During the compulsory process of land acquisition, disputes can arise regarding whether the compensation offered is on just terms for the owners of land. The recent case of G&J Drivas Pty Ltd v Sydney Metro [2023] NSWLEC 20 provides further guidance on how the Court assesses compensation of land.
Process
Land acquisition in New South Wales is the compulsory process by which a state authority (Authority) can acquire private property for public use. In NSW, the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Act) governs compulsory land acquisition and outlines the process:
- an Authority must first give the owners of the land written notice of its intention to acquire land by compulsory process (section 11);
- the proposed acquisition notice must give at least 90 days before the land is compulsorily acquired (section 13);
- after the expiration of the notice period, the Authority must acquire the land by compulsory process or by agreement or withdraw the proposed acquisition notice as soon as practicable (section 14);
- an owner of an interest in land divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation by the Authority (section 37).
Case Summary
In this case, G&J Drivas Pty Ltd and Telado Pty Ltd (Applicants) held a freehold interest as tenants in common over allotments situated in the Parramatta CBD with a total area of 3,673.4m2 consisting of 220 and 222-230 Church Street and 48 Macquarie Street (Acquired Land). The Acquired Land was acquired for the Sydney Metro West Project (Public Purpose).
The Applicants claimed that the compensation for the market value of the Acquired Land on the date of the acquisition was $200 million. Sydney Metro (Respondent), claimed the market value was $119 million.
As at the date of acquisition (19 March 2021), the Acquired Land was improved by a two-storey mixed use office and retail complex (Greenway Plaza) and was leased to and occupied by tenants. The land was zoned B4 – Mixed Use and a Development consent had been granted by the City of Parramatta Council for the demolition of Greenway Plaza and the erection of a 25-storey tower fronting Macquarie Street, four-storey tower fronting Church Street and a common ground floor retail podium and basement.
The Applicants contended that as at the date of acquisition:
- no physical works had been undertaken.
- they had undertaken non-physical steps to progress the development such as entering into marketing and future leasing contracts and preparation of detailed drawings for the proposed buildings.
- they delayed and ultimately abandoned the development as a result of the proposal of the carrying out of the Public Purpose (Discontinue and Stop Work Decision). But for the proposal, they would have progressed the planned development.
Relevant matters when calculating compensation
Section 55 of the Act outlines the relevant matters to be considered in determining compensation:
- Market value of the land on the date of its acquisition;
- Any special value of the land to the person on the date of its acquisition;
- Any loss attributable to severance;
- Any loss attributable to disturbance;
including: legal costs, valuation fees, financial costs, stamp duty costs;
- Disadvantage resulting from relocation (non-financial disadvantage arising as a result of the relocation, capped at $75,000 indexed); and
- Any increase or decrease in the value of the any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, the proposal to carry out, the public purpose for which the land was acquired.
Statutory construction of market value
Section 56(1)(a) of the Act sets out market value being:
Any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.
The Court was tasked with interpreting section 56(1) of the Act, specifically whether preparatory work not comprising physical work would apply.
The Respondent argued that the Act only permits consideration of the impact on value of physical work actually undertaken at the date of acquisition. If the Respondent’s construction of section 56(1) of the Act was correct, the Acquired Land will be valued as a development site with an occupied and tenanted existing building with the benefit of an approved development consent for the original buildings and the reasonably likely potential for an approval for the Church Street extension.
The Applicant, on the other hand, argued that they made decisions which decreased the value of the land, which they would not have taken but for the proposal to carry out the Public Purpose. If the Applicant’s construction of section 56(1) of the Act was correct, it would be necessary to determine whether the Discontinue and Stop Work Decision were caused by the proposal to carry out of the Public Purpose and whether the effect of those decisions resulted in a decrease in the value of the Acquired Land as at the date of acquisition.
The Court found that the provisions of the Act do not prevent a claim for a drop in market value to be made when the drop was caused due to actions not undertaken due to the Proposal to carry out the Public Purpose where the undertaking of such actions would have increased the value of the Acquired Land as at the date of acquisition.
Key takeaways
In summary, this case provides the following key considerations for the court:
- To interpret the definition of market value, is not intended to enact substantive law: the meaning of the definition depends on the context and object of the substantive enactment (at 70);
- In undertaking the exercise of statutory construction, a meaning that best serves the objects of the Act is preferred (at 91), that is to compensate the dispossessed owner for acquisition of the interest in the Acquired Land and that the amount of such compensation is to be just taking into account relevant matters under the Act.
Landowners should be aware of their rights to ensure they receive just compensation pursuant to the Act.
If you have any questions about this process, or if you have received a notice, contact the Property Team at Vincent Young Lawyers.