September 2020

A claim for disturbance costs based on an ‘agency relationship’ rejected by the Court of Appeal in Alexandria Landfill Pty Ltd v Transport for NSW [2020] NSWCA 165

In Alexandria Landfill Pty Ltd v Transport for NSW [2020] NSWCA 165  the Court of Appeal was asked to consider whether an owner has a claim for lost future profits against an acquiring authority as agent if there is another entity carrying out business activities on the land.

In this case, Dial A Dump was the entity responsible for carrying out the landfill and waste operations on the land, which was separate from the legal owner and the tenant with exclusive possession of the land.

The owner’s claim for disturbance based on an ‘agency relationship’ was rejected by the Land and Environment Court and by the NSW Court of Appeal.

Background

In December 2014, Transport for NSW (TfNSW) (which was then known as WestConnex Delivery Authority) compulsorily acquired two parcels of land owned by the appellant (ALF) in St Peters, Sydney for the purposes of building the WestConnex Motorway (part of the M8 Motorway).

The land was leased to a tenant, Boiling Pty Ltd (Tenant). The company that carried out the landfill and waste operations on the land was a separate entity controlled by the same directors known as Dial a Dump.

On 20 July 2015, the Valuer-General determined the owner’s entitlement to compensation under the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) in the amount of $70,019,285 which included $56,900,000 for market value and $13,119,285 for disturbance for both lots. The tenant of the premises was also awarded costs for legal and valuation fees.

The owner and tenant rejected the offers of compensation and on 14 August 2015 filed class 3 proceedings in the Land and Environment Court appealing the Valuer General’s determination.

The matter was heard by Justice Sheahan at first instance.

The owner’s claim included a claim for $348 million for market value. Transport for NSW submitted the market value for both properties at $49.6 million.

The owner also claimed $195 million for disturbance where the Valuer-General had assessed disturbance to be $13,119,285.

However, the Court found the owner could not claim lost profits because there was no use of the land by the owners. It was leasing the land and was not in possession or control of the land.

The Land and Environment Court awarded total compensation in an amount of some $50 million for both parcels of land which was less than the amount determined by the Valuer-General.

The owners, dissatisfied with the judgment, appealed to the Court of Appeal on several grounds.

The Appellant lost on all grounds of appeal, including the ground that the primary judge erred in rejecting the claim for disturbance for loss of future profits.

Disturbance claim – loss of future profits based on ‘agency’ relationship

The Court of Appeal confirmed that an owner is unable to claim disturbance costs for lost future profits as ‘agent’ if there is another entity carrying out operations on the land. In this case, Dial A Dump was the entity responsible for carrying out the landfill and waste operations on the land which was separate from the legal owner and the tenant of the land.

The owner did not use the land and was unable to establish that Dial A Dump was using the land as agent for the owner. The owner failed to establish that it had incurred costs or derived revenue in connection with the business operated on the land.

Interestingly, even if the owner had carried on the actual use of the land itself, the Court of Appeal confirmed that its claim would have failed as an element of double recovery. The Court of Appeal relied upon the decision in Roads and Maritime Services v United Petroleum Pty Ltd  [2019] NSWCA 41 Pty Ltd and held that where the claimant’s interest in land has been valued by reference to its commercial potential to return profits it would be double recovery for the claimant to obtain the capital value of the land valuated on that basis and, in addition, the amount representing the present value of future profits.

Dial A Dump was also held to have no interest in the land as it lacked exclusive possession of the land, thereby disentitling it from making a claim for compensation under the Just Terms Act. The NSW Court of Appeal confirmed that the giving of permission to carry on operations on the land to Dial A Dump did not carry with it the grant of the right to exclusive possession of the land.

This case is important as it confirms that an owner is unable to claim disturbance costs for lost future profits as ‘agent’ if there is another entity carrying out operations on the land, and if the owner is unable to establish that it (as distinct from a related company) incurred costs or derived revenue in connection with the business on the land.

Both dispossessed claimants and acquiring authorities need to be aware of who can make a claim for compensation under the Just Terms Act and on what basis especially during the negotiations stage.

If you have any questions or require further information regarding land acquisitions, please do not hesitate to contact our team at Bartier Perry.

Authors: Dennis Loether & Julide Ayas