Revisting the concept of 'relocation' under the Just Terms Act

Sydney Metro v C & P Automotive Engineers Pty Ltd [2024] NSWCA 186

The recent decision of Sydney Metro v C & P Automotive[1] provides clear authority for the validity of any claims for 'relocation' under s 55(d) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act).  Not only does the case clearly address the salient facts of the matter, but the case also considers the facts of earlier decisions on 'relocation'.

Claims for 'relocation' following the acquisition of leasehold interests often give rise to vexing issues.  If you have any questions or concerns about a potential or actual acquisition involving 'relocation', we can advise you based on the reasoning and findings in Sydney Metro v C & P Automotive.

Background

On 19 March 2021, Sydney Metro, the acquiring authority or the appellant in the Court of Appeal proceedings, compulsorily acquired the whole of 8 Tennyson Street, Clyde (Acquired Land).  C&P Automotive Engineers Pty Ltd (Automotive), the dispossessed lessee or the respondent in the proceedings, leased the Acquired Land, on which it conducted a hire, storage, sale and repair business.  Automotive's business was operated from 'a main warehouse building (including a large gantry crane), a ground floor office and amenities building, a first floor office and amenities building, a rear warehouse, a large hardstand area, and a side awning area' at [15], which were all located on the Acquired Land and owned by the freeholder, or the landlord.  Automotive secured a site at 131 and 133 Railway Parade, Granville (Relocation Site), to which it could relocate its business.

However, given that a suitable office building, warehouse and hardstand area (what the Court termed 'improvements') were not built on the Relocation Site, Automotive claimed $1,914,404 in construction costs as a 'relocation' claim under ss 55(d) [disturbance] and 59(1)(c) [relocation] of the Just Terms Act (Construction Claim).  Essentially, to replicate or re-construct what it had on the Acquired Land at the Relocation Site.

Additionally, Automotive claimed $88,173 for the difference in rent payments between the Acquired Land and the Relocation Site for the remainder of its lease (four years) as a 'relocation' claim under ss 55(d) and 59(1)(c) of the Just Terms Act (Rental Differential Claim).

Automotive was awarded the Construction Claim and the Rental Differential Claim, totalling $2,002,577, by the primary judge in the NSW Land and Environment Court, and it was from this finding that Sydney Metro appealed to the Court of Appeal.

Court of Appeal

The issues for consideration by the Court of Appeal:

Issue 1: What was the correct construction of s 59(1)(c) of the Just Terms Act?

Issue 2: Was Automotive entitled to compensation under s 59(1)(c) of the Just Terms Act for the costs incurred in constructing new landlord’s fixtures at the Relocation Site (i.e. the $1,914,404 Construction Claim)?

Issue 3: Was Automotive entitled to compensation for disturbance in constructing new landlord’s fixtures (i.e. the $1,914,404 Construction Claim), given that Automotive had been compensated for the loss of the right to use the landlord’s fixtures as part of the market value of the acquired leasehold right?

Issue 4: Was Automotive entitled to compensation under s 59(1)(c) of the Just Terms Act for the increased rent at the Relocation Site (i.e. the $88,173 Rental Differential Claim)?

Issue 1 and Issue 2

These issues were considered together.

During the hearing, Automotive accepted that all of the improvements, the new office building, warehouse and hardstand area on the Relocation Site would become the property of and remain with the freehold owner, or the landlord, not Automotive. The improvements that were on the Acquired Land did not belong to Automotive, nor were they installed by Automotive; they formed part of the leased premises on the Acquired Land.  'All [of the improvements] were affixed to the land before the lease was entered. No right to sever the fixtures [in the form of the improvements] was granted by the lease' at [63].  In the context of a freehold land contract for sale, the improvements were essentially what would be considered fixtures as opposed to chattels.

Given this, Payne JA reasoned at [72]:

“Relocation” as a matter of ordinary usage means the act of moving something or someone from one place to another. Building new capital works, which then accrue to the value of the owner at the new premises, on its face does not involve the act of moving something or someone from once place to another. There is nothing in the text of s 59(1)(c) [relocation head of claim] that permits compensation to be paid for financial costs of replacing assets available for use as an incident of a lease of leased premises if those assets are not available to be moved by the lessee, as is the case in relation to landlord’s fixtures which form part of the leased premises.

In narrowing the scope of what can be claimed under s 59(1)(c) as relocation, Payne JA talked at [81] of the 'impermissible judicial gloss' in earlier decision which imported the 'value to the owner [principle into] the construction of the Just Terms Act in general and s 59(1)(c) in particular'.  A good portion of these cases were decided prior to the commencement of the Just Terms Act, and Payne JA suggests that they may be decided differently now.  He opined that previous judgments dealt with 'reinstatement and replacement, as purported synonyms for the statutory term, relocation, [and imported] notions which are not relevant to the determination of whether [relocation] compensation may be claimed' at [81].

Helpfully, Payne JA applied his reasoning to the facts of former cases to test his findings[2].  Of interest, and in relation to a recent relocation decision Whitcurt Unit Trust v TfNSW[3], he said Whitcurt 'was correct' at [104].  Whitcurt, the facts of which were not dissimilar to Sydney Metro v C & P Automotive, was a relocation claim under s 59(1)(c) by a leaseholder for the expenditure of constructing the Council’s golf driving range fixtures at a new golf driving range, in the context where the leaseholder did not own the fixtures; the claim was not allowed.

In reaching a conclusion in Sydney Metro v C & P Automotive, Payne JA rejected Automotive's submission at [113]:

… that “relocation” within the meaning of s 59(1)(c) imports a qualitative element meaning relocation to suitable premises or premises having particular characteristics. [He found that] “Relocation”, within the meaning of the section is neutral about the premises to which the relocation occurs. Section 59(1)(c) does not import the concept of “reinstatement” or “replacement” derived from the value to the owner cases …

Further, Payne JA concluded at [114] – [115]:

It is a significant expansion to the Just Terms Act to read “financial costs reasonably incurred in connection with the relocation” as permitting compensation to a lessee who spends money on landlord’s fixtures which enhance the value of the new landlord’s property.

The Just Terms Act does not provide for relocation to “like-for-like” premises. It does not guarantee that the relocation premises will have the same fixtures. The statute is neutral about the quality of the replacement premises.

Issue 3

In rejecting Automotive's claim for compensation for disturbance in constructing new landlord’s fixtures (ie rejecting the $1,914,404 Construction Claim), Payne JA reasoned that Automotive had been paid for this loss when it was compensated for its leasehold market value under s55(a) [market value] of the Just Terms Act.  Which was in the amount of $231,000, and was not challenged in the Court of Appeal.  He considered that the only asset of Automotive's business that was affected by the acquisition was the lease, and this was compensated.  The market value payout included the market value of the rights of Automotive to use the improvements on the Acquired Land.

Essentially, if Automotive was paid market value of $231,000, and then paid $1,914,404 for relocating the improvements, it would be compensated 'twice in respect of the same loss' (as was submitted by Sydney Metro).

Issue 4

Automotive submitted that the Rental Differential Claim was based on the fact that it could not find another suitable site, and the increased rent for the 'comparatively larger area of the new premises' at the Relocation Site was reasonably incurred under s 59(1)(c) of the Just Terms Act.

In holding that compensation 'is not payable [to Automotive] for the difference in market rents between the old premises and new premises' and rejecting the Rental Differential Claim, Payne JA opined quite succinctly at [149]:

It is open to a dispossessed owner or lessee to purchase or lease whichever replacement property they wish to acquire in order to relocate their business. That freehold or leasehold property may be of greater or lesser quality than the acquired property, and, in the case of leased premises, the rent payable may be greater or lesser than that paid for the leasehold of the acquired property. But where rent for a leasehold interest in a property is greater than the rent payable under the acquired leasehold interest, compensation for disturbance under s 55(d) of the Just Terms Act is not payable for the additional cost.

[1] Decision date: 31 July 2024

[2] George D Angus v Health Administration Corporation (2013) 205 LGERA 357; [2013] NSWLEC 212; The Trustee for Whitcurt Unit Trust v Transport for NSW [2021] NSWLEC 82; Speter v Roads and Maritime Services [2016] NSWLEC 128; Rocco Fraietta v Roads and Maritime Services [2017] NSWLEC 11; Konduru v Roads and Maritime Services (2017) 224 LGERA 262; [2017] NSWLEC 36 considered.  McDonald v Roads & Traffic Authority of NSW [2009] NSWLEC 105; Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW (1998) 101 LGERA 30; Home Care Services (NSW) v Albury City Council (2003) 136 LGERA 117; [2003] NSWLEC 433; Mathew Massasso t/as Five Dock Pharmacy v Sydney Metro [2023] NSWLEC 115 not followed. Hua v Hurstville City Council [2010] NSWLEC 61 doubted.

[3] The Trustee for Whitcurt Unit Trust v Transport for NSW [2021] NSWLEC 82