The Facts

RMS acquires land for upgrade of Pacific Highway

In 2016, Roads and Maritime Services of New South Wales compulsorily acquired a block of land to upgrade the Pacific Highway.

The landowner accepted an offer of $3,114,540 as compensation from RMS for the compulsory acquisition of land. This sum was determined by the Valuer-General and comprised $2,950,000 for the market value of the land and $164,540 for disturbance to the business.

Service station impacted by compulsory acquisition

The service station which occupied the land was to be significantly impacted by the compulsory acquisition. The business had been successful because of its proximity to the Pacific Highway. Due to its locality, it serviced a number of nearby towns.

The landowner and the owners of the service station business were two distinct and separate legal entities. The service station had no lease over the premises. Instead, it had a verbal tenancy agreement with the landowner and paid monthly rent under a "tenancy at will" (that is, one of no fixed duration) which could be terminated with one month's notice.

The Valuer-General determined compensation payable to the service station operator based solely on disturbance to the business and did not otherwise take into consideration the anticipated costs associated with relocation or alternatively, if it had to close, the permanent loss of profits by the service station.

Service station makes claim for disturbance to business

The service station reasoned that the amount paid to the landowner was irrelevant to its own claim for compensation, because the service station was a completely different entity and its claim was based solely on disturbance to the business from the compulsory acquisition, not on the market value of the land.

The service station claimed compensation for the loss attributable to the disturbance, which included the anticipated costs associated with relocation, including short-term loss of profits, or alternatively, the permanent loss of profits that the service station would have otherwise derived, but for the acquisition by RMS.

CASE A

The case for the service station

CASE B

The case for Roads and Maritime Services

We operated this service station business for a long time before RMS's acquisition of the land. We are a landmark for road users along that particular stretch of coast in NSW.
To relocate or terminate our business without compensation would be supremely unfair. We should be entitled to adequate compensation, taking into account any future loss of profits.
While we have not found a suitable relocation site, we intend to continue our search. We have found other opportunities; it is simply a matter of those sites becoming available.
What's relevant is the impact the acquisition has on our business. If we cannot relocate, we will lose any future profits, which far exceed the assessment by the Valuer-General.
Any compensation paid to the landowner is irrelevant, because our claim is based on the impact on our business of relocating or being forced to close. This is a loss we will suffer as a direct result of the disturbance, unconnected to the market value of the land.

We do not deny that the service station business has a legal interest in the land and that it enjoyed a statutory tenancy at the time of the acquisition.
The compensation we paid to the landowner took into account the fact that the service station business's tenancy could have been terminated at any time with merely one month's notice. Once we had acquired the land, the service station business's interest in the land ceased to exist.
The potential of the land to generate a profit in the future has already been taken into account in calculating the compensation to be paid to the landowner. Compensating the service station business separately would mean paying for this potential twice.
Given the weak nature of the tenancy, the court should set aside any claim by the service station business that it would have remained in occupation of the property indefinitely.
The costs associated with relocation are not claimable because there is currently no alternative site available. It is also unlikely that a suitable relocation site will be found.
The cost of planning, rezoning and building a new service station should not be included in the compensation amount, irrespective of the impact that the compulsory acquisition has had on the business. The service station's claim should be rejected.

So, which case won?

Cast your judgment below to find out

Digby Dunn
Compulsory acquisition
Stacks Law Firm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

"Our business was forced to close to make way for the highway, so we deserve compensation." Which case won?

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