Land and Environment Court of New South Wales
Murlam Pty Limited v Roads and Traffic Authority of New South Wales [2009] NSWLEC 1365 (6 November 2009)
CITATION:
Murlam Pty Limited v Roads and Traffic Authority of New South Wales [2009] NSWLEC 1365
PARTIES:
APPLICANT
Murlam Pty Limited
RESPONDENT
Roads and Traffic Authority of New South Wales
FILE NUMBER(S):
30506 of 2008
CATCHWORDS:
COMPENSATION; COMPULSORY ACQUISITION OF LAND :- Market value of lease, extinguishment of business, value of business goodwill, entitlement to loss of profits pre acquisition, loss on sale of stock at date of acquisition and rental offset for occupation post acquisition
LEGISLATION CITED:
(Just Terms Compensation) Act 1991
CASES CITED:
Privy Council in Director of Buildings and Lands v. Shun Fung Ironworks Ltd [1995] 2 AC 111
N Stevenson Pty Limited v Roads and Traffic Authority of New South Wales [1994] 83 LGERA 248
Caruana v Port Macquarie — Hastings Council [2007] NSWLEC 109
Fitzpatrick Investments Pty Limited v. Blacktown City Council (No 2) [2000] NSWLEC 139
Inland Revenue Commissioners v. Muller and Co’s Margarine Ltd [1901] All ER 413
The Minister for Home and Territories v Lazarus [1919] HCA 12; [1919] 26 CLR 159
Commissioner of Succession Duties (South Australia) and Executor Trustee and Agency Company of South Australia Ltd and others [1947] HCA 10; [1947] 74 CLR 358
Elense No 17 v. Minister for Public Works [1990] 77 LGRA 56-57
Keogh V. Housing Commission of Victoria (No 2) [1969] 18 LGRA 297
TEXTS CITED:
Rost and Collins, Land Valuation and Compensation (3rd ed 1984)
CORAM:
Miller AC
DATES OF HEARING:
28 April 2009, 29 April 2009, 30 April 2009, 1 May 2009, 13 May 2009, 22 May 2009, 18 June 2009 and 20 July 2009
JUDGMENT DATE:
6 November 2009
LEGAL REPRESENTATIVES
APPLICANT
Mr I Hemmings (barrister)
SOLICITOR
Gadens Lawyers
RESPONDENT
Mr N Eastman (barrister)
SOLICITOR
Clayton Utz
JUDGMENT:
THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES
Miller AC
6 November 2009
30506 of 2008 Murlam Pty Limited v Roads and Traffic Authroity of New South Wales
JUDGMENT
This is a claim for compensation consequent upon the compulsory acquisition of an interest in land.
In delivering judgment for the majority of the Privy Council in Director of Buildings and Lands v. Shun Fung Ironworks Ltd [1995] 2 AC 111, Lord Nicholls said at [126] “The application of the general principle of fair and adequate compensation bristles with problems”. This case is no exception.
Background
On 28 December 2007 The Roads and Traffic Authority of New South Wales (the RTA) compulsorily acquired from Mr Adib Chidiac the property known as 195 Parramatta Rd Haberfield (the subject property) to enable the construction of a pedestrian bridge over Parramatta Road. Some 18 months earlier Mr Chidiac had granted a lease to Murlam Pty Limited ( Murlam ) which lease was current at the date of acquisition. Accordingly, Murlam , having an interest in land is entitled to make a claim for compensation, as an owner, under The Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act). The acquisition terminated the lease and the used car business which Murlam conducted from the subject property under the name of Platinum Motors.
In accordance with s 42 of the Just Terms Act the RTA offered Murlam compensation in an amount determined by the Valuer General. Murlam objected to this amount under s 66. Section 66 (2) requires the Court to hear and dispose of the owner’s (in this case Murlam ’s) claim for compensation. Compensation is to be determined in accordance with Division 4 of Pt 3.
The Claim for Compensation
Murlam claimed compensation under four headings totalling $1,475,459.29; details being as follows:
Disturbance claim for the extinguishment of the business (The Extinguishment Claim), $892,000
Disturbance Claim for Loss of Profits and Loss on Stock (The Business Impact Claim), $549,539
Disturbance costs for legal fees, $6,379 31
Disturbance costs for valuation fees, including accountancy advice provided to the valuer, $27,540.98
The RTA contend that Murlam is only entitled to compensation, under s 59 for two types of disturbance costs, namely, legal fees, $6,379 31 and valuation fees, $5,000 — a total of $11,379 31 . This amount is to be reduced by a set-off for rent of the subject property, post acquisition, in the sum of $38,000. Accordingly, the RTA’s position is that, after making this deduction, compensation should be determined as $nil.
Determination Summary
The Court determines compensation payable to the Applicant in the sum of $221,803.31.
The Extinguishment Claim is dealt with at 24 to 87, the Business Impact Claim at 88 to 109, disturbance costs at 110 to 115 and the rental offset counter claim at 116 to 121.
The Subject Property
The subject property is rectangular in shape, located on the eastern corner of Parramatta Road and Bland Street. The frontage to Parramatta Road is approximately 33.2 m and to Bland St approximately 15.85 m. The site area is 600.7 square metres. At the date of acquisition improvements on the land comprised a refurbished motor showroom providing accommodation for approximately 5 cars, with driveway access from Bland St., offices and amenities at a mezzanine level and a workshop area beneath . Full height glass curtain walls to the showroom provided excellent exposure to vehicles on display from both Parramatta Rd and Bland St. Air-conditioning was provided throughout the showroom and office area. The workshop had a concrete floor, was fitted with a metal roller shutter door, which faced Parramatta Rd. The showroom and offices have areas of 131 square metres and 48 square metres respectively while the workshop has an area of 48 square metres. Site improvements included concrete driveways to both Parramatta Road and Bland Street, concrete paved vehicle display area, security lighting, boundary fencing and gates.
The lease to Murlam was for an initial term of three years from 1 July 2006 with two options each of five years. The lease was registered at The Land Titles Office as AD 301457W. The permitted use was “motor vehicle showroom”. The initial rent was $108,000 per annum with the lessor responsible for the payment of statutory outgoings and insurance premiums. Rent reviews were to occur, annually, to the greater of 5% or increases in the Consumer Price Index. At the date of acquisition the rent was $113,400 per annum.
The permitted use was in accordance with development consent granted by Ashfield Municipal Council on 23 May 2003 which, consent was for “Addition of use to add car sales to the existing car rental business”. Important conditions of consent provided that two off street customer car spaces were to be provided while one car space was to be set aside for staff parking [H3], 12 car spaces were to be maintained and line marked [H12] while “All vehicles associated with the business are to be parked at all times wholly within the site. Under no circumstances shall the storage of goods or parking of cars be carried out kerbside in Bland Street or on Parramatta Road” [H13]. Five vehicles can be parked within the showroom. It follows that 17 vehicles can be displayed for sale on the subject property at any one time.
Platinum Motors
Mr Chidiac purchased the subject property on 27 August 1997 and up until August 2004 conducted with his wife, Mrs Nadia Chidiac, a vehicle rental business trading as Sky View Rentals. In late 2003 extensive renovations were carried out to the property. Murlam was granted a Motor Dealers License on 27 May 2003 and in August 2004 commenced the conduct of a used car business, trading as Platinum Motors, planning to sell used cars either by retail or wholesale. The business continued to trade from the subject property until 24 December 2007, four days prior to the acquisition. Mrs Chidiac is the sole director of Murlam .
Platinum Motors was conducted as a family business. Mr Chidiac, a licensed motor mechanic with over 30 years experience in the motor vehicle industry, was mainly responsible for the purchasing of stock and sales. Mrs Chidiac’s experience in business, over many years, enabled her to act as business and office manager while their son James, who had completed his HSC in 2003, was employed in the business with particular responsibility for advertising and networking. Wages paid to the three family members were less than a wage appropriate to the position which each held.
Mrs Chidiac’s evidence was that in early 2004 she prepared a comprehensive Business Plan for Platinum Motors covering such matters as the mission statement, marketing strategy, products and services. She also gave evidence that at the same time she prepared a detailed cash flow projection (the projections) for the first 10 years of operation of Platinum Motors which sets out details of projected sales income, gross profit, expenses, wages and salaries, rent to be received and other income.
The evidence was given that an ancillary business, Travelcharge Australia Pty Limited, trading as Travelcharge Taxi Services, operated from the subject property. Mrs Chidiac was a director and 50% shareholder in the company.
The Just Terms Act
The relevant parts of s 55, s 56 and s 59 of the Just Terms Act are as follows:
“55.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;
—
(d) any loss attributable to disturbance;
56.(1) In this Act:
“market value” of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid):…
“59. In this Act:
“loss attributable to disturbance” of land means any of the following:
(a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land;
(b) valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land;
(c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs);
(d) stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired);
(e) financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharge mortgage);
(f) any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition.”
The Murlam Lease
Even though a claim was not made for compensation for the termination of this lease, I consider that the value of this lease, if any, needs to be addressed before dealing with the extinguishment claim.
Under the Just Terms Act “land” is defined as including “any interest in land” and “interest” in land means:
(a) a legal or equitable estate or interest in the land; or
(b) an easement, right, charge, power or privilege over, or in connection with, the land;”
Murlam , by virtue of its lease, has an “interest in land”. The lease is, of course, quite distinct from the business conducted by Murlam , in accordance with the terms of its lease. If the lease has a market value a claim for compensation can be made under s 55(a).
Mr Lunney, Registered Valuer, gave expert evidence as to the market value of Murlam ‘s lease. I accept Mr Lunney’s evidence that the market rental value of the subject property, under the terms of the Murlam lease, at the date of acquisition, was $80,000 per annum (Ex R17 [11]) which is $33,400 less than the rental of $113,400 per annum payable under that lease at the date of acquisition.
In the highly regarded text by Rost and Collins, Land Valuation and Compensation (3rd ed 1984) at 182 under the heading “Profit Rentals in Respect of Leases” it is noted that:
“The amount of the profit rental is therefore the amount by which the current rental value of the property exceeds the rental and other charges, if any, reserved under the lease. Where there is no profit rental the lease can scarcely be said to have any marketable value. The position could, however, be different if there were positive indications that rental values would increase during the remaining term of the lease…”
Here, no evidence of a prospective increase was presented.
As Murlam does not enjoy a profit rental, the lease, by itself, has no market value. This leads, inevitably, to the conclusion that Murlam by virtue of its lease, (and therefore its “interest in land”) is not entitled to any compensation under s 55 (a) of the Just Terms Act.
The Claim for Extinguishment of the Business
The claim for the extinguishment of the business of Platinum Motors (in fact a claim for extinguishment of the goodwill of this business) can only be dealt with under s 55 (d) of the Just Terms Act as a “loss attributable to disturbance”and specifically under s 59 (f).
Murlam submit that as suitable alternative premises could not and have not been located, the acquisition extinguished the business, which included its goodwill.
To deal with this claim (and the Business Impact claim) it is necessary to detail the passage of events that took place prior to and subsequent to the acquisition on 28 December 2007.
Acquisition Notification
On or about 1 November 2006, Mrs Chidiac observed surveyors undertaking work, outside the subject property, at the intersection of Parramatta Road and Bland Street. Enquiry of them revealed, for the very first time, that the RTA was planning to construct a pedestrian bridge which would affect the subject property. This was confirmed in telephone calls made to the RTA and to Ashfield Council. In an e-mail dated 21 November 2006 Mrs Chidiac was advised by the RTA that the pedestrian bridge was at an “early stage of investigation”.
This was followed by letter dated 13 December 2006 in which the RTA advised that it intended to acquire the whole of the subject property. Subsequently, Mr Cheney of the RTA advised that, in order not to lose funding for the project, construction of the pedestrian bridge would commence no later than April 2007. By e-mail dated 16 February the RTA expected to make an offer in mid-March with negotiations to follow immediately thereafter.
Just three weeks later, by e-mail dated 5 March 2007, Mrs Chidiac was advised that the RTA would now require vacant possession of the subject property no later than October 2007 which date was confirmed by letter of 6 July 2007. In a subsequent letter, dated 20 September 2007, the RTA advised that if contracts for the purchase of the subject property, including the interest of Murlam , were not exchanged by 21 December 2007 the process of compulsory acquisition would follow.
Acquisition finally occurred on 28th of December 2007.
I am satisfied that prior to 1 November 2006 Mrs Chidiac had no knowledge, whatsoever, of the plans of the RTA which culminated in the subject property being acquired some 14 months later.
Reaction to the Pending Acquisition
Mrs Chidiac’s evidence can be summarised, in her own words, on this aspect (Ex A 2 [43, 44 and 45]):
[43 ] “My husband and I, were devastated and shattered, and at a complete loss as to what to do next…”
[44] “After receiving the letter (the RTA letter of 13 December 2006) I spend a great deal of time researching the compulsory acquisition process and stressing over an impending situation that could potentially destroy what we, as a family, had worked so hard to build up”.
[45] “Having invested a substantial amount of money and time to renovate and establish the Platinum Motors and Travelcharge businesses we were devastated and shattered and at a complete loss as to what to do next. We considered the businesses to be our future and the future for our three sons”.
Mrs Chidiac’s situation was exacerbated by conflicting advice as to when the acquisition of the property would occur which meant her ability to plan the business activities of Platinum Motors was severely compromised. In addition, Mrs Chidiac, together with her husband, sought alternative premises (Ex A 2 [ 54])
“My husband and I spent considerable time and energy looking for an alternative site, one approximate in size to the acquired land and a site with the good exposure to passing trade. However, we were not able to locate one that we could afford based on the initial offer by the RTA”.
There were other business problems:
[ 55] “In the lead up to the acquisition, I was mindful that we could not be left in the position of holding on to a full fleet of vehicles (as and when the RTA proposed to physically take the site). That outcome would have involved substantial storage costs for all vehicles. Being prestige vehicles, they could not be left out in the open. The storing of prestige vehicles, without any immediate objective to sell the vehicles would also expose vehicles to significant market pressures and depreciation (with the longer the vehicles are held in storage the greater the depreciation)”.
[56] “The need to rent or purchase elsewhere meant that funds that would have been used to operate the business were instead used to relocate and eventually purchase another site. This contributed to the business not achieving its target of sales for 2006/2007 financial year”.
[57] “In addition, this was a family business and it was difficult for us to isolate the impending acquisition from our thoughts in order to focus on running the business. As a family our discussions were focused on how to deal with the acquisition rather than reaching our sales targets and working on our advertising and marketing strategies. This was a further way in which the impending acquisition negatively affected the business’ performance”.
On a number of days between 17 April and 29 September 2007 the RTA carried out works on Parramatta Road and Bland Street immediately adjacent to the subject property. Mrs Chidiac’s evidence was that: [71]
“such works would often block out driveways and cover our display vehicles with dust”.
I accept Mrs Chidiac’s evidence as to the detrimental effect of the impending acquisition, and its ramifications, had on her, her two fellow employees, namely, her husband and her son, James (who left the business in August 2007 as a result of “The constant uncertainty and disruption to the business” to seek permanent employment) (Ex A2 [69]) caused such a significant distraction and loss of focus that the number of cars sold and gross turnover declined.
Four questions immediately arise from the foregoing.
Is there an entitlement to pre-acquisition losses?
If so, when did the decline in turnover commence?
What would have been the turnover absent the detrimental effects of the impending acquisition?
What was the turnover in the” shadow period” prior to acquisition?
Entitlement to pre acquisition losses.
Pre-acquisition costs and losses claimed under s 59 (f) were disallowed by Talbot J. in N Stevenson Pty Limited v Roads and Traffic Authority of New South Wales [1994] 83 LGERA 248.
However, Talbot J. did not have the benefit of Lord Nicholls judgment in Shun Fung. Lord Nicholls held at [135 — 138]
“if the business losses arising in the period post-inception of the scheme and pre-resumption to be left out of account, a claimant will not receive compensation for those losses although they are attributable to the scheme… In every day terms, loss caused by the threat of an act, which later eventuates would normally be regarded as a loss caused by the act just as much as a loss incurred after the act has happened… One of the conditions for compensation is that the loss must have been incurred reasonably. If a reasonable person would have continued to trade normally the landowner cannot claim compensation for the losses incurred by his refusal to accept any more orders. He cannot simply let his business rundown, and then seek to recover compensation for his losses. The less certain the prospect of resumption, the greater will be the burden of showing that he acted reasonably in running down his business and that the losses were caused by the prospect of resumption. This provides also the answer to the floodgates argument”.
Biscoe J adopted Shun Fung in Caruana v Port Macquarie — Hastings Council [2007] NSWLEC 109 at [49]
“The legislation considered in Shun Fung is sufficiently similar to s 59 (f) as to make that decision authoritative as to the interpretation of s 59 (f) subject to making allowance for the adjectives “direct and natural” in s 59 (f). That interpretation is encouraged by the legislative mandate in s 54 (1) of the Just Terms Act that “The amount of compensation to which a person is entitled under this Part is such an amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land”.
Biscoe J also referred to Shun Fung at [48]:
“Lord Nicholls, in essence, explained that to be compensable a loss must be:
(a) caused by the resumption,
(b) not too remote and
(c) reasonably incurred.
As to the third condition his Lordship said at [126]:” The law expects those who claim recompense to behave reasonably. If a reasonable person in the position of the claimant would have taken steps to eliminate or reduce the loss, and the claimant failed to do so he cannot fairly expect to be compensated for the loss or the unreasonable part of it. Likewise if a reasonable person in the position of the claimant would not have incurred, or would not incur, expenditure being claimed, fairness does not require that the authority should be responsible for such expenditure. Expressed in other words, losses or expenditure incurred unreasonably cannot sense sensibly be said to be caused by, or be the consequence of, or be due to the resumption.” ”
Lloyd J. referred to the “floodgates argument ” in Fitzpatrick Investments Pty Limited v. Blacktown City Council (No 2) [2000] NSWLEC 139) at [20] in these terms
“Paragraph (f) of s 59 is wider than the preceding paragraphs. It is a “catch-all ” provision: ” any other financial costs reasonably incurred (or that might reasonably be incurred) relating to the actual use of the land, as a direct and natural consequence of the acquisition “. As a “catch-all” provision, the words “any other financial costs” should not, in my opinion, be read down. This does not mean, however, that this paragraph opens the floodgates. The costs must be ” reasonably incurred” and must relate to the actual use of the land, as a direct and natural consequence of the acquisition”.
These cases show that an applicant is entitled to pre-acquisition losses subject to meeting certain conditions.
Commencement of Decline in Turnover.
Having regard to the decline in normal business activity which occurs in the pre-Christmas period (commencing in about mid November and gathering pace in December) it is reasonable to expect that car sales would also decline. This is confirmed by the RTA statistics in respect of the vehicle transfers (dealer to private), which show a downturn in transfers between November and December 2006 of 6.12% (EX R8). For this reason I believe that it is reasonable to conclude that the full impact of the impending acquisition would have commenced from 1 January 2007. Accordingly, the Business should be considered as trading normally up to 31 December 2006. While the goodwill of the Business must be determined as at 28 December 2007 one of the starting points for that valuation must be the trading performance of the business up to 31 December 2006.
Platinum Motors vehicle sales from 1 January 2005 to 31 December 2007
An examination of the evidence shows sales were:
Retail
Wholesale
1 January to 30 June 2005
43
2
1 July to 31 December 2005
59
21
(102)
(23)
1 January to 30 June 2006
60
81
1 July to 31 December 2006
40
90
(100)
(171)
1 January to 30 June 2007
38
52
1July to 31 December 2007
31
37
(69)
(89)
The Platinum Motors Business
The termination of the Murlam lease did not, in itself, extinguish the Platinum Motors business and its goodwill; simply, the right of Platinum Motors to conduct its business from the subject property, under the terms of the Murlam lease, was brought to an end. In fact, evidence was adduced that Platinum Motors continued to conduct its business, from residential premises, owned by Mr and Mrs Chidiac in Turner Avenue Concord, subsequent to the acquisition although it appears that Platinum Motors Dealer’s Licence was still referable to the subject property until about 3 March 2008 when the licence was transferred to 360 Parramatta Rd Burwood .
Sometime after March 2008 the Motor Dealer’s Licence, in respect of the Burwood property, was cancelled, as Platinum Motors did not operate from those premises. It follows that it cannot be said that the business was relocated to that property.
The Turner Avenue premises could not be compared as a similar or a comparable location to the subject property for the conduct of the business of Platinum Motors. There was no evidence that approval of the local council had ever been sought or obtained to enable such use to be conducted from those premises or that the Motor Dealer’s Licence had been transferred to those premises.
Accordingly, there is no evidence whatsoever that the Platinum Motors business, as it was up to the date of acquisition of the subject property, was ever relocated to other premises and re-established thereon.
Search for Alternative Premises
Mrs Chidiac’s evidence was that her search for an alternative location for the Platinum Motors business concentrated on Parramatta Road, between the M4 exit, at Concord, and Petersham seeking a corner site with an area between 500 and 1000 square metres.
Mr Chidiac purchased a property at 360 Parramatta Rd Burwood in July 2007 with settlement being delayed until December 2007. This property has a site area of 1435 square metres, is located on the southern side of Parramatta road with frontages to two side streets, namely, Neich Parade and Britannia Avenue. There is also rear access from a laneway off Britannia Avenue. Mrs Chidiac’s evidence was very clear;
“He (Mr Chidiac) purchased this property as an investment. He did not purchase the property for the benefit of Platinum Motors. It was an investment decision.”
However, in cross examination she admitted that she and her husband had considered developing approximately 600 square metres of the property for the Platinum Motors business but in July 2007 an estimate was obtained as to the cost of construction works and the time involved which led to the thought of relocating to this property being completely rejected.
A development application for works required at this property was lodged with Ashfield Council in July 2008 — twelve months after exchange of contracts and six months after the settlement of the purchase. At the time of inspection, by the Court, the property was vacant and available for lease although there was no “To Let” sign publicising that fact.
Mrs Chidiac’s evidence was that she did not find any suitable premises suitable for the relocation of the Platinum Motors business in the months leading up to acquisition. The focus of her attention was to lease premises although she and her husband attended some auction sales.
Mr Lunney gave evidence that a number of properties with frontages to Parramatta Rd, both to the east and west of the subject property were available prior to and subsequent to the date of acquisition. Mrs Chidiac and her husband considered at least one of these properties but rejected same because of its mid block location compared with their preferred corner location.
Clearly, relocation of the Platinum Motors business in the form comparable to that conducted from the subject property would be claimable under section 59 (c) but that did not occur.
What is Goodwill?
Lord Macnaghten in Inland Revenue Commissioners v. Muller and Co’s Margarine Ltd [1901] All ER 413 at [416] summarised goodwill as:
“It is a thing very easy to describe, very difficult to define”.
His Lordship then expanded on this statement at [416 – 417], in the following terms:
“It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force, which brings in custom. It is the one thing, which distinguishes an old established business from a new business at its start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, goodwill is worth nothing unless it has the power of attraction sufficient to bring customers home to the source from which it emanates. Goodwill is composed of a variety of elements. It differs in its composition in different trades and in different businesses in the same trade… For goodwill has no independent existence. It cannot subsist by itself. It must be attached to a business. Destroy the business and the goodwill perishes with it, though elements remain which may perhaps be gathered up and be revived again”.
Common law distinguishes between local and personal goodwill. The goodwill of most businesses comprises both elements. Local goodwill is regarded as attaching to the land while personal goodwill is personal to the owner of the land and will follow that owner to a new location. It is well established that personal goodwill is not compensable; see, for example, The Minister for Home and Territories V. Lazarus [1919] HCA 12; [1919] 26 CLR 159.
Goodwill Valuations — Expert Evidence
Expert evidence touching on the value of the Platinum Motors Business, and its goodwill, was given by two well-qualified Chartered Accountants , Mr David Ferrier (on behalf of the Applicant) and Dr Rodney Ferrier (on behalf of the Respondent). Mr John Gavljak also gave evidence on behalf of the Applicant. Mr Gavljak is also a Chartered Accountant with particular experience in the motor industry.
Experts Joint Report — Principles
In the joint report prepared by Mr David Ferrier and Dr Rodney Ferrier (Ex A 5 [3.2]) they agreed” that an assessment of the fair market value of goodwill attaching to the Business is equal to the difference between the fair market value of the Business and the fair value of the net tangible assets use by the Business” and in [3.3] they further
“agreed that the fair value of the net tangible assets used by the business at the compulsory acquisition date should be determined based on the lower of the cost price and the expected net realisable value. They note that this is in line with generally accepted accounting principles.”
In [3.9] they state
“After consideration of the circumstances of this matter and the available valuation methodologies, the experts agree that the value of the Applicant’s business should be determined with reference to the capitalisation of future maintainable earnings method.”
In [3.10] they agreed that in assessing the value of a business by application of the capitalisation of future maintainable earnings method it is necessary to apply a capitalisation rate (“Multiple”) to the expected future maintainable earnings. They also agree:
“that future maintainable earnings are generally defined as future maintainable earnings before interest and tax (“Maintainable EBIT”)”.
In [3.11] they wrote, “In assessing the value of the business on this basis, the experts agree that a prospective purchaser that applied the capitalisation of future maintainable earnings method would adopt the multiple between 2.75 and 3.25 times maintainable EBIT. For the purpose of this joint report the experts agree that a Maintainable EBIT multiple of 3 may reasonably be adopted as a basis of assessing the fair market value of the Business.”
Maintainable EBIT
However, in [3.12] they:
“ do not agree as to the appropriate level of Maintainable EBIT on an Expected Earnings Basis.”
Mr David Ferrier considered that the Maintainable EBIT should be based on the projections prepared by Mrs Chidiac which had been reviewed and relied upon by Mr Gavljak (Ex A4) [ 4.3 ]. Mrs Chidiac’s projection was motor vehicle sales in 2007/2008 of 400 (indicating an average price of $22,000). Dr Rodney Ferrier, on the other hand, estimated the Maintainable EDIT by reference to the actual trading history of the business during the period ending 31 December 2006. His conclusion indicated car sales of approximately 236 per annum.
Goodwill Valuations – Experts’ Conclusions.
Their respective conclusions are set out in the following table: (Ex A5 [3.22]) (the initials DF refer to Mr David Ferrier and RF to Dr Rodney Ferrier)
DF
RF
Motor Vehicle Sales and Other
$
$
Operating Revenue
8,800,000
5,475,000
Motor Vehicle Cost of Sales
7,876,000
5,064,375
Other Variable Overheads
Agreed at 0 .54% of Sales
-47,676
-29,662
Advertising
-88,000
-15,335
Wages, Super, Annual Leave
-329,180
-186,225
Employee Contributions MV
22,000
18,000
Travelling Expenses
0
-1706
Accounting
-5120
-8505
Depreciation
-2465
-4318
Other Agreed Expenses
-128,000
-128,000
Rent — Travelcharge
12,000
0
Management Fee Travelcharge
26,000
0
Interest on Bailment Facility
-83,240
0
Personal Telephone
2000
0
Maintainable EDIT
302,319
54,874
Rounded to
302,000
55,000
Using the multiple of 3 the fair market value of the Business becomes:
DF
RF
$906,000
$165,000
The experts assessed the net tangible assets used by the Business with reference to the expected realisable value of those assets and liabilities as at 31 December 2007 (Ex A 5 ) [3.33] as follows:
DF
RF
$
$
Trade debtors
23,296
23,296
Inventory at net realisable value
700,944
700,944
Office furniture and equipment
13,683
13,683
Trade creditors and payables
(Including GST and provisions)
-147,417
-147,417
590,506
590,506
Loan, Mrs Chidiac (representing a reasonable bailment facility)
576,823
0
Fair Value of Net Tangible Assets
13,683
590,506
Rounded to
14,000
591,000
Fair Market Value of the Goodwill of the Business
906,000
165,000
Less Value of NetTangible Assets
14,000
591,000
Fair Value of the Goodwill of the Business
$892,000
$0
Commentary on Mr David Ferrier’s Approach
Mr David Ferrier has concluded that the prospective purchaser, as in envisaged in s 56 (1) of the Just Terms Act, will accept Mrs Chidiac’s projections (Ex A 2 Annexure 2) , notwithstanding the fact that those projections were prepared over three years earlier and prior to the commencement of the business, as reliably plotting the future of the business from July 2007 and beyond.
It was submitted that, as a testament to Mrs Chidiac’s expertise, there is an extremely close relationship, over the years, between the projected and the actual figures in both income and expenditure. For this reason, together with the fact that the projections were not tarnished by any interest, at the time of their preparation in selling the business, they could be relied upon as an accurate indication of the future income and expenditure of the business. To do this, the prospective purchaser would have placed his absolute confidence in Mrs Chidiac’s projections, disregard her position as a director and shareholder of the vendor company and ignore the obvious conflict of interest, namely, to secure the maximum price for the goodwill of Platinum Motors. While understanding the background to this submission I have come to the conclusion that a hypothetical purchaser, would find the projections prepared to be interesting and certainly worthy of consideration, but not persuasive, preferring to rely upon his own enquiries together with actual sales, income and expenditure as disclosed by the company’s financial records. In addition, I am not persuaded that the projections tendered in evidence were those that were actually prepared in early 2004.There are a number of reasons.
Firstly, there is an abnormally close similarity between projected and actual motor vehicle sales, in dollar terms in the first two years (projected, $3,100,000 actual, $3,101,715 for year ending June 2005; projected $4,700,000, actual, $4,753,027 for the year ending June 2006). I would have thought that projected sales, especially in the first two years of a new business, would have been little more than a best guess. Mrs Chidiac did not have any prior experience in managing/operating a second-hand car business on which to base such estimates. In addition, it was never suggested that Mr Chidiac had conducted such a business up until August 2004.
Secondly, while Mrs Chidiac acknowledged, in oral evidence, the importance of, firstly, the number of vehicles sold in each year, and , secondly, the breakup between wholesale and retail sales, the projections did not include any details on this latter aspect.
Thirdly, there are a number of items of expenditure where the projected and actual figures are either identical or closely similar. Especially notable examples are depreciation (projected $4, actual $4, for the year ending June 2005, projected $3734, actual $3,734 for the year ending June 2006) electricity (projected $2500, actual $2487 for the year ending June 2005, $4910 projected and actual for the year ending June 2006, projected $5,254, actual $5,194 for year ending June 2007) insurance (projected $7,300, actual $7,293 for the year ending June 2005, projected $4000, actual, $4064 for the year ending June 2006, projected $3000, actual $2856 for the year ending June 2007) and stamp duty (projected $400, actual $401 for the year ending June 2005, projected $1400, actual $1402 for the year ending June 2006, projected $400, actual $401 for the year ending June 2007) and accountancy fees (projected and actual $3460 for the year ending June 2006).
Finally, Capricorn Business Services issued a tax invoice, dated 22 January 2008, which included, as a description of duties “Analyse and adjust cash flows projection.”
Which Approach to Adopt?
Having considered the evidence by the two experts I prefer Dr Rodney Ferrier’s approach although, as will be seen, my conclusions as to the sales volume and Maintainable EBIT differ.
Predicted Retail sales as at 1 January 2007.
Mr Gavljak’s, evidence was that the industry benchmark for “days supply” per retail vehicle in second-hand car yards is 60 days. Days supply is calculated by dividing the number of sales in a month by the number of cars that the site can display for sale(including both indoor and outdoor spaces) and then dividing the quotient into 30 (being the average days in a month). If a vehicle was held for sale in a car yard for more than 90 days (Mr Gavljak refers to this as the drop-dead date) it should be sold, on a wholesale basis, to another dealer. As the development approval allows for only 17 cars to be displayed for sale at any one time, the adoption of the 60 day benchmark indicates an expectation of retail sales of 102 cars per annum. This figure was achieved in 2005. Retail sales in 2006 amounted to 100. In the months of July, August, September, and October 2006, 35 retail sales were made which is the annual equivalent of 105 sales indicating 58 days supply during this four month period.
Predicted Wholesale Sales as at 1 January 2007.
171 wholesale sales were transacted in 2006; 90 of the sales occurring in the second half of that year.
Conclusion – Predicted Retail and Wholesale Sales as at 1 January 2007
In coming to my conclusions of 105 retail sales and 171 wholesale sales per annum as an appropriate estimate for 2007 I have followed the obiter dictum of Dixon J in Commissioner of Succession Duties (South Australia) and Executor Trustee and Agency Company of South Australia Ltd and others [1947] HCA 10; [1947] 74 CLR 358 at 373:
“I should like, however, to add for myself that there is some difference of purpose in valuing property for revenue cases and in compensation cases. In the second the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss, while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While the difference cannot change the test of value, is not without effect upon a court’s attitude in the application of the test. In the case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate”.
Predicted Retail and Wholesale Sales as at 28 December 2007.
In the absence of evidence of any change in either the of volume of retail and wholesale sales or the benchmark days supply in the Sydney market during 2007, I have come to the conclusion that as at the 28th of December 2007 a prospective purchaser would accept that a reasonable expectation of retail and wholesale vehicle sales for the business would be 105 and 171 per annum respectively.
Goodwill Valuation –Spreadsheet Calculations.
A spreadsheet, which became Ex R 18, was prepared at my request. It showed 5 scenarios. I was provided with a compact disc, which I have used as a tool for calculating goodwill. The CD included some additional information, namely, an average price per car for retail and wholesale, which I found useful for a purpose to which I will refer to later in this Judgment. These average prices broadly compare with the average prices that can be calculated from Ex R 3. Exhibit R 18 has been reduced to one Scenario showing 105 retail sales and 171 wholesale sales and now forms Appendix A to this Judgment. The spreadsheet shows my predicted sale numbers. There are consequential changes to Total Variable Expenses but otherwise all income and expenditure inputs were agreed by the experts. Salaries, wages and superannuation reflect market rates of pay.
I have not included income from Travelcharge both in respect of the management fee and rent ($26,000 and $12,000 respectively — a total of $38,000). I have done this as a prospective purchaser would not have considered these two items as a reliable source of income that could be expected to be maintained; there were no agreements in place and, secondly, Mrs Chidiac was a 50 per cent shareholder in Travelcharge. For these reasons I regard these sources of income as personal to Platinum Motors. The inclusion of such income in a goodwill valuation would mean that the valuation included both local and personal goodwill; the latter, as already noted, is not compensable. I accept Mr Gavljak’s evidence that bailment interest is treated as an expense item, which has been calculated as 9.01% of gross profit from retail sales.
The spreadsheet shows a negative Maintainable EBIT in each case. Adopting Mr David Ferrier’s method the business shows a negative maintainable income $43,734. A business with a negative Maintainable EBIT has no goodwill.
It should be pointed out that if the income from the two sources associated with the Travelcharge business were included the loss would be reduced by $38,000 to $5,734 indicating that the business would be operating almost on a break even basis and, for that reason, would have to be treated as being on the verge of profitability.
It will be noted that in Dr Rodney Ferrier’s method the net tangible operating assets of $591,000 includes $577,000, which is Dr Ferrier’s estimate of the cash equivalent of the bailment sum which, in effect, he treats as a loan to the business. If I was required to make a decision on the appropriate method to allow for bailment, I would have preferred Mr David Ferrier’s approach.
Retail sales are the profit driver in the second-hand car business (gross profit $4065, net contribution $2941 per vehicle compared with a gross profit $895, net contribution $774 per vehicle for wholesale sales). I estimate that the negative value of the goodwill of the business, as calculated by Mr David Ferrier, will only return to neutral if retail sales were increased to some 120 cars per annum indicating days supply of 51 assuming that wholesale sales remain unchanged. It would only be if retail sales could be further increased (above 120 per annum) that the business would have any goodwill, assuming, again, that wholesale sales remained unchanged. It was submitted that the business was in growth phase and while growth may be a possibility, very substantial growth would have been required before the business could be said to have any goodwill. Substantial growth in retail sales would mean a corresponding substantial reduction in days supply which, based on my understanding of Mr Gavljak’s evidence, would be difficult to achieve.
As I have concluded that the Platinum Motors business is just on the verge of profitability I can understand why Mrs Chidiac, having initially embraced the challenge of relocating the business to 360 Parramatta Rd Burwood, decided not to proceed, taking into account the best interests of her family especially when James Chidiac left for permanent employment, obviously at market rates of pay, in August 2007.
Conclusion — The Extinguishment Claim.
As the Platinum Motors business has no goodwill, the claim of $892,000 for extinguishment cannot be substantiated.
The Business Impact Claim.
This is in two parts, firstly, loss of profits and, secondly, loss on sale of vehicles, in stock, at date of acquisition.
Loss of profits.
The Applicant claims a loss under this heading of $363,006.
Reduction in Turnover
The business records, referred to earlier, show that sales in 2007 comprised 69 retail and 89 wholesale compared with my projected figures in that year of 105 retail and 171 wholesale sales. I consider that the loss of 36 retail and 82 wholesale sales can be attributed to the detrimental effects of the impending acquisition. The consequence of those turnover losses are compensable as they meet the requirements, in my opinion, of the three tests enunciated by Biscoe in Caruana at [48].
Loss in Net Contribution.
I have calculated the loss in net contribution to the business as a consequence of the reduced sales as follows:
Retail
36 sales at a gross profit of $4065 per car
$146,340
Less net variable expenses per retail unit, 36 cars at $622 per car
($22,392)
percentage of gross profit at 12.35%
($18,073)
Total, net variable expenses
$40,465
Loss in net contribution
$105,875
Wholesale
82 sales at a gross profit of $895 per car
$73,390
Less net variable expenses
per retail unit, 82 cars at $85 per car
($6,970)
percentage of gross profit at 4.05%
($2,972)
Total net variable expenses
$9,942
Loss in net contribution
$63,448
Total Loss in Net Contribution, Retail &Wholesale
$169,323
The loss in net contribution from reduced sales, on the basis that other costs remain unchanged, becomes a loss of profits for the period from 1 January 2007 to 28 December 2007.
Conclusion — Loss of Profits
Compensation of $169,323 is allowed for loss of profits under s 59 (f) of the Just Terms Act.
In coming to this conclusion I have had regard to the fact that, as already noted, the Platinum Motors business, including the income which it derived from rent and services provided to the Travelcharge business, was on the verge of profitability and, as such, should be treated, in its totality, as a viable business.
Gobbo J in Elense No 17 v. Minister for Public Works [1990] 77 LGRA 56-57 referred to a judgment of Barber J in Keogh V. Housing Commission of Victoria (No 2) [1969] 18 LGRA 297. The claimant in Keogh had:
“shown a net loss over five years before acquisition. It was a family company”.
Barber J made the following finding at 297
“I am prepared to assume that it is a going concern carried on profitably in the sense that it supplies an income to the Keogh family. At worst it is a business with potential of profit”.
When considered in its totality, Platinum Motors cannot be treated as a business that had no prospect of being viable. The Keogh case concerned a claim for relocation costs. It illustrates the point that there is no rule that precludes relocation costs being awarded simply because the business was operating at a loss provided that there is a potential for profit. In my opinion the same principle applies to a loss in net contribution from reduced sales. Secondly, I am satisfied that throughout 2007 Mrs Chidiac and her staff acted as reasonably as they were able, under the lengthening shadow of the impending acquisition, and therefore the loss was reasonably incurred.
Loss on Sale of Vehicles, in Stock, at Date of Acquisition
The Applicant claims a total loss under this heading of $182,534.
This comprises a net loss of $104,630 for the difference between purchase price and sale price of 12 cars (six cars were sold at a profit and six at a loss), variable expenses incurred in respect of those vehicles, $9,211 and for loss of net contribution of 9.8%, based on the total sale price of the 12 cars ($700,944), namely, $68,693. These three figures total $182,534.
The loss on the sale of two cars was, precisely, $100,000. One vehicle, a Ferrari, registration number BAL 60U, was purchased for $450,000 on 29 May 2007 and sold, 266 days later, on 19 February 2008 for $381,818. The second vehicle, a Mercedes, registration number AXO 76F, was purchased for $154,545 and sold for $122,727 but dates of purchase and sale were not tendered in evidence.
My first concern is that Mr David Ferrier adopted, in the CD provided to me, the average sale price of cars , sold by retail, at $30,002 and the average sale price of wholesale cars at $17,413 which, as I have already observed, broadly compares with the average prices that can be calculated from Ex R 3. The purchase of the Ferrari represented the purchase of a luxury car (perhaps even a super luxury car) completely out of character for the business, which concentrated on selling prestige cars (a class of car between luxury and non-luxury) such as Volkswagen and Saab. Mrs Chidiac explained this departure; this
“vehicle was purchased at a premium. It was purchased, if I remember, we had actually committed to that vehicle before this whole acquisition process started and I didn’t make money on it”.
And further, in answer to a question from Mr Eastman –
“So what did you have it there for, advertising or was it just a mistake?”
Mrs Chidiac responded;
“No it was a — the idea was the showroom would be like a, like I said it was going to be like a billboard. People drove past, it was lit up, it was well presented and having in that type of car meant that we could get consignment cars, other consignment cars that we could put in a showroom. It just created the image that we wanted to create for our dealership, it assisted us.”
Mrs Chidiac was not asked any questions concerning the reasons for the purchase of the Mercedes . I have a similar concern in respect of that car.
I refer to Mr Gavljak’s evidence that once a car has been on a site for more than 90 days it should be sold to another dealer on a wholesale basis. If this had been followed in the case of the Ferrari it would have been sold by September 2007 at the latest.
No evidence was presented as to the reason why the Ferrari and the Mercedes were sold at a loss of precisely $100,000. It is hard to imagine that if they were sold on the open market that such a precise loss would have been occasioned. For this reason I can only conclude the two vehicles were sold to a party or parties who were aware of the purchase prices.
The net loss on the sale of the other 10 vehicles is accepted at $4630. Without evidence to the contrary, I have assumed that these 10 vehicles were purchased for resale on a retail basis. The loss on variable expenses is reduced by $618 (being the expenses incurred in respect of the Ferrari and the Mercedes) to $8593, which is an average of $859 per vehicle. The gross profit $4065 per retail sale (adopted by the experts in Ex R18) is reduced by the net variable expenses actually incurred ($859) and net variable expenses — per retail gross of 12.35% of $4065 ($502) reducing the net contribution to $2704; 10 vehicles — $27,040 to which must be added the net loss on sales resulting in a total loss under this heading of $31,670.
Loss of Sale of Vehicles, in stock, at rate of acquisition
I am satisfied that the losses incurred on the 10 vehicles amounting to $31,670 is compensable under s 59 (f) but the losses claimed in respect of the Ferrari and Mercedes cars are not compensable as they fail the third test, in Caruana as not “reasonably incurred”. The purchase of these two vehicles did not fit the profile of the business either in regard to price or type while such significant losses raises grave doubts as to the appropriateness of the prices paid. In addition the precise combined loss of $100,000 reflects adversely on the nature and authenticity of the subsequent sales.
Conclusion — The Business Impact Claim.
Accordingly, compensation of $200,933 is allowed in respect of the Business Impact Claim under s 59(f) of the Just Terms Act.
Other Disturbance Costs.
Legal Costs.
Legal costs in the sum of $6,739 31 have been claimed under s 59 (a) of the Just Terms Act. The parties have agreed on this amount.
Valuation Fees.
Valuation fees in the sum of $27,540 98 have been claimed under s 59 (b) of the Just Terms Act.
The claim comprises Abbotts Valuers, $20,335 98 for the provision of a business valuation assessing compensation at $2,100,000, Capricorn Business Services, $5,500 for “ preparation of interim accounts … discussions with valuers”, and $1705 for “Review, analyse and adjust cash flows projection, amendment to draft 2007 interim accounts for Murlam Pty Ltd and Travelcharge Pty Ltd.”
I consider that it is reasonable to conclude that the services provided by Capricorn Business Services were required for valuation purposes and thus can be claimed under s 59 (b). Any claim can only relate to fees incurred by Murlam , and not Travelcharge, but having regard to the amount of the smaller tax invoice I consider that the Travelcharge component of the fee would not be a material part of that tax invoice. All of the amounts charged under these three tax invoices include GST totalling $2,503 73. As GST paid can be claimed as an input tax credit, the net cost to Murlam for the services covered by the three tax invoices is $25,037 25 (Abbott’s Valuers , $18,487 25 and Capricorn Business Services , $6,550). There is nothing to suggest that the three tax invoices have not been paid.
The business valuation report prepared by Abbotts Valuers was not tendered in evidence nor was the author called to substantiate the valuation. Without the benefit of a copy of the Abbotts Valuers report I find it very difficult to assess the quantum of “valuation fees reasonably incurred”especially as the valuation assigned of $2,100,000 is substantially in excess of the opinion of Mr David Ferrier and the conclusions reached in this judgment. It was reasonable for Murlam to engage Abbotts Valuers but the fee charged, taking into account the circumstances, as I see them, was not reasonable. I allow $9,000 in respect of the claim for fees incurred by Abbotts Valuers . I allow the full amount claimed in respect of the two tax invoices from Capricorn Business Services totalling $6,550. Compensation, as reimbursement of valuation fees, is allowed in the sum of $15,550 net of GST under s 59 (b) of the Just Terms Act.
Conclusion — Other Disturbance Costs
Accordingly, compensation of $22,289 31 is allowed in respect of other disturbance costs under s 59 (a) and s 59 (b) of the Just Terms Act.
Respondents Entitlement to Rental Offset.
The Respondent has claimed, in accordance with s 34 of the Just Terms Act that it is entitled to rent for the period between the date of acquisition ( 28 December 2007) and vacant possession of the subject property becoming available (7 March 2008); 69 days or 9.86 weeks amounting to $38,000.
s 34 is in the following terms:
“34.(1) A person who was in lawful occupation of land immediately before it was compulsorily acquired under this Act and to whom compensation is payable under this Act is entitled to remain in occupation until:
(a) the compensation is duly paid to the person; or
(b) the authority of the State makes (in accordance with any other provision of this Act) and advance payment of not less than 90% of the amount of compensation offered by the authority; or
(c) the authority of the State makes (in accordance with any other provision of this Act) a payment into the trust account kept under Pt 3 of not less than 90% of the amount of compensation offered by the authority, whichever first occurs.
(2) Any such person is entitled to remain in occupation of any building that is the person’s principal place of residence or the person’s place of business, for 3 months after it is compulsory acquired, even though the person has ceased to be entitled to remain in occupation under subsection (1). However, if the Minister responsible for the authority of the State is satisfied that the authority requires immediate vacant possession of the land, the authority is entitled to immediate vacant possession even though the 3-month period has not expired.
(3) The terms on which a person remains in occupation of land that has been compulsorily acquired under this Act are, in the absence of agreement, such reasonable terms as are determined by the authority of the State (including terms as to the rental to be paid and the restrictions on use of the land). The Residential Tenancies Act 1987 does not apply to that continued occupation.
(4) Any such unpaid rent or other money due to the authority of the State may be set off against compensation payable under this Act.”
The rental offset sought by the respondent has been calculated in accordance with the rent previously paid by Murlam under the terms of its lease. The applicant maintains that following acquisition Murlam was not in “occupation” of the subject premises as the business had been extinguished. However, it was agreed that five cars were stored in the showroom and this was the only use made of the subject property.
“Occupation” is defined in the Australian Concise Oxford Dictionary as “taking or holding possession” and in the Macquarie Dictionary as “possession, as of a place”. I am satisfied that while no business, as such, was being conducted from the subject premises Murlam remained in occupation of same until the cars in the showroom were removed and keys handed to the respondent.
The other key words in s 34 are “reasonable terms” indicating that the terms must reflect the market rental value of the subject property having regard to all matters, which affect that rental value including the actual use (as opposed to what activities were previously conducted). I have already concluded that the market rental value of the subject property, under the terms of the Murlam lease, at the date of acquisition, was $80,000 per annum. That lease permitted the business to be conducted as it was prior to acquisition. Mr Lunney’s valuation is the equivalent of $90 50 per car per week based on the site capacity of 17 cars. I consider that a rental equal to one third of this amount would be appropriate for storage purposes only indicating a rental of $30 per car per week or, for five cars, $150 per week which, for the 9.86 week period becomes $1479. As a check, a rental of $150 per week for the showroom ($7,800 per annum), with an area of 131 square metres, shows a rental of $60 per square metre per annum which I thought was an appropriate rental for storage purposes.
Conclusion — Respondents Entitlement to Rental Offset
$1479 is to be allowed as an offset against compensation for occupation of the subject premises, by the applicant, post acquisition, under s 34 (4) of the Just Terms Act.
Order of the Court
Pursuant to s 66(2) of the Just Terms Act the Court determines the objection to the amount of compensation offered by the Respondent in the sum of $221,803.31 made up as follows:
Business Impact Claim:
$200,993.00
Other Disturbance Costs:
$22,289. 31
($223,282.31
less Rental Offset
$1479.00
$221,803.31
Costs.
I note that the compensation payable is substantially in excess of the amount contended by the Respondent in these proceedings and also in excess of $105,000 advised to the Applicant in the Compensation Notice dated 22 February 2008.
___________________
E Craig Miller
Acting Commissioner of the Court