We have been closely following the compulsory acquisition cases emerging from the North West Rail Link in which a large number of properties have been compulsorily acquired. Already there have been a number of judicial decisions from the Land and Environment Court on these acquisitions.

After seven days of hearing in March and April, Justice Biscoe has handed down another decision in relation to the compulsory acquisition of land on the southern edge of what is known as the “Area 20″ precinct of the North West Growth Centre under the State Environmental Planning Policy (Sydney Region Growth Centres) 2006. Like some of the other North West Rail Link cases which we have commented on, similar issues have emerged in Chircop v Transport for NSW, in particular the application of section 61 and section 59(f) of the Just Terms Act relating to disturbance losses. The Court in this matter reined in the applicant’s claim under section 59(f) as elements of the claim were beyond the ambit of these sections.

Summary on Compensation awarded

In this regard, Justice Biscoe’s determination of compensation was much closer to the Respondent’s position in the proceedings. The following table summarises the amounts claimed and awarded.

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Comparison with other North West rail Link Cases

Interestingly, the market value of the acquired land was much higher than the previous North West Rail Link cases we have blogged on – the market values were $165m2 and $175m2 respectively in Bonomo v Transport for New South Wales [2014] NSWLEC 25 (Bonomo), and each of the properties were valued at between $120m2 and $130min Attard & Ors v Transport for NSW[2014] NSWLEC 44 (Attard). His Honour acknowledged these differences and advised that the reason for the discrepancy related to the different evidence in each case, for example, the respondent’s valuer opined a higher market value in the present case which was different to the valuer’s opinions in both Bonomo and Attard. There was also an acknowledgement of upward market movement in 2012 in this case, as well as there being agreement on the availability of sewerage in 2014 for one of the precincts which is where most of the comparable sale were located.

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Contentious issues

The areas of dispute in the case related to the heads of market value and disturbance.

Market value

The Court looked at the directly comparable sales proposed by each of the valuers and appropriate adjustments either upward or downward derived from the application of those comparable sales to the acquired land.

A 1 percent per month adjustment was made by the Applicant’s valuer due to increases in property prices in the North West Growth Centre during 2012 and 2013, whereas the respondent’s valuer proposed an adjustment of 0.5 percent per month. Due to the NSW Government’s announcements regarding the acceleration of housing provision and infrastructure, the Court held that these statements would have increased market confidence and contributed to rising property values in the North West Growth Centre, leading to a single adjustment of 1 percent per month in the period before the acquisition.

A number of adjoining properties sold to the Minister for Education for a school were considered, but the Court held that these were not reliable comparable sales because they were sold at a premium. A number of other directly relevant comparable sales were looked at which led the Court to value the property within the range of 185/m2 to 195/m2 and for this reason the Court adopted the middle position of $190/m2 equating to $3,850,000.

Disturbance

Both parties agreed that the “chapeau” of section 61 was engaged as the land had potential to be used for a purpose other than that for which it was currently used (namely residential subdivision).

Section 61 states that:

If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:

  1. any financial advantage that would necessarily have been forgone in realising that potential
  2. any financial loss that would necessarily have been incurred in realising that potential.

The land in this case was “ripe for development”. Accordingly, various initial costs were considered by both parties not to be recoverable by reason of section 61. However, the applicant argued that section 61 did not preclude their claim for:

  • rent for 32 months until a new home was ready
  • land tax of $2,961
  • the expense for a second and third move
  • ancillary expenses such as redirecting mail, telephone and internet reconnection
  • stamp duty of $22,780.

The applicant argued that section 61 did not apply to these costs as they were not in fact “necessarily” or “inevitably” incurred within the meaning of section 61(b). In this regard, they argued that they might not have rented and could have moved multiple times or could have bought a property without renting and made only one move. For stamp duty, they argued they might not have bought a more expensive property such as the one they had bought, and could have instead bought a cheaper rural residential property similar to the acquired land. However, this “options” based argument failed in the end.

The Court reiterated the comments of Preston CJ in El Boustani which we have previously blogged on as to the meaning of “necessarily” and “inevitably”. The Court held that stamp duty on a new property is not recoverable at all under section 59(d) to the extent that it exceeds the stamp duty on the purchase of land of equivalent value to the acquired land. The Court considered that the applicant’s construction of the phrase “financial loss that would necessarily have been incurred” was too narrow.

Biscoe J held that on the applicant’s argument “almost no specific loss would have been “necessarily” incurred as there is always likely to have been another option”. In this regard, there are a large number of contingencies in any acquisition process, for example, the dispossessed landowner might not buy a replacement property at all and move in with friends or perpetually rent. For these reasons, the Court considered the above claims were barred by section 61.

The decision increases the certainty around the types of expenses that will not be allowed by the Court for compulsory acquisitions.