The NSW Court of Appeal has allowed the NSW Government to override private property rights by validating a defective Proposed Acquisition Notice (PAN), against the spirit, if not the intent, of Sir Owen Dixon’s aphorism in Jones v The Commonwealth (1963) 109 CLR 475. Namely,

that the landowner who is compulsorily disposed of his land would seem to have a right in point of justice to know precisely for what it was needed as a public purpose

In Roads and Maritime Services v Desane Properties Pty Ltd [2018] NSWCA 196 (6 September 2018) the Court of Appeal, Supreme Court of New South Wales (Bathurst CJ, Ward JA, Payne JA, jointly), found that:

  1. The PAN was valid despite the fact it did not strictly comply with the Approved Form;
  2. The PAN was valid despite the fact it was not updated to reflect amendments to the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Just Terms Act);
  3. The PAN was valid despite the fact it did not state the public purpose of the acquisition;
  4. The issue of the PAN was not actuated by an improper purpose.

This article examines the background to the issue of the PAN and the Court’s analysis, followed by commentaries on the commercial advantage and the public benefit.

Background: WestConnex project – Stage 3 The proposed Rozelle Interchange

Desane Properties owned a valuable tenanted commercial complex with parking at 68-72 Lilyfield Road, Rozelle. It was adjacent to the disused Rozelle Rail Goods Yard.

In 2012, Infrastructure NSW announced the WestConnex M4-M5 Link Project, one of the largest transport and urban revitalisation projects in Australia.

In January 2016, the Desane property was identified as a “strategic” land acquisition for tunnel portals and ramps, interchanges and construction facilities for Stage 3B - the Rozelle Interchange to connect the City West Link, the Anzac Bridge and the proposed future Western Harbour Tunnel Beach Link.

In April 2016, the NSW Cabinet approved the compulsory acquisition of the Desane property and its funding.

In July 2016, the Rozelle Interchange was publicly announced – it would largely be built underground, and on completion of the road works, it would to be “grassed over as to 10 hectares of new parkland, with pedestrian and cycle links”. This is an artist’s impression:

On 23 August 2016, RMS commenced negotiations to acquire the Desane property. Desane resisted the proposed acquisition, claiming that the purpose was improper – it was not for roadworks, but for parkland, and it was not conditional upon the Rozelle Interchange project proceeding.

On 26 May 2017 (six months later), RMS served the PAN, which stated: Roads and Maritime Services intends to compulsorily acquire this land by acquisition notice published in the Government Gazette … not less than 90 days after the giving of this notice … [unless there is a] negotiated purchase.

On 10 August 2017 (within 90 days), Desane commenced legal proceedings seeking declarations that the PAN was invalid, and an injunction to prevent the compulsory acquisition being gazetted, pending determination by the Court.

Analysis: Was the Proposed Acquisition Notice (PAN) valid?

The PAN was issued under the Just Terms Act, which the Court said: 

imposes procedural steps which are required to be put in place to give effect to a decision made pursuant to a power granted by other legislation (judgment, paragraph 203)

The ‘other legislation’ in this case was the Roads Act. The Court said:

The principle of legality may well have had a more prominent operation in this case … if the argument was whether the purpose of a particular acquisition fell within that acquisition power [i.e. s 177(1) of the Roads Act] (paragraph 197)

Desane did not make that claim. It argued procedural invalidity in terms of form of the notice and improper purpose, under the Just Terms Act.

As to the form, the Court said:

if a PAN does not comply with the formal requirements of the Just Terms Act then the proposed acquisition may be challenged prior to the acquisition taking place and could be prevented by injunction. Discretionary issues would arise in the grant of that relief (paragraph 216)

The question was: Were the formal requirements to be strictly observed? The Court said:

Substantial compliance rather than strict compliance with the Approved Form was sufficient (paragraph 230)

The major defect in the PAN Form was the reference to “disadvantage resulting from relocation” (which derived from an amendment to the Just Terms Act), in place of the “solatium” the Latin cognate of that English phrase used in the Approved Form. The Court held that this discrepancy was acceptable, as was a reference to 45 days compared with 30 days in the Approved Form for giving notice, as were five “trivial” discrepancies such as “This” instead “The”, omitting “(“of New South Wales”)” and the street address of the Authority.

Desane argued that the purpose of the acquisition should have been stated on the form.

The Court said that the identification of the public purpose in the PAN, was a requirement of the former Public Works Act 1912 (NSW), but not of the Just Terms Act. In any event, it was not necessary given that reference was made in the covering letter and the opportunity the landowner was given to negotiate the acquisition:

A critical feature of the Just Terms Act is the requirement for a six month period of [good faith] negotiation between a landowner and an acquiring authority prior to the issue of a PAN [during which a landowner can request information about the acquisition] (paragraph 258).

Finally, the Court addressed the ‘improper purpose claim’ raised by Desane that the acquisition was not needed, except for parkland. The Court analysed the evidence as a whole and concluded:

While there remained uncertainty as to how the land would be used within the envelope of a construction site, there was no uncertainty that it would be used as part of a construction site and no need to identify the specific use with precision at the time the PAN was issued. (paragraph 302)

The precise use of the Desane property for the purposes of constructing the Rozelle Interchange would naturally evolve over time and did not need to be identified with precision at the time the PAN was issued. (paragraph 308)

Therefore, there was no improper purpose on the part of the RMS when the PAN was issued.

The Court upheld the validity of the PAN and so allowed the appeal by RMS. Desane was ordered to pay the legal costs of RMS on the appeal, while the order that RMS was to pay Desane’s legal costs of the trial was not disturbed.

Commentary - The commercial advantage

The objective of commercial litigation is often commercial advantage, through use of legal processes.

So it was in this case, that by instituting proceedings in August 2017, Desane delayed the commencement of the Rozelle Interchange until the proceedings were determined.

Did Desane achieve a commercial gain?

On 4 August, 2017, Desane Group Holdings Ltd announced to the ASX that it had received an offer from RMS to purchase the property for $18.4 million (which took no account of the significant development potential half a hectare of land in inner-city Rozelle).

On 10 August 2017, Desane instituted legal proceedings.

On 7 September 2018 (the day after the Court of Appeal decision), Desane announced to the ASX that it had entered into a Contract for Sale of the property to RMS for $78 million plus GST. This was a satisfactory commercial resolution to the legal proceedings!

Commentary - The public benefit

On a broader view, by taking the proceedings Desane benefited the whole community.

In the proceedings, Desane highlighted the ambiguity in the RMS plans for the land. For instance, in 2017, the site was designated as ‘light vehicle parking’ during construction. In the proceedings, the RMS accepted that the property would “be used as parkland” after the road works were completed.

This acceptance leaves little scope for the NSW Government to change its plans to re-zone and re-sell the property for high density residential/commercial, as ‘value capture’, after the Rozelle Interchange is completed.

As a result, the public benefit is that instead of “up to 10 hectares”, a full “10 hectares of open space and green parkland” will be provided.

For my article on the decision appealed click The Government must have a proper purpose to resume land