On 11 September 2015, we published an article regarding the alternative law on the calculation of solatium pursuant to s.44 of the Land Acquisition and Compensation Act 1986 (“LAC Act”). The purpose of this article is to provide an update following the Honourable Justice Emerton’s judgment in the Secretary to the Department of Economic Development, Jobs, Transport and Resources v CRG Nominees Pty Ltd [2015] VSC 301 (“CRG Appeal”), which was handed down on 1 June 2016. Whilst this decision is also being appealed (to the Court of Appeal), it provides guidance on the law regarding the calculation of solatium in partial compulsory acquisitions of land. However, until the appeal is decided, the law remains uncertain.

Background

The CRG Appeal was instituted by the Secretary to the Department of Economic Development, Jobs, Transport and Resources (“EcoDev”) following the Victorian Civil and Administrative Tribunal’s decision on 29 April 2015. EcoDev appealed the Tribunal’s decision with respect to the assessment of the market value of the land acquired and the calculation of solatium.

In the case of a partial acquisition of land, the market value of the interest in land is calculated pursuant to s.41(3) of the LAC Act as the difference between the market value of the landowner's interest "before" and "after" the acquisition. The Tribunal determined that for a partial acquisition, it was inconsistent with s.41(3) to import a concept of market value as meaning only the land acquired (ie, excluding severance). The Tribunal did not believe that one could consider the market value on a “before” and “after” basis in terms of assessing compensation and then disregard the wording of s.41(3) of the LAC Act when calculating solatium and interpreting the “market value of the land” in s.44.

The CRG Appeal

Essentially, EcoDev argued that the narrow interpretation of market value should be adopted. It submitted that:

  • in assessing the market value of the land acquired pursuant to s.41(1)(a) of the LAC Act, regard must be had to the words “market value” as defined in s.40 of the LAC Act; and
  • the Tribunal was bound to follow the decision of Vickery J in Roads Corporation v Love [2010] VSC 537 (“Love”)who held that the 10% statutory cap is to be applied to the market value of the acquired land itself.

Conversely, CRG maintained that the broad interpretation of market value should be adopted. Therefore, it argued that:

  • the LAC Act does not require an assessment of the market value of the land actually acquired in partial acquisitions. Rather, s.41(3) requires an assessment of the overall “before” and “after” values of the whole land; and
  • the decision of Vickery J in Love is not binding on the Tribunal or the Court because neither the narrow nor the broad interpretation of market value were considered by His Honour. Rather, in Love the opposing submissions were as follows:
    • the statutory cap operates on the market value of the land actually acquired (as submitted by the acquiring authority); and
    • the statutory cap operates on the entire “before” land value (as submitted by the claimant).

Determination of the Honourable Justice Emerton

Her Honour found that Vickery J’s decision in Love was not binding on the Tribunal as His Honour “was presented with alternative courses that were different from those before the Tribunal”. Furthermore, there is already Supreme Court authority supporting the approach adopted by the Tribunal.

Her Honour noted that the Tribunal decision in the related case of Secretary to the Department of Economic Development, Jobs, Transport and Resources v Driver [2015] VCAT 813 provided the clearest explanation of the reasoning underlying the broad interpretation advanced by CRG. Consequently, she adopted this analysis, stating that:

“Section 41(3) provides for ‘the market value’ of acquired land to be determined in a particular way where the acquisition is a partial acquisition. In the present case, the ‘market value’ of the land compulsorily acquired from CRG is the difference between the market value of the whole of CRG’s land before the acquisition and the market value of the whole of CRG’s land after the acquisition.

...The market value of land in s.41(3) is a product of the relationship between two other market values, which are to be determined in accordance with the definition in s.40. Where there is a partial acquisition, the definition of ‘market value’ in s.40 does not, on its own, determine the market value of the land taken.

Accordingly in the case of a partial acquisition, the words ‘market value of the land’ in s.44(1) refer to the market value of the land as determined by applying s.41(3).”

Consequences of the CRG Appeal

In partial acquisitions of land, Vickery J’s decision in Love can be distinguished based on the discrete arguments put forward by the parties in that case. It is therefore to be treated with caution.

If Emerton J’s decision in the CRG Appeal is upheld, acquiring authorities are likely to pay a higher sum of compensation in partial acquisitions due to the increased payment for solatium. This is particularly the case where severance forms the major component of the market value assessment (as is often the case with easement acquisitions). This is best explained by the following example:

Land or an easement is acquired and the market value component is resolved or determined in the sum of $100,000. This sum is comprised as follows:

  • $15,000 for the land component; and
  • $85,000 for the severance impact to the balance of the land.

If the CRG Appeal is upheld, solatium will be capped at $10,000, being 10% of the overall market value assessment of $100,000. Alternatively, if the CRG Appeal is overturned and the decision of Vickery J in Love is applied, solatium will be capped at $1,500, being 10% of the land component only (excluding severance).