Property adjustment works in compulsory acquisitions – what’s ‘just’ is not a matter for the courts
An owner whose interest in land affected by an acquisition notice is entitled to compensation paid by the acquiring authority, pursuant to section 37 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act). The amount of compensation to be paid, having regard to relevant matters for consideration, must ‘justly compensate’ that owner for the acquisition: see sections 54 and 55 of the Just Terms Act.
However, that compensation need not be monetary in all circumstances. It may also be provided, either wholly or partly, in the form of the carrying out of works on the land pursuant to section 64 of the Just Terms Act, otherwise known as ‘property adjustment works’.
Such compensation is common in compulsory acquisitions, especially when only part of a parcel of land is acquired. In such instances, property adjustments often include relocation and reconstruction of driveways and boundary fences, but may include more extensive works as well.
Providing property adjustment works - key elements
Breaking down section 64 of the Just Terms Act, the following three elements are apparent:
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The compensation concerned is that which the owner of the interest is entitled to. Accordingly, pursuant to section 54 of the Just Terms Act, the compensation must ‘justly compensate’ the owner of the interest for the acquisition.
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Whole or part of the entitlement may instead be provided in the form of property adjustment works.
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The owner of the interest and acquiring authority must agree that either whole or part of the compensation being provided as property adjustment works.
Case law regarding property adjustment works
The Land and Environment Court (the Court) has jurisdiction to determine disputes concerning compensation for compulsory acquisitions. Its power is limited to determining the nature of the estate or interest and the amount of compensation to which the owner of the interest is entitled, pursuant to section 25(1) of the Land and Environment Court Act 1979 (NSW) (LEC Act). It does not have jurisdiction to rule on the nature or extent of property adjustment works.
This was made clear in Van Tonder v Hodgkinson [2012] NSWLEC 86 at [9] per Biscoe J, where the Court stated:
In substance, at least some of the orders sought appear to be for compensation for compulsory acquisition in the form of land and works. In my opinion, even if this Court has jurisdiction, it has no power to make such orders. The Court's power under the Just Terms Act is limited to determining compensation because of the compulsory acquisition of land “in accordance with” the Just Terms Act, Division 2 of Part 12 of the Roads Act 1993 or any other Act: ss 19(e) and 24 of the Land and Environment Court Act 1979. Entitlement to compensation in the form of land or works only arises if the person and the authority of the State concerned agree: s 64 Just Terms Act. In the present case there is no such agreement.
However, the Court may make orders for property adjustments in accordance with an agreement of the parties (being the owner of the interest and the acquiring authority) as to terms of a decision in the proceedings, pursuant to section 34(3) of the LEC Act. In that instance, the Commissioner must dispose of the proceedings in accordance with the agreement and set out the reasons for the decision in writing.
In Billbergia Group Pty Ltd v Transport for New South Wales [2020] NSWLEC 1652, the parties agreed on compensation to be provided in the form of money paid and in the form of an easement (being a form of land, as defined in section 4(1) of the Just Terms Act). Peatman AC proceeded to make orders in accordance with that agreement and provided the following reasons in the written decision at [26]-[28]:
[26] In this case, the parties have agreed that the compensation will be partly by money paid, and partly by way of an easement for services over the Land, and entering into a deed to facilitate potential relocation of the easement if required…In light of the s 34 agreement between the parties in this case, compensation determined in accordance with the requirements of Part 3 Division 4 of the Just Terms Act may be provided partly by the payment of money and partly by the giving of an interest in land.
[27] As set out above, I am satisfied that the parties’ decision is one that the Court could have made in the proper exercise of its functions, as required by s 34(3) of the LEC Act.
[28] As the parties’ decision is a decision that the Court could have made in the proper exercise of its functions, I am required under s 34(3) of the LEC Act to dispose of the proceedings in accordance with the parties’ decision.
Case law to date is clear that the operation of section 64 of the Just Terms Act is dependent upon agreement being reached between the owner of the interest and the acquiring authority: see Reginald Arthur Gosper v Hornsby Shire Council [1993] NSWLEC 84 (Bignold J); Cook, Saad, Raguz & Ors v Roads and Traffic Authority of New South Wales [2007] NSWLEC 136, [77] (Jagot J); Van Tonder v Hodgkinson [2012] NSWLEC 86, [9] (Bisco J).
Although the above decision did not involve compensation in the form of property adjustment works, the same approach is taken by the Court when such agreements are reached.
In the absence of agreement between the parties, the Court cannot make orders for compensation in the form of property adjustment works; it may only make a determination on compensation to be paid. However, compensation that may have otherwise been provided in the form of property adjustment works can be awarded as disturbance, pursuant to sections 55(f) and 59(f) of the Just Terms Act.
Key elements revisited
Looking back to the three key elements for providing property adjustment works pursuant to section 64 of the Just Terms Act, it is evident that the second and third elements are clear-cut and supported by the Court.
However, the first element begs the question: how do acquiring authorities determine whether compensation in the form of property adjustment works will ‘justly compensate’ the owner of the interest in land?
Where compensation is to be provided partly in the form of property adjustment works, the remaining compensation amount may be discounted by the exact cost of the property adjustment works. In that respect, calculating losses for disturbance pursuant to section 59(f) of the Just Terms Act may be useful in determining an arrangement that may ‘justly compensate’ the owner of the interest.
Ultimately, it is for the owner of an interest in land and the acquiring authority to determine what constitutes a ‘just’ arrangement. The property adjustment works may represent a ‘like-for-like’ arrangement, for example, a driveway that directly replaces one on land that has been compulsorily acquired. The property adjustment works may also represent a ‘this-for-that’ arrangement, where works leave the owner of the interest either better or worse off than before.
What is fundamental is that the parties reach agreement.
A common issue in negotiating such agreements is the possibility of ‘double-dipping’, that is, the provision of property adjustment works and monetary compensation, without any discount being applied to the latter by virtue of the former. This can be avoided by distilling the agreement into a Deed, where the scope and timing of property adjustment works are sufficiently detailed, the works themselves are accurately quantified and the remaining monetary compensation is subsequently discounted.
Bartier Perry can assist with the negotiation, drafting and review of such agreements. If you have any questions regarding this article, please contact Dennis Loether.
Author: Adrian Guy
Contributing partner: Dennis Loether