Desane Properties Pty Limited v State of New South Wales [2018] NSWSC 553 has broken new ground with a successful challenge to the validity of the compulsory acquisition notice for its land for the Westconnex motorway project.

Background

On 26 July 2016, Desane Properties, the owner of the land and commercial buildings at 68-72 Lilyfield Road, Lilyfield in inner city Sydney, was shocked and aggrieved to receive a letter from the NSW Department of Planning. 

The letter notified Desane that it could not proceed with its re-zoning application because the land was required by NSW Roads and Maritime Services (RMS). The letter put to an end the re-zoning application that Desane had been pursuing with the Department for some 200 apartments, retail and commercial space and a 90 place childcare centre on the property.

Various meetings took place and correspondence was exchanged with no result. Desane offered to lease the property to RMS for the duration of the project, but was told it would be demolished and that after the project was completed, it would become open space and green parkland. This designated use would of course minimise the value of the property that RMS must pay.

On 10 March 2017, RMS offered Desane compensation of $21,489,959.00 for the property, which equated to $18.5 million net of GST, stamp duty and legal fees. The offer was completely inadequate because it failed to take into account the valuable development potential if the land were re-zoned.

On 26 May 2017, RMS served a Proposed Acquisition Notice (PAN) upon Desane. By law, it needed to give at least 90 days in which to agree on compensation and terms. In the absence of agreement, RMS would compulsorily acquire the property on 1 September 2017. A compulsory acquisition extinguishes the landowner's title to the property and converts it into a claim for compensation.

In August 2017, Desane decided it was not going to lie down without a fight! It wanted to keep the property and develop it. And so it applied to the Supreme Court of New South Wales for a declaration that the PAN was invalid so as to derail the compulsory acquisition by proving that there was no proper purpose for acquiring the property.

The case was vigorously fought and the legal costs were high. After eight hearing days, a court book that ran to 17 volumes comprising over 6,000 pages, extensive written submissions and oral argument and a site inspection, the decision was reserved.

The three reasons why the Proposed Acquisition Notice was invalid 

Desane was victorious when Justice Hammerschlag decided that the PAN was of no statutory effect for these three reasons:

1.  The PAN form used did not comply with the statute - It was not in the Approved Form, and contained significant defects. Note: a new PAN form has since been gazetted.

2.  It is necessary to state a public purpose on the PAN - This necessity derives from sections 56(1)(a) and (1)(b) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) which refer to the public purpose for which the land is to be required as a factor to be considered in determining the value of the land to be acquired. In the Court's opinion, the statement in the PAN that the land was required for a public purpose was inadequate. It needed to be more specific, such as, 'a construction site', 'for infrastructure', 'for cut and cover tunnel construction'.

3.  The Court reviewed the various statements made by the RMS and found that the PAN was invalid because it had been given for an improper purpose, namely to acquire the land for open space and parkland. This was an improper purpose because the RMS could resume land under section 177(2)(b) of the Roads Act 1993 (NSW) only for the purpose of opening, widening or constructing a road or road work.

The rule of law applies to the RMS

It is a basic tenet of constitutional law that the Executive Branch of Government act in accordance with the law. The courts are the custodians of the rule of law.

The following observations by Justice Hammerschlag are pertinent:

Compulsory acquisition of private property is no light matter. Complying with requirements ... is not too much to ask of an authority of State given power to interfere with such rights.

Any public inconvenience which might result from holding invalid a non-compliant PAN does not outweigh the public interest in protecting vested property rights from unlawful interference.

The Court applied the rule of law to the RMS, in two ways:

The  Government authority - the RMS had not finalised the design, structure, route and location of the Rozelle Interchange which it said was the purpose for the resumption. The Court observed that the only fixed purpose stated was to provide 10 hectares of open space and green parkland, which was a somewhat amorphous purpose. This fell short of the legal requirements for a road resumption.

The Court noted that none of the senior executives in the RMS who had decided the resumption was necessary were called as witnesses by the RMS. This was deliberate. It deprived Desane of the opportunity to cross examine them in the witness box about what they would do with the property if it was surplus to requirements when the project was completed: Would they re-sell the property for redevelopment at a premium, to defray the cost of the project? The Court concluded that shielding the senior executives from being called as witnesses was consistent with an improper purpose.