Last week, we commented on the first set of decisions by the Land and Environment Court on the compulsory acquisitions for the North West Rail Link. Biscoe J has handed down a further lengthy written judgment in Attard & Ors v Transport for NSW [2014] NSWLEC 44. The judgment is in respect of eight sets of proceedings claiming compensation in relation to the compulsory acquisition of seven similar, neighbouring rural residential properties in Schofields or Rouse Hill acquired on the same date for the North West Rail Link.

This latest decision covers similar terrain to the previous cases discussed in this blog relating to compulsory acquisition law, including the concept of market value, and whether section 61 of the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) precludes certain disturbance costs being awarded. However, the judgment provides valuable new commentary on compensation in circumstances where land is being used or has been developed without development consent, or where the land is being used for illegal activities. In short, the Court has distinguished between illegal activities, and unlawful development or uses on land, with the latter less likely to impact on a dispossessed landowner’s ability to recover costs incurred in connection with an acquisition.

Market value in Attard

Each of the properties were valued at between $120m2 and $130m2. The Court adopted a ’bottom-up’ approach on the market value rate where the land is valued on the basis of its existing zoning and with an adjustment upwards for the chance of future zoning.

Judicial comity

His Honour then commented on the Bonomo v Transport for New South Wales[2014] NSWLEC 25 and  decisions which we commented on in our blog post last week. In particular, Biscoe J noted that those matters involved market values much higher than in the present case: the market values were $165m2 and $175m2 respectively. His Honour distinguished the subject properties in this judgment, which related to land and had not yet been up-zoned, which therefore led to lower valuations by the Court.

Contamination

An issue that often arises in compulsory acquisition cases relates to diminution of the market value of land due to contamination affecting an acquisition site. In this case, one of the parcels of land was affected by contamination. His Honour held that a ‘prudent notional buyer at the acquisition date would have retained a contamination expert to carry out the sort of extensive investigation…and that this would probably have disclosed the existence of the few locations containing small amounts of asbestos and TPH…I consider that the notional buyer would consider it prudent to carry out remediation but unnecessary to remove a large volume of material given the extensive investigation, the use of the land by the Sultanas for more than 30 years for market gardening, and the apparent absence of any illegal dumping…’[paragraph 120].

Accordingly, His Honour deducted remediation costs of $40,000 to what would otherwise be the market value of one of the parcels of land.

Disturbance

There was a fair degree of divergence between the parties as to the items of disturbance in terms of both compensability and quantum. Justice Biscoe allowed the following costs under the head of ‘disturbance’:

  • rental claims
  • stamp duty claims for a replacement property
  • a loss of income from solar panels on the now demolished house on one of the subject sites
  • removalists costs for future moves
  • reconnection of internet and telephone services
  • the cost of surveying new properties
  • cost of change of address notifications
  • additional insurance premiums for certain replacement property.

However, the Court disallowed the following types of claims:

  • mortgage establishment fees
  • for some of the applicants – the need to borrow money for the purchase of a new property
  • capital gains tax on investment properties sold to liquidate funds to buy another property
  • mortgage interest.

It was also argued by the respondent that section 61 of the Just Terms Act barred the disturbance loss claims of the applicants in the freehold proceedings as well as one of the dispossessed landowners claims in respect of its business. His Honour referred back to the El Boustani v The Minister administering the Environmental Planning and Assessment Act1979[2014] NSWCA 33 (El Boustani) case, and held that section 61 did not apply to any of the applicants’ claims for disturbance losses given that the change in zoning would occur 2.5 years after the resumption date and therefore the land could not be said to be ripe for redevelopment for the subdivision.

Lawful use of the acquired land

As mentioned in the preamble to this blog, the judgment also provides significant commentary on disturbance losses where the use of the acquired land was unlawful in a planning law sense.

One of the claimants claimed costs relating for the relocation of a one truck haulage business. His Honour held that the land was not being used for the purposes of a ‘prohibited road transport terminal’ and the purpose of the use was lawful with development consent. However, the development consent that had been obtained only covered some but not all aspects of the business purpose use on the acquired land.

His Honour turned then to consider whether sections 55(d) and 59 of the Just Terms Act have a lawfulness requirement. Justice Biscoe held that these sections do not contain an implicit requirement of lawfulness for the purpose of the use, which would automatically exclude a claim for relocation of a business conducted unlawfully.  His Honour agreed that relocation costs of an intrinsically unlawful business, for example, a business of manufacturing illegal drugs, would not be ‘reasonably’ incurred.

His Honour held that sections 55(d) and 59 do not contain an explicit requirement that the purpose of a use be lawful, in contrast with section 56(1)(c) which relates to defining market value for the purposes of the Just Terms Act. In this regard, section 56(1)(c) requires a Court in assessing market value to disregard ‘any increase in the value of the land caused by its use in a manner or for a purpose contrary to law’. His Honour held that ‘there is no automatic exclusion of compensation under section 59 of the Just Terms Act in the case of a use for a purpose which requires but does not have a necessary development consent. That said, His Honour expressed the opinion that ‘the lawfulness of the purpose of a use is a fact in determining whether the claimed costs were “reasonably” incurred, which is a requirement of all provisions under section 59′. For the above reasons, the disturbance cost for the relocation of business was determined to be compensable under the head of disturbance.

What we’ve learnt

This judgment sets out the Court’s approach to compensation where the acquired land was at the time of acquisition being used for purposes that are either prohibited under planning law, that do not have development consent, or that are ‘intrinsically illegal’. It also provides some clarity as to the differences between interpreting the head of disturbance and the head of market value when it comes to disallowing compensation where the use of land is for a purpose contrary to law.