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Snapshot

  • Some dispossessed owners of land in NSW can now seek compensation on the basis of ‘reinstatement’.
  • The NSW reinstatement provision has been judicially considered for the first time, with the applicant unsuccessful in seeking to apply it.
  • It remains open to former owners of land used for a range of unique purposes to claim compensation for reinstatement.

Compensation for the acquisition of land by government entities is typically calculated by reference to what a dispossessed owner of land has lost; the market value of the land being acquired, their costs of procuring legal and other expert advice, and relocation costs incurred, etc. These ‘heads’ of compensation are set out in s 55 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (‘Just Terms Act’). Of prime importance is how one assesses the market value of the land being acquired:

‘56   Market value

(1)  In this Act –

market value of land at any time means 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) –

  1. 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, and
  2. any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and
  3. any increase in the value of the land caused by its use in a manner or for a purpose contrary to law.’

Reforms to the Just Terms Act in 2017 introduced a new means by which compensation can be claimed based on what the dispossessed owner is required to buy in order to reinstate itself elsewhere, rather than the value of what it is losing. This is achieved through s 56(3) – the ‘reinstatement’ provision:

‘(3)  If –

  1. the land is used for a particular purpose and there is no general market for land used for that purpose, and
  2. the owner genuinely proposes to continue after the acquisition to use other land for that purpose, the market value of the land is taken, for the purpose of paying compensation, to be the reasonable cost to the owner of equivalent reinstatement in some other location. That cost is to be reduced by any costs for which compensation is payable for loss attributable to disturbance and by any likely improvement in the owner’s financial position because of the relocation.’

The ability to claim compensation on the basis of what it costs a dispossessed owner to be ‘reinstated’ on other land is available in certain circumstances. First, the land being resumed must be used for a particular purpose for which there is ‘no general market’. Second, there must be an intention by the dispossessed land owner to continue that former use on other land post-acquisition.

The decision of Justice Pain published on 30 July 2021 in The Trustee for Whitcurt Unit Trust v Transport for NSW [2021] NSWLEC 82 (‘Whitcurt) is the first time in which s 56(3) has been judicially considered. While on the facts a reinstatement claim was rejected by the Court, the decision helpfully surveyed the case law from other jurisdictions, which may offer guidance on how the provision will be applied for future claims.

Whitcurt

The applicant leased land at Tempe owned by Inner West Council and operated a golf driving range from it. The Council owned all the equipment on site prior to Transport for New South Wales (‘TfNSW’) acquiring the land in March 2020 for the Sydney Gateway Project.

The applicant’s occupation of the site was, by the date of acquisition, pursuant to a holdover lease, terminable on two months’ notice. As a result of the acquisition, the applicant was seeking to re-create a golf driving range-type facility in Campbelltown, also to be owned by that local Council.

The applicant made its claim for compensation on three alternative bases, including reinstatement. Ultimately, given the applicant’s tenuous interest in the acquired land (i.e. the readily-terminable lease), the Court determined that compensation was only payable for legal and other experts’ fees, and nothing was allowed by way of reinstatement (or, in the alternative, relocation costs, market value or special value).

The decision serves to illustrate the importance of identifying the nature of the interest in land in acquisition cases – without secure tenure, access to compensation is often significantly diminished (see, e.g., Roads and Maritime Services v United Petroleum Pty Ltd [2019] NSWCA 41 and Olde English Tiles Australia Pty Ltd v Transport for New South Wales [2021] NSWLEC 90).

Her Honour observed that an allowance for significant reinstatement costs would not, in fact, amount to a ‘reinstatement’; what it would produce would be a more secure tenure and a facility full of new equipment. At the existing site, the applicant had neither. Further, had a reinstatement claim been sustainable, it would need to have been reduced by any improvement in the claimant’s financial position (reflecting the discount mechanism in s 56(3)), and the Court considered that this would have produced a significant reduction.

At [160]-[162], her Honour also made three obiter observations about s 56(3):

  • Unlike relocation costs under s 59(1)(c), which must be ‘reasonably incurred’, the reinstatement costs under s 56(3) must be reasonable in quantum;
  • Golf driving ranges are an example of the kind of land use that has ‘no general market’;
  • Section 56(1), which is the provision under which market value for acquired land is ordinarily assessed, does not take precedence over s 56(3) and does not need to be tested before s 56(3) can be applied.

Reinstatement in other jurisdictions and its elements

The 2014 ‘Russell Review’ of the Just Terms Act produced a recommendation that a reinstatement provision – something already available under other acquisition legislation in Australia – be incorporated into the Just Terms Act in circumstances where the conventional method could not justly compensate a dispossessed owner. Golf courses and churches were cited as examples where this could arise, given the likely absence of a general market for land used for those purposes.

‘No general market’: In Trustees of The Australian Workers Union v Townsville City Council [1982] 8 QLCR 195, a union building ‘designed to meet the peculiar needs’ of its user was considered to be the ‘particular purpose’, and the Court held that there was no general ‘demand’ (a term that has been used in a similar way to ‘market’ in other jurisdictions) for such a site.

That level of specificity has been supported elsewhere, such as In Trustees of the Nonentities Society v Kidderminster Borough Council (1971) 22 P&CR 224, where a market for theatres in London was not considered to support the existence of a general market for theatres outside the city. Likewise, in Trustees of the Manchester Homeopathic Clinic v Manchester Corporation (1971) 22 P&CR 241, different types of medical clinics (such as specialists or dental) were distinguished from one another as the Court sought to define the general market into which the applicant might fit.

Larger reinstatement land? The reinstatement concept already exists in the Commonwealth Lands Acquisition Act 1989. Although the Commonwealth provision applies to non-commercial uses of land, the Federal Court has accepted that reinstatement land can be larger than the land which it is replacing (Hubertus Schuetzenverein Liverpool Rifle Club Ltd v Commonwealth of Australia (1994) 85 LGERA 37).

Under the Just Terms Act (where there is no ‘non-commercial’ land restriction), reinstatement under s 56(3) might have application where the land acquired accommodates an older existing use not in strict compliance with current planning controls (e.g. for setbacks). Where such planning controls must be complied with to allow the use to be reinstated, the dispossessed owner may have no other option but to purchase (and seek compensation for the cost of) a larger parcel of land.

Intention to reinstate: In South Australia, reinstatement was considered in Commissioner of Highways v Shipp Bros Pty Ltd (1978) 19 SASR 215 (‘Shipp Bros’). The Court emphasised the importance of the intention of the relocating party, holding that ‘there must be a firm and bona fide intention to reinstate and there must be a specific site for the new premises, already identified at the date of assessment of the compensation’.

Reasonable reinstatement costs: Shipp Bros also highlighted the importance of the ‘reasonableness’ of a decision to reinstate a business – a notion replicated in the requirement that the costs incurred in reinstatement be ‘reasonable’. What is reasonable will often turn on its facts, as exemplified in Hua and Anor v Hurstville City Council [2010] NSWLEC 61, where significant relocation costs were considered appropriate, despite the modest financial performance of the relocating business. That business was a family-owned and operated one, and therefore subject to different considerations to those that might apply to a listed enterprise.

Applying s 56(3)

Even though the preconditions to the application of s 56(3) were not made out in Whitcurt, Pain J’s decision offers some guidance as to how the Courts are likely to approach claims for reinstatement in the future. Importantly, her Honour rejected the resuming authority’s submission that a claimant can only advance a reinstatement claim if an ‘orthodox’ claim for compensation under s 56(1) cannot be made out. Her Honour found that s 56(1) does not take precedence over s 56(3). Reinstatement is therefore a discrete ‘channel’ through which compensation can be claimed – a potentially significant development for dispossessed owners in unique circumstances who may previously have been undercompensated by an orthodox approach to ‘market value’ under the Just Terms Act.


Timothy Allen is a solicitor at Beatty Hughes & Associates.