 In summary, therefore, the recitals to the Deed contemplated payments under the Land Sale Agreement of $3.6 million and $1.15 million (on different dates), a total of $4.75 million. That is the same amount as is referred to in cl 46(a) of the Land Sale Agreement. This may be a coincidence. Recital B(1) contemplated a one-off payment of $2.5 million on the Commencement Date. Clause 2.9 of the Deed reduced that, perhaps inadvertently, to $2.45 million. That amount was, according to cl 46(b) of the Land Sale Agreement, part of the purchase price of Lot 1. The total payable for Lot 1 was, therefore, $7.2 million, which included the amount payable under cl 2.9 of the Deed. The only other amount payable under the Deed was the $2.5 million referred to in Recital B(1) but, as we have said, there was no operative provision of the Deed mandating its payment although we were informed, as noted in the preceding paragraph, that it was paid. However, there was no finding to that effect by the primary judge no doubt because it was not relevant to any of the issues which required determination at trial. 34 If one accepts that the $2.5 million referred to in Recital B(1), assuming it was paid, was a one-off payment "for making available [future] airspace", then the only amount paid with respect to already existing but unused airspace as at 6 May 2002 (being the date of the Land Sale Agreement) was the $2.45 million referred to in cl 46(b) of that Agreement. However, there was no finding by the primary judge as to the volume of such airspace as at that date and we were not referred to any evidence on the point by counsel. 35 In our view, therefore, one cannot gain any assistance from the payment of the $2.45 million for unused but existing airspace as at the date of the Land Sale Agreement as some sort of benchmark with respect to the primary judge's assessment of the value of future airspace lost as a consequence of the acquisition. The same comment applies to the $2.5 million even assuming, as we were told, that it was paid. 36 We return to the provisions of the Deed. Clause 7.1 required Collex to pay Austral a monthly payment including the Airspace Creation Payment "for each tonne of waste material" taken onto the Land (cl 7.1.1). The "Airspace Creation Payment" was defined to mean "the greater of: (a) $4.00 [per tonne of waste] Indexed; and (b) 15% of the Average Revenue". If the amounts so paid in any calendar year were less than the "Minimum Payment" (defined relevantly as $1 million indexed per calendar year) otherwise than by reason of certain specified events, Collex was required by cl 7.5 to pay the amount of such shortfall. 37 Austral's obligations under the Deed in respect of the provision of airspace are to be found in cl 8. Relevantly, those obligations were as follows. Austral was required by cl 8 to "use all reasonable endeavours" to provide not less than 250,000 m3 of airspace for landfilling per calendar year on such part of the Land as the parties agreed, having regard to Austral's obligations under cl 8.4. If Austral could not provide the airspace so specified, cl 8.2 provided that "it may provide an equivalent amount of reasonably adjacent Airspace for Landfilling at its other quarries located in proximity to the Land". 38 If Austral was unable to provide the 250,000 m3 of airspace, either from Lot 1 or other quarries as required by cl 8.1 and cl 8.2, then cl 8.3.1. provided that the Minimum Payment per annum that Collex was required to pay Austral was to be reduced in the same proportion that the amount of unavailable airspace bore to 250,000 m3. 39 Clause 8.4 provided that Austral "use all reasonable endeavours" to provide up to a maximum of 6.8 million m3 (being the volume of solid waste landfill for which approval had been obtained – in fact the approved maximum volume was 6,946,712 m3) of "Airspace For Landfilling over the life of the Landfill in accordance with the diagram and works plan" annexed to the Deed. If it was unable to do so, then cl 8.5 provided as follows: "8.5 If it becomes apparent to the parties acting reasonably that it will not be possible for Austral to reasonably provide the airspace required under clause 8.4, and the amount of airspace able to be provided is materially less than the required airspace, then within 30 days of the parties either: 8.5.1 agreeing; or 8.5.2 obtaining a binding determination under clause 27.6 that it will not be possible to provide the required airspace, Austral must reimburse to Collex from the Purchase Price paid under the Land Sale Agreement, the amount being $7.2/6.8 multiplied by the number of metres of Airspace not able to be provided. The Purchase Price will be reduced by the amount so reimbursed." $7.2 million divided by 6.8 million equals $1.06 per m3. 40 Clauses 8.8 and 8.9 relevantly provided as follows: "8.8. Subject to the Land Sale Agreement Austral in conducting Quarrying Operations on the Land shall be a licensee only and shall not acquire any interest in the Land . 8.9 Collex acknowledges and agrees that: 8.9.1 … 8.9.2 Austral and its contractors will have a profit à prendre to extract and remove … material from the Land in such quantities as Austral sees fit, without payment to Collex or any other party". (emphasis added) 41 Clause 14 of the Deed made provision for the disposal of the Land. Clause 14.1 and 14.1.3 imposed a number of restrictions upon its disposal. First, by cl 14.1.1, cl 14.1.2 and cl 14.1.3 Collex was not entitled to dispose of the Land within five years of the Commencement Date; or at any time to an Austral competitor; or to any person who could not demonstrate to Austral's reasonable satisfaction that it had the financial resources to discharge Collex's obligations under the Deed, or who could not provide a reasonably acceptable third party or bank guarantee in respect of Collex's obligations. By cl 14.1.4 Collex was also unable to dispose of the Land unless it first procured a binding agreement from the intended disponee to be bound by the terms of the Deed, although this constraint did not apply once Collex had paid the "Total Minimum Payments" under the Deed. 42 Clause 14.2 provided that, subject to cl 14.5 and cl 14.6, if Collex disposed of the Land it was required to pay to Austral 66 per cent of the "Net Sale Proceeds". Clauses 14.5 and 14.6 are not presently relevant. Pursuant to cl 14.3, Collex was to act with reasonable diligence "to dispose of the whole of the Land following filling of the voids" and to rehabilitate the Land. The relevant provisions of the Land Sale Agreement 43 It will be recollected that cl 8.9.2 of the Deed was an acknowledgment and agreement by Collex, at a time when it did not own Lot 1, that Austral and its contractors "will have a profit à prendre to extract and remove clay, shale [and] other brickmaking materials." However, it would appear that the position had at least to some extent changed by the time the Land Sale Agreement was consummated. 44 Clause 40 of the Land Sale Agreement was headed "Profit à Prendre". It provided as follows: "40.1 Completion of this contract is conditional upon registration at Land and Property Information of the profit à prendre as set out in the instrument attached to this contract as Annexure "A" ("Profit"). 40.2 The vendor will use reasonable endeavours to register the Profit, however the vendor is not required to register the profit until the purchaser has obtained the Approval." 45 The "Approval" referred to in cl 40.2 was defined in cl 31 to mean the obtaining by Collex (as purchaser) of all licences necessary to carry out Landfill Operations on Lot 1. Annexure "A" set out the terms of the proposed profit à prendre. Relevantly, it authorised the transferee of the profit to enter onto Lot 1 for the purpose of conducting mining activities and removing soil and minerals therefrom and, for that purpose, included excavating and quarrying. 46 A document in identical terms to Annexure "A" was duly registered in the name of Brickworks as transferee from Austral as transferor and given dealing No. 8769304. 47 The correspondence between the RTA and Austral referred to at [17] and [18] above referred to the RTA acquiring, via Austral, Brickworks' compensable interest under its profit à prendre over Lot 9. This was confirmed in cl 52 of the 2004 Contract. It provided that prior to completion, Austral was to obtain from Brickworks the extinguishment of the profit à prendre created by dealing 879304 insofar as it affected Lots 9 and 10. 48 The foregoing is relevant to the issue raised by the RTA on the appeal as to whether Austral had an "interest" in Lot 9 that was compensable under the Just Terms Act. Whatever "interest" it had, according to Collex's submissions, this did not include the profit à prendre contemplated by cl 8.9.2 of the Deed which, by the date of acquisition of Lot 9, had been transferred to Brickworks and which was the subject of the offer and acceptance between the RTA and Austral dated 16 June 2004. We shall return to this submission later in these reasons. The relevant provisions of the Just Terms Act 49 It is useful, at this stage, to have regard to the relevant provisions of the Just Terms Act. " 3 Objects of Act (1) The objects of this Act are: (a) to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and (b) to ensure compensation on just terms for the owners of land that is acquired by an authority of the State when the land is not available for public sale, and (c) to establish new procedures for the compulsory acquisition of land by authorities of the State to simplify and expedite the acquisition process, and (d) to require an authority of the State to acquire land designated for acquisition for a public purpose where hardship is demonstrated, and (e) to encourage the acquisition of land by agreement instead of compulsory process. (2) Nothing in this section gives rise to, or can be taken into account in, any civil cause of action … 4 Definitions interest in land means: (a) a legal or equitable estate or interest in the land, or (b) an easement, right, charge, power or privilege over, or in connection with, the land. … 20 Effect of acquisition notice (1) On the date of publication in the Gazette of an acquisition notice, the land described in the notice is, by force of this Act: (a) vested in the authority of the State acquiring the land, and (b) freed and discharged from all estates, interests, trusts, restrictions, dedications, reservations, easements, rights, charges, rates and contracts in, over or in connection with the land. (1A) Subsection (1) is subject to any express provision of an Act that authorises the acquisition of land by compulsory process but preserves the operation of any trusts, restrictions, dedications, reservations, declarations, setting apart of or other matters relating to the land concerned. (2) If: (a) the acquisition notice excepted an easement from acquisition, and (b) immediately before the vesting, the benefit of a restriction as to user was annexed to the easement, then (unless otherwise specified in the acquisition notice) the restriction continues to have effect as if the acquisition had not taken place. … 37 Right to compensation if land compulsorily acquired 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. … 54 Entitlement to just compensation (1) 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. … 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) solatium, (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." [Par (a) and par (f) are the only provisions relevant to the appeal.] " 56 Market value (1) In this Act: market value of land at any time 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. (2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition." The primary judge's decision on the separate question 50 Talbot ACJ (as his Honour then was) noted at [7] of his judgment on the separate question (to which we will refer, to distinguish it from his Honour's principal judgment, as "SQ") that a question had arisen between the parties as to the relevance of the provisions of the Deed for the purposes of the assessment of the compensation payable to Collex as a result of the compulsory acquisition of Lot 9. At SQ [14] and [15], his Honour considered that the real question was not the proper construction of the Deed so as to determine its legal effect. Rather, it was "… a question of how the respective theoretical vendor and purchaser properly advised would have regard to the terms of the Deed in the determination of an agreed purchase price for the subject land in the event of an assumed sale at the date of resumption …" 51 These considerations led to the questions for separate determination being reformulated. The questions as reformulated and his Honour's determination of those questions were as follows (at SQ [18] and [20]): "1. In a hypothetical sale of the subject land (Lot 9), would the prudent purchaser and vendor have taken into account all of the provisions of the Deed of Licence and Operation between Collex Pty Ltd and Austral Brick Company Pty Ltd dated 2 July 2001 (the Deed)? Answer: Yes. 2. Would a prudent hypothetical purchaser have obtained a legal opinion on the operation of the Deed so far as it affects Lot 9? Answer: Yes. 3. Would the prudent hypothetical purchaser and vendor have been advised that Lot 9 had the potential, at the date of acquisition, for the use of that land for the filling of waste after excavation by Austral Brick Company pursuant to the Deed? Answer: The prudent hypothetical purchaser and vendor would have been advised that under the terms of the Deed strictly applied (without any consideration to the physical constraints or consequences about which separate advice would be required by persons having appropriate expertise in that regard) Lot 9 had the potential for use for filling of waste. 4. Would the prudent hypothetical purchaser and vendor have been advised that the proper interpretation of the Deed that had been entered into between Collex and Austral requires the following conclusions: (a) that any sale of Lot 9 was to be in accordance with the terms of the Deed; (b) that the purchaser would be required to agree to be bound by the terms of the Deed with Austral. Answer: Yes, subject in particular to the effect of clause 14 according to the circumstances at the date of sale. Pursuant to the definition of ' disposed of ' in the Deed a sale includes the whole or any part of the land. (c) that clause 8 of the Deed was applicable to the continued operation of the extraction and filling of Lot 9 and of land retained in the ownership of Collex. Answer: Yes. (d) that Austral was not required by Clause 8 to replace any land, or airspace, acquired by a public authority at its (Austral's) expense (or otherwise compensate the owner of Lot 9) either by Clause 8 of the Deed or otherwise. Answer: Austral was not required by clause 8 to replace any land or airspace acquired by a public authority but was subject to the effect of clauses 8.2, 8.3, 8.4 and 8.5. (e) that the owner of Lot 9 was bound by the obligations in relation to any future disposal of Lot 9 in accordance with Clause 14.1, 14.2 and other applicable provisions of Clause 14 of the Deed? Answer: Yes." (emphasis added) The primary judge's decision on Collex's claim for compensation · Present market value of Lot 9 52 It will be recalled that as at the date of acquisition, Lot 9 was in its natural state. At the hearing before the primary judge, the parties agreed that for the purposes of assessing the compensation payable for Lot 9, it should be assessed in two segments. The southern sector, designated Area A by the parties, comprised an area of 37,120 m2. Area A was available for quarrying and landfill and its underlying zoning was Non Urban 1(a). The northern sector, designated Area B, comprised an area of 8000 m2 and was not available for quarrying and landfill. 53 His Honour concluded (at [40]) in respect of Area A that the hypothetical purchaser would not have paid any more than its market value, assessed against the potential compensation payable for its acquisition based on a Non Urban 1(a) zoning as the alternative zoning to its Regional Parklands zoning after filling was completed. 54 In respect of Area B, his Honour considered (at [41]) that that part of Lot 1 would be recognised by the hypothetical purchaser as having a real potential for industrial use, at least during the period that the brickmaking and landfill operations continued on the adjoining land. He therefore assessed the present value of Lot 9, assuming that landfill on Area A would be completed in 18 years and that Area B would be immediately available for industrial use for an indeterminate period, to be: Area A: Land affected by landfill (37,120m2): $757,798.00 Area B: Land unaffected by landfill (8,000m2 at $155 per m2): $1,240,000.00 55 Accordingly, the primary judge found (at [43]) that the value of Lot 9 as at the date of acquisition, assuming completion of the landfill, was $1,997,798.00. The RTA does not challenge this element of his Honour's determination of compensation. · The value of the lost airspace 56 The primary judge held that the acquisition of Lot 9 would give rise to a loss of airspace approved for solid waste landfill on both Lots 8 and 9 of 1,048,186 m3, the value of which he assessed (at [104]) in the amount of $4,887,000. 57 His Honour's reasoning that led to this conclusion may be summarised as follows. It will be recalled that the LEMP required by the 1998 consent adopted a final landform designed to accommodate landscaped open space. The RTA had contended before the primary judge that Collex could offset and accommodate the effects of any loss of airspace consequent upon the acquisition under the terms of the 1998 consent by creating a finished landform to a maximum height of RL85AHD under the recommendations contained in the EIS adopted by condition 2 of that consent: see [11] above. Collex argued on the other hand that there was a requirement for a setback of 30.48 metres from the adjusted western boundary of Lot 8 (due to the acquisition of Lot 9). That could not be implemented or replicated without modification of the existing scheme as approved by the 1998 consent. 58 His Honour recorded (at [49]) that the planning experts were equivocal as to whether Collex ought to have been advised to make an application to the Council for approval to modify the 1998 consent following the acquisition. The experts acknowledged that some problems could arise with respect to the shape of the ultimate landform, setbacks and landscaped areas, so that legal advice was necessary as to whether a modification of that consent was required. However, regardless of whether a modification was required, the experts agreed that an application for modification of the 1998 consent was likely to have been approved. They further agreed that on the assumption that the consent required modification, the Council would require a 30.48 metre landscaped setback from the boundary of Lot 8, being Collex's retained land. 59 It is appropriate to record in full the primary judge's reasons for accepting Collex's revised contours which established, on its case, the volume of lost airspace because it is relevant to the RTA's ground of appeal alleging lack of adequate reasons: "50 The respondent asserts that, as it is open to create a finished landform to a maximum height of RL 85 AHD under the recommendations contained in the EIS adopted by the existing development consent, Collex could offset and accommodate the effects of any loss of airspace as a consequence of the acquisition. ... 51 I accept that notwithstanding the compulsory acquisition the consent can still be implemented, albeit after modification to ensure that the environmental and amenity impacts on the M7, in lieu of Wallgrove Road, are reasonable. I agree that in order to satisfy the Council any amended scheme would need to provide at least 30 m setback from the adjusted western boundary of the land. That in my view would involve sufficient change to demand an application for modification of the existing development consent. Otherwise, it might reasonably be expected the Council would take steps to ensure that changes satisfactory to it were made in order to meet the altered circumstances following acquisition. 52 Notwithstanding that it may be feasible for the applicant to reconfigure the landfill to ensure that the same amount of space for landfill is provided in the remaining area, I am satisfied, nonetheless, that there is a loss of airspace as a direct consequence of the acquisition. If the replacement of airspace can be achieved by re-design after acquisition then it must be accepted that the same could have been achieved beforehand. 53 I find that the deprivation of the opportunity to use the part of the land acquired that could have been made available for landfill is a compensable loss under the Just Terms Act. The use of airspace for the proposed waste disposal is a factor that parties to a hypothetical transaction between a vendor and purchaser would take into account when determining the price to be paid for the land at the date of acquisition. I further find that the applicant is entitled to compensation pursuant to s 55(f) of the Just Terms Act for the decrease in the value of its other land, which adjoins the acquired land by reason of a loss of airspace in that land. 54 On the basis of a setback of 30 m and adopting the revised contours developed by Collex rather than the RTA the value of lost airspace has been determined by an agreement between surveyors at 1,048,186 m3. Mr Preston, after deferring what he says is the present value of lost airspace comprising 1,048,186 m3, derives a value for the lost airspace of $3,056,603.00 whereas Mr Large adopts the actual figure of $4.75 per m3 to derive a value of $4,978,884.00. The difference is the discount allowed by Mr Preston for deferring the value to allow for the time before the airspace becomes available." 60 His Honour then applied (at [58]) an agreed market rate of $4.75 per m3 (based on comparable sales evidence) of airspace to derive a value for the lost airspace due to the acquisition of $4,978,884. Although Collex had originally based its case with respect to the value of lost airspace on rates per m³ derived from comparable sales, it ultimately contended that its preferred approach to that value was to apply a discounted cash flow (DCF) methodology. It tendered a valuation based on that methodology prepared by a Mr Don Reed and supported by Mr Wayne Lonergan and his associate, Mr Martin Holt. No issue arose as to the expertise of these witnesses to conduct such an exercise. 61 On the other hand the RTA did not conduct a DCF based valuation exercise. It merely relied on its valuer, Mr Preston, to criticise aspects of Mr Reed's valuation and, in particular, the discount rate he had adopted. Those criticisms do not give rise to any issue on the appeal. 62 After reviewing the relevant authorities which had commented on the adoption of the DCF methodology where land had been compulsorily acquired, his Honour observed (at [82]) that "Although Courts have clearly experienced difficulty from time to time in accepting the DCF method due to the unreliability of the assumptions made for the purpose of the analysis, it is nonetheless a method which can be accepted where the special facts and circumstances pertaining to the subject land make it appropriate to do so." 63 The primary judge then determined (at [113]) that it was appropriate to adopt the DCF methodology as the primary basis upon which the lost airspace should be valued, rather than using a comparable sales analysis. In doing so, he considered that the DCF methodology had the advantage of eliminating a number of possible variables and adjustments that were required to be made under the comparable sales method, such as "a betterment factor or possible deferral of the price of the airspace as these matters [were] taken into account by the DCF calculation". His Honour then used the comparable sales analysis as a check on the ultimate "figures" derived from the DCF calculation. Applying the DCF methodology, Collex's claim for the lost airspace was assessed (at [104]) in the sum of $4,887,000 based upon the valuation of Mr Reed as recalculated by Mr Lonergan. 64 The RTA's valuation expert, Mr Preston had considered that Lot 9 could be readily valued using comparable sales evidence and that the DCF methodology was, at best, a possible check method. Collex's experts in turn were critical of using the comparable sales methodology, given the difficulty of identifying two directly comparable sites in the quarrying and landfill industries which, they said, were subject to a large number of variables. In response Mr Preston accepted that the DCF method was "one of the best methods to value a business" but, as we have noted above, raised a particular difficulty with respect to the discount rate that should be used. In the end, however, his position was that the best method of assessing the compensation that should be payable to Collex was to use a "before and after method on a discounted cash flow approach combined with a comparable sales approach". 65 The RTA has not challenged his Honour's adoption of the DCF methodology as such. Rather, its challenge is based upon an alleged failure by the primary judge to have regard to the terms of the Deed in assessing whether there was, in fact, any loss of airspace as a result of the acquisition of Lot 9 and, if so, the extent of such loss. The effect of this challenge, if successful, would be to undermine a critical integer in his Honour's adoption of Collex's DCF valuation. · The primary judge's treatment of the relevance of the Deed 66 The primary judge dealt with the effect of the Deed (insofar as it is relevant to the grounds of appeal) at [59]–[66]. At [59], he referred to the provision made in the Deed to the circumstance that Austral may not be able to deliver the maximum 6.8 million m3 of airspace as specified in cl 8.4, or the annual minimum of 250,000 m3 as specified in cl 8.1. His Honour referred to Austral's "right" under cl 8.2 to provide alternative airspace if it could not provide the annual minimum airspace of 250,000 m3 on Lot 1. He also referred to the reimbursement from the purchase price of that land that Austral was required to make to Collex under cl 8.5 if the total airspace provided was materially less than the 6.8 million m3 specified in cl 8.4. His Honour also referred (at [60]) to Austral's right to receive royalties under cl 7.1.1 of the Deed being the Airspace Creation Payment for the amount of airspace provided. 67 In addition or complementary to the contention referred to at [57] above, the RTA also submitted at trial that, having regard to the provisions of the Deed and cl 8.2 and cl 8.5 in particular, Collex would not in fact suffer any reduction in available airspace as a result of the acquisition. This remained the RTA's primary submission on the appeal. His Honour recorded (at [61]) the RTA's submission on this point by reference to the following written submission: "The implementation of the public purpose (that is, the construction of the M7 Westlink) has the consequence that the land in Lot 9 is not available for excavation and landfilling. However that does not have the necessary consequence of loss to Collex. Clauses 8.2 and 8.5 of the Agreement are matters not connected to or caused by the public purpose for which the land was acquired. It is an aspect of an agreement by which the value of the land is to be privately adjusted in certain circumstances, activated in the present case." 68 In response to this contention, Collex submitted that the question for his Honour's determination was the decrease in market value of those parts of Lots 8 and 9 that otherwise would have been used for the purpose of landfill but for the acquisition. It argued that at the date of acquisition, Lot 9 and the affected part of Lot 8 were available for future excavation and filling. Therefore, any agreement with a third party, such as that with Austral, was not a relevant consideration for the purpose of ascertaining the market value of Lot 9 for which Collex was entitled to be compensated. 69 His Honour (at [63]) rejected the RTA's submission set out at [67] above as well as its submission that no loss had been sustained by Collex due to its ability to adjust the final landform of Lot 8 after filling to accommodate, at least in part, the loss of airspace from Lot 9 and the affected part of Lot 8. He therefore accepted (at [64]) Collex's submission that it was entitled to compensation for the loss of potential airspace. He considered that compensation could be properly assessed against the value of the acquired airspace as reflected in the loss in market value of Lot 9 and Lot 8. 70 His Honour further found (at [65]) that the Airspace Creation Payment (see cl 7.1.1 of the Deed), whereby Collex paid Austral for the progressive creation of a void on the land, was not relevant to the assessment of compensation for the purposes of the Just Terms Act. He also found that any payment by the RTA to Austral under the agreement between them effected on 16 June 2004 (see [18] above) and based on the Airspace Creation Payment referable to Lot 9 was not relevant to the question of the compensation payable to Collex, because Austral was a mere licensee under the Deed and did not have a relevant interest in Lot 1 and, therefore, in Lot 9. His Honour, therefore, rejected the RTA's submission that the payment it had made to Austral, to the extent that it reflected a loss to Austral of the Airspace Creation Payment, should be deducted from the compensation payable to Collex. Rather, he considered that any adjustment between Austral and Collex was a matter of private agreement. 71 His Honour explained (at [66]) that the reason why the payment the RTA had made to Austral was irrelevant to the assessment of market value for the purposes of the compensation payable to Collex was because the cost to Collex of Austral providing airspace was a fee for service and any payment by the RTA to Austral was a matter between them and had no bearing on the compensation payable to Collex. However, he did acknowledge that if the DCF method was adopted the "so-called royalty payment" (being the Airspace Creation Payment) would be incorporated into the calculations. It was common ground that they were. Summary of errors of law 72 Before dealing with the specific grounds of appeal, it is convenient to set out the precise errors of law upon which the RTA ultimately relied on the appeal. Six of those errors are set out at par 29 of the RTA's written submissions to this Court, of which the last two were abandoned. We set out the remaining four verbatim: "(a) His Honour erred in law in concluding that the Deed and payments and other conduct under the Deed were not relevant considerations for the purpose of ascertaining the market value of the land acquired and for which the applicant is entitled to be compensated [Ground 1 in the Amended Notice of Appeal]; (b) His Honour erred in law in concluding that the applicant suffered a loss of (potential) airspace as a direct consequence of the acquisition [Ground 2 in the Amended Notice of Appeal]; (c) His Honour erred in the particular respects set out in the third ground of the Notice of Appeal … which involve various findings of the trial judge that were either wholly unsupported by the evidence before him or affected by the errors referred to above in relation to grounds (a) and (b) [Ground 3 in the Amended Notice of Appeal]; (d) The trial judge erred in failing to give any reasons for his decision to adopt ' the revised contours developed by Collex rather than the RTA ' and so to conclude that the volume of lost airspace was 1,048,186 m3 (at [54]) [Ground 4 in the Amended Notice of Appeal]." 73 Ground 3 of the Amended Notice of Appeal (see par (c) above) was in the following terms: "3 Further and in particular, the errors identified in grounds 1 and 2 involved the following errors of law: (a) that clauses 8.2 and 8.5 of the Deed were not relevant to the determination of compensation (at [61]-[65]). The trial judge should have found that the terms and effect of the Deed, in particular clauses 8.2 and 8.5, had the consequence that the applicant did not or was not likely to suffer any loss in respect of the reduction in available airspace consequent upon the compulsory acquisition of the land; (b) that the ability of the applicant to approach the Council to vary the final landform of the landfill and the fact that such an approach was likely to succeed (see at [49]) (and thereby achieve the full volume of fill provided for in the Deed) was not relevant to the determination of compensation (at [63]). (c) [this particular was abandoned] (d) that the Airspace Creation Payment under the Deed was not relevant to the determination of compensation (at [65]); (e) that the interest of The Austral Brick Company Pty Ltd under the Deed was not a relevant interest in the land for the purposes of the determination of compensation to the applicant (at [65]); and (f) that the question of any payment by the respondent to The Austral Brick Company Pty Ltd in respect of the loss of the Airspace Creation Payment under the Deed was irrelevant to the determination of compensation to the applicant (at [65])." 74 In essence the appeal raised four issues. First, given the adoption by the primary judge of Mr Reed's valuation based on the DCF methodology (which determined the value of the lost airspace on a "before" and "after" basis, being the difference between the value of the available airspace on Lot 1 pre-acquisition and the value of the available airspace on Lot 8 post-acquisition), did his Honour err in failing to take into account in the "after" DCF valuation the compensatory provisions of cl 8.2, cl 8.3 and cl 8.5 of the Deed? 75 This first issue is related to the RTA's submission that Collex had sustained no loss of airspace due to the acquisition because the fact that it was potentially deprived of airspace by the acquisition of Lot 9 and the required setback of any excavation on Lot 8 would be fully compensated by Austral providing the shortfall (from the required 6.8 million m³) from its other quarries pursuant to cl 8.2. Alternatively, Collex would receive $1.06 for each cubic metre of any shortfall pursuant to cl 8.5 of the Deed, which, it was submitted, was required to be deducted from the determined value of the lost airspace. 76 Second, did the primary judge err in finding that Austral did not have a compensable interest in Lot 9 under the Just Terms Act and, if he did, in failing to deduct from the compensation payable to Collex the amount the RTA paid to Austral for its lost royalty income being the Airspace Creation Payment due to the lost airspace caused by the acquisition of Lot 9? It might be noted that this issue would not arise if the first issue is answered in favour of the RTA. 77 Third, did the primary judge err in holding that the obligation of Collex under cl 7.1.1 of the Deed to pay Austral the Airspace Creation Payment was irrelevant to the amount of compensation to which Collex was entitled and, therefore, did not need to be taken into account in its assessment? 78 Fourth, did his Honour err in failing to provide any or any adequate reasons for adopting (at [54]) Collex's revised contours and rejecting those of the RTA in arriving at his conclusion that the volume of lost airspace was 1,048,186 m³? The Third Issue 79 The third issue can be disposed of at once. It was common ground that in both his "before" and "after" DCFs Mr Reed had deducted as an administrative cost the Airspace Creation Payment payable under cl 7.1.1 of the Deed at the rate of $4 per tonne of waste indexed: see B7/1679 for the "before" calculation and B7/1681 for the "after" calculation. 80 In his report dated 12 May 2006 (being Exhibit AA in the trial) Messrs Reed and Holt, in response to a report of Mr Preston dated February 2006 alleging "double dipping" on the issue of lost royalties, stated (at B7/1701): "● Preston argues that DRA [Mr Reed] has claimed a value for royalty payments already compensated by the RTA, that is, that Collex are making a claim for something for which Austral has already been compensated. Preston has prima facie failed to understand the separate claims. Austral has claimed (amongst other factors) for the royalty payments from Collex it will no longer receive. Collex has claimed for the lost (net) cash flows from the reduced airspace available, which have been adjusted (reduced) to reflect the savings to Collex from the royalty payments which will no longer be made. ● This allowance by Collex is inherent in the before and after case approach adopted by DRA. DRA's After Case DCF model does include royalty payments as costs. However, the DRA after case model covers years 1 to 13, whilst Austral's claim should have been for royalties lost from year 13 to year 17. Thus DRA has adjusted his analysis in the after case to allow for saved royalties (as well as other costs no longer incurred). That is the whole premise of the before and after analysis. …" 81 In the joint report (Exhibit T) dated 23 June 2006 of Messrs Reed, Holt and Preston, the latter accepted "Reed's explanation" set out in the preceding paragraph. 82 So much was also recognised by the primary judge at [66] where he remarked that "[i]f the DCF method is adopted the so-called royalty payment will be incorporated in the calculations." It was also conceded by senior counsel for the RTA (at Appeal Transcript 34). 83 The primary judge had held (at [65]) that the Airspace Creation Payment was not relevant to the assessment of compensation for the purpose of the Just Terms Act. Such a proposition was, in our view, too broad. It was relevant to the assessment based on the DCF methodology and it was taken into account in that exercise. 84 During oral argument on the appeal there was a deal of confused argument as to whether the obligation of Collex to make that payment had been taken into account by the expert valuers on both sides when they agreed a rate per m³ for lost airspace of $4.75 per m³ based on comparable sales. But whether it was or not became irrelevant once the primary judge adopted the DCF methodology which did take the obligation into account. Grounds 3(d) and (f) of the Amended Grounds of Appeal (see [73] above) thus became non-issues. We therefore turn to the other three issues. The First Issue: Did his Honour err in law in failing to take into account the terms of the Deed and in concluding that Collex suffered a loss of airspace? (Grounds 1, 2, 3(a) and (b) of the Amended Notice of Appeal) 85 As we have observed, the RTA did not challenge his Honour's adoption of the DCF methodology as the primary basis for the assessment of the compensation payable. Indeed, that challenge would have been unavailable to it, as its own expert agreed that the DCF methodology was the preferable approach to the assessment of compensation. It asserted, however, that the DCF methodology was flawed, having regard to the premises upon which it was based. The particular challenge was to the underlying calculation used to assess the discounted cash flow in the "after" situation. That calculation took into account a 15 per cent reduction (approximately 1 million m3) in landfill capacity as a result of the acquisition. 86 The 15 per cent reduction in landfill capacity, on Mr Reed's calculation, resulted in a 1.02 million m3 loss of airspace otherwise approved for solid waste landfill. Mr Reed then calculated the projected loss in earnings, based on that reduction, by calculating the variation in the net present value of discounted cash flows prepared for "the before and after case". It was submitted that in undertaking this calculation, Mr Reed took no account of Austral's right under cl 8.2 of the Deed to provide alternative airspace to make up for that shortfall. Nor did he take account of the operation of cl 8.3 should the airspace provided by Austral be less than 250,000 m3 per annum and which would result in a reduction (at the rate of $4 indexed per m³) of the annual Minimum Payment. Further, Mr Reed's underlying methodology also failed, so it was submitted, to take into account the operation of cl 8.5 of the Deed. 87 Mr Reed's approach in reducing the landfill capacity by 15 per cent was in one sense reflected in his Honour's findings (at [65]–[66]) that the Airspace Creation Payment was not relevant to the assessment of compensation for the purposes of the Just Terms Act, and that any adjustment of payments made by Collex to Austral was a matter of private agreement between them and thus was an irrelevant consideration. In other words, his Honour regarded the terms of the Deed as irrelevant to the assessment of compensation and this would have included the relevant provisions of cl 8. 88 The RTA made two complaints about these findings. First, it submitted that the implicit finding that the terms of the Deed were irrelevant was inconsistent with the primary judge's determination of the separate question and in particular, was inconsistent with the determination of SQ 4(c) and SQ 4(d). His Honour's determination of these questions is set out at [51] above. In general terms, he determined that the prudent hypothetical purchaser and vendor would have been advised that the proper interpretation of the Deed required the conclusion that cl 8 would be applicable to the continued operation of the extraction and filling of Lots 8 and 9. It was common ground between the parties that the hypothetical purchaser of Lot 9 would be a person who was reasonably financial and who would take over Collex's landfill operations and other obligations under the Deed insofar as those obligations were applicable to Lot 9. 89 Collex submitted that having regard to his Honour's determination in his answer to SQ 4(d) that Austral was not required by cl 8 to replace any land or airspace compulsorily acquired by a public authority, this argument was not open to the RTA. His Honour's finding was that, although Austral was not required to provide alternative airspace, it remained subject to cl 8.2 to cl 8.5. In our opinion, the significance of the question his Honour answered lies in the word "required". In other words, was Austral "required" to replace airspace? His Honour answered that question correctly: cl 8.2 provided that, if Austral could not provide airspace in accordance with cl 8.1, "it may provide an equivalent amount of reasonably adjacent Airspace". It was not obliged to do so. But his Honour also held that that provision as well as cl 8.3, cl 8.4 and cl 8.5 continued to operate. 90 The second complaint was the substantive challenge to his Honour's finding that the terms of the Deed (including cl 8) were irrelevant to his determination of compensation. The RTA contended that the assumption of a loss of landfill capacity, upon which Mr Reed calculated the discounted cash flow in the "after situation", was erroneous because it failed to take into account cl 8 of the Deed which required Austral to provide a specified minimum volume of airspace per annum either from Lot 1 or other of its quarries. It followed on the RTA's argument that the hypothetical purchaser of Lot 9 would have to pay to Austral a portion of the Minimum Payment of $1 million Indexed payable each year. Otherwise, there was to be a proportionate adjustment of the yearly minimum Airspace Creation Payment: see cl 8.3.1. Likewise, there was a requirement to provide a proportion of the specified volume of airspace over the life of the Deed: otherwise there was to be an adjustment to the original purchase price of Lot 1: cl 8.4 and cl 8.5. 91 Mr Reed's approach was to have regard only to the volume of airspace that was to be provided under the terms of the Deed and to the reduction in that volume caused by the acquisition. The RTA contended that if the market value of Lot 9 was assessed having regard to the volume of airspace actually delivered, then the compensatory provisions in cl 8.3 and cl 8.5, and Austral's right under cl 8.2 to provide alternative airspace elsewhere, should also have been taken into account in the "after" valuation. 92 Collex's argument in response to the RTA's challenge to the primary judge's determination that cl 8 of the Deed was irrelevant, can be reduced to two propositions. First, the assessment of compensation was made on the basis that the hypothetical purchaser of Lot 9 was bound by and would have the benefit of the terms of the Deed. Second, there would be a loss of airspace due to the acquisition of Lot 9 and the effect this would have on Lot 8. However, there was nothing in the Deed that dealt with the consequence of a compulsory acquisition by a public authority of any part of the land to which it applied. Accordingly, as Lot 9 was compulsorily acquired through no fault of Austral, the latter could not be required to make any reimbursement for that consequential loss of airspace to Collex pursuant to cl 8.3. Nor was Austral required to consider whether to make up that lack of airspace pursuant to cl 8.2. In other words, the provisions of cl 8 were, as his Honour held, irrelevant. 93 During the course of the argument on the appeal, a suggested reformulation of this submission was that, acknowledging that neither Collex nor Austral contended that the Deed had been frustrated by the acquisition of Lot 9, there was an implied term that Austral would have available to it the whole of Lot 1 to provide the specified airspace of 6.8 million m3. On this argument, rather than having a continuing obligation to provide 6.8 million m3 of airspace from the reduced area of Lot 1, that is, from Lot 8 alone, a proportionate share only would be required to be made available by Austral to Collex on that lot. In that circumstance, cl 8 did not arise for consideration. The only relevant loss of airspace in respect of Lot 8 would be the extent to which the proportionate volume of airspace would be reduced by the fact that there had to be a 30.48 metre setback from its western boundary. 94 The implication of such a term would follow from the terms of the Deed for the following reasons. The Deed contemplated that there could be a disposal of part of Lot 1: see definition of "Dispose of" at [25] above. Although there were restrictions on the sale of Lot 1 (see cl 14), the Just Terms Act required that any such prohibition on sale be ignored insofar as it applied to Lot 9: see Leichhardt Municipal Council v Roads and Traffic Authority of New South Wales [2006] NSWCA 353; (2006) 149 LGERA 439. In other words, the compulsory acquisition of Lot 9 occurred in a sale between a hypothetical vendor and purchaser. Although there was a temporary prohibition on the sale of any part of Lot 1 within five years from the Commencement Date, that would have to be ignored for the purposes of the hypothetical sale of Lot 9. The Deed would, however, be otherwise operative for the purpose of that sale. 95 It would follow that if there was an assessed entitlement to dispose of Lot 9 and the terms of the Deed otherwise applied, it would be necessary to imply a term that the hypothetical purchaser of Lot 9 as well as Austral would be bound by the terms of the Deed in proportion to the airspace available on that land: see BP Refinery (Westernport) Pty Ltd v Hastings Shire (1977) 180 CLR 266 at 283. That proportion would have been ascertainable because the Plan annexed to the Deed delineated the area on Lot 9 that was to be used for excavation with the consequent creation of airspace. Collex adopted this as an alternative way to approach its case. 96 Whilst we are of the opinion that there would be such an implied term, for reasons we explain below, we do not consider that Collex's approach needs to be categorised as involving an implied term of the Deed. Nor do we consider that the implication of such a term completely answers the question of whether Collex is entitled to compensation for the approximately 300,000 m3 of lost airspace from Lot 9 due to the acquisition. 97 In the "before situation", the market value of Lot 1 would be assessed having regard to the terms of the Deed. In the "after situation", two steps were required. First, the market value of the airspace on Lot 8 had to be determined on the assumption that it had been sold in accordance with the terms of the Deed: that is, landfill operations could continue to be carried out on that land: see Leichhardt Municipal Council. However, compared to the "before situation" there would be a loss of airspace from Lot 9 of approximately 300,000 m3 and there would be some further loss because two separate excavations would be required, whereas previously when the land was one lot, there would be a single excavation at the point where Lots 8 and 9 abutted. 98 Second, there has to be compensation for any decrease in the value of Lot 8 by reason of the proposal to carry out the public purpose for which Lot 9 was acquired. In this regard, there was a loss of approximately 700,000 m3 of airspace on Lot 8 due to the 30.48 metre setback requirement and the reconfiguration of contours required as a result. This amounted to a total loss of airspace of approximately 1 million m3, the exact figure claimed being 1,048,186 m3. 99 On this approach, as Lot 9 had been hypothetically sold in accordance with the terms of the Deed, there was no further room for the operation of cl 8.2 to cl 8.5, as their effects had already been taken into account in the "before" and "after" exercise. Collex contended that this was the reasoning behind his Honour's conclusion at [65], namely, that the question of any adjustment of payments made by Collex to Austral was a matter for private agreement and did not fall for consideration in the proceedings. In other words, it was not for his Honour to determine what, if anything, Collex and Austral would have agreed to as between themselves, now that there was approximately 1 million m3 less airspace available on Lots 8 and 9 due to the acquisition of Lot 9. Further, it was submitted that there was no obligation on a person whose land had been compulsorily acquired to 'mitigate' their loss by taking measures such as the RTA suggested: that is, reconfiguring Lot 8 in such a way as to eliminate or minimise any such loss of airspace. 100 In approaching the DCF on the basis that there was a total loss of approximately 1 million m3 of airspace, Collex's experts treated Lots 8 and 9 as a single unit for the purposes of valuing the lost airspace in the "before" valuation and Lot 8 as a single unit in the "after" valuation. Collex submitted that this was an accepted valuation approach, notwithstanding that the "valuation" was being undertaken under the different provisions of the Just Terms Act, namely, s 55(a) in the case of Lot 9 and s 55(f) in the case of Lot 8: see Roads and Traffic Authority of New South Wales v Muir Properties Pty Ltd [2005] NSWCA 460; (2005) 143 LGERA 192. 101 In Muir Properties, Tobias JA observed (at 212 [103]) that a "before" and "after" valuation of the whole of the land was often undertaken where part only of land was compulsorily acquired. His Honour explained: "In other words, the market value of the land before acquisition is determined (including the acquired land) as is its value after acquisition (excluding the acquired land). In this way the difference between the two values determines not only the market value of the acquired land but also captures any injurious affection to the retained land by reason of the acquisition for the public purpose. This approach will also, in an appropriate case, capture any loss due to the severance of the dispossessed owner's land by that acquisition." 102 Tobias JA further stated (at 212–213 [104]): "In proceeding according to that approach, there has never been any doubt that the Pointe Gourde principle is applied in the ' before ' valuation exercise. In other words, the ' before ' value is determined on the basis of disregarding any decrease in the value of the land arising out of the purpose of the compulsory acquisition and any steps in the scheme leading to that acquisition. It is only in the ' after ' value that any decrease by reason of the proposed implementation of the public purpose for which the resumed land was compulsorily acquired is taken into account." 103 This paragraph must now be read as if the reference to the Point Gourde principle was read as a reference to s 56(1) of the Just Terms Act: see Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259. See also Leichhardt Municipal Council. 104 In Roads and Traffic Authority of New South Wales v Damjanovic [2006] NSWCA 166; (2006) 146 LGERA 403, Tobias JA confirmed the appropriateness of the "before" and "after" approach to the market value of the acquired land pursuant to s 55(a) of the Just Terms Act and any injurious affection to the retained land pursuant to s 55(f). Damjanovic provides some assistance in understanding the present case. 105 The respondents in Damjanovic owned 10.33 ha of land with a frontage to Wallgrove Road. The land was used for poultry egg production. The RTA compulsorily acquired a portion of the land, comprising a band of variable width ranging between 50 and 75 metres fronting Wallgrove Road, for the purposes of the M7. It was common ground between the valuers that a "before" and "after" approach should be adopted for the purposes of assessing the market value of the acquired land and any injurious affection to the retained land. The parties' expert valuers had valued the land in the "before" situation on the basis of its use for industrial purposes. They differed, however, as to the basis upon which the land should be valued in the "after" situation. 106 The effect of the compulsory acquisition of the land fronting Wallgrove Road was to eliminate the direct road access between the retained land and the M7, with the consequence that the retained land was left without any usable road frontage. The RTA had provided a temporary access to the retained land during the construction of the M7, and it was accepted by the parties that this temporary access would become the only continuing road access to that land. The alternative road access was sufficient for the purposes of the respondents' egg poultry business, but was not sufficient to carry any additional traffic, should the land be used for any "higher use" and, in particular, for industrial use. 107 The dispossessed owner's valuer considered that the restricted access arrangements significantly diminished the value of the retained land in the "after" situation and he therefore "valued" the land on the basis of its existing use. The RTA's valuer considered that in the "after" situation, the land should be valued on the same basis as in the "before" situation, namely, as land available for industrial use. 108 The primary judge held that the effect of the M7 on the retained land was to decrease its value, essentially because of the loss of its usable street frontage which had provided direct access to the land, compared to the situation before the date of compulsory acquisition, when the land had a substantial street frontage with three separate driveways directly connecting the land to Wallgrove Road. The access the property had before acquisition made the land suitable for industrial purposes. Once that access was lost, the retained land was no longer suitable for industrial use. The primary judge had concluded that just as the road frontage of the respondents' land was conducive to its potential for industrial development, the absence of such frontage (after acquisition of a portion of the land) was destructive of that potentiality. 109 In Damjanovic, the RTA contended on appeal that the primary judge had erred in law in that by focussing upon the effect of the creation of the M7 on the respondents' retained land, he had "demonstrated an approach to the valuation 'after' acquisition which was entirely inconsistent with the approach he had applied to the valuation 'before' acquisition" (at [58]). 110 Tobias JA, Beazley and Santow JJA agreeing, rejected the RTA's contention. His Honour said that: "[66] … the fundamental flaw in the appellant's argument is that it denied the proposition that when valuing the retained land, the valuers were required to assume that the land did not have a 390 metre frontage to Wallgrove Road from which access for industrial purposes was permitted. If that argument was correct and the retained land was to be valued upon the same basis as the respondents' land in the ' before ' valuation, then the result would ignore the decrease in the value of the retained land by reason of the undertaking of, or the proposal to undertake, the public purpose for which the respondents' land was acquired. This result would be contrary to s55(f) of the Just Terms Act . [67] Thus, in contrast to any suggestion of inconsistency in the primary judge's approach to the ' before ' valuation on the one hand and the ' after ' valuation on the other, s55(f) of the Just Terms Act required his Honour to approach the latter valuation in the manner in which he did … in order to ensure that the ' before ' and ' after ' valuation did in fact capture the injurious affection to which s55(f) is directed." 111 In our opinion, the same principle applies in this case. The public purpose for which Lot 9 was compulsorily acquired had an injurious effect on Lot 8 in that it caused a loss of airspace in the order of 700,000 m3 because of the 30.48 metre setback requirement from its boundary with the M7, and some loss due to the necessity to excavate on two separately owned lots rather than one, as already explained. In our opinion, it is erroneous to suggest that Collex could, or ought to have looked to Austral to make good that loss. The rights and obligations under the Deed were to be found in the context of there being a certain area of land available on Lot 1 for the creation of the airspace and a plan for its excavation. Although that plan could be altered by agreement between the parties, the surface area of the excavation site was a constant. The loss of airspace in the 30.48 metre setback on Lot 8 was unrelated to the obligation of Austral to provide 250,000 m3 per annum and unconnected with its obligation to use its best endeavours to provide 6.8 million m3 of airspace over the life of the Deed. The loss of that airspace was entirely due to the public purpose for which Lot 9 was acquired. In our opinion, it was a form of injurious affection for which compensation was payable under s 55(f). 112 We also consider that the same approach applied to the valuation of Lot 9. Lot 9 had to be valued having regard to the terms of the Deed. That is, the hypothetical purchaser would have purchased Lot 9 on the basis that the purchase carried with it obligations and rights under the Deed. However, as already discussed, the surface area of Lot 9 on which airspace could be created was less than the surface area on which airspace could be created when Lot 9 was part of Lot 1. 113 In our opinion, the market value of Lot 9 in the "after situation" had to be assessed according to the area that was then available for the creation of airspace, having regard to the changes that needed to be made to its contours and to the loss of any area required for a setback from the M7 as a result of the acquisition. For the reasons already discussed, the Deed was irrelevant to that aspect of the valuation. The Deed was relevant, however, to the "before" market value of Lot 9 as it was unaffected by the acquisition. However, cl 8.2, cl 8.3 and cl 8.5 had no application as there was no reason to believe that the volumes of airspace referred to in cl 8.1 and 8.4 could not be provided. 114 There is a further reason why the valuers were not required in the "after" valuation to take cl 8.2, cl 8.3 and cl 8.5 into account. As to cl 8.2, we have already observed that it entitled, but did not oblige, Austral to make up any shortfall from its quarries. As we were not referred to any evidence, let alone finding, that Austral would exercise that right, the matter was left in the realm of speculation. 115 As to cl 8.3 the same comment applies. It could not follow that because Lot 9 and part of Lot 8 were removed from the equation Austral would not be able to provide 250,000 m³ of airspace in any year from the balance of Lot 8 as required by that provision. The life of the landfill might be shorter but the annual extraction rate would be the same. 116 Clause 8.5 must be read with cl 8.4. The latter obliged Austral to "use all reasonable endeavours" to provide "up to a maximum 6.8 million cubic metres" over the life of the Landfill. Provided it used such endeavours it fulfilled its obligation under that clause. As Collex submitted, Austral could not be in breach of that provision if the reason why it fell short of the maximum airspace target was due to no lack of reasonable endeavours on its part but rather was due to the compulsory acquisition by the RTA over which Austral had no control. 117 Clause 8.5 is only engaged if it becomes apparent to the parties "acting reasonably" that it will not be possible for Austral to "reasonably provide" the 6.8 million m³. In our view the requirement for the parties to be "acting reasonably" harks back to the "all reasonable endeavours" requirement of cl 8.4. There may well be a question as to whether it would be apparent to Austral that Collex was "acting reasonably" if it alleged that it would not be possible for Austral "to reasonably provide" the required airspace when the reason for that impossibility was not due to any failure of Austral to "use all reasonable endeavours" within the meaning of cl 8.4. Accordingly, issues of reasonableness on the part of Austral dictate the application of cl 8.5 to the particular situation. 118 Further, the obligation of Austral to reimburse Collex in accordance with the formula set out in cl 8.5 only arises if the parties agree or, if they do not, on them obtaining a binding determination under cl 27.6 of the Deed (which is a dispute resolution provision) that it will not be possible for Austral to provide the required airspace. 119 It follows from the foregoing that contrary to the thrust of the RTA's submissions, cl 8.5 does not automatically impose an obligation upon Austral to reimburse Collex the equivalent of $1.06 per m³ of airspace shortfall simply because there is a possibility of shortfall. In these circumstances the application of cl 8.5 to a situation where the shortfall is caused solely by the compulsory acquisition of Lot 9 by the RTA and not by Austral acting unreasonably or failing to use all reasonable endeavours to provide the maximum volume of airspace contemplated by cl 8.4, becomes a matter of speculation which it was open to the judicial valuer (the primary judge) as a matter of fact to wholly discount as being relevant to the "after" valuation. In these circumstances no question of law arises. 120 Collex submitted that the valuers took that approach in their application of both the DCF and comparable sales methodologies and that the primary judge's comments to the effect that the terms of the Deed were irrelevant had to be understood in that context. For the reasons we have given, we consider that his Honour's finding that the terms of the Deed were irrelevant to the assessment of compensation payable to the extent that there had been a loss of airspace due to the reduction in the area available for excavation because of the acquisition, was therefore correct. Grounds of Appeal 1, 2, 3(a) and 3(b), insofar as they are based on the provisions of cl 8 of the Deed, should be rejected. The Second Issue: Did Austral have a relevant interest in land? (Ground of Appeal 3(e)); Should there have been a deduction from the compensation to take account of the payment made by the RTA to Austral? (Ground of Appeal 3(f)) 121 The RTA contended that his Honour erred in law in his findings that first, Austral's interest under the Deed was not an "interest in land" within the meaning of the Just Terms Act and, second, that the RTA's payment to Austral was irrelevant to the determination of the compensation payable to Collex. 122 This challenge to his Honour's findings was based upon the operation of s 56(2) of the Just Terms Act which we have set out at [49] above. It was submitted that pursuant to that provision the acquiring authority was not required to compensate each of two owners for the acquisition of a single item where the total amount of compensation exceeded the market value of the acquired land. In this regard, the RTA contended that of the $8.9 million (excluding GST) paid to Austral, an amount of $1.06 million had been attributed by the RTA to the loss referable to the Airspace Creation Payment which, but for the acquisition of Lot 9, Austral would otherwise have received under the Deed. It was submitted that Austral's and Collex's interests in Lot 9 together made up to the total market value of Lot 9. As the RTA had compensated Austral for the loss of its interest, it should not also have had to compensate Collex for the loss of its interest in the same airspace without the amount attributed to Austral's interest being deducted from the value of Collex's interest. It was submitted that on his Honour's approach, Collex had been compensated twice; first by being awarded compensation as though it had been relieved of its liability to make the Airspace Creation Payment to Austral under cl 7.1.1 of the Deed; and, second, because it would be partially relieved of that obligation due to the acquisition. 123 The RTA further submitted that whilst it accepted that the DCF valuation took Collex's liability to pay the Airspace Creation Payment into account, it failed to take into account the payment of that royalty (assessed by the RTA at $1.06 million) to Austral in satisfaction of Collex's liability to pay had there been no acquisition. In other words, the RTA had paid to Austral the royalty for the lost airspace sustained by Collex due to the acquisition of Lot 9, which had the effect of relieving Collex from itself paying that royalty. 124 The primary judge found (at [65]) that the Airspace Creation Payment was not relevant to the assessment of compensation payable to Collex under the Just Terms Act. His Honour also found that the fact that the RTA had paid compensation to Austral for the loss of the Airspace Creation Payment was also irrelevant to the assessment of the compensation payable to Collex. He found that under the terms of the Deed, Austral had no relevant interest in Lot 1 (or Lot 9), but was a mere licensee. His Honour held that, as between Collex and Austral, whatever consequence flowed under the Deed as a result of the acquisition was irrelevant to the determination of compensation and did not impact upon Collex's claim. 125 The primary judge's finding that Austral had no interest in Lot 1 and was a mere licensee appears to be derived from the terms of cl 8.8 of the Deed, which provided that "subject to the Land Sale Agreement Austral in conducting Quarrying Operations on the Land shall be a licensee only and shall not acquire any interest in the Land". His Honour's finding (at [66]) that the payment for the creation of airspace was a "fee for service" was presumably a deduction from his finding that Austral was a mere licensee. 126 The RTA's submission as to what constituted Austral's relevant interest in Lot 9 or for that matter, Lot 1, was not always clear. It initially asserted that Austral had or retained a profit à prendre in the land based upon the provisions of cl 8.9.2 of the Deed. If it did, it would be an interest in land for the purposes of the Just Terms Act: Hornsby Council v Road and Traffic Authority of New South Wales (1997) 41 NSWLR 151 at 155 per Meagher JA. 127 Yet Austral never claimed compensation from the RTA on the basis that it had such an interest which had been compulsorily acquired: nor in the correspondence referred to in [17] and [18] above did either it assert or the RTA acknowledge that it had such an interest. On the contrary, the only profit à prendre acknowledged by the parties was that of Brickworks and the only interest of Austral in Lot 9 was its right to receive royalty income being the Airspace Creation Payment. It is only the latter and the amount allegedly paid by the RTA to Austral with respect to its non-compulsory "acquisition" by the RTA that became relevant on the appeal. Accordingly, whether or not Austral retained a profit à prendre in Lot 9 or for that matter, in Lot 1, need not be determined. 128 For present purposes it may be assumed that Austral had a relevant interest in Lot 9 constituted by its contractual right to receive the Airspace Creation Payment for the creation of voids for the purpose of Collex's landfill operations and that the primary judge erred in finding to the contrary. However, the question arises as to whether that error was a material error of law. The answer to that question depends on the relevance of Austral's (assumed) interest in the determination of the compensation to which Collex was entitled. 129 The materiality of Austral's interest was advanced by the RTA on two bases. It was submitted that that interest was required to be taken into account first in the "before" and "after" evaluation of compensation which captures both ss 55(a) and 55(f) of the Just Terms Act and, second, under s 56(2) of that Act. 130 The difficulty with the first basis relied upon by the RTA for requiring the Airspace Creation Payment or royalty to be taken into account is that, as the RTA conceded, it was taken into account in the DCF calculation which his Honour adopted. At [66] he observed that if "the DCF method is adopted [and it was at [113]] the so-called royalty payment will be incorporated in the calculations." And so it was: see [79] to [84] above. 131 However, the RTA's second and primary submission was that the value of Austral's interest in Lot 9 constituted by the Airspace Creation Payment was required to be taken into account under s 56(2) of the Just Terms Act. In particular, it was contended that in order to conform to the dictate of s 56(2) the primary judge was required to deduct from the value of Collex's interest in the lost airspace from Lots 8 and 9, the amount of $1.06 million being the amount attributed by the RTA to the value of Austral's interest, constituted by the Airspace Creation Payment, in Lot 9. 132 In response Collex submitted that even if Austral had an interest in Lot 9, s 56(2) had no effect or impact on the compensation payable to Collex, because Austral's interest therein had not been compulsorily acquired. It was submitted that the section only applied when there was a compulsory acquisition of each of several interests in land from the various owners of those interests. Reliance was placed on the provisions of s 37. 133 In our opinion there is substance in this submission for the following reasons: (a) Section 56(2) is in Division 4 of Part 3 of the Just Terms Act which is concerned with the determination of compensation; (b) Part 3 is concerned with compensation for the compulsory acquisition of land or an interest in land; (c) Section 37 which is in Division 1 of Part 3, entitles an owner of an interest in land to compensation in accordance with that Part where that interest has been diverted, extinguished or diminished by an acquisition notice; (d) An acquisition notice is, by definition, a notice under s 19 which declares that land has been acquired by compulsory process; (e) Section 54, which also is in Division 4 of Part 3, refers to the amount of compensation to which a person is entitled under Part 3; as indicated that entitlement is granted by s 37; (f) Section 55 refers to the determination of the amount of compensation to which a person is entitled by regard to, amongst other things, the market value of the land at the date of its acquisition; (g) Section 56(2) is concerned with the market value of land for the purpose of paying compensation; that must be a reference to compensation to which a person is entitled, a reference back to s 37; (h) Other provisions of Part 3 relating, for instance, to making a claim for compensation (Division 2) and post-acquisition procedures relating to compensation (Division 3) are all predicated upon there having been an acquisition by compulsory process; (i) Accordingly, s 56(2) only applies when assessing the market value of land for the purpose of paying compensation to more than one former owner of interests in land where those interests have been acquired pursuant to an acquisition notice which declares that those interests have been acquired by compulsory process. 134 In the present case, only the interest of Collex in Lot 9 was so acquired. It follows that only Collex was entitled to compensation under Part 3 of the Just Terms Act. Neither Brickworks nor Austral were so entitled as their respective interests in Lot 9 had not been divested by an acquisition notice, that is, by compulsory process. 135 It is true that s 3(1)(e) of the Just Terms Act encourages the acquisition of land by agreement rather than compulsory process. Part 2 of the Act thus provides for various pre-acquisition procedures to be complied with before land is acquired by compulsory process. Thus a proposed acquisition notice is required to be given pursuant to s 11 being, by definition, a notice under that section of an intention to acquire the land by compulsory process. Such a notice must give at least 90 days notice before land is compulsorily acquired: s 13(1). By s 14(1) the relevant authority must as soon as practicable after the expiry of the notice, either withdraw the notice or acquire the land by compulsory process or agreement. It is only if the former method of acquisition is adopted that the owner of the land becomes entitled to compensation. 136 It is in the foregoing manner than s 3(1)(e) is implemented. But once s 19 is engaged and an acquisition notice is published in the Gazette, compensation must be determined in accordance with Part 3 including s 56(2). But the latter proceeds on the clear assumption that the interests to which it refers and which together make up the market value of the relevant land have been acquired by compulsory process which entitles their owners to compensation. 137 In any event, a further question arose relating to the "market value" of the lost Airspace Creation Payment. The RTA, in submitting that that was a relevant consideration, contended that the best, and in fact only, evidence of the "value" of that payment before the primary judge was the $8.9 million (exclusive of GST) compensation payment it made to Austral, of which $1.06 million was attributed in an email from the RTA to Austral dated 30 July 2004 to "lost royalty income". Senior counsel for the RTA recognised that the RTA's assessment of that figure was not necessarily representative of its true value which may have been more or less. The point was that it was the only evidence of that loss before his Honour who was bound to take it into account in assessing the compensation payable to Collex. However, it was not evidence of a sale and there was nothing to indicate that Austral was party to its negotiation and determination. As far as the evidence goes, it was a figure unilaterally determined by the RTA. It could carry no weight. 138 There may have been a nice question had his Honour found that Austral did have an interest in land arising out of the loss of its entitlement to the Airspace Creation Payment with respect to Lot 9, but the value of that interest was not established. If the RTA was to rely on s 56(2) the onus lay upon it to establish the true market value of the lost airspace upon Lot 9 and then to establish the true market value of the respective interests of Collex and Austral in that lost airspace. Clearly, it did not discharge or even attempt to discharge that onus. Furthermore, s 56(2) only applied to the market value of the airspace lost from Lot 9 for the purposes of s 55(a) of the Just Terms Act. It had no application to that lost from Lot 8 for which Collex was entitled to be compensated pursuant to s 55(f). 139 Accordingly, for the foregoing reasons, in our opinion the RTA's challenge to his Honour's assessment of the value of the lost airspace founded on s 56(2) should be rejected. The Fourth Issue: the primary judge's alleged failure to provide reasons for adopting Collex's revised contours rather than those of the RTA 140 The requirement to give reasons and the principles governing that requirement are not in issue. Nor is it in dispute that a failure by a primary judge to give adequate reasons constitutes an error of law. The question is whether his Honour failed to give adequate reasons so as to satisfy that obligation: see Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247; Beale v Government Insurance Office of New South Wales (1997) 48 NSWLR 430. The factual basis of this ground of appeal was his Honour's acceptance of the revised contours of Lot 8 that Collex maintained were necessary following the acquisition of Lot 9 and his rejection of the RTA's evidence that by a permitted reconfiguration of those contours, the lost airspace would be significantly less than that claimed by Collex. 141 The specific finding which is the subject of this challenge was the following: "54. On the basis of a setback of 30m and adopting the revised contours developed by Collex rather than the RTA the value of lost airspace has been determined by an agreement between surveyors at 1,048,186 m3." (emphasis added) 142 The RTA complained that his Honour provided no reasons at all for his preference for the Collex revised contours over those of the RTA. It pointed out that there had been a significant contest in relation to this issue, with experts for both parties giving detailed evidence on the topic at trial. However, his Honour did not give any reasons as to why he accepted Collex's experts and rejected those of the RTA. This challenge to his Honour's reasons accepted that there would be a loss of airspace as a result of the acquisition of 689,966m³. The difference between that volume and that accepted by his Honour (1,048,186m³) is 358,220m³. Thus if the RTA's submission that his Honour failed to give adequate reasons is correct, Ground 4 of the appeal will have been made out, as the volume of lost airspace was the primary integer in the calculation of Collex's compensable loss. 143 The last point was recognised by the primary judge when he noted at [22], "the possible fill volumes depend upon the Court's ultimate finding in respect of a dispute regarding the final landform in the ' after ' situation …". He then noted that the surveyors had carried out four alternative agreed calculations of lost airspace, namely, 1,048,186m³; 715,800 m³; 689,966 m³ and 483,682 m³. The first of these figures was Collex's revised contours whereas the other three were advanced by the RTA based on three different scenarios as to the treatment of the new boundary with the M7. As noted above, the RTA contended for the second of its calculations. 144 His Honour's reasoning that led to his conclusion that the value of lost airspace was to be based upon Collex's revised contours commenced, relevantly, at [49]. He there set out the opinion of the expert planners as to whether the owner of Lot 8 should be advised to make a development application for the purposes of modifying the existing consent to take account of the effects of the acquisition of Lot 9, noting that the planners were equivocal on that matter. However, they had agreed that an application under s 96 of the EPA Act or a new application for development consent to reconfigure the ultimate landform of Lot 8, having regard to the setbacks and landscaped areas that would be required because of the acquisition, would be likely to succeed. 145 At [50], his Honour recorded the difference of opinion between the planners as to whether a modification of the existing scheme was required. The RTA's expert contended that the reconfiguration could be accommodated within the existing development consent having regard to the maximum height of AHD 85 permitted by the EIS. Collex contended that any change was such that a modification to the development consent was required. 146 His Honour found (at [51]) that the original development consent, with modification, could still be implemented and that any amended scheme would require at least a 30 metre setback from the adjusted western boundary of Lot 8. Otherwise, the Council would take steps to ensure that satisfactory changes were made to meet the altered circumstances following acquisition. 147 His Honour then found (at [52]) that although it was feasible for Lot 8 to be reconfigured so as to ensure the same amount of space for landfill was provided, he was satisfied that there was a loss of airspace as a direct consequence of the acquisition. He added: "If the replacement of airspace can be achieved by re-design after acquisition then it must be accepted that the same could have been achieved beforehand." This was a contested finding of fact at trial but not one open to challenge in this Court. 148 The primary judge therefore held (at [53]) that as Collex was deprived of the opportunity to use so much of Lot 9 as otherwise would have been available for landfill, that was a compensable loss under the Just Terms Act. His Honour found that the use of airspace for waste disposal was a factor that the parties to the hypothetical sale would have taken into account when determining the price to be paid for Lot 9 as at the date of the acquisition. He also held that Collex was entitled to compensation under s 55(f) for the loss of airspace on Lot 8. 149 At [54], his Honour accepted that there was a loss of airspace of 1,048,186 m3 when regard was had to the 30 metre setback on Lot 8 and adopting Collex's revised contours. The RTA's primary case was that there was a loss of airspace of 689,966 m3. The difference in the two calculations was due to two factors. First, Collex had adopted a variable setback of between 26.6 and 36.1 metres, rather than 30 metres. This resulted in a miscalculation of the available airspace, which was subsequently corrected by Collex's expert. Second, Collex had adopted in the "after" situation, final contours that were similar in shape to those originally approved. On the RTA's expert evidence, its contours, which created a finished landform to a maximum height of RL85AHD under the recommendations contained in the EIS adopted in the 1998 consent, would produce greater available airspace in that situation than those of Collex. Having determined the volume of lost airspace, his Honour then went on to consider the issues with respect to the determination of its value. 150 A consideration of [50]–[54] of his Honour's judgment reveals the following reasoning process. First, the RTA's finished landform for Lot 8 (being its revised contours) provided for a maximum height of RL85AHD as permitted under the EIS. The effect of that landform was that it would "offset and accommodate" the loss of airspace alleged by Collex as a consequence of the acquisition. Second, the new landform proposed by the RTA required modification of the 1998 consent. 151 Third, although it was possible that the reconfigured landform/contours adopted by the RTA would ensure that the same volume of airspace for landfill would be provided on Lot 8 as would have been provided on Lot 1, nevertheless, because the design to achieve that greater volume of airspace could have been achieved before as well as after acquisition, it should be rejected in favour of the loss of airspace contended for by Collex which was a direct consequence of the acquisition of Lot 9 and the new setbacks required on Lot 8. In other words, the revised contours adopted by the RTA were not a direct consequence of the acquisition because those contours could have been the subject of a modification application by Collex even if there had been no acquisition. 152 Fourth, it followed that it was therefore necessary to determine the lost airspace which was a direct consequence of the acquisition and which could not be offset or reduced by the adoption of revised contours or a final landform which were not such a consequence but which could have been pursued irrespective of the acquisition. 153 One may cavil with the logic of his Honour's reasoning and may even disagree with it. But that would not be to the point of the present challenge which was, and could only be, directed to establishing that his Honour had not provided reasons for his rejection of the RTA's revised contours and his adoption of those of Collex. 154 It follows in our view that the primary judge did provide reasons for his decision to adopt Collex's revised contours. The assertion of the RTA in Ground 4 of its Amended Notice of Appeal that his Honour failed "to give any reasons for" that decision cannot be sustained. That ground of appeal should therefore be rejected. Conclusion 155 In our opinion each of the challenges by the RTA asserting errors of law on the part of the primary judge fail. We would therefore propose that the appeal be dismissed with costs. 156 HODGSON JA: When I first read the papers in this case, it struck me that the result seemed utterly contrary to commonsense. Having heard the oral argument and having considered the matter carefully, I remain of that view. This does not of course necessarily mean that the primary judge was in error, having regard to the evidence before him and the way the case was presented to him. It certainly does not necessarily mean that the judge made an error of law, and it is only an error of law that could justify intervention by this Court. It will be necessary carefully to consider the issues properly raised on this appeal. 157 The case has some complexity. It is very easy to get lost in this complexity. I will begin with a simplified (but I hope not oversimplified) account of the essential facts and the result arrived at by the primary judge. I will then explain why I believe this result is contrary to commonsense, and how and why I believe this happened. Then I will outline the main issues raised by the appeal, and will deal with each of them. Essential facts and result 158 The respondent Collex is a company with a profitable business in waste disposal. On 2 July 2001 it entered into a Deed with Austral Brick Company Pty Limited (Austral), a company engaged in brick-making activities. 159 The Deed provided terms concerning the purchase by Collex and the licensing and development of 35.2 hectares of land (Lot 1) then owned by Austral. It is plain from the terms and conditions of the Deed that what was intended was that Austral and/or associated entities would over ensuing years (which on the evidence would probably be in the order of eighteen years) progressively excavate the land and thereby obtain clay for brick-making and other materials, thereby creating voids ("airspace") which could be used by Collex for its waste disposal business. 160 The Deed recited that agreement had been reached for the sale of Lot 1 by Austral to Collex on terms to be set out in a land sale agreement, including payment by Collex to Austral of $3.6 million on the obtaining of relevant approvals and a further $1.15 million when conditions in the Deed had been satisfied. 161 The Deed also provided for further payments to be made by Collex to Austral for the creation of airspace, namely a payment of $2.45 million when conditions in the Deed had been satisfied (cl 2.9, 1 Blue 67) and annual payments of a minimum of $1 million indexed (that is, adjusted to follow movements in the Consumer Price Index each year) made up of payments of an "Airspace Creation Payment" of at least $4 indexed for each tonne of waste taken on to the land, these minimum payments being subject to proportionate reduction, at the rate of $4 indexed per cubic metre, in any year in which Austral was unable to provide 250,000 cubic metres of airspace: cl 8.3, 1 Blue 76-77. 162 The recitals to the Deed also made reference to a payment of $2.5 million: recital B(1), 1 Blue 55. The Court was told that this was a payment additional to the $2.45 million referred to in cl 2.9, being a payment for airspace already existing. However, in my opinion this could not possibly be the case. The land sale contract subsequently entered into makes reference to a payment for airspace already existing, and makes it clear that this payment was the $2.45 million referred to in cl 2.9. In my opinion, the only rational explanation for the reference to $2.5 million in the recitals to the Deed is that this was a mistaken reference to the $2.45 million referred to in cl 2.9. 163 The Deed also provided to the effect that if it should not be possible for Austral to provide 6.8 million cubic metres of airspace, Austral was to refund to Collex an amount of $7.2 / 6.8 multiplied by the number of cubic metres of the shortfall (cl 8.5, 1 Blue 77-78). In effect, Collex was treated as having paid $7.2 million for the right to acquire 6.8 million cubic metres of airspace by making the Airspace Creation Payments, and thus to be entitled to a refund of about $1.06 per cubic metre of any shortfall. 164 The Deed provided for the grant of a profit à prendre to Austral and its contractors to enable extraction of materials to take place (cl 8.9, 1 Blue 79). 165 The Deed also restricted re-sale of the property by Austral (cl 14, 1 Blue 83-84); and the restrictions had the effect that, if there was a re-sale during the currency of the extraction enterprise, the purchaser would have to enter into a similar agreement with Austral. It also provided that, on any other re-sale, Collex had to pay sixty-six per cent of the net proceeds of sale to Austral. Collex was obliged to undertake such a re-sale after the conclusion of the extraction enterprise and rehabilitation of the land. 166 On 6 May 2002, pursuant to this Deed, Austral and Collex entered into a standard form of contract for the sale and purchase of Lot 1 (5 Blue 958). Its terms generally reflected those of the Deed. It provided for a purchase price of $7.2 million, agreed to be apportioned as to $4.75 million to the land and as to $2.45 million to airspace already existing (this being identified as identical to the amount payable under cl 2.9 of the Deed): 5 Blue 965. 167 The contract made completion conditional on registration of a profit à prendre granted by Austral to an associated company Brickworks Limited. This profit à prendre was expressed to be for a consideration of $10 and to entitle Brickworks to enter Lot 1 and extract soil and materials from it. 168 On 28 May 2004, the appellant RTA compulsorily acquired 4.5 hectares of Lot 1 (Lot 9), leaving Collex with the remaining 30.7 hectares (Lot 8). 169 The question before the primary judge was the amount of compensation payable by RTA to Collex pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act). The amount awarded was $7,012,663.60. 170 The amount was awarded under three headings. (1) Surface value of the land: $1,997,798.00 (2) Value of lost airspace: $4,887,000.00 (3) Compensation for disturbance: $127,865.60 171 No issue has been raised as to the third element. 172 As regards the first element, the primary judge dealt separately with 0.8 hectares which was unaffected by the "landfill" (that is, the proposed excavation, waste disposal and ultimate remediation), and 3.7 hectares which was affected by the landfill. He found the surface value of the land acquired, as at the date of acquisition, assuming immediate availability of the 0.8 hectares and completion of the landfill on the 3.7 hectares in eighteen years, to be $1.24 million for the former and $757,798 for the latter. 173 As regards the second element, the primary judge adopted the method of comparing the value of the airspace in the whole of Lot 1 on the date of acquisition with the value of the airspace in Lot 8 immediately after the acquisition, thereby obtaining the aggregate of the value of the airspace in Lot 9 on the date of acquisition (s 55(a) of the Just Terms Act) and the decrease in value of the airspace in Lot 8 (s 55(f) of the Just Terms Act): see RTA v Muir Properties Pty Ltd [2005] NSWCA 460; (2005) 143 LGERA 192 at [103]-[104]; RTA v Damjanovic [2006] NSWCA 166 at [9]. The total lost airspace was found to be about one million cubic metres (to be precise, 1,048,186 cubic metres), of which about 300,000 cubic metres was on Lot 8 and about 700,000 cubic metres was on Lot 9. 174 The primary judge considered the value of this lost airspace first on the basis of comparable sales, applying a rate of $4.75 per cubic metre to 1,048,186 cubic metres, giving $4,978,884. He then considered it on the basis of a discounted cash-flow, supported by valuation evidence; and on this basis arrived at a figure of $4,887,000. He considered that the latter was the preferable method, and adopted the latter figure. The conflict with commonsense 175 Collex was awarded about $7 million as compensation for the acquisition of about thirteen per cent of land which it had purchased about two years earlier for $7.2 million. A simply extrapolation of the rate at which Collex was compensated would give a value for the whole of Lot 1, as at the date of the compulsory acquisition, of about $55.4 million; that is, nearly eight times what Collex had paid for it only two years earlier. 176 This was the simplistic calculation that originally led me to think the result grossly conflicted with commonsense. A closer examination of the problem suggests only a very slight amelioration of this incongruity. 177 To understand exactly what Collex purchased, and how much it paid, and/or was obliged to pay, for what it purchased, it is necessary to consider together the contract of May 2002 and the Deed of July 2001. 178 An important element of what Collex purchased was an entitlement to be provided, over a period of about eighteen years, with 6.8 million cubic metres of airspace in return for Airspace Creation Payments of a minimum of $1 million per year, which minimum would be reduced at the rate of $4 indexed per cubic metre in the years in which less than 250,000 cubic metres of airspace was provided. It is to be noted however that, although the minimum yearly payments were adjusted at the rate of $4 indexed per cubic metre, the amounts to be paid were to be calculated at the rate of $4 indexed per tonne of waste deposited, which might approximate to $4 indexed per cubic metre but might vary somewhat from it. 179 This entitlement to be provided with airspace in return for such payments (which have been described as "royalty" payments) was part of what was obtained in return for the price of $7.2 million specified in the contract. The remainder of what was obtained was entitlement to the land itself, to the extent that it was unaffected by the excavation / waste disposal operations, and, as to the remainder, to the extent that it was available for use at the end of those operations. However, this entitlement was subject to the obligation of Collex to pay Austral sixty-six per cent of the net proceeds of sale of the land, unless it was sold during the period of the operations to another entity that undertook Collex's obligations. 180 These two elements (airspace and the land itself) were reflected in the two principal elements of compensation arrived at by the primary judge. 181 It is important clearly to understand that what Collex obtained, in relation to airspace, was not simply airspace, but an entitlement to be provided airspace on the land in return for Airspace Creation Payments (ACPs) approximating to $4 per cubic metre indexed (and more precisely, calculated at $4 per tonne indexed). Thus, to the extent that Collex lost airspace, by reason of the acquisition by RTA, what it actually lost was not simply airspace, but rather the entitlement to be provided airspace in return for such payments; and in calculating the value of what Collex had lost by way of lost airspace, it was necessary not to include in the compensation figure the value of payments which Collex still had to make for the airspace. 182 The contract purported to attribute $4.75 million to the land and $2.45 million to airspace already existing; but the provision for a reduction of the purchase price in the Deed proceeded on the basis that $7.2 million had been paid for an entitlement to be provided with 6.8 million cubic metres of airspace, in return for the ACPs, giving rise to a proportionate reduction of the price if less than 6.8 million cubic metres was provided. This suggests it would be reasonable to regard the contract between Collex and Austral as having been negotiated on the basis of about $1.06 for each cubic metre to be provided by Collex in return for the ACPs. 183 I note however that this calculation would attribute no value to the "land" element in the purchase, to thirty-four per cent of which Collex was to be entitled. Thus, for example, if one reduced the rate giving entitlement to provision of airspace to $1 per cubic metre, that would leave $400,000 of the $7.2 million which could then be attributed to the land element. If one then added the sixty-six per cent which was effectively to remain with Austral, one would get a figure of $1.2 million representing the total value of the land element. This calculation may or may not be realistic: I include it merely to show that in order to treat the land element as making any appreciable contribution to the purchase price, it is necessary to reduce the rate for the airspace entitlement from the figure of $1.06 per cubic metre. The greater the value attributed to the land, the greater the reduction from the figure of $1.06 per cubic metre. 184 If then the bargain struck between Collex and Austral, two apparently successful companies with substantial experience in the relevant areas of business, is taken as a guide to the value of what was acquired by RTA, it would suggest a rate of about $1.06 per cubic metre of airspace to which there would be entitlement in return for the ACPs, if nothing is allowed for land value. This would be the figure as at May 2002, the date of the contract; and it could reasonably be considered as justifying a larger figure of (say) around $1.20 per cubic metre as at May 2004, the date of the acquisition. Applying this to 1,048,186 cubic metres of lost entitlement to airspace in return for the ACPs, one gets $1,257,823, about one quarter of the amount awarded for this by the primary judge. 185 This is the result reached if no part of the purchase price is attributed to the land value element. The greater the amount attributed to the land value element, the less would be attributed to the airspace element. However one does the calculation, one does not arrive at a figure greatly in excess of the figure mentioned in the previous paragraph. I will not set out here any detailed calculations; but a broad brush commonsense approach suggests that a combined figure for land value and airspace in excess of about $1.5 million is unlikely. Yet, as we have seen, what was awarded was nearly $7 million. How did this conflict with commonsense occur? 186 There seems to be a severe conflict with the commonsense approach in each of the elements of value under consideration. The figure of $1,997,798 for the land value or surface value of thirteen per cent of the land purchased two years earlier for $7.2 million, given that a substantial part of the $7.2 million was attributable to airspace rather than to land value, seems excessive, to say the least. That figure for thirteen per cent would extrapolate to $15.4 million for the whole, for land value alone. 187 However, one factor entering into this aspect of the calculation is an agreement between Collex, RTA and Austral for the purpose of these proceedings that Collex should be treated as entitled to all of the proceeds of the ultimate sale of the land, and should pay on to Austral whatever Austral is entitled to pursuant to its entitlement to sixty-six per cent of sale proceeds. Accordingly, it would seem, of the figure of $1,997,798, only thirty-four per cent or $679,251 represents land value purchased by Collex. If we were to treat $679,251 as at May 2004 as equivalent to (say) about $600,000 in May 2002, this would not so obviously be an unreasonable figure, even allowing for the fact that that amount is being attributed to only thirteen per cent of the area purchased. However, it is to be noted, as before, that the greater amount that is attributed to land value, the less the amount of the purchase price available to be attributed to airspace. In any event, if then one adds an amount for airspace to the figure of $1,997,798 for land value, at best one could get to a little over $3 million, out of which sixty-six per cent of $1,997,798 (that is, $1,318,547) would be paid on to Austral, leaving about $1.7 million for Collex. Although that is a high figure compared with my commonsense calculation, it is not so different as to cause any real concern. 188 The real cause for concern is the figure of $4,887,000 for lost airspace, which is about four times the highest amount that could be supported on a commonsense basis. 189 In my opinion, part of the explanation to this extraordinary figure lies in a gross error made in determining the loss of airspace element of Collex's claim, on the basis of comparable sales. While compensation was ultimately awarded on a different basis, namely a discounted cash-flow basis, the gross error in the calculation on the basis of comparable sales must, in my opinion, have had substantial influence on the experts and/or the primary judge in arriving at the discounted cash-flow figure. 190 As regards determination of the loss of airspace element of the claim on the basis of comparable sales, it will be recalled that this was done on the basis of a rate of $4.75 per cubic metre. This equates to a total of about $32.3 million for the 6.8 million cubic metres that was to be provided to Collex, pursuant to its purchase of the land for $7.2 million (that is, about four and half times what Collex paid for the land, leaving nothing for land value). 191 The most comparable sale on which the expert valuers based the figure of $4.75 per cubic metre was the sale of the subject property by Austral to Collex. The experts arrived at the figure of $4.75 per cubic metre by adding to the $7.2 million the present value, as at the date of the Collex purchase, of all the ACPs to be made by Collex over the presumed life of the excavation/waste disposal project, and then making an upward adjustment to account for the increase in value between the date of the Collex purchase and the date of the RTA acquisition. (This method appears at 7 Blue 1590-91, the final result at 8 Blue 1872, and there is some confirmation of the method at 3 Black 419.) 192 As a calculation of the value of the airspace as at the date of acquisition, this is a reasonable result. But as at that date, Collex was not entitled to the airspace: it was entitled merely to be progressively provided with the airspace in return for progressive payment of ACPs. Of the $4.75 per cubic metre, a maximum of about $1.20 per cubic metre was the value of this entitlement as bargained for in the sale from Austral to Collex, and the remainder of about $3.55 per cubic metre represented the present value of the ACPs that were to be made in the future to Austral (and thus to be a measure of Austral's interest in the land and/or its contract with Collex in respect of the airspace). Collex was not entitled to be compensated for the present value of the ACPs which it had yet to make; and the inclusion of this element in the figure of $4.75 per cubic metre is a major reason why the value of lost airspace arrived at on the basis of comparable sales was about four times too high. 193 It is not possible to say whether this gross error was due to a mistake of the valuers, mistake of the lawyers, misunderstandings in communications between them, or misunderstandings as to the true effect of the Deed and contract. For present purposes, it does not matter. It will be necessary in due course to determine whether there was an error of law in the judgment. 194 There is no such obvious error in the calculation of the value of the lost entitlement to airspace on the discounted cash-flow basis: those calculations did take into account that the ACPs (or royalties) were payable. However, there were many doubtful and contentious elements of these calculations, including assumptions about revenue, expenses, risk factors and capitalisation rates. In my opinion, it is inconceivable that, if the valuers (and the primary judge) had been aware that the correct valuation of the lost entitlement to airspace, on the basis of the recent bargain concerning this actual property between two experienced parties, was of the order of $1.2 million, they would have adopted a discounted cash-flow valuation of about $5 million. Issues on appeal 195 It is necessary now to consider the issues raised by this appeal, with a view to determining whether they disclose any error of law made by the primary judge. 196 One problem is that the points I have been discussing were not clearly raised below, and indeed not clearly raised in the appeal. This of course suggests the possibility that I am simply mistaken in the points I have made, and I acknowledge that possibility. However, I raised these points as clearly as I could during oral argument in this case, and was given no reason to think I was mistaken. Of course, this Court can intervene only if it finds a relevant error of law by the primary judge, within the actual issues raised on the appeal, which materially affected the result and reliance on which is not precluded by Suttor v Gundowda considerations (Suttor v Gundowda (1950) 81 CLR 418). 197 The issues raised in this appeal are whether the primary judge erred in law in one or more of the following respects: (1) In not finding that, by reason of certain provisions in the Deed, Collex did not or was not likely to suffer any loss of airspace (appeal ground 3(a)). (2) In not taking into account the ACPs which had yet to be made for the creation of the airspace (appeal ground 3(d)). (3) In not finding that Austral had an interest in the land which reduced the value of Collex's interest (appeal ground 3(e)). (4) In not giving reasons justifying the adoption of 1,048,186 cubic metres for the loss of airspace rather than the figure of about 700,000 cubic metres supported by RTA's witnesses (appeal ground 4). 198 Within the third issue, RTA contended that the primary judge should have taken account of compensation paid to Austral pursuant to an arrangement reached between RTA and Austral. I would say at once that, in my opinion, this arrangement is irrelevant, except to the extent that it draws attention to the need to consider carefully the extent of Collex's interest in the land for which compensation is to be given. In particular, such an arrangement between RTA and another party cannot engage at all with the provisions of s 56(2) of the Just Terms Act, which only applies where the court is able to act on what it finds to be the true market value of various interests in the land. 199 Having regard to that comment, I will be considering issues (3) and (4) together, because they substantially overlap. I will consider each of the other issues individually. No loss of airspace? 200 On this issue, RTA relied on three provisions of the Deed: a provision requiring Austral to use all reasonable endeavours to provide 250,000 cubic metres of airspace each year, a provision entitling Austral to provide "reasonably adjacent airspace" on other land if it could not do so, and a provision that Austral use its best endeavours to provide in all 6.8 million cubic metres of airspace, failing which there was to be the price reduction referred to earlier. 201 Accordingly, RTA submitted that, even if RTA's acquisition of Lot 9 removed 300,000 cubic metres of potential airspace and reduced by 700,000 cubic metres the potential airspace on Lot 8, nevertheless Austral was obliged to use its best endeavours to provide the agreed airspace, was entitled to provide it on other land, and was given price incentives to do so. Accordingly, either there was no loss of airspace or probably no loss or little loss; and insofar as there was loss, Collex would be compensated for it. 202 This argument requires consideration as to how the Deed would operate following the acquisition of Lot 9, when part of the land to which the Deed applied was no longer available. 203 It was submitted for Collex that this should be considered on the basis that there had been a consensual sale of Lot 9, rather than the compulsory "sale" involved in RTA's acquisition of it, such a consensual sale requiring agreement by Austral, which presumably would only be given if Austral was relieved of its obligation to provide 6.8 million cubic metres of airspace. However, I see no basis for the contention that the position must be considered on the untrue assumption that there had been a consensual sale. Although Leichhardt Council v RTA [2006] NSWCA 353; (2006) 149 LGERA 439, established that the s 55(a) and s 56(1) value of Lot 9 must be determined on the basis of a hypothetical sale of Lot 9, it does not establish that the diminution in value of Lot 8 must be determined on the untrue assumption that Lot 9 was consensually sold: on the contrary, s 55(f) refers to decrease in value by reason of the carrying out of the public purpose, not by reason of a presumed consensual sale. 204 Plainly, the Deed was intended to apply to the whole of Lot 1, and some of its provisions are inapt to apply to part only of Lot 1 after a substantial part of it had been compulsorily acquired. Neither party contended that the Deed was frustrated; and in my opinion, the Deed should be considered as continuing to apply, as best it can, to the changed situation. 205 One aspect of that changed situation is that Collex is to be compensated in full for the value of its interest in the compulsorily acquired land, and for any diminution in value of the retained land, thus removing any rationale for a reduction in purchase price of the land by reason of any deficiency in its value resulting from the compulsory acquisition. Having regard to that consideration, in my opinion the only reasonable way that the Deed could continue to apply to part only of Lot 1 would be to treat Austral's obligation to provide airspace subject to a qualification "except to the extent that any shortfall is caused by the compulsory acquisition of Lot 9". I am not sure if it is necessary actually to imply a term to that effect: this is merely expressing the only reasonable application the Deed could have in the changed circumstances. However, if it is necessary to imply a term, then in my opinion the requirements for implication of a term would be satisfied. 206 On that approach, there was no obligation on Austral to make up the one million cubic metres shortfall caused by the compulsory acquisition of Lot 9. Nor, in my opinion, was there a financial incentive for Austral to do so. Any airspace that Austral provided from other land would be provided to Collex for the ACP of $4 indexed per tonne; whereas pursuant to the Deed and contract, my earlier analysis shows that Austral received in return for the airspace, in addition to the ACP, a price of the order of $1.06 per cubic metre. Thus each cubic metre of shortfall made up by Austral from other land would thus cost Austral something of the order of $1.06, or possibly more. 207 Accordingly, in my opinion, there was no error by the primary judge in holding that the terms of the Deed relied on by RTA did not eliminate or make less likely the loss of airspace. The ACPs and Austral's interest in the land 208 The primary judge's judgment on the issue of compensation for loss of airspace noted (at [44]) the agreement of the valuers that the rate for the purchase of land-fill airspace was $4.75 per cubic metre, and also noted (at [45]) that the only issue between the valuers was whether this rate should be applied directly to the total volume of lost airspace or applied as a deferred value according to the time at which the airspace was likely to be created. He resolved this issue at [58]: [58] Although under the arrangement made with Austral the airspace is to be made available to Collex progressively, the price paid by Collex including an initial payment and subsequent progressive payments reflects the availability of airspace for the purposes of landfill by Collex as and when required over the years. In those circumstances the consideration paid by Collex is for the provision of airspace for the purpose of its business progressively over time. Collex will be in no different position to a purchaser of land, which already contains a void suitable for progressive landfill over a similar period of years. There is no evidence to support a deferral of the value of the airspace based upon present market value. The adopted comparable sales take account of the fact that the whole of the void will not be utilised immediately. I therefore propose to adopt the value of $4,978,884.00 based on comparable sales evidence as the value of the lost airspace calculated at the rate $4.75 per m3 in respect of 1,048,186 m3. 209 The primary judge dealt with the question of the ACPs and the possibility of Austral having an interest in the land as follows: [64] I agree with the applicant that it is entitled to be compensated for the loss of potential airspace. The compensation can be properly assessed against the value of the airspace as it is reflected in the loss in the market value of the land, including the residue land. [65] I find that the Airspace Creation Payment is not relevant to the assessment of compensation for the purposes of the Just Terms Act. The additional fact that the RTA paid an amount to Austral in respect of the loss of the Airspace Creation Payment is equally irrelevant to the assessment of compensation payable to Collex. Austral is a mere licensee under the Deed and as between it and Collex it has no relevant interest in the land for current purposes. Whatever the consequence may be, as between Collex and Austral, under the terms of the Deed Collex is not precluded from a claim to compensation following the acquisition of part of the land it purchased from Austral. The question of any adjustment of payments made by Collex to Austral is a matter of private agreement and does not fall for determination in these proceedings. The payment of compensation may have consequences inter parties under the Deed but any potential payments trigged by the operation of the Deed do not affect the amount of compensation gauged against the value of the land acquired and the detrimental effect on the value of the residue land. [66] Either way a cost of providing airspace is irrelevant in the assessment of market value. It is a fee for service. If the DCF method is adopted the so-called royalty payment will be incorporated in the calculations. Irrespective of the context it is an irrelevant consideration. Any alleged payment by the RTA to Austral as compensation based on the loss of income for the payment, however it is characterised, is a matter between the authority and Austral and has no bearing on the determination of compensation to which Collex is entitled. No evidentiary basis for finding that Austral had a relevant interest in the land has been established in these proceedings. 210 In my opinion these paragraphs do disclose errors of law. 211 In the first place, in my opinion, it is clear that Austral did have an interest in the land. There is an assertion in the Deed that Austral "shall not acquire any interest in the Land" (cl 8.8, 1 Blue 79); but this cannot displace the legal effect of the agreement in the Deed that "Austral and its contractors will have a profit à prendre to extract and remove clay, shale, other brick-making materials and potentially marketable material from the Land" (clause 8.9.1, 1 Blue 79). Nor, in my opinion, can that assertion overcome the necessary implication in the Deed, arising from Austral's obligation to provide airspace on the land, that Austral must be able to go onto the land and to do whatever is necessary by way of removal of material to create that airspace. 212 For Collex, it was submitted that it was Brickworks, not Austral, that had the profit à prendre. In my opinion there is no substance to this submission. 213 I understand it is common ground that Brickworks and Austral are associated companies. In any event, it can readily be inferred that Collex accepted the term in the land contract obliging it to receive the land subject to the profit à prendre in favour of Brickworks only because it was in any event subject to the obligation to grant a profit à prendre to Austral and its contractors; and also that, insofar as Brickworks in fact exercises rights under the profit à prendre, what it does constitutes the compliance by Austral with Austral's obligation under the Deed to provide Collex with airspace. If Brickworks went into liquidation, plainly Austral would still be entitled under the Deed to perform this obligation itself and to exercise a profit à prendre itself. Austral's right to a profit à prendre amounted to an interest in the land at general law, and a fortiori it amounted to an interest within the extended definition in s 37 of the Just Terms Act. 214 Collex's interest in the land is qualified by an interest or interests constituted by Brickworks' registered profit à prendre and Austral's right to a profit à prendre to enable it and/or its contractors to enter and extract material so as to provide airspace to Collex. Having regard to the symbiotic nature of the interests of Brickworks and of Collex, it would be unrealistic to treat them as separate and independent interests. 215 The value to Austral of its interest in the land is that it entitles Austral to receive the ACPs; and the ACPs were treated by the valuers as having a present value, as at the date of acquisition, such as to produce a figure of $4.75 per cubic metre as the value of airspace. In the light of my earlier discussion, this must put the present value of the ACPs to Collex at something in the order of $3.55 per cubic metre (see par [192] above). This value would presumably take into account any expense Collex would incur in providing the airspace; but even if it did not, Brickworks or whoever else was excavating material was getting the benefit of material suitable for brick-making; and so it seems highly unlikely that Collex would be incurring significant expense in providing the airspace. 216 The Court was referred to Hornsby Council v Roads and Traffic Authority of New South Wales (1997) 41 NSWLR 151 in support of the submission that Collex did not have an interest in the land. In my opinion, that case gives no support to that submission, dealing as it did with the generalised rights of a Council in respect of parks within its local area. 217 Thus, in my opinion, the primary judge made an error of law in holding that Austral had no interest in the land; and also made an associated error of law in holding that the ACPs were not relevant to the amount of compensation. Just as Austral had an interest in the land that could reasonably be valued at the present value of future ACPs, Collex's interest in the land, with respect to airspace, was subject to its obligations to make the future ACPs to Austral. This obligation was accordingly relevant to the valuation of Collex's interest. 218 As the earlier discussion shows, there is a question whether this error of law was material, since ultimately compensation for loss of airspace was based on discounted cash-flows, which did take into account Collex's obligation to make the future ACPs. 219 However, in my opinion, but for the error of law, it would have been apparent to the primary judge that the figure of $4,978,884 for lost airspace, based on comparable sales evidence, was grossly excessive, because it left altogether out of account that Collex still had to pay substantial amounts for the airspace, while Austral had a corresponding interest in the land commensurate with its entitlement to receive those payments. Whether or not my earlier calculations are correct, it is obvious that these considerations would greatly reduce the figure of nearly $5 million. 220 It will be recalled that my calculation gave something like $1.2 million; but even if some other calculation were to give a figure greater than that amount, the contrast between the comparable sales valuation and the discounted cash-flow valuation of nearly $5 million would, in my opinion, have precluded adoption of the $5 million figure. 221 My own view is that a valuation soundly based on a bargain recently made in respect of this very property, by two companies experienced in the relevant areas of business, is a sounder indicator of market value within s 56(1) of the Just Terms Act than cash-flow calculations, depending on doubtful assumptions about revenue, expenses, risk factors and capitalisation rates, extending up to about seventeen years into the future. I do not think responsible valuers would be prepared to maintain a valuation of $5 million on a discounted cash-flow basis against a soundly based comparable sales valuation of the order of $1.2 million, or even double that amount; and if they attempted to do so, I do not think a judge would accept their evidence, at least unless it was extraordinarily well reasoned. 222 These comments are not of course directed to showing there was an error of fact in this case, but rather to support my view that the error of law I have identified was a material error of law. Having regard to that view, it follows that the appeal should be allowed on this basis. 223 Since writing the above, I have read a copy of the joint judgment of Beazley JA and Tobias JA. In the interests of clarity, I should identify where I disagree with them on this point. I believe their reason for rejecting grounds 3(d) and 3(e) of the appeal (my issues (2) and (3)) is set out in par [130] of their judgment; namely, that the ACPs (and thus presumably Austral's interest in the land) was taken into account in the discounted cashflow method which the primary judge adopted. 224 In my opinion, that is no answer to these grounds of appeal. The primary judge made the finding, which in my opinion was plainly erroneous in law, that the figure of $4.75 per cubic metre was to be applied to the lost airspace of 1,048,146 cubic metres to give a value of lost airspace of $4,978,884 on the basis of comparable sales (judgment [58]), this error arising and/or being maintained because of errors of law in holding that the ACPs were not relevant to assessing compensation and that Austral had no relevant interest in the land (judgment [65]). 225 These errors of law having been identified, the next question is whether they were material. In my opinion, plainly they were. The fact that the primary judge took the trouble in paragraphs [44]-[45], [54]-[58] and [64]-[66] to make these findings suggests that he considered them material. The primary judge did not explicitly say that he considered that the discounted cashflow value was supported by the comparable sales value, but in my opinion this is plainly implicit in the judgment. Furthermore, had the primary judge not made these errors, it would have been apparent to him that the true value of the airspace on a comparable sales basis was something of the order of $1.2 million; and it is inconceivable to me that in those circumstances he would have accepted evidence that the value on a discounted cashflow basis was about $4.9 million. The errors of law were thus highly material. Lack of reasons 226 In my opinion, ground 4 of the appeal is also made out. 227 In my opinion, the reasons of the primary judge at paragraphs [50]-[54] of his judgment go only to the question whether there could be revised contours such that there would be no loss of airspace. 228 The issues raised as between Collex and the RTA as to whether, given that there was a loss of airspace, this should be assessed at 689,966 cubic metres or 1,048,186 cubic metres, were not touched upon at all in these paragraphs. The issues raised in Blue 720-723, and illustrated by the contour plans at Blue 751, 754 and 762, concern contours within the same height limits (up to a maximum of RL 80); with the RTA contending for a boomerang shape, similar to that adopted originally by Collex (see Blue 751, 762), and Collex apparently contending for a more cigar-like shape that made less use than its original boomerang shape of the upper contour levels. 229 In my opinion, there was a complete lack of reasons on the actual issue engaged between the parties, and I would allow the appeal on that basis also. ORDERS 230 In my opinion, the costs of the appeal have been significantly extended because of lack of focus and clarity in the RTA's submissions, and I would allow the RTA one-half of the costs of the appeal. I propose the following orders: (1) Appeal allowed. (2) Set aside the determination of the primary judge as to the amount of compensation payable to the respondent in respect of loss of airspace; (3) Remit matter to the Land and Environment Court for re-determination of the compensation payable to the respondent in respect of loss of airspace in accordance with these reasons; (4) Order that the respondent pay one-half of the appellant's costs of the appeal. (5) Set aside the costs order at first instance and order that the costs of the hearing at first instance be within the determination of the trial judge on the remitted hearing. 231 I would comment finally that this case shows that it is sometimes wrong for lawyers and the court to defer uncritically to the opinions of experts, particularly where those opinions are about matters affected by somewhat complex factual and legal issues. It is generally desirable, where possible, to engage in commonsense reality checks on what the experts are saying, if only to ensure that their views are not distorted by mutual misunderstandings in a complex legal and factual situation. ********** 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.