Land and Environment Court New South Wales Medium Neutral Citation: United Petroleum Pty Limited v Roads and Maritime Services (No 2) [2018] NSWLEC 64 Hearing dates: 23 April 2018 Date of orders: 27 April 2018 Decision date: 27 April 2018 Jurisdiction: Class 3 Before: Robson J Decision: See orders at [19] Catchwords: COMPULSORY ACQUISITION – parties unable to reach agreement on calculation of final quantum of compensation – date from which discount rate for capitalised maintainable earnings calculation is to be applied – whether Just Terms Act requires it to be from the date of acquisition – final orders entered Legislation Cited: Land Acquisition (Just Terms Compensation) Act 1991 (NSW) ss 55, 59 Cases Cited: Health Administration Corporation v George D Angus Pty Ltd [2014] NSWCA 352 Qasabian Family Investments Pty Ltd v Roads and Maritime Services; Fishing Station Pty Ltd v Roads and Maritime Services [2017] NSWLEC 73 United Petroleum Pty Limited v Roads and Maritime Services [2018] NSWLEC 35 Category: Principal judgment Parties: United Petroleum Pty Limited (Applicant) Roads and Maritime Services (Respondent) Representation: Counsel: J McKelvey (Applicant) M J Astill (Respondent) Solicitors: Thomson Geer (Applicant) Corrs Chambers Westgarth (Respondent) File Number(s): 2016/00160710 Judgment 1. On 23 March 2018, in United Petroleum Pty Limited v Roads and Maritime Services [2018] NSWLEC 35 ('the earlier judgment'), I handed down my findings in respect of the issues contested by the parties in these proceedings. At [331], I directed the parties to provide the Court with an agreed calculation of quantum of compensation in accordance with those findings, upon receipt of which document I indicated the Court would enter final orders. 2. The parties have been unable to reach agreement, and the matter came before me on 23 April 2018 on which date I heard oral submissions from Ms McKevley of counsel for the applicant, and Mr Astill of counsel for the respondent, in respect of the issue about which there remains some dispute. 3. The difference relates to the date from which the discount rate in the capitalised maintainable earnings calculation is to be applied. At par [327] of the earlier judgment, I made the following findings: [327] For the foregoing reasons, I make the following findings and direct the parties to calculate the quantum accordingly. I find that the amount of compensation to which United is entitled should be determined having regard to the financial costs reasonably incurred as a natural consequence of the acquisition pursuant to s 59(f). The lost profits from the date of vacant possession should be calculated by way of a CME calculation. The variables for the CME calculation will be: (a) An annual post-tax earnings figure of $463,000 ($497,000 minus $34,000 profits not lost), to be adjusted after 15 August 2016 to allow for market rent which would have been paid after that date; and (b) A post-tax discount rate of 17%. 1. The applicant contends that in that paragraph I made a finding which dictates that the post-tax discount rate is to be applied from the date of vacant possession, being 7 April 2016, given that the lost profits were to be calculated from that date. 2. The applicant also observes that the joint valuation report prepared by Mr Adam Giliberti and Dr Rodney Ferrier stated in footnote 10 on page 15: "Mr Giliberti and Dr Ferrier consider it would be reasonable that if the loss is assessed as at the date of vacant possession, any interest to be calculated is from the date of vacant possession rather than the date of compulsory acquisition because the date of vacant possession is the date the loss of profits has been calculated to commence." 3. The joint report noted that Mr Giliberti and Dr Ferrier agreed that this course, whilst accepted by them as the reasonable one, is contrary to the terms of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) ('Just Terms Act'). The applicant disagrees that it is a course contrary to the Just Terms Act. 4. Furthermore, the applicant submits that it is a course which makes sense for a number of reasons. First, it says that, as the valuers have identified, the date of vacant possession is the date upon which the loss actually accrues, so that to discount to beyond when the loss accrues would be to undercompensate for that loss. Secondly, it submits that s 55(d) and s 50(f) of the Just Terms Act, which deal with the head of compensation in dispute, are silent as to the date at which the loss is to be calculated. The applicant notes that in this respect, those provisions are in contradistinction to other provisions of the Act such as s 55(a) and s 55(b) which mandate that losses under those heads are to be calculated as at the date of acquisition. 5. The respondent submits that the finding I made in the earlier judgment at [327] is silent as to the date upon which the discount rate is to be applied. As a matter of judicial comity, the respondent says I should follow the approach of Moore J in Qasabian Family Investments Pty Ltd v Roads and Maritime Services; Fishing Station Pty Ltd v Roads and Maritime Services [2017] NSWLEC 73 ('Qasabian'). 6. In Qasabian, Moore J made the following finding at [137]-[138]: [137] Before turning to the outcome of Dr Ferrier's calculations, it is appropriate to note one matter where he recorded a caveat as to the correct position to be adopted. This arises in the context of how past lost profits are to be treated in the calculations. The joint report of Mr Russell and Dr Ferrier of 23 February 2017 sets out, at [4.11], the matter to be resolved in the following terms: In Dr Ferrier's opinion, whether the loss should be discounted to the date of compulsory acquisition is a matter for the Court. Although the loss is a past loss at the date of this report, it is Dr Ferrier's understanding that compensation is to be expressed at the date of compulsory acquisition, with interest payable on that loss for the period between the date of compulsory acquisition and the date of payment of compensation. Under these circumstances it is appropriate to assess the net present value of the loss as at the date of acquisition, rather than at the date of this report. [138] The whole of the Land Acquisition Act's structure is predicated on the rights of dispossessed parties and the obligation of the acquiring authority being triggered at the date of the compulsory acquisition. The assumption made by Dr Ferrier that the date of acquisition is the appropriate measuring point for his calculations is the correct one. 1. The respondent submits that I should follow this reasoning as I would not be persuaded that it is clearly wrong. However, the applicant says that this passage is not authority for the proposition for which the respondent seeks to use it, and that Moore J was only choosing between the date of acquisition and the date of the report, the latter choice clearly being wrong. 2. The applicant further submits that there is no reasoning in Qasabian as to the operation of the Just Terms Act in respect of when compensation should be calculated for disturbance and that it appears this is a result of the point not being argued before Moore J. In those circumstances, the applicant submits that I would not be persuaded that par [138] of Qasabian represents a finding to the effect which the respondent claims. 3. The issue of the date from which to apply the discount rate was not the subject of detailed argument before I handed down my reasons in the earlier judgment, perhaps because the valuation experts had reached an in principle agreement that it would be reasonable that it should apply from the date of vacant possession. The fact that they added a caveat that this was contrary to the terms of the Just Terms Act appears to be predicated upon their understanding that all losses need to be calculated at that date. 4. As a matter of statutory construction, I do not think that assumption is strictly accurate. Section 55 provides as follows: 55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division): (a) the market value of the land on the date of its acquisition, (b) any special value of the land to the person on the date of its acquisition, (c) any loss attributable to severance, (d) any loss attributable to disturbance, (e) the disadvantage resulting from relocation, (f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. 1. It is clear that subsections (a), (b), and (f) mandate that consideration is confined to the date of acquisition, but that severance, disturbance, and disadvantage are not so limited. That is unsurprising when one considers that these are losses which by their nature necessarily succeed the compulsory acquisition of the land. 2. In Health Administration Corporation v George D Angus Pty Ltd [2014] NSWCA 352, Tobias AJA, with whom Emmett and Leeming JJA agreed, said at [60]: … [D]isturbance losses are separated from the determination of "special value" in accordance with the terms of s 57. There is no overlap between the two. That this is so can be demonstrated by the fact that, like market value, special value as defined is to be determined as at the date of acquisition whereas losses attributable to disturbance arise, by virtue of their very nature, post-acquisition. 1. In my opinion, the effect of Moore J's judgment in Qasabian was not to challenge the correctness of that view, but merely to clarify that the date of a report prepared by valuation experts is not a date to which regard can be had for the calculation of compensation under the Just Terms Act. 2. Accordingly, my view is that the discount rate should be applied from the date of vacant possession. This is the date at which the loss which the capitalised maintainable earnings calculation is used to compensate, that is, the loss of profits, was incurred. I consider calculation from that date is also the logical consequence of the finding I made at par [327] of the earlier judgment. 3. As this was the only outstanding issue between the parties, it is appropriate that final orders be entered in accordance with the applicant's proposed Short Minutes of Order. Orders 1. The Court orders that: 1. Compensation under Pt 3 Div 4 of the Land Acquisition (Just Terms Compensation Act 1991 (NSW) ('Just Terms Act') for the compulsory acquisition of the land in Lots 1 and 2 in DP 517094 and Lot 1 in DP 527320 is determined in the sum of $2,050,360 comprising: 1. $1,967,404 for lost profits from the date of vacant possession pursuant to s 59(1)(f); and 2. $82,956 for rent paid to the respondent during the period from the date of acquisition to the date of vacant possession pursuant to s 59(1)(f). 1. The applicant will duly complete and execute the Deed of Release and Indemnity and Direction as to Payment ('Forms') to be provided to the applicant by the respondent. 2. The respondent is to pay the amount of compensation referred to in Order 1 (less any advance payment already made pursuant to Pt 3 Div 3 of the Just Terms Act), plus statutory interest to be calculated in accordance with ss 49 and 50 of the Just Terms Act, within 28 days of the respondent receiving the duly completed and executed Forms. 3. The respondent is to pay the applicant's costs. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 April 2018