Characterising the public purpose for compulsory acquisitions

Compulsory acquisition is the process by which a public authority will exercise statutory powers to acquire land for a public purpose, regardless of whether the owner agrees.  The power to acquire arises in enabling legislation such as the Roads Act 1993 (NSW) but compensation is to be assessed under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (‘Just Terms Act’).

Statutory context

Section 37 of the Just Terms Act provides that ‘an owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with [Part 3 of the Act] by the authority of the State which acquired the land’.

Section 55 of the Just Terms Act sets out the ‘relevant matters to be considered in determining amount of compensation’, including relevantly:

‘(a) the market value of the land on the date of its acquisition,

…

(f)  any increase or decrease in the value of 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, or the proposal to carry out, the public purpose for which the land was acquired.’

‘Market value’ is defined in section 56(1) of the Just Terms Act as:

‘the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid) —

(a)  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 term ‘public purpose’ is defined in section 4 of the Just Terms Act to mean ‘any purpose for which land may by law be acquired by compulsory process under this Act’. The requirement to disregard the impact of the public purpose on the market value of land which has been acquired is known as the ‘statutory disregard’.

It will be observed that the definition of ‘public purpose’ is necessarily broad. Despite the breadth in the definition, as the decision to be discussed shows, it is crucial to accurately identify and characterise the ‘public purpose’ for which land is being acquired as that finding can have significant implications on the final determination of compensation payable to the dispossessed owner.

Goldmate

On 19 April 2024, Duggan J of the Land and Environment Court handed down the long-anticipated judgment in Goldmate Property Luddenham No. 1 Pty Ltd v Transport for NSW [2024] NSWLEC 39 (‘Goldmate’). The decision follows recent Court of Appeal decisions concerning the characterisation of the ‘public purpose’ in determining market value under the Just Terms Act in Sydney Metro v G & J Drivas Pty Ltd [2024] NSWCA 5 and Coffs Harbour City Council v Noubia Pty Ltd [2024] NSWCA 19.

The applicant owned 31.79 hectares of land in Luddenham it had purchased in November 2020 for $33,056,500. On 19 March 2021, Transport for NSW (‘TfNSW’) issued a proposed acquisition notice to acquire part of the land ‘for the purposes of the Roads Act 1993 in connection with the construction, operation and maintenance of the M12 Motorway’. On 30 June 2021, TfNSW acquired 14.66 hectares known as Lot 7 and the applicant landowner retained 17.13 hectares known as Lot 2.

As at the date of acquisition, the land was primarily zoned Enterprise (‘ENT’) under the State Environmental Planning Policy (Western Sydney Aerotropolis) 2020 (‘Aerotropolis Policy’), prior to which it had been zoned RU2 Rural Landscape under the Penrith Local Environmental Plan 2010.

The primary issue in dispute was whether the carrying out of, or the proposal to carry out, the public purpose had caused the change in zoning from RU2 to ENT and the consequent increase in market value. The competing positions on the entitlement to compensation payable under the Just Terms Act for the acquisition of Lot 7 were $55,437,200 for the applicant and $4,000,200 for TfNSW.

The public purpose and the statutory disregard in determining market value

Relying on the language used in recent Court of Appeal decisions (Coffs Harbour City Council v Noubia Pty Ltd [2024] NSWCA 19 (at [61]) and Sydney Metro v G & J Drivas Pty Ltd [2024] NSWCA 5 (at [38]-[39])), the applicant contended the public purpose needed to be construed having regard to TfNSW’s acquisition powers under the Roads Act 1993 and was therefore limited solely to the construction, operation and maintenance of the M12. This narrowly characterised public purpose, when disregarded, would result in the market value being determined on the basis of the actual ENT zoning under the Aerotropolis Policy (a more valuable zone than the RU2 zone).

TfNSW contended for a far broader public purpose, being the NSW Government’s delivery of the Western Sydney Infrastructure Plan (‘WSIP’) plus rezoning of relevant areas for urban purposes, as part of a coordinated State Government response to the announcement of the Western Sydney Airport (‘WSA’). This broader characterisation would mean that the Aerotropolis Policy as a whole is to be disregarded and as such the acquired land should be valued based on the underlying RU2 zoning.

Her Honour found the purpose of TfNSW’s ‘acquisition of the M12 was not merely to provide vehicular movements to and from the WSA but also to make provision for transport related to the intended land use changes which would facilitate commercial, employment and industrial uses around the WSA to leverage the economic opportunities provided by the WSA. Each element had to work in concert, or the goal (the purpose of such works) would not be achieved…’ (at [42]).

Her Honour also found ‘there was a unified goal that characterised the actions subsequent to the announcement of the construction of the WSA, that goal was to facilitate the operations of the WSA and to facilitate the commercial, industrial and employment uses around the WSA to leverage the economic opportunities provided by the WSA. This was the public purpose’ (at [51])

As the rezoning of the acquired land from RU2 to ENT was a consequence of the public purpose, it needed to be disregarded when determining market value under s 56(1)(a). Adopting a ‘before and after’ approach, Justice Duggan determined that the market value of the acquired land was $9,523,500 under s 56(1)(a) of the Just Terms Act.

Implications of the decision

The Goldmate decision is the first judgment in a series of proceedings concerning land acquisition near the WSA. Accordingly, assuming Justice Duggan’s decision remains undisturbed on appeal, it is likely to set a precedent for those other cases. While each case must be determined on its facts, the finding of a coordinated public purpose in furtherance of the delivery of infrastructure required for the WSA and surrounding land is likely to be welcomed by acquiring authorities tasked with delivering that infrastructure.

More broadly, the judgment highlights there are no ‘clear rules’ for characterising the relevant public purpose. While it is the public purpose of the acquiring authority that is relevant, that purpose may be associated with a coordinated cross-government strategy. It is not necessary to confine the characterisation of the public purpose by reference to the legislation that gives rise to the authority’s acquisition power.

Tom White is a partner at Lander & Rogers. Alex Beale is special counsel at Lander & Rogers.