15 November 2021

The latest on land acquisition matters in the Land and Environment Court

As always, a flurry of decisions have recently emerged from the Land and Environment Court regarding claims for compensation under the provisions of the Land Acquisition (Just Terms Compensation) Act 1991 (JTC Act). We provide the following updates on a couple of those decisions.

Reinstatement costs and Section 56(3)

The Trustee for Whitcurt Unit Trust v Transport for NSW [2021] NSWLEC 82

This decision offers helpful insights into how the Court is likely to approach claims for reinstatement.

The Applicant, Whitcurt, conducted a golf driving range business on land owned by the Inner West Council. In March 2020, the land was acquired by Transport for NSW.

The Applicant sought compensation for the compulsory acquisition of its leasehold interest in the land under section 66 of the JTC Act. The claim rested on three bases:

  • as disturbance under s55(f) for relocation of the business elsewhere

  • as market value under s56(3) for reinstatement of business elsewhere

  • as special value under s55(b)/57.

Key findings of the Court were:

  1. The lost interest that gives rise to a claim for compensation ceases to exist on the date of acquisition. While loss need not be assessed only at the date of acquisition, the interest for which loss may be payable is fixed by that date. At the date of acquisition, the Applicant held a tenancy terminable on two months’ notice and the likelihood of an extension of the lease and the attitude of the lessor are irrelevant.

  2. At the date of acquisition, the critical infrastructure was owned by Council as the landlord. The Court held that in assessing the nature of the interest in land where compensation was sought for relocation costs, it was highly relevant to ask who owns the chattels and fixtures. In this case, the Applicant owned only the moveable chattels. The Court held that the Applicant’s efforts to secure alternative premises and the costs of establishing a golf driving range had no role in relation to section 59(1)(c) relating to financial costs reasonably incurred for relocation.

  3. The Applicant’s interest must be considered in relation to its actual leasehold interest and what equipment it owned at the date of acquisition. The Applicant’s claim for fitout and business relocation costs could not succeed as that would not be compensating the Applicant for its disturbance loss.

  4. No loss of profits arose during business relocation.

  5. Given the limited leasehold interest of the Applicant, the Court rejected the Applicant’s claim for special value and market value under section 56(3).

The Applicant would only be entitled:

  • as to reinstatement of interest lost, the cost of obtaining a leasehold tenure of two months

  • as to relocation, the cost to relocate the items identified in the tenant’s property under the lease together with other moveables such as stock and light equipment.

We wait to see what approach the Court will take in future applications. This decision highlights the inherent difficulties confronted when dealing with the vexed issue of compensation on the basis of reinstatement. Here, the dispossessed owner was largely unsuccessful.

Apportioning market value
G Capital Corporation Pty Ltd v Transport for NSW [2021] NSWLEC 44

In G Capital, the Court was asked to consider how to apportion market value in relation to acquired land that was subject to a contract for sale.

This case involved three separately owned properties in Camperdown, acquired for the WestConnex project. Each owner had entered into a contract to sell their property, but none of the sales had been completed at the time of acquisition.

The Valuer General apportioned market value between the vendor and the contracted purchasers.

The three vendors were related interests of a Mr Gertos, and the three purchasers were related interests of a Mr Pamboris.

In addition to the contract for sale, a separate deed executed by all vendors and purchasers required the three transactions to be completed simultaneously.

TfNSW also lodged a cross claim against one of the Pamboris interests (Portman Securities) over the properties at 166-172 Parramatta Road Annandale into which it had entered a contract for sale. The cross claim sought to recover the difference between the amount paid plus statutory interest, versus the amount (to be determined by the court) of the actual market value compensation entitlement.

The hearing was conducted in two phases.

  1. The first concerned market value matters.

  2. The second related to a claim for the payment of stamp duty based on the market value of the land compulsorily acquired from that entity by each of the purchasers.

1. Consideration of market value matters:

  • Portman Securities entered into a contract for sale with Marsden Developments Pty Ltd, the owner of 166-172 Parramatta Road, Annandale.

  • For Portman Securities to have a compensable market value interest in Parramatta Road, it would need to demonstrate that all three properties could have settled in one line, as the deed mandated.

  • The Court held that Portman Securities had no entitlement to compensation for its equitable interest and that the appropriate compensation determination for that interest was nil. The result is that the full market value compensation, as determined by the Valuer General, is to be paid to the Gertos entities and not apportioned between it and Portman Securities (the vendor and contracted purchaser, respectively).

2. Consideration of cross claim

  • The Court held that it had jurisdiction and power to make an order, as sought by TfNSW, for the recovery of the compensation paid to Portman Securities, as that entity had no entitlement to compensation. Therefore, the Court upheld TfNSW’s cross claim.

  • Pursuant to s48(5) of the JTC Act, Portman Securities was ordered to repay $7,915,000 to TfNSW, being the amount paid as compensation for market value under s55(a). That said, Portman Securities was entitled to disturbance costs under s55(d).

Disturbance issues

  • The entities that entered into the contract for sale claimed they were entitled to disturbance costs based on the stamp duty that would be payable if a property

    of the same market value was to be purchased.

  • The Court stated that section 59(1)(f) is no longer available for claims like the ones made by the three purchasers.

  • While the buyers claimed disturbance under s59(1)(d), the Court held that something tangible (not merely the concept of ownership) must be relocated for such an entitlement to arise. Therefore, the claims for stamp duty equivalent payments were dismissed.

The decision was notable and should help acquiring authorities better understand the Court’s scope of jurisdiction. Having found that there should be no compensation to Portman Securities for its equitable interest, the Court was satisfied that TfNSW should succeed on its cross claim.

Author: Dennis Loether