A Court of Appeal has overturned the $2M loss of profits resumption compensation previously awarded to the Lessee of a small long-established highway roadhouse largely because of an oral arrangement that included an expectation of renewal based on the relationship between the parties. This decision serves as a warning to legal advisors and lessees alike concerning reliable tenure.
The United Roadhouse at Harwood on the Pacific Highway near Yamba had served passing motorists for many decades. The land was owned by related parties which had an oral lease with United, terminable on one month’s notice.
The Lessor owners of the fee simple estate accepted compensation in excess of $3 million for the freehold interest.
The Lessee (United) had been awarded $1.9 million as the capitalised sum for the loss of its business and an additional $83,000 for the increase in rental paid to Roads and Maritime Services (RMS) in the period between compulsory acquisition and vacant possession by the Land and Environment Court for loss attributable to disturbance under s 59(f) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW).
RMS challenged both elements of the award of compensation. The appellant’s primary contention was that existing authority did not permit recovery of an amount equal to the capitalisation of projected future profits of the business as “loss attributable to disturbance” caused by the acquisition.
A full bench of the NSW Court of Appeal held that s 59(f) did not permit compensation for a commercial business operation beyond the amount recovered as the market value of the land. It held that, to the extent that earlier case law contained inconsistent reasoning, it was incorrect and should not be followed. Although the Court’s decision was unanimous, four of the five Justices provided separate and somewhat contrasting reasonings to arrive at the same outcome.
Roads and Maritime Services v United Petroleum Pty Ltd  NSWCA 41
United Petroleum Pty Limited v Roads and Maritime Services  NSWLEC 35