Posted on September 26, 2023 by Liam Mulligan and Dimitrious Havadjia 1

How much ‘disturbance’ is required before compensation is payable when land is compulsorily acquired?

Given the significant number of public infrastructure construction projects at all levels of government – and particularly with large projects such as Sydney Metro, Western Sydney Airport, and WestConnex –  the law regarding the compulsory acquisition of rights and interests below the surface of land is a potentially critical matter. The recent decision of the NSW Court of Appeal in Sydney Metro v Expandamesh Pty Ltd [2023] NSWCA 200 provides some guidance to landowners and government as to what constitutes a ‘disturbance‘ to a landowner when the land or interest being acquired is underground.

Background

Expandamesh (the plaintiff) owned land in Waterloo. Tunnels for the Sydney Metro City and Southwest Project were constructed beneath the surface of this land. Expandamesh claimed compensation for the acquisition of the substratum beneath its land.

On the basis of Clause 2 Schedule 6B of the Transport Administration Act 1988 (NSW) (TA Act), the NSW Valuer General determined that Expandamesh was entitled to no compensation for the acquisition of the subsurface land under the Land Acquisition (Just Terms Compensation) Act 1991.

Expandamesh would only be entitled to compensation if the surface of its land has been ‘disturbed’. Monitoring devices installed around (but not on) Expandamesh’s land measured an average of 1.5mm of subsidence of the land after the tunnels were constructed.

On that basis, the Primary Judge found that Expandamesh was entitled to compensation of $20,000, as subsidence of the soil “at a minimum of 1.5 millimetres (and accepting the possibility that there might be some minor increment on that number), the subsidence would be imperceptible but, nonetheless, has taken place.” 

Sydney Metro appealed this decision on several grounds.

Relevant Issue

Sydney Metro’s appeal argued, in essence, that 1.5mm of subsidence was not a “disturbance” of the overlying soil for the purposes of the TA Act.

The relevant Clause 2 of Schedule 6B of the TA Act reads as follows (our emphasis):

(1) If land under the surface is compulsorily acquired under the Land Acquisition (Just Terms Compensation) Act 1991 for the purpose of underground rail facilities, compensation is not payable under that Act unless—

(a) the surface of the overlying soil is disturbed, or

(b) the support of that surface is destroyed or injuriously affected by the construction of those facilities, or

(c) any mines or underground working in or adjacent to the land are thereby rendered unworkable or are injuriously affected.

The Primary Judge found that there was no basis to read any qualification into the word “disturbed”, meaning that even an ‘imperceptible’ disturbance of 1.5mm would trigger the exception contemplated by Clause 2 of Schedule 6B. The question would then be one of quantum (with a greater degree of disturbance entitling a landowner to a greater amount of compensation).

The Court of Appeal disagreed with this assessment on the following grounds:

1. The word ‘disturbed’, as commonly understood, “does not extend to an impact or effect which is objectively trivial and of no practical significance,” and requires a non-trivial effect, which will depend on the context of the matter; and
2. When considering the legislative history and extrinsic materials, the insertion of this wording into the TA Act was not to expand the ability of landowners to claim compensation, but provide protection to entities involved in the construction and operation of underground rail facilities.

In a separate opinion, Simpson AJA noted that “I have difficulty with the notion that “disturbance” may be “imperceptible”. The very concept of a “disturbance” ordinarily, and, indeed, inherently, connotes something that is perceived; certainly something that is “perceptible”.

On the basis of the above, the Court of Appeal determined that the 1.5mm disturbance was too trivial to entitle Expandamesh to compensation, and as such the Primary Judge’s decision was reversed.

The full judgement can be accessed here.

Implications

Although this case was engaged with disturbance under the TA Act, the Land Acquisition (Just Terms Compensation) Act 1991 contains an almost identically worded provision at section 62(2), except that it only refers to tunnels being constructed underground (as opposed to rail facilities more generally). It therefore appears that the same reasoning would apply to claims made under section 62(2)(a), in that the disturbance would need to be non-trivial in order to entitle the landowner to compensation.

The Court of Appeal also noted that context could be a relevant consideration: “To put it another way, how land is currently being used or might be used in the future may be relevant to an assessment of the triviality or otherwise of disturbance to the surface of overlying soil.” Thus, although 1.5mm was determined to be trivial in this instance, the Court left open the possibility that a situation could arise where such a small subsidence could be considered a disturbance warranting compensation.

If you have any questions in relation to this decision, please leave a comment below or contact Liam Mulligan on 02 8235 9715 or Dimitrious Havadjia on 02 8235 9724.