Key Takeaways

• Fishing Station Pty Ltd, an entity owned by Qasabian Family Investments received a significant improvement on its market value.
• As a non-commercial and unregistered sublease, Fishing Station Pty Ltd was awarded compensation on a business valuation approach, receiving $391,934 for the sublease, and $175,932 for relocation costs.
• Compensation received increased in the second hearing, as Fishing Station was entitled to compensation for the future rental difference on the basis of the agreement of the land valuers.

Background

These proceedings concerned the compensation payable for the acquisition of a site comprising a service station and fishing supplies store.

Qasabian Investments was the freehold owner of a site in Frenchs Forest, Sydney which had a service station leased to 7-Eleven and options to renew until 2041. Another company, Fishing Station Pty Ltd, which was an entity owned by the Qasabian family, had an unregistered sublease from 7-Eleven to operate a retail fishing tackle and related fishing supplies shop on the site.

Fishing Station’s sublease from 7-Eleven was considered to be a non-commercial arrangement as the rent that was paid was $18,000 per year, compared to the market rate rent of $90,000 per annum. Fishing Station’s location was advantageous for 7-Eleven, as people who went to purchase fishing supplies were also attracted to going to the service station and vice versa for Fishing Station. The Respondent, Roads and Maritime Services, acquired the land for road widening purposes, and Fishing Station opened up a new Fishing Station store in Mona Vale shortly after the acquisition.

Judgment at First Instance

Qasabian Family Investments Pty Ltd v Roads and Maritime Services; Fishing Station Pty Ltd v Roads and Maritime Services [2017] NSWLEC 73

Compensation for Fishing Station

Fishing Station claimed $1 million for the value of its non-commercial sublease from the date of acquisition till its expiry in 2041. The $1 million represented the value of the loss between the agreed market rent value of $90,000 per annum and the $18,000 rent payable by Fishing Station under their sublease.

As the permitted use of the land was restricted in 7-Eleven’s sublease to operating a fishing store, the interest would have to be discounted to account for this restriction. Using a business valuation approach, the discount to be applied was 20% per annum and the compensation was calculated to be $391,934. Additional compensation for the relocation of the store to the Mona Vale site was awarded as $175,932.

Fishing Station claimed compensation for future relocation for their business to a location in reasonable proximity to their old site and which could serve the geographic market for which they catered to. However, as Fishing Station had opened another fishing store in Mona Vale 9 months following the acquisition of Frenchs Forest Fishing Station, this was considered to be a relocation rather than an extension of the business operating as a fishing store ‘chain’. There was no future relocation compensation awarded.

Compensation for Qasabian Investments

In determining compensation for the land, rather than the 4.03% capitalisation rate agreed to in the joint expert’s report which was a compromise on either side, the Applicant argued that the capitalisation rate should be 3.8% which would make the market value $5 million.

The Court found that there was no basis to not accept the capitalisation rate in the joint expert valuer’s report. The market value of the site was found to be $4.7 million.

Judgment at Second Instance

Qasabian Family Investments Pty Ltd v Roads and Maritime Services (No 2); Fishing Station Pty Ltd v Roads and Maritime Services (No 2) [2017] NSWLEC 179

A second hearing was held to deal with two outstanding issues in relation to the compensation for Fishing Station for the increased rent at the premises to which it had relocated in Mona Vale, as well as the costs of the proceedings.

Fishing Station was entitled to compensation for the future rental difference on the basis of the agreement of the land valuers which was $391,392 and was entitled to an additional $15,000 for a typographical correction in the earlier judgment for the store fit out at Mona Vale.

The total amount of compensation Fishing Station received was $1,100,092.10. The Roads and Maritime Services contended Fishing Station was entitled to was $223,002.99.

Costs

The Qasabian Investments had its costs of the proceedings paid up until the time of the joint expert report, which disclosed the agreed value of interest in the land. Fishing Station was unsuccessful on the “no relocation” point, however the Court held that Fishing Station was entitled to have its costs paid by the Respondent to avoid contradicting the principle that allows a dispossessed owner to reasonably challenge the basis of compensation.

The full judgments can be found at the following links:

• Qasabian Family Investments Pty Ltd v Roads and Maritime Services; Fishing Station Pty Ltd v Roads and Maritime Services [2017] NSWLEC 73
• Qasabian Family Investments Pty Ltd v Roads and Maritime Services (No 2); Fishing Station Pty Ltd v Roads and Maritime Services (No 2) [2017] NSWLEC 179

Disclaimer: Beatty Hughes & Associates acted for the Applicant in these proceedings.