Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: El Boustani v The Minister administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33
• Hearing dates: 12 November 2013
• Decision date: 28 February 2014
• Before: Beazley P at [1]; Gleeson JA at [2]; Preston CJ of LEC at [3]

Decision

1. Extend the time for the appellants to file and serve the notice of appeal to 24 April 2014.

2. Allow the appeal.

3. Set aside the orders made by the Land and Environment Court of 6 December 2012.

4. Remit the matter to the Land and Environment Court to determine the appellants' claim for compensation under the Land Acquisition (Just Terms Compensation) Act 1991 according to law.

5. Order the respondent to pay the appellants' costs of the proceedings in this Court.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: APPEAL - appeal on a question of law -compensation for compulsory acquisition of land - primary judge rejected appellants' claim for relocation costs on the basis of s 61 of the Land Acquisition (Just Terms Compensation) Act 1991 relating to market value assessed on potential of land - consideration of the proper construction of s 61 of the Act - primary judge erred on questions of law in construing and applying s 61 of the Act - primary judge's assessment of loss attributable to disturbance - primary judge erred on questions of law in assessing amount of compensation for lost profits - primary judge reached conclusions that were without evidentiary foundation and constructively failed to exercise jurisdiction - appeal allowed - matter remitted to court below to be determined according to law - costs follow the event
• Legislation Cited: Land Acquisition (Just Terms Compensation) Act 1991 ss 20, 54, 55, 56, 57, 58, 59, 60, 61, 66(2); Land and Environment Court Act 1979 ss 24(1), 57(1); Uniform Civil Procedure Rules 2005 r 36.17
• Cases Cited: Amaba Pty Ltd v Booth [2010] NSWCA 344; AMP Capital Investors Ltd v Transport Infrastructure Development Corporation [2008] NSWCA 325; (2008) 163 LGERA 245; Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321; Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209; Bruce v Cole (1998) 45 NSWLR 163; Crisp v Gunn Co-operative Ltd v Hobart Corporation (1963) 110 CLR 538; D'Amore v Independent Commission Against Corruption [2013] NSWCA 187; Defence Force Retirement and Death Benefits Authority v House [2009] FCA 302; (2009) 49 AAR 525; El Boustani v Minister Administering the Environmental Planning and Assessment 1979 (No 2) [2013] NSWLEC 25; Horn v Sunderland Corporation [1941] 2 KB 26; Housing Commission of NSW v Falconer [1981] 1 NSWLR 547; Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; (2010) 241 CLR 390; Leichhardt Council v Roads and Traffic Authority (NSW) [2006] NSWCA 353; (2006) 149 LGERA 439; Maurici v Chief Commissioner of State Revenue [2003] HCA 8; (2003) 212 CLR 111; McDonald v Roads and Traffic Authority [2009] NSWLEC 105; (2009) 169 LGERA 352; Myers v Milton Keynes Development Corporation [1974] 1 WLR 696; Pike v Minister of Housing (1979) 20 LCR 166; Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33; Roads and Traffic Authority of NSW v McDonald [2010] NSWCA 236; (2010) 79 NSWLR 155; (2010) 175 LGERA 276; Royal Agricultural Society of NSW v Sydney City Council (1987) 61 LGRA 305; Shire of Perth v O'Keefe (1964) 110 CLR 529; State Super SAS Trustee Corporation v Cornes [2013] NSWCA 257; Sydney Water Corporation v Caruso [2009] NSWCA 391; (2009) 170 LGERA 298; The Commonwealth v Milledge (1953) 90 CLR 157; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259
• Texts Cited: ALRC Report No 14, Land Acquisition and Compensation (Canberra, 1984); Macquarie Dictionary (4th ed, 2005); (1942) 58 Law Quarterly Review 29
• Category: Principal judgment
• Parties: Elias El Boustani (First Appellant); Guita El Boustani (Second Appellant); The Minister Administering the Environmental Planning and Assessment Act 1979 (Respondent)
• Representation: Mr T F Robertson SC with Mr J E Lazarus and Ms J Walker (Appellants); Mr I J Hemmings SC with Mr S B Nash (Respondent); HWL Ebsworth (Appellants); Hunt & Hunt (Respondent)
• File Number(s): 397031 of 2012
• Publication restriction: No

Decision under appeal

• Citation: [2012] NSWLEC 266
• Date of Decision: 2012-12-06 00:00:00
• Before: Pepper J
• File Number(s): 30818 of 2010

Judgment

1 BEAZLEY P: I agree with Preston CJ of LEC.

2 GLEESON JA: I agree with Preston CJ of LEC and the orders that his Honour proposes.

3 PRESTON CJ OF LEC:

Nature of appeal and outcome

Mr and Mrs El Boustani ('the El Boustanis') own land at 242 Byron Road, Leppington, which was partially resumed by the Minister administering the Environmental Planning and Assessment Act 1979 ('the Minister') for the purposes of the South West Rail Link project. Their claim for compensation was heard and determined by the Land and Environment Court of NSW (Pepper J). The Court decided that the amount of compensation payable was $1,436,059, assessed as comprising $1,194,556 for the market value of the acquired land, $237,310 for disturbance for lost profits, and $4,193 for disturbance of legal fees and valuation fees. The Court decided that an additional $920,000, although found to be a loss attributable to disturbance as costs incurred in connection with relocation, was not payable because of the operation of s 61 of the Land Acquisition (Just Terms Compensation) Act 1991 ('the Act').

4 The El Boustanis appealed against two parts of the Court's decision: the rejection of their claim for relocation costs on the basis of s 61 of the Act and the assessment of the amount of compensation for lost profits. The appeal, under s 57(1) of the Land and Environment Court Act 1979 ('the Court Act'), is limited to being an appeal against an order or decision "on a question of law". The El Boustanis contended that the primary judge erred on questions of law in these two parts of the decision.

5 The El Boustanis' notice of appeal was filed seven weeks out of time. They seek an extension of time to initiate the appeal by 24 April 2013, which was the date on which they filed and served their notice of appeal. The Minister did not oppose the extension of time. It is appropriate, in the circumstances of this appeal, for an extension of time to appeal to be granted.

6 I find the primary judge has erred in the two parts of the decision challenged on questions of law and I would uphold the appeal. It is not practicable for this Court to make new factual findings or to reassess the amount of compensation to which the El Boustanis are entitled. The matter should be remitted to the Court below to be determined in accordance with the decision of this Court. The Minister should pay the El Boustanis' costs of the appeal.

The judgment below

7 The El Boustanis grew tomatoes and other vegetables on their land at Leppington. There were significant improvements on the land. The northern two thirds of the land (1.346 ha) was compulsorily acquired by the Minister, leaving a residue of one third (0.6074 ha) in the south fronting Byron Road (at [2]). The acquired land contained a large multi-span igloo, two smaller single span igloos and a dam. The residue land contained the residence and two smaller single span igloos (at [4]).

8 The acquisition took effect on publication of the acquisition notice on 23 July 2010 (at [2]). The Minister permitted the El Boustanis to remain in occupation until 30 November 2010 (at [5]).

9 At the time of acquisition, crops of tomatoes, cucumbers and other vegetables had been planted by the El Boustanis but were not due to be harvested until late December 2010 to early January 2011. Because the El Boustanis were required to vacate the land by 30 November 2010, they were not able to harvest these crops, and hence the costs they incurred in planting and tending the crops were thrown away by the abandonment of the crops (at [5]). The parties agreed that the El Boustanis should be compensated for these costs thrown away (agreed in the sum of $11,221: at [139]).

10 The primary judge determined that the amount of compensation to which the El Boustanis were entitled was $1,436,059, comprising $1,194,556 for the market value of the acquired land, $237,310 for loss of profits as a consequence of the acquisition and $4,193 for other disturbance costs (at [8] and [161]).

11 The primary judge's assessment of the market value of the acquired land was not challenged on the appeal as involving error on a question of law. However, the primary judge's assessment of the compensation to which the El Boustanis were entitled for loss attributable to disturbance was dependent in part on the primary judge's assessment of the market value of the acquired land. I will therefore briefly summarise the primary judge's assessment of the market value of the acquired land.

12 The primary judge accepted that the "market value of the land equates to the highest and best use of the land" (at [22]). The primary judge recorded that the valuers called by the parties, Mr Wood (by the El Boustanis) and Mr Dyson (by the Minister), "agreed that the highest and best use of the land was its existing use of intensive horticulture" (at [30]).

13 The primary judge noted that the conventional, if not preferred, method of assessing the market value of the land was by reference to comparable sales (at [23]). The primary judge considered the comparable sales put forward by the parties' respective valuers, Mr Wood (at [32]-[41]) and Mr Dyson (at [42]-[48]), and drew conclusions on which sales and which valuer's evidence her Honour preferred (at [49]-[58]). The primary judge ultimately relied on four sales of rural small holdings in the existing suburb of Austral, three of Mr Dyson (250 Sixth Avenue, 230 Fifth Avenue and 230 Seventh Avenue) and one of Mr Wood (415 Fifteenth Avenue) (at [58]). The primary judge derived a unitary value from these sales of $70 per m² for market value purposes (at [58] and [59]). The primary judge applied this rate to the area of the total land before acquisition and added the value of improvements on that land to derive a market value of the land before acquisition. The primary judge then applied the rate of $70 per m² to the area of the residue land after acquisition, added the value of the improvements on the residue land, and allowed for injurious affectation on the residue land, to determine the market value of the residue land after acquisition. Finally, the primary judge deducted the latter from the former to derive the market value of the acquired land (see [71]).

14 As a consequence of the acquisition of most of the El Boustanis' land, they were no longer able to carry out their horticulture business on the residue land. This was because of the loss of access to the dam and to most of the growing areas that were on the acquired land. The remaining infrastructure on the residue land served no purpose given the loss of the acquired land (at [6]). This had two consequences for assessing the compensation to which the El Boustanis were entitled.

15 First, the El Boustanis wished to re-establish their horticultural business elsewhere on suitable land and sought their relocation costs of doing so (at [6]). The parties agreed that, if relocation costs were compensable, the costs required to re-establish the existing facilities on a new site would be $852,000. To this, the El Boustanis claimed another $68,000 for fit out, stamp duty and legal fees, bringing the total amount claimed for disturbance to $920,000.

16 The Minister submitted that the El Boustanis were not entitled to relocation costs for two reasons: first, because neither s 59(c) nor (f) of the Act were engaged and, secondly, because the rate of $70 per m² (adopted by the primary judge to assess the market value of the land) reflected the acquired land's potential to be used for a purpose other than that for which it was being used at the date of acquisition and s 61 of the Act applied to preclude the claim (at [76]).

17 Secondly, the El Boustanis sought compensation for the profits they had lost from the date of acquisition until they would be able to re-establish their horticultural business elsewhere. It was not a matter of controversy that compensation for loss of profits was payable (at [138]), but there was a contest as to how many years of lost profits should be allowed. The El Boustanis claimed four years (2010-2011, 2011-2012, 2012-2013, 2013-2014: see at [138]-[148]) while the Minister contended that only two years should be allowed (2010-2011 and 2011-2012: at [138]-[149]). The parties agreed on the amount of lost profit for the first financial year after the date of acquisition (2010-2011), being $104,579 (at [139]). However, the parties disagreed on the method of calculation of lost profits for subsequent years (at [140]).

18 The primary judge's decisions on these two consequences of the acquisition - relocation costs and lost profits - are the subject of the appeal.

19 In relation to the claim for relocation costs, the primary judge found that s 59(c) of the Act permitted compensation in respect of the claimed relocation costs (at [87]) but even if s 59(c) were not applicable, s 59(f) nevertheless applied (at [88]) to make the claimed relocation costs compensable (at [95]-[96]).

20 The primary judge then dealt with a submission by the Minister that because a development consent granted on 16 June 2007 authorising the use of igloos for agriculture would have expired on 16 June 2012 (see [10](d)), the El Boustanis were unable to claim relocation costs (at [97]). The logic of this submission was not explained by the primary judge. The date of acquisition was 23 July 2010, whereupon the land vested in the Minister (see s 20 of the Act). The Minister permitted the El Boustanis to remain in occupation of the acquired land until 30 November 2010. Thereafter the El Boustanis were required to and did cease occupation of the acquired land. From this date onwards, the El Boustanis were no longer able to conduct their horticultural business on the acquired land and, because of the intimate connection between the acquired land and the residue land, also on the residue land. Hence, the need for the El Boustanis to relocate arose from that date. This was still over a year and a half before the date of expiry of the 2007 development consent. Hence, it could not be said that the financial costs incurred in connection with the relocation would not be a direct and natural consequence of the acquisition but rather would be caused by the expiry of the 2007 development consent.

21 Nevertheless, the primary judge went on to consider whether the 2007 development consent would have been extended for another five years after the 16 June 2012 expiry date. The primary judge noted that the Minister had conceded that if the 2007 development consent would have been extended for another five years, then the El Boustanis would be entitled to their relocation costs (at [98]). The primary judge found, on the evidence, that an extension of five years would have been granted by the Council to the El Boustanis (at [112]). Hence, the primary judge found that the El Boustanis would have been entitled to their claimed relocation costs, subject to the operation of s 61 of the Act.

22 The El Boustanis do not contend that the primary judge erred on any question of law in finding that the El Boustanis would be entitled to their claimed relocation costs.

23 The primary judge then dealt with the Minister's argument that compensation was not payable for the claimed relocation costs because of the operation of s 61 of the Act. After setting out the terms of s 61, the primary judge said:

117. At issue is the proper construction of s 61, which in turn gives rise to factual questions with respect to whether the acquired land has been valued according to its potential to be used for another purpose and whether relocation costs would necessarily be incurred in order to realise this potential.

118. The Minister argued that properly construed, the language of the chapeau to s 61 poses a question of fact, that is, whether the market value of the acquired land is assessed on the basis that the land had the potential to be used for a purpose other than that for which it is currently being used. In the present case, because the current and best use of the land is intensive horticulture, the question of fact is simply whether the market value of the land has been assessed on the basis that the land has the potential to be used for a different purpose, namely, town centre or urban development.

24 The language the primary judge used in these paragraphs reveals that the primary judge considered that the relevant inquiry required by the chapeau of s 61 ("[i]f the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used") was directed to the methodology used by the valuers called by the parties to assess the market value of the land, rather than the basis of assessment used by the primary judge to assess the market value of the land.

25 In the belief that that was the relevant inquiry required by the chapeau, the primary judge considered the methodology and evidence of Mr Dyson, the valuer called by the Minister (at [119]); the statements in evidence by Mr Wood, the valuer called by the El Boustanis (at [121], [122]); the statements by both Mr Wood and Mr Dyson on the Court's view of the acquired land and the comparable sales held as part of the court hearing (at [123]); Mr Wood's description of his comparable sales (at [124]); and the primary judge's preference for the evidence of Mr Dyson over that of Mr Wood (at [125]). After this evaluation of the valuers' evidence the primary judge concluded:

126. I therefore find that the market value of the land was assessed on the basis that the land had the potential to be used for a purpose other than that which it was being used for at the time of acquisition, namely, urban development.

26 That is to say, the primary judge answered what the primary judge had said (in [117]) was the first factual question of "whether the acquired land has been valued according to its potential to be used for another purpose".

27 The primary judge next turned to answer what the primary judge had said (in [117] and [127]) was the second factual question that the application of s 61 gives rise to of "whether the claimed relocation costs are to be characterised as a 'financial loss that would be necessarily incurred in realising that potential'" (in [127]). Although the primary judge uses quotation marks, the phrase is not in the precise terms of paragraph (b) of s 61 of the Act. The primary judge noted that "[i]f they are, then the section precludes compensation for these costs" (at [127]).

28 The primary judge framed the issue for inquiry as follows:

130. The issue, therefore, is whether, as a matter of fact, any of the claimed "financial loss", that is to say, any of the claimed relocation costs (including stamp duty), would necessarily have been incurred in realising the urban development potential of the acquired land upon which the El Boustanis market value was, as I have found, assessed.

29 Here, the primary judge accepted that the claimed relocation cost fell within the category of "financial loss" in s 61(b) of the Act.

30 The primary judge then considered the terms "necessarily" and "inevitably incurred" in s 61(b):

132. The term "necessarily" requires a finding that, in order for the subsection to be engaged, the relocation costs claimed by the El Boustanis would have been "inevitably incurred" (McDonald (NSWCA) [Roads and Traffic Authority of New South Wales v McDonald [2010] NSWCA 236; (2010) 79 NSWLR 155] at [94]) if the potential to develop the land for urban usage was realised or implemented.

31 The primary judge noted the Minister's submission:

133. The Minister contended that intensive horticulture and the development of the town centre are inconsistent (cl 16 of the Growth Centres SEPP) and hence to realise the potential of the acquired land, relocation, with its attendant costs, was inevitable.

and then the El Boustanis' submission:

134. The El Boustanis argued that because the urban development of the acquired land was so distant and uncertain, it could not be said that the relocation was inevitable in order to realise its potential. This contention echoed the opinion of Mr Shiels [called by the Minister], who considered that a prudent purchaser would have appreciated that there was nothing certain or imminent about the release and rezoning of the land and that any number of factors, for example, the absence of public transport, could delay the ultimate realisation of the acquired land's potential.

135. Mr Grech [called by the El Boustanis] disagreed, noting that since the gazettal of the Growth Centres SEPP the acquired land had been located in the Leppington North precinct within the South West Growth Centre. This suggested that the urban development of the land was likely to occur in the near future and that the current rural use of the acquired land was inconsistent with any town centre development. The current lack of public transport was not, according to Mr Grech, necessarily an impediment to the release and rezoning of the land for urban purposes, although Mr Grech acknowledged that the staging and timing of any development would be subject to a number of variables such as the availability of service infrastructure (water and sewerage) and the amalgamation of allotments.

32 The primary judge concluded:

136. While, as I discussed above with respect to s 59(f), I am sceptical that the potential of the acquired land is realisable "after early 2012", I nevertheless do not accept that it was so remote and uncertain that the relocation costs would not have been inevitably incurred by the El Boustanis. On the contrary, having regard to the evidence of the town planners, I find that in order to realise the urban development of the land, these costs would have been incurred. I accept as correct on the planning evidence the submission of the Minister that "igloos and the town centre are inconsistent and cannot co-exist".

137. For these reasons I find that recovery by the El Boustanis of relocation costs is precluded by the operation of s 61 of the Just Terms Act. In arriving at this conclusion I am mindful that these costs form a significant proportion of the compensation claimed by the El Boustanis. But were I to hold otherwise, the El Boustanis would be unjustly compensated contrary to the words of s 54 of the Act. This is because the market value of the acquired land has been assessed on the basis of a potentially higher and more valuable use than the usage as at the time of acquisition (Peter Croke Holdings Pty Ltd v Roads and Traffic Authority (NSW) (1998) 101 LGERA 30 at 43 per Bignold J).

33 In relation to the claim for lost profits, the primary judge noted that the parties agreed that compensation for loss of profits for the first two years after acquisition, being 2010-2011 and 2011-2012, was payable (at [138]).

34 The sum agreed for the first year was $104,579, to which it was agreed $11,221, being the costs thrown away by the abandonment of the 2010-2011 crop should be added, resulting in an agreed total of $115,800 (at [139]).

35 The amount of lost profits for the second and subsequent years were not agreed. The primary judge, after considering the evidence of the forensic accountants called by the parties, determined the amount of lost profits in the second year (2011-2012) to be $60,755 (at [147]).

36 The primary judge next dealt with the El Boustanis claim for compensation for loss of profits for a further two years, namely 2012-2013 and 2013-2014. The primary judge noted that "[t]his represented the amount of time they estimated it would take to re-establish their business to the point of production after construction of the igloos (and related facilities) on any newly acquired property". The amount of compensation claimed was $60,755 for each of the two years, totalling $121,511 (at [148]).

37 The primary judge noted that the Minister disputed that the El Boustanis were entitled to compensation for the further two years claimed by the El Boustanis:

149. The Minister's submission was that the El Boustanis were only entitled to an initial two years of lost profits, and that anything further could not properly be characterised as a direct and natural consequence of the acquisition because it was occasioned by the preference of the El Boustanis, as Mrs El Boustani expressed in her oral and written evidence, to wait until proceedings were finalised prior to purchasing a property with an existing dwelling located on it. Put another way, the lengthy delay in re-establishing their business arose as a consequence of the desire by the El Boustanis to "replace something different to that which has been acquired", viz, a farm with no home.

38 The primary judge concluded:

150. I do not agree. The evidence that it would take two years before a crop would be produced after the construction of igloos and related infrastructure on any new property was unchallenged and was not dependant upon whether or not the newly purchased property was vacant. Allowing for a year to find a new property and to construct the facilities necessary to grow tomatoes, in addition to the two years necessary to permit full production, in my opinion the El Boustanis should be compensated for a total period of three years of lost profits. That is to say, $115,800 + (2 x $60,755) = $237,310. I note that this approach is also consistent with the evidence of Mr White.

39 The primary judge also awarded additional disturbance costs, comprising legal and valuation fees, agreed by the parties in the sum of $4,193 (at [151]).

40 The primary judge, therefore, assessed the compensation payable as being $237,310 for disturbance for lost profits and $4,193 for the additional disturbance (at [152]).

41 The El Boustanis thought the primary judge might have made a mistake or error in calculating the number of years of lost profits as three years rather than the four years they had claimed, and applied under r 36.17 of the Uniform Civil Procedure Rules 2005 for the primary judge to correct the mistake or error. However, the primary judge dismissed the El Boustanis' application under the slip rule: El Boustani v Minister Administering the Environmental Planning and Assessment 1979 (No 2) [2013] NSWLEC 25. No appeal is made against this decision.

The El Boustanis' submissions on the appeal

42 Ground 1 of the El Boustanis' appeal, challenging the primary judge's decision on relocation costs, was broken down into four subgrounds. The first subground (ground 1(a)) was that the primary judge erred in the construction and application of the chapeau of s 61 of the Act concerning whether the market value of the acquired land was assessed on the basis that the land had the potential to be used for a purpose other than that for which it was currently used. The second and third subgrounds (grounds 1(b) and (c)) were that the primary judge erred in the construction and application of paragraph (b) of s 61 concerning whether the relocation costs would "necessarily" have been incurred in realising the future urban potential. The fourth subground (ground 1(d)) was that the primary judge erred in failing to apply the statutory mandate of awarding "just compensation" under s 54 of the Act and in failing to have regard to the purpose of s 61, namely the avoidance of double counting.

43 In relation to the first subground (ground 1(a)), the El Boustanis submitted:

(a) "the basis" of an assessment of value is that upon which the assessment stands, or rests, its principal constituent or fundamental ingredient: Macquarie Dictionary (5th ed, 2009) meanings 1. and 3. of "basis";

(b) the basis of an assessment of the value of land is the highest and best use of the land: Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209 at [271]);

(c) an assessment based on potential use rather than an existing use assumes the notional buyer is a developer, purchasing the land for a higher and better future use;

(d) the four sales in Austral considered by the primary judge to be comparable (in [58](a) to (d)) were for residential purposes or intensive horticulture (the existing use of the land) and not for redevelopment. The primary judge made findings of fact that buyers were not buying land for future urban development but rather were buying for rural/residential purposes or to build large mansions (at [110](d)) and developers were more likely to buy land for redevelopment elsewhere than in Austral or Leppington (at [110](e));

(e) the valuers had agreed that the highest and best use, and therefore the basis for assessment of the market value, was the existing use of the land of intensive horticulture (at [30]);

(f) although there was some evidence that urban potential was influencing prices, the primary found that the prices currently being paid in Austral or Leppington "did not reflect pressure from developers" (at [110](e));

(g) the potential use of the land for urban development was too remote - the acquired land was not ripe for development for the potential use: see Pike v Minister of Housing (1979) 20 LCR 166;

(h) a distinction needs to be drawn between deferring for a certain period a present value based on a higher and better use, and the value of land in its existing use with an addition on account of the hope it would be profitable to develop at some uncertain time in the future ("hope" value): Myers v Milton Keynes Development Corporation [1974] 1 WLR 696 at 705; and

(i) the primary judge's description of the potential use as "town centre" or "urban development" (such as in [118]) was insufficiently precise to identify a potential use - was it residential, commercial, civic, road, retail, park, etc?

44 In these circumstances, the El Boustanis submitted that neither the parties' valuers nor the primary judge made an assessment of the market value of the acquired land on "the basis" that the land had potential to be used for a purpose "other than" that for which it was being currently used.

45 The El Boustanis submitted that the primary judge's finding at [126], that the "market value of the land was assessed on the basis that the land had the potential to be used for a purpose other than that which it was being used for at the time of acquisition, namely, urban development", involved an error of construction of s 61. The primary judge effectively ignored the words "the basis" in s 61 and treated her finding that the market value had been influenced by the distant prospect of redevelopment as sufficient for finding that it had been assessed on that basis (T6). That the primary judge misdirected herself or applied the wrong test is evidenced by the primary judge's language in framing the test:

(a) "the rate of $70 per m² [adopted by the primary judge for market value purposes] reflects the acquired land's potential to be used for a purpose other than that for which it is currently used" (at [76] - emphasis added);

(b) at issue is the proper construction of s 61, which in turn gives rise to factual questions with respect to whether the acquired land has been valued "according to its potential to be used for another purpose" (at [117] - emphasis added);

(c) although the El Boustanis eschewed any reliance upon "an uplift in value by dint of the development potential of the acquired land, overall the evidence was to the contrary" (at [120]) and that statements by Mr Wood "to the effect that his valuation did not take into account any such uplift due to the potential for a higher use because none of the sales he considered reflected it, were demonstrably not correct and were inconsistent with other statements made by him during the course of his evidence" (at [121] - emphasis added in both quotations);

(d) "Mr Wood's approach to valuation is one that includes value for the land's potential to be used for a purpose other than intensive horticulture, viz, urban development" (at [124] - emphasis added).

46 Accordingly, the El Boustanis submitted that it was an error of valuation principle for the primary judge to find that an influence of a potential use on market value is the same as basing an assessment of market value on that potential use. An error of valuation principle is an error of law: Maurici v Chief Commissioner of State Revenue [2003] HCA 8; (2003) 212 CLR 111 at [8]; AMP Capital Investors Ltd v Transport Infrastructure Development Corporation [2008] NSWCA 325; (2008) 163 LGERA 245 at [40].

47 The El Boustanis also submitted that the primary judge erred in asking whether the parties' valuers in their evidence assessed the market value on the basis that the land had potential to be used for a purpose other than that for which it was currently used, instead of the primary judge asking whether her assessment of the market value of the land was so based. In fact, the primary judge never assayed the task of determining the basis of her assessment of market value as required by s 61 (T11, 16).

48 The second and third subgrounds (grounds 1(b) and 1(c)) related to the primary judge's determination that the relocation costs would have necessarily been incurred in realising the potential for the land to be used for some other purpose than the current use. The El Boustanis submitted:

(a) the "financial loss" in question comprises the cost of relocation that would need to be incurred if the business of intensive horticulture was extinguished;

(b) the primary judge accepted that the business would have continued until such time as the relevant local council declined to further extend the consent, which would occur when the town centre existed;

(c) the primary judge did not make any findings as to when that was likely to be, because the primary judge accepted the evidence of Mr Dyson (the Minister's valuer) that it was not known and uncertain when any development potential would have been realised. Mr Dyson's evidence was that no indication was available as to what future development would be permitted on the land, and that the future development potential of the land was not known and "was and is uncertain";

(d) the business of intensive horticulture would at least have continued until 2017. The primary judge found that the Council would have extended the 2007 development consent for intensive horticulture on the land for 5 years after the 16 June 2012 expiry date (to 16 June 2017) (at [112]);

(e) in fact, the business may have continued until, and any redevelopment may not have occurred before, 2021. The primary judge accepted Mr Dyson's evidence (at [48]-[70]) allowing the depreciated replacement cost of the business improvements over their effective life to 2021 because "although there was potential for future redevelopment, redevelopment would not occur before the end of the effective life of the improvements (after 2012)" (at [48]). The reference to 2012 was a typographical slip as the primary judge's statement (at [48]) was a paraphrase of Mr Dyson's evidence in the joint valuation report where he referred to the end of the effective life of the multi-span igloo and other improvements as 2021. Mr Dyson then said that, had he "considered the potential for urban development, no added value would have been attributed to these improvements" but because he did attribute added value to the improvements, he had not considered the potential for urban development. The primary judge accepted Mr Dyson's valuation of the improvements premised on a remaining life until at least 2021 (at [70]-[71]). However, the primary judge failed to give effect to that finding when extinguishment of the business would have been a necessary condition for developing the land for a potential urban use;

(f) the primary judge found that town centre and intensive horticultural "are inconsistent and cannot co-exist" (at [136]). However, the town centre must have been built, rather than merely planned or zoned, in order to create that inconsistency. That is inconsistent with the primary judge's finding that no development was likely to take place in 2012 after the land was expected to be rezoned (at [110]);

(g) however, when a town centre was imminent, the land would be developed for a specific use, not some amorphous purpose such as "urban usage" (at [132]), or "urban development" or "town centre" (at [136]).

49 In these circumstances, the El Bounstanis submitted the primary judge committed three errors of law. First, the primary judge confused purpose with use - neither urban development nor town centre is a use of land but rather a description of its purpose.

50 Secondly, if these were "uses", on the time line the primary judge accepted, the realisation of them would not require extinguishment of the business of intensive horticulture in the short term, and its longevity was not determined by the primary judge, apart from her finding that it would endure until at least 2017 or 2021 if her finding concerning the value of the improvements was applied. The loss of the business in that period would not have been incurred in order to achieve the potential use: see Pike v Minister of Housing at 172-175.

51 Thirdly, the primary judge failed to ask the question required by s 61(b) and to make a finding of when the financial loss would have been necessarily incurred. If no finding could be made on the evidence of the time by which urban potential could be realised, then it could not have been found that extinction of the business was necessary. Where the life of the business is indeterminate, in the sense that there is no evidence that it would be absolutely necessary to extinguish it by a certain time to achieve the better use, the Court cannot (at least without determining the time by which the extinction would be necessary) deprive a dispossessed owner of compensation. Section 61(b) requires that the potential use, realisation of which necessarily causes the financial losses to be incurred, be "ripe" before the dispossessed owner will be deprived of those losses: The Commonwealth v Milledge (1953) 90 CLR 157 at 165; Pike v Minister for Housing at 173.

52 The fourth subground (ground 1(d)) was that the primary judge erred in failing to have regard to the purpose of s 61 and failed to apply the statutory mandate of just compensation in s 54 of the Act. This was put in the alternative to the first three grounds.

53 The El Boustanis submitted that the purpose of s 61 is to prevent double counting or inconsistent claims: McDonald v Roads and Traffic Authority [2009] NSWLEC 105; (2009) 169 LGERA 352 at [123], [124] per Biscoe J, this passage being approved by the Court of Appeal in Sydney Water Corporation v Caruso [2009] NSWCA 391; (2009) 170 LGERA 298 at [180]. An applicant will be prevented from claiming an amount for disturbance in addition to the market value of the land where that value exceeds the "present use" value by an amount in excess of any loss resulting from disturbance: Crisp & Gunn Co-operative Ltd v Hobart Corporation (1963) 110 CLR 538 at 547, 548; Sydney Water Corporation v Caruso at [172]; The Commonwealth v Milledge at 165.

54 In this case, the El Boustanis submitted, the primary judge's application of s 61 resulted in the El Boustanis being denied losses attributable to disturbance in the amount of $920,000 merely by reason of a significantly smaller uplift in the market value of the acquired land by virtue of the distant potential for it to be used for a different purpose to its current use. The El Boustanis calculated that had the primary judge applied a rate of $40 per m² that the primary judge said would have been the rate but for the acquired land's potential for urban development (at [119]), rather than the $70 per m² she actually adopted (at [59]), the computation of market value would have been about $755,000, which would be a diminution in the market value of the acquired land from that which the primary judge calculated (of $1,194,556) of about $440,000. That is less than half the amount of the claimed relocation costs.

55 The El Boustanis submitted that where there is a partial uplift in the market value of the acquired land because of the potential for urban development at some indeterminate time in the future, but the amount of that partial uplift is less than the claimed relocation costs, then to disallow the claimed relocation costs under s 61 would lead to an injustice - there would not be an award of "just compensation" as is required by s 54 of the Act.

56 The El Boustanis submitted that s 54 provides a guarantee of just compensation: Leichhardt Council v Roads and Traffic Authority (NSW) [2006] NSWCA 353; (2006) 149 LGERA 439 at [37]. The El Boustanis submitted that for the primary judge to deny the El Boustanis a larger sum for disturbance losses because of a smaller uplift in market value of the acquired land due to its potential for urban development, was to fail to apply the statutory mandate of just compensation under s 54.

57 Ground 2 of the El Boustanis' appeal, challenging the primary judge's decision on lost profits, was put in two basic ways. First, the primary judge's finding allowing only one year to find a new property and to construct the facilities necessary to grow tomatoes was arrived at in the absence of evidentiary material supporting that finding or on the basis of a process of reasoning which was neither logical nor rational. Second, the primary judge failed to determine a critical issue relevant to the El Boustanis claim for lost profits, namely, whether Mrs El Boustani's preference to wait until the conclusion of the proceedings was justifiable in the circumstances.

58 As to the first way, the El Boustanis submitted that:

(a) the primary judge found that it would take two years before a crop would be produced after construction of the igloos and related infrastructure on any newly acquired replacement property and that the El Boustanis should be compensated for lost profits in those two years (at [150]);

(b) the issue before the primary judge was the length of time required to find and purchase a new property before that two year period necessary to permit full production commenced;

(c) the primary judge "allowed" a year to find and purchase the new property (at [150]);

(d) the effect of the primary judge findings and orders were to allow that one year to commence from the acquisition date (23 July 2010), that is to say to 23 July 2011;

(e) there was no evidence before the primary judge which would support a finding that it would take only one year from the acquisition date to find and purchase a new property;

(f) indeed, all the evidence was to the contrary. Mrs El Boustani's evidence given at the hearing in November - December 2011 was that:

• numerous attempts had been made by the El Boustanis to purchase a replacement property but without success;

• her preference was to wait until the proceedings were finalised before settling on a suitable property for the relocation of their business, because she was very concerned about purchasing a suitable property for their business without knowing the amount of compensation which would be awarded by the Court; and

• the El Boustanis had been unsuccessful in their attempts to secure a loan from a number of different financial institutions because they were unable to provide proof of income in the absence of a business which generated any income;

(g) the primary judge had found that the El Boustanis had been initially told before the resumption that the crops that the El Boustanis had planted could be harvested in late December 2010 to early January 2011, notwithstanding the proposed resumption, but had been subsequently informed on 20 September 2010 that they had to vacate the resumed land by 30 November 2010 (at [5]). Hence, the El Boustanis were legitimately occupied in their horticultural business on the land for a considerable part of the one year that the primary judge allowed after the date of acquisition to find a replacement property; and

(h) neither the hearing nor the judgment occurred within the one year after the acquisition date allowed by the primary judge for the El Boustanis to purchase a replacement property. The hearing of the proceedings did not occur until 21-24 November and 5 December 2011 and the reserved judgment was not delivered until a year later on 6 December 2012.

59 The El Boustanis submitted that to make a finding in these circumstances that they were only allowed one year from the acquisition date to purchase a replacement property was to commit an error of law on any or all of the following bases:

(a) there was no evidence to support the finding: see Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 355;

(b) the finding was not reasonably open on the evidence: see Australian Broadcasting Tribunal v Bond at 356;

(c) her Honour acted without probative evidence: see Bruce v Cole (1998) 45 NSWLR 163 at 188;

(d) there was an absence of material capable of supporting a finding on a material issue: see Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; (2010) 241 CLR 390 at [91]; D'Amore v Independent Commission Against Corruption [2013] NSWCA 187 at [224]; and/or

(e) the finding was arrived at on the basis of a process of reasoning that was neither logical nor rational: see Amaba Pty Ltd v Booth [2010] NSWCA 344 at [22]-[24]; D'Amore v Independent Commission Against Corruption at [223]-[236].

60 The El Boustanis also submitted that the primary judge erred in failing to determine the critical issue of whether Mrs El Boustani's preference to wait until the conclusion of the proceedings was justifiable in the circumstances. A failure to consider a submission of substance which, if accepted, would be capable of affecting the outcome of the case constitutes an error of law: Defence Force Retirement and Death Benefits Authority v House [2009] FCA 302; (2009) 49 AAR 525 at [31] (and the authorities there cited). Alternatively, a material issue has not been addressed or material evidence has been overlooked: see Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33 at [9].

The Minister's submissions on the appeal

61 Starting with the first subground (ground 1(a)) of the challenge to the primary judge's decision on relocation costs, the Minister submitted:

(a) the primary judge did not make a factual finding (at [30]) that the highest and best use to the land was its existing use of intensive horticulture but merely recorded an agreement between the parties' valuers as to that fact. The observation (at [30]) needed to be read with the later findings of fact relating to the "basis" for the valuation, viz, potential future urban development of the acquired land;

(b) the primary judge found as a fact (at [126] and confirmed at [130]) that the market value of the acquired land was to be assessed on the basis that the acquired land had the potential to be used for a purpose (urban development) other than that for which it was being used at the time of acquisition;

(c) in support of that finding of fact, the primary judge relied on the concession made by Mr Wood, the El Boustanis' valuer, in cross-examination (recorded at [121]) and other statements in Mr Wood's report (recorded at [122]);

(d) there was nothing imprecise about how the primary judge characterised the potential use. Mr Wood had used the expression "urban development" (recorded in [121]);

(e) the primary judge posed the correct question under s 61; and

(f) relying on evidence available, the primary judge answered the question adversely to the El Boustanis. Their complaint concerned the answer to that question, but that is a finding of fact which is unassailable on an appeal under s 57 of the Court Act limited to questions of law.

62 In relation to the second and third subgrounds (grounds 1(b) and (c)), the Minister submitted that:

(a) the market value of the land was determined by the primary judge at the rate of $70 per m², which compensated the El Boustanis for its future urban value, rather than the $40 per m² rural rate. In order to achieve that value, it was necessary for the El Boustanis to sell their land. Only in that way could the El Boustanis achieve the higher value because of its future urban potential. Upon sale of the land, if they wished to continue to carry out their intensive horticultural activities, they would need to relocate to alternative premises. The case is, therefore, a clear example of s 61(b);

(b) the primary judge was not obliged to find that at a certain point in time the land would have had the potential to be used for a purpose other than its current use of intensive horticulture. The descriptor "potential" does not mandate temporal certainty. All that is required is to find whether the loss would have been "inevitably incurred" in realising that potential: see Roads and Traffic Authority of NSW v McDonald [2010] NSWCA 236; (2010) 79 NSWLR 155; (2010) 175 LGERA 276 at [94].

(c) the primary judge found that intensive horticulture and urban development were "inconsistent" land uses which could not "co-exist" (at [133], [136]). The primary judge found, as a matter of fact, that the claimed financial loss, being the cost of relocation, would necessarily have been incurred in realising the urban development potential (at [136]). That is an end to the matter.

(d) section 61 did not mandate that the primary judge engage in any additional inquiry as suggested by the El Boustanis;

(e) the primary judge's findings concerning the effective life of the improvements or the findings in relation to the development consent did not inform the primary judge's determination of the s 61 issue or the task that is required by s 61;

(f) the El Boustanis' complaint relates to a finding of fact which is unassailable on an appeal under s 57 of the Court Act limited to questions of law.

63 In relation to the fourth subground (ground 1(d)), the Minister submitted:

(a) section 61 does not mandate, either as part of the evaluative exercise or upon answering the question posed by that provision, that there be any adjustment to compensation as posited by the El Boustanis;

(b) the Court must apply the terms of s 61 without any gloss derived from pre-conceived ideas or other principles: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259 at [47];

(c) section 61 prevents recovery of "any" financial loss that would necessarily have been incurred in realising the potential use. That the uplift in market value by reason of the potential use may be less than the financial loss is of no consequence in the s 61 exercise. Section 61 operates according to its terms. "Any" is not an ambiguous word;

(d) the Court's obligation is indeed to award "just" compensation, however if the Court properly applies the legislative provisions (including s 61) to the facts as found, there can be no basis for any complaint that the Court has not awarded "just" compensation;

(e) the El Boustanis' construction of s 61 finds no support in the language of the provision.

64 In relation to the challenge to the primary judge's decision on lost profits (ground 2), the Minister submitted:

(a) the El Boustanis style this ground of appeal as one based on "no evidence" but, in truth, their complaint is that the primary judge should have made different findings of fact based on the evidence;

(b) the decision of a court to not accept unchallenged evidence does not give rise to an error of law and in particular the "no evidence" ground is not engaged;

(c) the primary judge's decision to award three years lost profits was logical in light of the primary judge's finding that it would take two years after purchase of a replacement property to achieve full production and it would take the El Boustanis one year to find a new property;

(d) the primary judge only intended to award compensation for loss of profits for the three years commencing from the acquisition date and not from the date of determination of the proceedings.

Grounds 1(a) to (c) challenging the construction and application of s 61

65 The primary judge denied payment of compensation for relocation costs which she found the El Boustanis would otherwise have been entitled to by reason of her construction, and application of her construction, of s 61 of the Act. The El Boustanis' challenged (by grounds 1(a) to (c)), the primary judge's construction and application of s 61. It is necessary, therefore, to start with what is the proper construction of s 61 and compare that to the primary judge's construction and application of s 61.

The proper construction of s 61

66 Section 61 provides:

If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:

(a) any financial advantage that would necessarily have been forgone in realising that potential, and

(b) any financial loss that would necessarily have been incurred in realising that potential.

The change in approach to awarding compensation implemented by the Act

67 Section 61 is often assumed to be a statutory manifestation of the decision of the majority of the English Court of Appeal in Horn v Sunderland Corporation [1941] 2 KB 26, which has been applied in Australia, including by the High Court, for example in The Commonwealth v Milledge and Crisp v Gunn Co-operative Ltd v Hobart Corporation. The meaning and application of s 61 is often then informed by these decisions.

68 However, care needs to be taken in relying on these decisions for two reasons. The first reason is that the Act establishes a code for making and determining a claim for compensation for compulsory acquisition of land. The amount of compensation to which a person, who has had an interest in land divested, extinguished or diminished by a compulsory acquisition, is entitled is to be determined under Pt 3 of the Act, in particular under Div 4 of Pt 3, which prescribes the basis for and the matters to be considered in the assessment of compensation. The terms of Pt 3 of the Act are determinative.

69 Section 54(1) of the Act provides:

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.

70 This section mandates that the amount of compensation is to be determined "having regard to all relevant matters under this Part". The matters under Pt 3 which may be relevant are the matters listed in s 55 (as assessed in accordance with Div 4 of Pt 3). The matters identified in s 55 constitute "an exhaustive list to which regard must be had when determining the amount of compensation under s 54"; Leichhardt Council v Roads and Traffic Authority (NSW) at [37]; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority at [13]. The relevant matters from this exhaustive list are those which are relevant to the interest in the land acquired and the owner of that interest.

71 The amount of compensation to which a person is entitled is not only to be determined having regard to the relevant matters but also is to be such amount as will "justly compensate" the person for the acquisition of the land. This has been referred to as the "just compensation override". In Leichhardt Council v Roads and Traffic Authority (NSW) at [28], Spigelman CJ observed that the Act was clearly influenced by the Lands Acquisition Act 1989 (Cth) which was based on the report of the Australian Law Reform Commission (ALRC Report No 14, Land Acquisition and Compensation (Canberra, 1984)). The ALRC Report noted that a statutory list of matters to which regard must be had in determining the amount of compensation:

in the overwhelming majority of cases, will provide just compensation to the claimant. However, cases may arise where that list will provide a measure of compensation which, in the opinion of the court, is inadequate properly to compensate the loss. It is important, in terms of both constitutionally validity and justice to the claimant, to provide a means whereby the court may increase the award of compensation to a figure which, in its judgment, will fully compensate the loss. With this in mind it would be desirable to start the statutory list by a formula providing that the amount of compensation payable to a person who had an interest that has been divested, extinguished or diminished by the acquisition is such amount as will justly compensate the person in respect of the acquisition (at [237]).

72 Spigelman CJ also noted in Leichhardt Council v Roads and Traffic Authority (NSW) at [28] that:

This recommendation is clearly reflected in s 54 and s 55. Indeed, the New South Wales Parliament, unconstrained by a Constitutional requirement of just terms, could and did go further by making the list an exhaustive one.

73 Section 55 contains the exhaustive list of relevant matters to be considered in determining the amount of compensation to which a person is entitled. Section 55 of the Act provides:

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.

74 Not only does s 55 exhaustively list the relevant matters, it also requires that the matters be assessed in accordance with Div 4 of Pt 3 of the Act. Thus, "market value" in s 55(a) is to be assessed in accordance with s 56; "special value" in s 55(b) is to be assessed in accordance with s 57; "loss attributable to severance" in s 55(c) is to be assessed in accordance with s 58; "loss attributable to disturbance" in s 55(d) is to be assessed in accordance with s 59; and "solatium" in s 55(e) is to be assessed in accordance with s 60.

75 The terms of s 55 and ss 56-60 are determinative. It should not be assumed that they reproduce or attempt to reproduce an understanding of "principles" derived by way of judicial gloss upon the spare terms of similar provisions of earlier legislation: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority at [47]. Nor should the court, in construing the statutory provisions of Div 4 of Pt 3 of the Act, slavishly follow judicial decisions of another jurisdiction in respect of similar or even identical legislation: Marshall v Director General, Department of Transport [2001] HCA 37; (2001) 205 CLR 603 at [62]; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority at [31].

76 The second reason flows from this last point. The decision in Horn v Sunderland Corporation and the High Court's decisions deal with materially different legislation and concepts. The legislative formulation considered in those cases involved "value of the land' which was characterised as being "value to the owner" of the land. The concept of "value to the owner" was a unifying concept which encompassed market value, special value, disturbance and severance: Leichhardt Council v Roads and Traffic Authority (NSW) at [24]. Importantly for present purposes, loss attributable to disturbance was not, under the legislation considered in those cases, separately compensable but rather was included within the concept of special value: see Pastoral Finance Association Ltd v The Minister [1914] AC 1083 at 1088, 1089; Horn v Sunderland Corporation at 33, 45, 51-52; The Commonwealth v Reeve (1949) 78 CLR 410 at 417-420, 425, 434-436; The Commonwealth v Milledge at 164; Housing Commission of NSW v Falconer [1981] 1 NSWLR 547 at 556-557, 572-574; and Boland v Yates Property Corporation Pty Ltd at 226.

77 This was because earlier judicial decisions were assessing the value to the owner of the land and such value was to be assessed taking into consideration the loss of the business that the owner conducted on the land or the loss of trade or production involved during the period of relocation of the business to other premises. As was said in Housing Commission of NSW v Falconer:

Thus, where the owner is carrying on a business on the land, that which is resumed is the land but the effect of the resumption may be to extinguish the business, or even to pass the benefit of the intangible elements of it to the resuming authority. But it has been repeatedly said that the owner is not compensated for the loss of the business as such: it, and its loss, are taken into account only if and in so far as they constitute an element in the value of the land. ...

It is upon the basis of the "value to the owner" principle that amounts variously described for "disturbance" and the like have been awarded. Thus the court has taken into account, as part of the special value of the land to the owner or occupier, the costs which he would incur in moving to other equivalent premises, the loss of trade or production involved during the period of the move, and the cost of setting up in the new premises (at 572-573).

78 The decision in Horn v Sunderland, and the High Court decisions such as The Commonwealth v Milledge, are explicable with this understanding that they were determining compensation on the basis of the value to the owner.

79 In The Commonwealth v Milledge, for example, Dixon CJ and Kitto J noted:

Though it was considered convenient in this case, as it often is, to deal with this topic as a separate matter, it must always be remembered that disturbance is not a separate subject of compensation. Its relevance to the assessment of the amount which will compensate the former owner for the loss of his land lies in the fact that the compensation must include not only the amount which any prudent purchaser would find it worth his while to give for the land, but also any additional amount which a prudent purchaser in the position of the owner, that is to say with a business such as the owner's already established on the land, would find it worth his while to pay sooner than fail to obtain the land. But a prudent purchaser in the position of the owner would not increase his price on account of the special advantage he would get by not having to move his business, unless the amount he would have been prepared to pay apart from that special advantage was the value of the land considered as a site for that kind of business. Disturbance, in other words, is relevant only to the assessment of the difference between, on the one hand, the value of the land to a hypothetical purchaser for the kind of use to which the owner was putting it at the date of resumption and, on the other hand, the value of the land to the actual owner himself for the precise use to which he was putting it at that date. It follows that if in the first instance the land is valued on the basis of its suitability for some more profitable form of use, there can be no justification for making an addition to the value so ascertained because of disturbance (at 164).

80 Note the way in which the value to the owner is said to be assessed: it is from the perspective of the "prudent purchaser in the position of the owner" and it looks at what such a person would be prepared to pay for the land. Loss attributable to disturbance, including the cost of relocation from the land, is but one matter to be considered in determining the price that such a person would pay.

81 If the value of the land is considered as a site for the precise use or kind of business that the owner has already established on the land, then the prudent purchaser in the position of the owner would be prepared to increase the price to be paid to account for not moving that business from the land and hence not incurring financial costs in connection with such a move. The value to the owner is, therefore, the sum of the value of the land as a site for that business and the financial cost saved by not having to relocate that business (which equates to the financial cost of relocation of the business).

82 However, if the value of the land is not valued as a site for the precise use to which the owner was putting it but rather on the basis of its suitability for some more profitable form of use, the prudent purchaser in the position of the owner would not be prepared to increase the price to be paid on account of not having to move his business. This is because the owner, if he wishes to put the site to a more profitable use, necessarily would have to relocate the existing business. The owner is taken to be a person who is willing to abandon the existing use of the land to obtain the higher price based on the more profitable use. Hence, in assessing the value to the owner of the land, there would be no justification to make an addition to the value of the land based on the more profitable use because of any loss attributable to disturbance of the existing use.

83 This accords with the explanation of the majority of the Court of Appeal in Horn v Sunderland:

In the present case the respondent was occupying for farming purposes land which had a value far higher than that of agricultural land. In other words, he was putting the land to a use which, economically speaking, was not its best use, a thing which he was, of course, perfectly entitled to do. The result of the compulsory purchase will be to give him a sum equal to the true economic value of the land as building land, and he thus will realize from the land a sum which never could have been realized on the basis of agricultural user. Now he is claiming that the land from which he is being expropriated is for the purpose of valuation to be treated as building land and for the purpose of disturbance as agricultural land, and he says that the sum properly payable to him for the loss of his land is (a) its value as building land plus (b) a sum for disturbance of his farming business. It appears to me that, subject to a qualification which I will mention later, these claims are inconsistent with one another. He can only realize the building value in the market if he is willing to abandon his farming business to obtain the higher price. If he claims compensation for disturbance of his farming business, he is saying that he is not willing to abandon his farming business, that is, that he ought to be treated as a man who, but for the compulsory purchase, would have continued to farm the land, and, therefore, could not have realized the building value (at 35).

84 The upshot was, in assessing the value to the owner of the land expropriated, any loss attributable to disturbance that would be necessarily incurred in order to realise a more profitable use of the land than the use to which the owner was currently putting the land would not be added to the value of the land based on that more profitable use.

85 However, the Act did not implement this concept of the value to the owner. The Act adopted an exhaustive statutory list of matters to be considered in determining the amount of compensation instead of the vague concept of "value to the owner", consistent with the recommendation of the ALRC (at [236]). Section 55 of the Act requires that separate consideration be given to each of its sub-paragraphs and to each of the definitions in ss 56-60 of the Act. The concept of "value to the owner" has no operative function: Leichhardt Council v Roads and Traffic Authority (NSW) at [27]. As a consequence, prior case law that characterised a statutory formulation of "value of the land" as being "value to the owner" must be treated with care. Neither the formulation nor the characterisation is applicable to the statutory provisions in the Act: Leichhardt Council v Roads and Traffic Authority (NSW) at [29].

86 The Act adopted a different approach in at least three ways: first, it separated the concepts of "market value", "special value" and "loss attributable to disturbance"; secondly, it introduced a new formulation of "special value" (that in s 57); and thirdly, it exhaustively defined "loss attributable to disturbance" (in s 59) separately from "special value". Hence, earlier case law on special value and disturbance must be treated with care.

87 Against this legislative change in the approach to determining compensation, s 61 needs to be considered. I will start with the chapeau of s 61.

The meaning of the chapeau of s 61

88 First, the phrase "the market value of land is assessed" refers to the particular assessment of the particular matter of market value in accordance with Div 4 of Pt 3. Section 55 mandates that, in determining the amount of compensation to which a person is entitled, regard must be had only to the matters specified in paragraphs (a) - (f) of s 55, and furthermore that each matter be "assessed in accordance with this Division". One of the matters (in s 55(a)) is the market value of the land on the date of its acquisition, and that market value is to be assessed in accordance with s 56. Section 56(1) defines "market value" as:

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.

89 This definition does not incorporate the value to the owner concept. It does not consider what the prudent purchaser in the position of the owner would pay for the land. Hence, the market value of the land, assessed in accordance with s 56, cannot be the value to the owner of the land expropriated. This means that, for the purposes of s 61, it is not now possible to have an assessment of the market value of the land derived in the manner considered in Horn v Sunderland Corporation and The Commonwealth v Milledge and that formed the basis for those decisions as to when loss attributable to disturbance can be added to the value of the land to the owner.

90 Secondly, the wider phrase "[i]f the market value of land is assessed" refers to the assessment of market value made by the person determining the dispossessed owner's claim for compensation. Where an objection to the amount of compensation offered to a person who has made a claim for compensation under Pt 3 of the Act has been lodged with the Land and Environment Court, that Court determines the person's claim for compensation (s 66(2) of the Act and s 24(1) of the Court Act). Determination of the person's claim for compensation involves determining the amount of compensation to which the person is entitled. In determining that amount, regard must be had to the relevant matters in s 55 of the Act, one of which is the market value of the land and another is any loss attributable to disturbance.

91 Section 61 qualifies the manner in which the relevant matters in s 55 and ss 56-60 are to be assessed. For example, for loss attributable to disturbance (s 55(d)), assessment in accordance with Div 4 of Pt 3 involves not only compliance with s 59 but also s 61. Compensation for loss falling within one of the paragraphs in s 59 will nevertheless not be payable if it is a loss to which s 61 applies. The Court, in determining the person's claim for compensation, must therefore assess the market value of the land and any loss attributable to disturbance, then consider whether s 61 applies. The Court must consider the basis on which it assessed the market value of the land. The Court's assessment of the market value may have been made after consideration of evidence of valuers called by the parties to the proceedings, including opinion evidence of the market value of the land. However, such valuation opinion evidence does not itself constitute the assessment of market value of land referred to in s 61. Only the Court's finding as to the market value of the land constitutes the assessment of the market value of the land for the purposes of s 61.

92 Thirdly, the precondition in the chapeau is that the market value of the land be assessed "on the basis" that the land had potential to be used for a purpose other than that for which it is currently used. The word "basis" bears its natural and ordinary meaning of:

1. the bottom or base of anything, or that on which it stands or rests. 2. a groundwork or fundamental principle. 3. the principal constituent; a fundamental ingredient: Macquarie Dictionary (4th ed, 2005).

93 The use of the definite article "the", rather than the indefinite article "a", before "basis" reinforces that the use specified in the phrase following the words "the basis" must be the fundamental foundation on which the assessment of the market value of the land rests. It is not sufficient for the market value of the land to be assessed "having regard to" or "be influenced by" the use specified in the phrase following the words "the basis". The concepts of having regard to or being influenced by the use specified in the phrase following the words "the basis" do not import a requirement that the use specified be the foundation, the fundamental principle, on which the assessment of market value rests. Hence, it is insufficient, in order for the precondition that the market value of land be assessed on the basis that the land be used for the specified use, for the Court to assess the market value merely having regard to or being influenced by its use.

94 Fourthly, the basis on which the market value of the land must be assessed is that the land had potential to be used for a purpose "other than" that for which it is currently used. The words "other than" are important. They mean "different from in nature or kind": Macquarie Dictionary (4th ed, 2005). The expression in the chapeau contrasts uses of the land for two purposes that are different from one another in nature or kind. One is the purpose for which the land is currently used; the other is a purpose for which the land has the potential to be used "other than" the purpose of the current use. The chapeau requires that, in order for s 61 to be engaged, the basis on which the market value of land is to be assessed is that the land be used for a purpose other than the purpose of the current use. If the purpose of the current use of the land is the basis, or even if it is a basis, that is to say, one of the bases, on which the market value of the land is assessed, then the precondition in the chapeau is not satisfied. It cannot be said that the market value of the land is assessed on the basis that the land had potential to be used for a purpose other than the purpose for which the land is currently used if the purpose of the current use is a basis of that assessment of market value.

95 Fifthly, the chapeau refers to the need for the basis on which the market value is assessed to be that the land "had potential" to be used for a purpose other than that for which it is currently used. The phrase "had potential" has two temporal components. The first comes from the word "had". The time at which the land needs to have "had" that potential to be used for the requisite other purpose is the date of acquisition of the land. This is because, by virtue of s 55(a) of the Act, the "market value" of the expropriated land is to be assessed, in accordance with s 56, "on the date of its acquisition". Thus the potential for the land to be used for the requisite other purpose must exist as at the date of the acquisition of the land, notwithstanding that the assessment of the market value of land, in the case of the Court's finding as to the market value of the land following an objection to the amount of compensation offered, necessarily occurs at a later time.

96 For the purposes of s 61, therefore, the Court needs to find not only that the land had the required potential to be used for that other purpose on the date of its acquisition but also that the Court's assessment of the market value was on the basis that the land had that potential to be used for the other purpose.

97 The second temporal component comes from the word "potential". As a noun, "potential" refers to the possibility or potentiality as opposed to the actuality. The word is used in the chapeau to describe the possibility that land be used for a purpose other than the purpose for which it is currently used. But the use of the word "potential" in such a description is silent on when the land could be used for that other purpose. Put another way, what degree of temporal proximity of the potential or ripeness for development for that other purpose is required by s 61?

98 The proximity or conversely remoteness of the potential for development for the required other purpose obviously affects the market value of the land. The more proximate, the higher the uplift in the value for the potential; the more remote; the lower the uplift in value for the potential.

99 The ambiguity in the temporal proximity required by the word "potential" alone may, however, be resolved once the word is considered in the context of the language of the chapeau and the particular requirements of the precondition imposed by the chapeau. The precondition is that the market value of the land must be assessed "on the basis" that the land had potential to be used for a purpose other than the purpose for which the land is currently used. This precondition will be satisfied if the potential for development for the other purpose is temporally very proximate - the land is ripe and would be virtually certain to be developed for the other purpose within the very near future. In such circumstance, the market value of the land will be assessed on the basis that the land is to be used for the other purpose and not for the purpose of the current use.

100 However, if the land is unlikely to be developed for that other purpose for a long time and there is considerable uncertainty that it would be so developed for that purpose, the precondition will not be satisfied. The market value of the land will be assessed on the basis that the land is to be used for the purpose of the current use, with perhaps some addition on account of the hope that at some time in the future it will be profitable to develop it: see Myers v Milton Keynes Development Corporation at 705. The addition of any hope value to the market value the land has for its current use does not satisfy the precondition in s 61. True it is that the hope value could be said to represent some potential for the land to be used for the other purpose, albeit a long time in the future, and it is a component of the aggregate that makes up the market value of the land. But the market value is assessed primarily on the basis that the land is to be used for the purpose of the current use. Whilesoever the market value of the land is based on the current use of the land, the precondition is not satisfied - the market value is not based on a use for a purpose other than that for which it is currently used. The consequence is that the potential of land to be used for a purpose other than that for which it is currently used will need to be sufficiently temporally proximate or ripe in order for the precondition in s 61 to be satisfied.

101 A similar conclusion was reached by the majority of the Ontario High Court of Justice in Pike v Minister of Housing. The claimant's farm had been expropriated. At the time of expropriation, the land was not ripe for urban development - that was not likely to occur for about 20 years. Nevertheless, because of the development possibility in about 20 years, the market value of the farm was about 10 times its agricultural use value, although it would have been several times still more valuable if held until ripe for development (at 169).

102 The Expropriations Act, RSO 1970 (s 13(2)) provided that the compensation payable to a dispossessed owner was to be based upon, among other matters, "(b) the damages attributable to disturbance", but then had a proviso that "where the market value is based upon a use of the land other than the existing use, no compensation shall be paid under clause b for damages attributable to disturbance that would have been incurred by the owner in using the land for such other use".

103 Southey J (with whom Griffiths J agreed) held:

In the circumstances of this case, in my judgment, there is no inconsistency or duplication in awarding the appellant damages for disturbance in addition to a market value based largely on the value of the land's potential for development, and only to a small degree upon its value for agricultural use. The potential for development is sufficiently remote in this case that its value is not conditional upon the owner's willingness to give up farming on the lands. Continued use of the lands for farming for another 20 years is quite consistent with the potential for development for which the appellant is being paid. Had he not been expropriated, he might well have been able to realize the value of that potential in a private sale, while reserving the right to continue to occupy and farm the lands for the next 20 years.

Moreover, there would be no duplication in compensation, if he were awarded damages for disturbance to his agricultural operation. The payment of such damages, as I have explained, would do no more than save him from suffering a loss due to the expropriation, if he wished to continue farming after being forced to leave the expropriated lands.

This is a case in which the land is a long way from being ripe for development. It should be anticipated that the hypothetical purchaser of the farm in the open market contemplated by s. 14(1) of the Expropriations Act would continue to farm it, or cause it to be farmed, for 20 years of more. In these circumstances, it cannot be said, in my view, that a market value derived from an examination of sale of other properties having a similar potential and a similar present use is based upon a use other than the existing use, simply because such value is much greater than that of lands being used for farming that have less or no potential for future development. The concluding words of s. 13(2), therefore, have no application in the present case, and the Board, in my judgment, erred in holding that the appellant was not entitled to damages attributable to disturbance (at 174).

104 The injustice that arises when land is not fully ripe for development for a purpose other than that for which it is currently used was highlighted by R E Megarry in a case note critical of the majority in Horn v Sunderland Corporation published in (1942) 58 Law Quarterly Review 29 at 30:

The rule laid down by the majority seems to be unworkable in a case where agricultural land is not fully ripe for building, but nevertheless has a present enhanced value due to its potentialities; on a compulsory purchase of land which would be worth £4,000 as mere agricultural land, and £12,000 if fully ripe for building, but is now worth £8,000, would the majority of the Court of Appeal apportion a claim for £2,000 for disturbance?

105 The answer to Megarry's question, if applied to s 61 of the Act, for the case example he gives, may be that compensation for the disturbance loss would not be denied because the market value of the land would still be assessed on the basis that the land is used for the current agricultural purpose, notwithstanding that it is also assessed on the basis that it has potential to be used for building.

The meaning of paragraph (b) of s 61

106 I now come to paragraph (b) of s 61. Section 61 provides that if the precondition in the chapeau is satisfied, compensation is not payable in respect of:

(b) any financial loss that would necessarily have been incurred in realising that potential.

107 A number of points can be made about this paragraph. First, the words "financial loss" have been held to include "financial costs" of the kind falling within four of the subparagraphs of s 59 of the Act: see Sydney Water Corporation v Caruso at [186] per Tobias JA (with whom Sackville AJA agreed at [190]).

108 Secondly, the words "that potential" refer back to the chapeau to the potential of the land to be used for a purpose other than that for which it is currently used.

109 Thirdly, the words "in realising" mean "making real or giving reality to": see Macquarie Dictionary (4th ed, 2005) meaning 2. of "realise". Hence, the phrase "in realising that potential" refers to making real or giving reality to the potential of the land to be used for a purpose other than that for which it is currently used; in short, it refers to the transformation from the potential for, to the reality of, using the land for a purpose other than that for which is currently used.

110 Fourthly, the financial loss must be a loss that would "necessarily have been incurred" in realising that potential. The adverb "necessarily" means: "1. by or of necessity; 2. as a necessary result". The word "necessity", in turn, means: "1. something necessary or indispensable": Macquarie Dictionary (4th ed, 2005). Hence, the financial loss must be incurred inevitably or as a necessary result in realising the potential to use the land for a purpose other than that for which it is currently used: see also Roads and Traffic Authority of New South Wales v McDonald at [94].

111 If the financial loss is incurred for reasons other than realising the potential to use the land for that other purpose, it will not satisfy the requirement of being necessarily incurred to realise that potential. For example, legal costs or valuation fees incurred by the persons entitled to compensation in connection with a compulsory acquisition of the land (within s 59(a) and (b) of the Act) will not satisfy the requirement of being necessarily incurred in realising that potential: Sydney Water Corporation v Caruso at [185].

112 Whether and when a financial loss will be incurred inevitably or as a necessary result in realising that potential will depend in part on the temporal proximity or conversely remoteness of the potential.

113 As the potential to use the land for a purpose other than the purpose for which it is currently used becomes more remote, it will become more difficult to satisfy the requirement of necessity or inevitability. For example, if the potential is that the land is unlikely to be developed for a purpose other than the purpose for which it is currently used for another 10 years, then the land is likely to continue to be used for its current use for those next 10 years. A sale of the land now would not realise the potential to be used for the purpose other than the purpose for which the land is currently used - such realisation will not occur for 10 years. The land will continue to be used for the purpose for which it is currently used after the sale, although still having the potential to be used for that other purpose, some 10 years in the future.

114 On the other hand, if the land is ripe for redevelopment for the other purpose, the sale of the land now will realise the potential to be developed for that other purpose.

115 A financial loss, such as relocation costs, incurred in connection with the sale of the land could be said to be necessarily incurred in realising the potential in the case of the land that is ripe for development for the other purpose but not in the case of the land where the potential for development for that other purpose is some 10 years away.

The primary judge erred in the construction and application of s 61

116 The primary judge's decision to deny the El Boustanis' relocation costs on account of s 61 involved numerous errors on questions of law in the construction and application of s 61.

117 First, the primary judge asked herself the wrong question and failed to address the correct question in relation to the basis on which the market value of the land was assessed. The primary judge was required, in determining whether the precondition in the chapeau of s 61 was satisfied, to identify the basis on which the primary judge had assessed the market value of the land. The primary judge's assessment of a rate of $70 per m² for market value purposes (in [49]-[59]) did not make any findings of whether the land had the potential to be used for a purpose other than that for which it was currently used on the date of acquisition of the land or whether the basis of the primary judge's assessment was that the land had that potential (as was necessary under the chapeau of s 61). Moreover, when the primary judge came to address the precondition in the chapeau of s 61, the primary judge did not ask herself what was the basis on which she had earlier assessed the market value of the land.

118 Instead, the primary judge endeavoured to answer the question of fact she posed for herself in [118], namely "[i]n the present case, because the current and best use of the land is intensive horticulture, the question of fact is simply whether the market value of the land has been assessed on the basis that the land has the potential to be used for a different purpose, namely, town centre or urban development." This question of fact was not framed, in form or substance, in the terms of the chapeau of s 61. It reveals many of the errors in the approach adopted by the primary judge, which I will explain below. But the first error was to inquire whether the market value of the land has been assessed, by the parties' valuers and not by the primary judge, on the basis that the land has the potential to be used for a different purpose. In the misdirected belief that this was the inquiry required by the chapeau of s 61, the primary judge examined the methodology that Mr Dyson, the Minister's valuer, had employed (at [119]); the statements of Mr Wood, the El Boustanis' valuer, in the joint expert report and during cross-examination (at [121]), in his report dated 2 June 2011 (at [122]) and his tabular description of his comparable sales (at [124]); and the statements by both Mr Wood and Mr Dyson on the site visit (at [123]), in order to ascertain how those experts assessed the market value of the land. Nowhere in this endeavour to answer the posed question of fact did the primary judge make an explicit finding of the basis on which she had assessed the market value of the land.

119 Not only did the primary judge misdirect herself by this examination of the valuers' assessment of market value, the findings made in this examination were largely irrelevant to satisfying the precondition in the chapeau of s 61. The primary judge made a finding that she preferred the evidence of Mr Dyson rather than that of Mr Wood (in [125]). Having done so, the primary judge's examination of the basis on which Mr Wood assessed the market value of the land was, therefore, irrelevant. Whatever Mr Wood's basis of assessment of market value was, it was not adopted by the primary judge as her assessment of the market value of the land, and, hence, it could not satisfy the precondition in the chapeau of s 61.

120 Furthermore, even though the primary judge found that the evidence of Mr Dyson was more credible, the primary judge still did not make a finding, in the terms of the chapeau of s 61, that Mr Dyson had assessed the market value of the land on the basis that the land had potential to be used for a purpose other than that for which it was currently used. Earlier in the judgment, the primary judge had accepted the evidence of Mr Dyson "that buyers were not buying land for future urban development, rather they were purchasing land for rural/residential purposes or to build large mansions", that developers were more likely to purchase land in the already released urban area of Edmondson Park rather than in Austral or Leppington, and that "the prices currently being paid did not reflect pressure from developers" (at [110]). Such findings are inconsistent with the market value of the land being assessed on the basis that the land had potential to be used for urban development.

121 The primary judge's finding in [119], that Mr Dyson, "but for the acquired land's potential for urban development, would have ascribed to it a rate of approximately $40 per m² when regard was had, in particular, to land immediately to the west of the acquired land in Rossmore", is not in form or substance a finding in the necessary terms of the chapeau of s 61. The only other finding relating to Mr Dyson's evidence of his assessment of market value of the land is in [123], that Mr Dyson had said on the site visit "that a relevant consideration for each of the comparable sales inspected was to identify whether the sale was within, or in reasonably close proximity to, the released precincts of Leppington North and/or Austral, or the proposed Leppington Town Centre". This is also not, in form or substance, a finding in the necessary terms of the chapeau of s 61. But in any event, the primary judge does not expressly say that she adopted these statements of Mr Dyson as her own assessment of the market value of the land. The primary judge does not say so in [119] or [123] or elsewhere. The finding in [125] that the primary judge preferred the evidence of Mr Dyson which, overall, she found to be more credible, was not necessarily an adoption of the particular statements of Mr Dyson as the primary judge's own assessment of the market value of the land.

122 Secondly, the primary judge misdirected herself by not inquiring whether "the basis" of the assessment of the market value of the land was that the land had a potential to be used for a purpose "other than" that for which it was currently used. The primary judge's formulation in [118] of the question of fact she considered s 61 posed omits entirely reference to the words "other than" in the precondition in the chapeau of s 61. This was not a mere stylistic paraphrase of s 61 - it changed the meaning of the precondition and thereby asked the wrong question. If the market value of land is assessed on the basis of the purpose for which it is currently used, irrespective of whether it also is assessed on the basis that the land had a potential to be used for another purpose, the precondition in the chapeau of s 61 will not be satisfied - the basis of the assessment of market value cannot be said to be "other than" use for the current purpose.

123 In this case, the primary judge had earlier noted that both Mr Wood and Mr Dyson had agreed that the highest and best use of the land was its current use of intensive horticulture (at [30]). Then, in the primary judge's formulation of the question of fact she considered s 61 posed (in [118]), the primary judge made a finding that "the current and best use of the land is intensive horticulture". The primary judge had earlier accepted that the market value equates to the highest and best use of the land (at [22]). Hence, the primary judge must be taken in making this finding to have found that, at the least, a basis on which the market value of the land was assessed was the purpose of intensive horticulture for which the land was currently used. The primary judge's inquiry as to whether the market value of the land has been assessed, in addition, on the basis that the land had potential to be used for a different purpose to intensive horticulture was misdirected. Whatever the answer to that inquiry might be, it could not change the fact that the market value of the land had been assessed by the primary judge on the basis of the current and best use of intensive horticulture. All that the potential to be used for a different purpose would have done was to add another basis.

124 Thirdly, the primary judge asked the wrong question in relation to, or misconstrued, the requirement of "the basis" in the chapeau of s 61. Instead of asking whether the use for the purpose specified in the chapeau was "the basis", in the sense of the fundamental foundation of the assessment of the market value of the land, the primary judge employed a different approach, as evidenced by the language the primary judge used in describing the assessment of the valuers of the market value of the land.

125 This is revealed in the primary judge's summary of the Minister's submission that s 61 precludes the claim for relocation costs because "the rate of $70 per m² reflects the acquired land's potential to be used for a purpose other than that for which it is currently used" (in [76]); her formulation of the first factual question, to which the primary judge said the proper construction of s 61 gives rise, of "whether the acquired land has been valued according to its potential to be used for another purpose" (in [117]); her description of Mr Dyson's methodology that, "but for the acquired land's potential for urban development", the rate would have been lower (in [119]); her description of the El Boustanis eschewing any reliance on "an uplift in value by dint of the development potential of the acquired land" (in [120]); her rejection as incorrect of the statements of Mr Wood to the effect that his valuation "did not take into account any such uplift due to the potential for a higher use because none of the sales he considered reflected it" (in [121]); her acceptance of the valuers' opinions on the site visit that "a relevant consideration" for each of the comparable sales was its proximity to released or proposed urban areas (in [123]); and her agreement that Mr Wood's approach to valuation was one that "includes" value for the land's potential to be used for a purpose other than intensive horticulture (at [124]).

126 To employ a "but for" test (but for the acquired land's potential to be used for urban development), to inquire whether there has been "an uplift in value" or whether comparable sales "reflect" an uplift in value because of development potential of the acquired land, to take into account "as a relevant consideration" the acquired land's proximity to released or proposed urban areas, or to ascertain whether the market value "reflects", "has been valued according to" or "includes" a potential to be used for a purpose other than the current purpose is, in each case, to ask a different question to that required by the precondition in the chapeau in s 61 - none of them involved determining "the basis" of the assessment of market value as required by s 61.

127 Fourthly, the primary judge asked the wrong question and failed to address the correct question of what was the "potential" the land "had" at the time on the date of acquisition to be used for a purpose other than that for which the land was currently used on that date. The error is manifested in at least three ways. One is that, as I have explained when dealing with the first error above, the primary judge failed to determine the question of what was the basis on which the primary judge had assessed the market value of the land. Hence, the primary judge did not ask or determine what was the potential that the land had to be used for a purpose other than the current purpose on the date of its acquisition.

128 The second way that the primary judge's error in approach is manifested is in the primary judge's framing of the question of fact in [118] in terms of whether the market value of the land has been assessed on the basis that the land "has" the potential to be used for a different purpose, instead of the terms of s 61 that the market value is assessed on the basis that the land "had" potential to be used for a purpose other than that for which it is currently used. The substitution of "has" for "had" misdirected the primary judge from undertaking the necessary inquiries of whether the land "had" the potential to be used for a purpose other than that for which it was currently used on the date of its acquisition and whether the primary judge's assessment of the market value of the land was on the basis that the land had that potential at that date.

129 The third way that the primary judge's error in approach is manifested is that the primary judge conflated the concepts of the use of land and the purpose for which land is used. The chapeau of s 61 is specific in referring to the purpose for which land has the potential to be used and for which it is currently used, not the mere use of land.

130 The purpose of a use is the end which is seen to be served by a particular use of land. It describes the character which is imparted to the land on which the use is pursued: Shire of Perth v O'Keefe (1964) 110 CLR 529 at 534. The characterisation of the purpose of a use needs to be done at the appropriate level of generality, not too narrow or not overly wide. The test is not so narrow that it requires characterisation of the purpose in terms of the detailed activities, transactions or processes which have taken or which may take place, but not so general that the characterisation can embrace activities, transactions or processes which differ in kind from the use which the activities, transactions or processes as a class have made or may make of the land: Royal Agricultural Society of NSW v Sydney City Council (1987) 61 LGRA 305 at 310.

131 In this case, the primary judge did not ask or determine what was the particular purpose (in the required sense) for which the land had the potential to be used. The primary judge employed varying language to describe the potential use of the land, ranging from the overly wide, generic characterisations of "town centre" (in [118]), "urban development" (in [118], [119], [121] quoting Mr Wood, [124], [126]) and "urban usage" (at [122]), to the amorphous descriptions of "development potential" (at [120]), "future urban potential" (at [121] in the cross-examination of Mr Wood), and "release potential" (at [122] quoting Mr Wood), to the absence of any characterisation of purpose in the descriptions of "potential for a higher use" (at [121]) and "potential for another purpose" (at [122]).

132 None of these descriptions meet the test for characterisation of the purpose of use. Descriptions such as "town centre" or "urban development" or "urban usage" embrace uses which differ in nature, kind and extent and which impart different characters to the land on which the uses are pursued. Examples would include the different types of residential development (such as low, medium and high density), commercial development (such as offices and a wide range of retail development), industrial development (a wide range from light to heavy industry as well as different kinds of industry), utilities, roads, public purposes (such as parks), and civic purposes (such as libraries, community centres, health clinics etc). All of these purposes fall within the generic descriptions employed by the primary judge. Yet the character such uses impart to the land are vastly different. They also would lead to vastly different market values. For example, land that has the potential to be used for retail purposes will have a significantly higher market value than land that has potential only to be used for low density residential purposes.

133 The primary judge, therefore, failed to address and determine the question of the purpose for which the land had the potential to be used, which purpose was the basis upon which the primary judge assessed the market value of the land.

134 Fifthly, the primary judge misdirected herself in relation to the need for temporal proximity of use for a purpose other than that for which the land was currently used. As I have explained earlier, the need for temporal proximity flows from the concepts of "potential" and "the basis" in the precondition in the chapeau of s 61. If the potential for land to be used for a purpose other than the current purpose is temporarily proximate - the land is ripe for development for that other purpose - the market value of the land will be assessed on the basis that the land is to be used for that other purpose. However, if land is unlikely or is not fully ripe to be developed for that other purpose for a considerable time, the market value of the land will be assessed on the basis of the current use with perhaps some addition of value on account of the hope that it will be developed for that other purpose in the future.

135 In this case, the primary judge did not find that the land was fully ripe to be developed for a purpose other than the current, highest and best use of intensive horticulture (such as town centre or urban development). To the contrary, the primary judge found that it was not known and it was uncertain whether and when such development for another purpose would be likely to occur.

136 The primary judge found that there were significant impediments to the land being developed for urban development. These included: the significant fragmentation of ownership, with most of the allotments being too small for large developers; as at the date of the hearing (November-December 2011), no work had commenced, there was no timetable for work to commence, the land was not sewered, town water was insufficient for urban purposes, and there were still significant roadworks to be carried out; and part of the surrounding land was flood prone and would require filling (at [110]). The primary judge also found that buyers were not buying land for future urban development in the area, developers were more likely to purchase land in already released urban areas rather than in Austral or Leppington, and the prices currently being paid did not reflect pressure from developers (also at [110]).

137 The primary judge did make some findings that suggested it would be many years, even a decade, before the land would be developed for urban purposes. The primary judge found that the current development consent authorising the use of intensive horticulture would have been extended for at least 5 years after its expiry (ie until 16 June 2017) (at [112]). The primary judge's assessment of market value was also based on her finding of the effective life of the improvements on the land. The primary judge adopted Mr Dyson's evidence that redevelopment would not occur before the end of the effective life of the improvements on the land, which was after 2021 (at [48], after recognising the typographical error that 2012 should have read 2021). Hence, the primary judge found that the potential for the land to be developed for town centre or urban development would not be realised until 10 years after the date of acquisition.

138 In these circumstances, the market value of the land must have been assessed by the primary judge on the basis that the land would continue to be used for the current, highest and best use of intensive horticulture for 10 years after any sale (required to be assumed by the compulsory acquisition) and would not be used for the other purpose of town centre or urban development until 10 years later.

139 However, the primary judge did not address or determine the question required by the precondition in the chapeau of s 61 of whether, having regard to these particular facts and circumstances, the market value of the land could be said to be assessed on "the basis" that the land had "potential" to be used for a purpose other than that for which it was currently used, notwithstanding the remoteness of that potential use.

140 Sixthly, the primary judge asked the wrong question and failed to address the correct question, required by paragraph (b) of s 61, of whether the financial loss incurred by the El Boustanis (the relocation costs) could be said to be "necessarily" incurred in "realising" the potential for the land to be used for the other purpose of town centre or urban development.

141 The primary judge found that relocation costs would have been "inevitably incurred" by the El Boustanis when development for the other purpose of town centre or urban development occurred. The El Boustanis could not have continued a use of the land for intensive horticulture and at the same time redeveloped it for a town centre: "igloos and the town centre are inconsistent and cannot co-exist" (at [136]). But such a finding does not address the question required by s 61(b).

142 If, as the primary judge had found, the redevelopment of the land for the town centre would not occur for up to 10 years after the date of acquisition, then the sale that must be assumed by the compulsory acquisition of the land does not "realise" the potential for redevelopment for a town centre; that redevelopment still would be 10 years distant. In the meantime, the land would be used for what the primary judge found was its current, highest and best use of intensive horticulture. Hence, the inconsistency between "igloos and the town centre" would not arise for 10 years. This is insufficient to engage paragraph (b) of s 61.

143 As I observed earlier, unless the potential for the land to be used for a purpose other than that for which it is currently used is temporally proximate - the land is fully ripe to be developed for that purpose - it will be difficult to satisfy the requirement that relocation costs would "necessarily" be incurred in "realising" the potential for the land to be used for that other purpose. Where redevelopment for that other purpose is remote and uncertain, realisation of any hope value, in addition to market value based on the current, highest and best use, in order to account for the hope that redevelopment for that other purpose may occur in the foreseeable future, is not dependent on the abandoning of the current use of the land, in this case, intensive horticulture, and relocating the business.

144 For these reasons, the primary judge erred on questions of law in determining that s 61 operated to preclude the payment of compensation for the relocation costs that the primary judge found were otherwise payable. The six reasons I have given address and, in effect, uphold grounds of appeal 1(a), (b) and (c) of the El Boustanis' appeal.

Ground 1(d) challenging the unjust compensation

145 Ground 1(d) was put by the El Boustanis in the alternative to grounds 1(a), (b) and (c) if they were to be unsuccessful. The El Boustanis' argument was that, if the primary judge did not err in determining that s 61 operated to deny payment of compensation for relocation costs, the result would be that the El Boustanis would not be awarded "just compensation" under s 54 of the Act. Because I have found that the primary judge did err on questions of law in determining that s 61 operated to deny the El Boustanis compensation for relocation costs, it is unnecessary to address this alternative ground. The primary judge's determination of the amount of compensation has not been made having regard only to the matters in, and as assessed in accordance with, Div 4 of Pt 3 of the Act. Hence, the primary judge's statement in [137] that, if she had allowed recovery of relocation costs, "the El Boustanis would be unjustly compensated contrary to the words of s 54 of the Act", is incorrect. However, an analysis of the meaning and application of what has been referred to as the "just terms override" in s 54 (in Leichhardt Council v Roads and Traffic Authority (NSW) at [28]), should await a case where the amount of compensation has been determined having regard only to the matters in, and as assessed in accordance with, Div 4 of Pt 3.

Ground 2 challenging the determination of lost profits

146 Ground 2 related to the primary judge's determination that the El Boustanis should be compensated under s 55(d) and s 59(f) of the Act for only three years of lost profits. The primary judge noted that it was not a matter of controversy that compensation for loss of profits was payable (at [138]). The Minister had accepted in the court below, and reiterated on the appeal before this Court, that the loss of profits from a business conducted on the acquired land that has been disturbed as a direct and natural consequence of the acquisition, fell within the words "any other financial costs" in s 59(f) of the Act. The primary judge determined the El Boustanis claim for compensation on this basis.

147 The principal issue between the parties was the number of years of lost profits that should be allowed. The primary judge's reasoning is opaque and some of the findings are inconsistent with one another. In the first part of the section of the judgment on compensation for lost profits, the primary judge addressed the first two years after acquisition, namely 2010-2011 and 2011-2012. The primary judge up front recorded the lack of controversy concerning, and seemingly adopted as her finding, that compensation for loss of profits for the 2010-2011 and 2011-2012 years was payable (at [138]). The primary judge accepted the parties' agreed sum of $104,579 for the first year (2010-2011), to which the primary judge added the agreed sum of $11,221 for the costs of the abandoned 2010-2011 crop, bringing the total to $115,800 (at [139]).

148 The primary judge then came to determine the amount of lost profits for the second year (2011-2012), compensation for which the primary judge had recorded there was no controversy. The primary judge analysed the evidence in [140]-[147] and found that the amount of profits in 2011-2012 was $60,755 (at [147]). These findings dealt with the first two years of lost profits after the date of acquisition.

149 The primary judge next dealt with the El Boustanis' claim for compensation for loss of profits for a further two years (namely 2012-2013 and 2013-2014 (beginning at [148])). The primary judge recorded that the basis of the El Boustanis' claim for the third and fourth years after acquisition was that "[t]his represented the amount of time they estimated it would take to re-establish their business to the point of production after construction of the igloos (and related facilities) on any newly acquired property". The El Boustanis claimed $121,511 for these additional two years (at [148]).

150 The primary judge recorded that the Minister had submitted that the El Boustanis were only entitled to the initial two years of lost profits (ie 2010-2011 and 2011-2012). The primary judge gave as the Minister's reason that any further loss of profits (in the third and fourth years after acquisition) "could not properly be characterised as a direct and natural consequence of the acquisition because it was occasioned by the preference of the El Boustanis ... to wait until proceedings were finalised prior to purchasing a property with an existing dwelling located on it" (at [149]).

151 The primary judge then stated in her conclusion on this section on compensation for lost profits (at [150]): "I do not agree". This statement is equivocal as it is silent as to the subject matter of the disagreement. Having regard to the order of paragraphs in the judgment, one would ordinarily have read the disagreement to be with the whole of the Minister's submission in the preceding paragraph, that is to say, with the Minister's submission that the El Boustanis were only entitled to the first two years and not to the third and fourth years of lost profits. This reading is supported by the sentence that immediately followed the primary judge's statement that she did not agree. In this following sentence the primary judge stated:

The evidence that it would take two years before a crop would be produced after the construction of igloos and related infrastructure on any new property was unchallenged and was not dependent upon whether or not the newly purchased property was vacant.

152 Further, the primary judge in her finding in [150] allowed "two years necessary to permit full production".

153 Yet when the primary judge came to put these various findings that she had made together in order to determine the amount of compensation for lost profits, instead of allowing four years of lost profits (the not-in-controversy, first two years of 2010-2011 and 2011-2012 in the amounts that the primary judge had found plus the two years necessary to permit full production, which the El Boustanis had claimed to be 2012-2013 and 2013-2014), the primary judge allowed only one year to find a replacement property and to construct the facilities necessary to grow tomatoes (which had to be 2010-2011) in addition to the two years necessary to permit full production (which had to be 20111-2012 and 2012-2013)(at [150]).

154 In so finding, the primary judge erred on questions of law in two respects. First, the primary judge's "allowing" of only a year to find a new property and to construct facilities necessary to grow tomatoes was made without reference to any evidence and was, in fact, without evidentiary foundation. It needs to be borne in mind that the allowed one year was after the date of acquisition (on 23 July 2010), that is to say, it was the 2010-2011 financial year. The hearing in the court below was conducted after the expiry of this financial year (on 21-24 November and 5 December 2011) and the reserved judgment (and hence the primary judge's determination of the El Boustanis' claim for compensation for lost profits) was given a year later on 6 December 2012. The primary judge, therefore, already knew that the El Boustanis had not purchased a replacement property or constructed the facilities necessary to grow tomatoes within the first year after acquisition. Mrs El Boustani had given evidence as to the reasons for the El Boustanis not having been able to do so and for preferring to await the outcome of their claim for compensation before doing so. The primary judge did not address this evidence and certainly did not make any findings rejecting it. The primary judge referred to no other evidence that could support the finding that the El Boustanis ought reasonably to have purchased a replacement property and have constructed the facilities necessary to grow tomatoes within one year after the date of acquisition.

155 To make a factual finding where there is no evidence in support of that finding is to make an error of law: Kostas v HIA Insurance Services Pty Ltd at [91]; D'Amore v Independent Commission Against Corruption at [224].

156 Secondly, the primary judge's allowance of only one year to find a replacement property and to construct the facilities necessary to grow tomatoes can be seen to involve a constructive failure to exercise jurisdiction. In Resource Pacific Pty Ltd v Wilkinson, Basten JA (with whom Beazley JA agreed) noted at [9] that:

The term 'constructive failure to exercise jurisdiction' is used to describe a situation where the court has purported to resolve the parties' dispute but has not in fact done so. Thus, particularly with a court or tribunal required to provide reasons for its decision, it may become apparent from those reasons that a material issue has simply not been addressed or that material evidence has been overlooked.

157 In State Super SAS Trustee Corporation v Cornes [2013] NSWCA 257 at [11], Basten JA (with whom McColl JA and I agreed) also observed that:

a mistake in understanding the facts, applying the law and reasoning to a conclusion could amount to a constructive failure to exercise jurisdiction if it revealed "a basic misunderstanding of the case brought by an applicant, [so that] the resulting flaw is so serious as to undermine the lawfulness of the decision in question in a fundamental way": Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; 77 ALJR 1088 at [88] (Kirby J), referred to in Goodwin v Commissioner of Police [2012] NSWCA 379 at [20].

158 In the present case, the primary judge was required to address the requirements of s 59(f) of the Act, and in particular whether the lost profits for the years claimed were "reasonably incurred" or "might reasonably be incurred", and "a direct and natural consequence of the acquisition". The primary judge was also required to deal with the El Boustanis' claim for four years of lost profits, comprising the initial two years as well as the additional two years, on the evidence before the Court.

159 The incomplete and inconsistent factual findings made by the primary judge; the allowing of only one year after acquisition to find a replacement property and construct the facilities necessary to grow tomatoes when there was no evidence in support of such allowance; the failure to give reasons explaining the allowance of only one year after acquisition; the failure to address the El Boustanis' claim for four years of lost profits, comprising the initial two years as well the additional two years; the failure to address the evidence of Mrs Boustani explaining the reasons for not being able to purchase a replacement property and construct facilities necessary to grow tomatoes in the year after acquisition and preference to await the outcome of their claim for compensation before doing so; and the failure to ground the primary judge's findings and allowance of only one year in the terms of the requirements of s 59(f) of the Act, together reveal a constructive failure to exercise jurisdiction, undermining the lawfulness of the primary judge's determination of the amount of compensation for lost profits.

160 I would therefore uphold appeal ground 2.

Conclusion and orders

161 The appeal should be allowed and the decision and orders of the primary judge set aside. Although the El Boustanis initially sought, if they were successful on the appeal, for this Court to redetermine the amount of compensation for itself, the reconsideration of the evidence, the new factual findings and the adjustment of the calculations that would need to be undertaken are sufficiently great as to make this course inappropriate. The proper course is to remit the matter to the court below to be determined in accordance with law. The costs of the appeal should follow the event.

162 The orders I propose that the Court should make are to:

(1) Extend the time for the appellants to file and serve the notice of appeal to 24 April 2014.

(2) Allow the appeal.

(3) Set aside the orders made by the Land and Environment Court of 6 December 2012.

(4) Remit the matter to the Land and Environment Court to determine the appellants' claim for compensation under the Land Acquisition (Just Terms Compensation) Act 1991 according to law.

(5) Order the respondent to pay the appellants' costs of the proceedings in this Court.

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Decision last updated: 28 February 2014