Posted on August 9, 2022 by Sue Puckeridge and James King 8

Compulsory acquisition – what is an interest in land?

The Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) provides that an owner of an interest in land which is divested, extinguished or diminished by a compulsory acquisition is entitled to compensation.  The NSW Court of Appeal has confirmed (in an unanimous judgment of 5 judges) that a permission to occupy and use land which can be withdrawn at any time cannot be the subject of a claim for compensation under the Just Terms Act.

Background

Roads and Maritime Services compulsorily acquired a parcel of land on Parramatta Road, Camperdown. The registered owners of the land were the sole directors of a company, Olde English Tiles Australia Pty Ltd (Olde English).  Olde English occupied the premises on the land under a bare licence from the registered owners and used the premises to operate a business manufacturing and selling tiles.  It had no enforceable right to possession of the premises and occupation of the premises could be terminated at any time.

Olde English was offered compensation pursuant to the Just Terms Act but challenged the adequacy of the offer in the Land and Environment Court (LEC).

Olde English did not claim that its right of occupancy had any market value. It only claimed compensation for loss attributable to disturbance (see s59 of the Just Terms Act). The disturbance losses claimed were legal costs, valuation fees and financial costs including loss of profits incurred in connection with the relocation of the business.

In the LEC, Duggan J found that Olde English did not have a compensable interest in the acquired land. Olde English appealed that decision.

The Question for Determination

An interest in land is defined under s4 of the Just Terms Act to mean:

(a) a legal or equitable estate or interest in the land, or

(b) an easement, right, charge, power or privilege over, or in connection with, the land.

The key question before the Court of Appeal was whether Olde English had a ‘privilege over, or in connection with, the land’ within the meaning of the definition of interest in land.

Previous Authorities

Olde English challenged the legal principles set out in two previous Court of Appeal cases:

• Dial A Dump Industries Pty Ltd v Roads and Maritime Services of New South Wales (2017) 94 NSWLR 554 (Dial A Dump); and
• Hornsby Council v Roads and Traffic Authority of New South Wales (1997) 41 NSWLR 151 (Hornsby v RTA).

In Hornsby v RTA the Court found that the matters listed in the definition of ‘interest in land’ under (b) could not include rights which were only personal.

Dial A Dump concerned a waste disposal business which had permission from a lessee and an owner to use and occupy land to operate its business.  The Court found that Dial A Dump’s permission to use the land to carry on a business was a right personal to it. Such a right is not an interest in land as defined in the Just Terms Act.

Determination by the Court of Appeal

The Court of Appeal unanimously dismissed the appeal.

Basten AJA (who wrote the judgment on behalf of the Court) found that the definition of interest in land does not include interests which are dependent upon a personal relationship between the occupier and the owner.

The Just Terms Act allows a wide range of possible interests to be compensated. However, the statutory context requires that they are all in, over or in connection with land. A bare permissive occupancy which can be withdrawn at will is not an interest in land and is not compensable under the Just Terms Act. While such occupancy may be a ‘privilege’ within the ordinary meaning of the term, it was not a ‘privilege’ ‘over or in connection with the land’ for the purposes of the Just Terms Act.

The Court confirmed that the previous decisions of Dial A Dump and Hornsby v RTA were correctly decided.

The Court also noted in respect of the ‘disturbance’ claim, that the loss of potential future profits in carrying out a business on land is generally part of the market value of land. In those circumstances, there is no room for any separate ‘disturbance’ claim on the basis of lost profits where the interest has no market value.

Takeaways

It is now well established that the only compensation which can be paid under the Just Terms Act is for legally enforceable proprietary interests in land. Unenforceable or personal interests, such as licences at will or permission to use land, are not compensable.

This case also emphasises that the overarching purpose of the Just Terms Act is to guarantee compensation assessed as the market value of interests in land. Other compensation for losses such as disturbance, severance or disadvantage under the Just Terms Act are additional to that amount and contingent upon the holder having a right to receive compensation for the market value of the interest.

The Court of Appeal’s judgment can be read here: Olde English Tiles Australia Pty Ltd v Transport for New South Wales [2022] NSWCA 108.

If you would like to discuss the issues raised in this post, please contact Sue Puckeridge on 8235 9702 or James King on 8235 9722.