The High Court has made its decision – who is entitled to compensation?
With a legislative history spanning just under two years, the decision of the NSW Court of Appeal in Olde English Tiles Pty Ltd v Transport for New South Wales has divided both the public and legal practitioners. So it comes as no surprise that the Applicant applied for special leave to the High Court of Australia. Interested parties have been eagerly waiting to see the High Court’s decision.
The power of five words - “special is refused with costs” – should not be underestimated. The High Court has now affirmed the Court of Appeal’s decision, changing the legal landscape of compulsory acquisitions.
In 2018, land in Camperdown owned by Antonio and Carmel Gaudioso was acquired by Transport for NSW. Mr and Mrs Gaudioso were also the sole directors and shareholders of the business Olde English Tiles, which occupied the acquired land pursuant to a bare licence (a permission to occupy the land but is terminable at will).
In the primary proceedings, Olde English Tiles conceded they did not have a market value claim for their occupancy right. However, they nonetheless claimed compensation for disturbance under section 59(1)(c) of the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act).
The crux of the matter fell to the interpretation of ‘interest’ in land as defined under section 4(1)(b) of the Just Terms Act. An applicant must prove they have an interest which constitutes a ‘right, power, or privilege over, or in connection with’ the land. Without this, an applicant is not entitled to compensation.
The Land and Environment Court held that Mr and Mrs Gaudioso’s personal interest did not constitute a compensable interest and they were not entitled to disturbance. In its decision, the Court referred to Dial A Dump Industries Pty Ltd v Roads and Maritime Services  Court of Appeal 73 (DADI) and Hornsby Council v Roads and Traffic Authority of New South Wales (1997) 41 NSWLR (Hornsby).
The Applicant appealed the decision.
The five-Judge bench of the Court of Appeal unanimously affirmed the decision for the following reasons:
An interest in land must be legally enforceable and capable of being divested, extinguished or diminished by the acquisition (section 20 of the Just Terms Act).
The right to claim compensation under section 55(d) and section 59(1) of the Just Terms Act is contingent upon having a right to claim compensation for the market value of the interest divested.
It is inappropriate to overturn the decisions of DADI and Hornsby Council, when it was those decisions that prompted Parliament to legislate substantial amendments to the Just Terms Act in 2016. Those decisions have helped clarify the scope and operation of the Just Terms Act and gives the Court even more reason not to overturn them.
Following the Court of Appeal judgment, there was debate as to whether it had correctly interpreted the intention of the Just Terms Act. Specifically, was the intention to exclude applicants with unenforceable or personal interests (for example, licences at will or permission to use land) from being compensated? And what about the consequential effects on applicants with leasehold interests who were not claiming market value?
The High Court’s decision on the special leave application
On 17 February 2023, the High Court refused the special leave application based on insufficient prospects of success. The Court only needed to hear oral submissions from Counsel for the Applicant before coming to this decision.
Although short, the line of questioning from the High Court was telling as to what would warrant a special leave application. That is, sufficient reasoning as to why DADI and Hornsby needed to be reconsidered or overturned. Given these decisions sparked amendments to the Just Terms Act in 2016, this was no easy feat.
Counsel for Olde English Tiles submitted that the issue with Hornsby was that it implied there must be a limitation to the definition of interest, arguing that a contextual meaning of the words should be adopted instead.
Edelman J of the High Court asked whether a ‘no limitation’ approach was appropriate given it would entitle anyone “in the sense of a broad ability to use the land” to compensation. In response, Counsel submitted that entitlement is not for ‘anyone’, but rather is based on whether there is something for which money’s worth ought to be paid; that is, significance of market value.
In this case, Mr and Mrs Gaudioso were both controllers of the land and controllers of the corporation which occupied the land. Therefore, a lawful permission to occupy the land was spelled out from that privilege. Counsel argued that, although this privilege was terminable at will, there was value in the occupation of the land because they were carrying on a business.
Edelman J noted that the arrangement with Mr and Mrs Gaudioso and Olde English Tiles did not confer an interest in the land in any legal sense. Counsel conceded that permissive occupancy by way of privilege does not give a proprietary interest in the land.
Again, as in the LEC and the Court of Appeal, the definition of interest was the salient point.
Counsel argued that Hornsby was silent on the proper meaning of the expression as defined in section 4(1)(b) in the Just Terms Act; namely:
An easement, right, charge, power or privilege over, or in connection with the land
Edelman J continued to press for details as to the limitation of the definition – that is, whether any contractual right, terminable by will or not, would have to be compensated if land was compulsorily acquired.
Counsel could not answer this without considering the terms of those contractual rights, but went on to say that there was a lack of instrument, and that no ‘perfect legal carpentry’ to expressly support that interest should capture those terminable by will. He turned to the statute title, ‘Just Terms’, to suggest its plain and beneficial purpose.
Counsel went on to suggest that the word ‘privilege’ in section 4(1)(b) of the Just Terms Act should include the many forms of non-contractual (and therefore, terminable at will) occupancies, which immunise one against the claim of trespass.
This was a common term referred to in Counsel’s submissions – immunisation against the claim of trespass – suggesting that this is simply what was missing in the definition, and what was needed to open the door to a claim for disturbance for privileges or rights which may not have a defined ‘legal interest’.
The High Court only needed a four-minute adjournment before deciding there were insufficient prospects of success to warrant special leave to appeal.
Why is this important?
The effects of this case on the future of compulsory acquisition claims cannot be understated. By dismissing the special leave application, the High Court affirms that the Just Terms Act should operate in a ‘limiting’ capacity. It does not exist as a ‘free for all’.
There are two readings we can take from this:
The special leave refusal solidifies the judgment of the Court of Appeal, and also has the potential to reiterate the intention and purpose of the Just Terms Act. It will be interesting to see the creativity of applicants in trying to circumvent the judgment:
- if they do not have a defined ‘legal interest’ pursuant to the definition; or
- if they do have a defined ‘legal interest’, but no market value claim.
The second reading is that ‘no market value means no compensable interest’ is obiter dicta and acquiring authorities are to continue negotiations as usual. Even if acquiring authorities adopt this approach, we anticipate that whilst an interested party may try to negotiate compensation absent a market value claim, they are less likely to appeal to the Land and Environment Court.
It may take another case to go through the Court dealing with this issue directly before we see a change, however, given the number of current acquisitions by state authorities, it may only be a matter of time before we see the effects of this decision playing out.
Authors: Laura Raffaele & Maja Podinic
Contributing partner: Dennis Loether