MMTR Pty Ltd v Roads and Maritime Services [2015] NSWLEC 177

What happens when part of a block of land is compulsorily acquired for an infrastructure project, and the project has the effect of increasing the value of the residue land? How should compensation be calculated?  Justice Craig’s decision in MMTR Pty Ltd v Roads and Maritime Services [2015] NSWLEC 177 shows that uplifts in value which occur by reason of the public purpose may lead to the setting off of compensation to factor in betterment.

How the claim arose

MMTR Pty Limited (MMTR) owned a 133.65ha parcel of land near Port Macquarie in NSW. The Roads and Traffic Authority (RTA)[1] compulsorily acquired 2ha of MMTR’s land to construct the Oxley Highway Upgrade (Oxley Upgrade) under the Roads Act 1993 (NSW) (the Roads Act).

The RTA offered $1,122,500 to MMTR as compensation for the acquisition of the land under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Just Terms Act).

MMTR objected to the amount of compensation offered and commenced proceedings for $21,448,273 in compensation.

The matter was heard in 2012, with judgment being handed down in 2015. The claim comprised:

  • the market value for the acquired land;
  • severance; and
  • the cost of constructing a bridge over the Oxley Upgrade under the head of disturbance.

The RTAs Position

The RTA argued that MMTR should be compensated $25,377 for disturbance losses.

The RTA’s primary argument was that the value of the residue land retained by MMTR had been increased by the RTA’s proposal to construct the Oxley Upgrade such that the amount of compensation should be nil.

The dispute centred on s 55(f) of the Just Terms Act which states that in determining the amount of compensation to which a person is entitled, regard must be had to 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.

MMTR’s land was rezoned from rural to residential in the year before the acquisition, substantially increasing the market value of the land.  The RTA argued that the rezoning of MMTR’s land occurred by reason of the proposal to carry out the Oxley Upgrade.

Section 55(f) and 56(1)(a) of the Just Terms Act

Justice Craig considered the differences between the head of injurious affection (s 55(f)) and the head of market value (s 56), stating that s 56(1)(a) speaks of an increase or decrease in value “caused by the carrying out of, or the proposal to carry out, the public purpose” whereas s 55(f) addresses impact “by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired”.

The connecting phrase “by reason of” in s 55(f), according to his Honour, was intended to convey a different meaning to the phrase “caused by” in s 56(1)(a). His Honour considered that this difference

evidenced the intent of the legislature to distinguish how compensation would be calculated under the two heads. The phrase “by reason of” has been interpreted by the Courts as implying a cause and effect relationship.  His Honour stated that considerable caution should be exercised in applying the meaning given to that phrase in a different statutory context from the context in which the phrase was being construed in the present case. Despite the above comments, the precise difference between “by reason of” and “caused by” in the context of MMTR’s land was not further explored, given that s 55(f) was held to be the relevant provision in this case.

Public purpose

The public purpose behind a compulsory acquisition can be a controversial issue due to the difficulty (in some cases) in precisely defining it and due to the implications it can have on compensation.  Justice Craig outlined that two issues arose as a result of s 55(f) being the relevant provision to determine compensation:

  • what was the ‘public purpose’ for which the land was acquired; and
  • whether at the date of acquisition, the asserted increase in value of residue land occurred ‘by reason of’ either the proposal to carry out or the carrying out of that ‘public purpose’.

His Honour considered that the public purpose for which land was acquired by compulsory process must be determined at a level of particularity beyond mere reference to the legislation under which the acquiring authority exercised its power to compulsorily acquire.  That is, the public purpose could not simply reference the Roads Act, but rather needed to be referable to the proposed project.

Findings

Justice Craig accepted the RTA’s argument that the urban rezoning of MMTR’s land occurred by reason of the RTA’s proposal to implement the public purpose of the Oxley Upgrade, and that s 55(f) of the Just Terms Act applied.  His Honour was satisfied that the decision by the Council to adopt the draft LEP and to request its making by the Minister would not have occurred had the proposal for the Oxley Upgrade not been adopted by the RTA. In other words, while the immediate cause in the uplift in value of the residue land was due to the rezoning, that effect was the consequence of the proposal by the RTA to carry out the public purpose of the Oxley Upgrade.

At the date of acquisition, the value of MMTR’s land, because of the rezoning, had significantly increased above that which it would have under its prior rural zoning. His Honour found there was the necessary causal link between the uplift in value of the residue land and the RTA’s public purpose (for the Oxley Upgrade land). The betterment, or increase in value accruing to the residue land meant that its value substantially exceeded all heads of compensation payable to MMTR. Following the decision in Tolson v Roads and Maritime Services [2014] NSWCA 161, his Honour nonetheless awarded $25,377 in disturbance costs under s 59, as this earlier decision held that disturbance can be claimed in these types of circumstances.

Take away from the case

The case demonstrates that in some compulsory acquisitions the possibility of no or little compensation will be paid.  The limited circumstances to which this applies is where the value of residue land increases above the value of the acquired land, by reason of the proposed public purpose.

Land values are often affected by infrastructure projects and matters surrounding the project such as rezoning.  It is important to consider whether s 55(f) applies to reduce what might otherwise be determined in compensation. With the number of new infrastructure projects in the Sydney metropolitan area and the resulting rezoning of land in these areas, the issues outlined in this case will need to be carefully considered by dispossessed landowners and acquiring authorities.