The case of Azizi v Council of the City of Ryde; Alnox Pty Limited v Council of the City of Ryde (No 2) [2022] NSWLEC 3 concerned two class 3 land value compensation appeals made to the New South Wales Land and Environment Court (Court) against valuation determinations made by the Valuer-General of New South Wales (Valuer-General) pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act).

The issues for determination by the Court were the following:

• Issue 1 – When the public purpose of the acquisition emerged so as to trigger the "statutory disregard" required under section 56(1)(a) of the Just Terms Act when assessing the market value of land.

• Issue 2 – Whether, as at the date of acquisition, there was a prospect of up zoning of the Subject Land that was required to be taken into account when assessing compensation.

• Issue 3 – Whether Mr Azizi was entitled to receive payment pursuant to section 59(1)(d) of the Just Terms Act for stamp duty likely to be incurred in the acquisition of a replacement residence.

• Issue 4 – Whether Mr Azizi was entitled to the maximum amount of compensation in respect of the disadvantage resulting from relocation (previously known as solatium) under section 60 of the Just Terms Act.

The outcome of the case involved mixed success for both parties as follows:

1. The Court agreed with the Council that the public purpose emerged in March 2016 and not earlier as stated by the former landowners.

2. The Subject Land had a future development potential of R3 Medium Density Residential (R3) zoning and was not to be valued based on the existing R2 Low Density Residential (R2) at the time of acquisition claimed by the Council, or the R4 High Density Residential (R4) zoning claimed by the former landowners.

3. Mr Azizi was not entitled to receive compensation for the stamp duty associated with purchasing a replacement property as argued by the Council.

4. Mr Azizi was entitled to the maximum amount of compensation payable under the Just Terms Act for the disadvantage resulting from relocation as argued by Mr Azizi.

The litigation also involved other legal proceedings in the case of Council of the City of Ryde v Azizi (2021) 248 LGERA 204; [2021] NSWCA 165, which related to a 90 per cent advanced payment of compensation required under section 68 of the Just Terms Act as set out in our October 2021 article.

Mr Azizi and Alnox Pty Ltd (the former landowners) owned three parcels of land in North Ryde that were acquired by the Council of the City of Ryde (Council) following the rezoning of land for residential purposes to public recreation, with the purpose of expanding the adjacent Blenheim Park.

The former landowners purchased the Subject Land at various times in 2011 and lodged with the Council in 2015 a planning proposal to rezone the Subject Land from R2 to R4 (Planning Proposal). The Council rejected the proposal and resolved to prepare a planning proposal to rezone the Subject Land to RE1 Public Recreation (RE1).

Following an unsuccessful rezoning review application made by the former landowners to the then Department of Planning and Environment, the Council resolved to acquire the Subject Land. 

The former landowners made hardship applications under section 23 of the Just Terms Act seeking that the Council acquire the Subject Land on the basis of the former landowners' suffering hardship, which were accepted by Council. The Council acquired the Subject Land on 24 August 2018.

On 21 December 2018, the Valuer-General determined the amount of compensation payable for the acquisition of the Subject Land. However, the Council successfully brought proceedings in the Supreme Court of New South Wales (Supreme Court) seeking judicial review of the Valuer-General's determinations. The Supreme Court in the case of Council of the City of Ryde v Azizi [2019] NSWSC 1605 found that the Valuer-General's determinations were void and of no effect. 

Further determinations were issued by the Valuer-General, which led to the former landowners commencing proceedings in which the former landowners objected to the amount of compensation determined, which is the proceedings the subject of this article. 

In respect of Issue 1, the Court held the following: 

• Submissions by the former landowners that the public purpose emerged in 2012 when the Council adopted the Integrated Open Space Plan proposing an extension of Blenheim Park and potentiality of acquiring residences to achieve the extension be rejected because the Integrated Open Space Plan only identified a possibility of expansion (at [93]).

• Submissions by the former landowners that the public purpose alternatively arose in 2014 when an open space study was done be rejected because the study had no formal status within the Council and no public consultation had occurred in respect of it (see [97] to [98]).

• Consistent with the Council's submission that the emergence of the public purpose, and therefore the trigger of the "statutory disregard", was from 8 March 2016, which was the date of a Council Committee meeting in which the Planning Proposal was considered and opposed by the Council (see [85] and [100]).

The Court's findings suggest that concrete and resolved policies of a Council will be needed to constitute the emergence of a public purpose, rather than less defined early iterations of the public purpose.

In respect of Issue 2, the former landowners contended the appropriate future development potential was R4 zoning, and if that was not accepted by the Court, R3 zoning, and the Council contended it was R2 zoning. 

The Court held at [282], on the basis of the rejected Planning Proposal and the specific attributes of the Subject Land and whether they would be a barrier to a higher development potential, that as at the date of compulsory acquisition the Subject Land had a future development potential at a density greater than its R2 zoning, being a hypothetical R3 zoning.

Loss attributable to disturbance of land which is compensable includes "stamp duty costs reasonably incurred (or that might reasonably be incurred)…in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired)" (see section 59(1)(d) of the Just Terms Act). 

Section 61(b) provides that where the market value of land is assessed on the basis that the land had potential to be used for a purpose other than its current use, "compensation is not payable in respect of…any financial loss that would necessarily have been incurred in realising that potential".

In the context of the Court's finding in respect of Issue 2 that the Subject Land's appropriate zoning was R3, the Court held in respect of Issue 3 that Mr Azizi was not entitled to compensation for stamp duty under section 59(d) of the Just Terms Act and reiterated (see [431] to [440]) the following principles enunciated in the cases of El Boustani v The Minister administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33 (El Boustani) and Sydney Water Corporation v Caruso and Ors (2009) 170 LGERA 298; [2009] NSWCA 391 (Caruso):

• The potential for land to be used for a future use must exist as at the date of acquisition (at [95] of El Boustani).

• The denial of compensation for disturbance under section 61 of the Just Terms Act occurs where costs in respect of a claim under section 59 of the Just Terms Act would necessarily have been incurred in realising the potential of a future use of the land (at [185] of Caruso).

• "[W]here stamp duty is incurred by persons entitled to compensation in connection with the purchase for relocation where that relocation is necessary to enable the potential to which s 61 refers to be realised, then…s 61 denies a claim under s 59(d)" (at [185] of Caruso).

• "[I]n realising that potential" as stated in section 61(b) of the Just Terms Act means "making real or giving reality to the potential of the land to be used for a purpose other than that for which it is currently used" (at [109] of El Boustani).

• "[A]ny financial loss" as stated in section 61(b) of the Just Terms Act "must be incurred inevitably or as a necessary result of in realising the potential to use the land for a purpose other than that for which it is currently used" (at [110] of El Boustani).

The Court nevertheless went on to consider how much stamp duty compensation might be allowed if its interpretation of the statute was wrong, and held that the amount would be calculated on the basis of the full quantum of market value compensation on an apportioned basis.

In respect of Issue 4, the Court considered the criteria stated in section 60(3) of the Just Terms Act, including Mr Azizi's interest in the Subject Land, the time Mr Azizi resided on the Subject Land, any inconvenience suffered by Mr Azizi in being removed from the Subject Land, and the period after the acquisition of the Subject Land that Mr Azizi was allowed to remain in possession of the Subject Land, and held that Mr Azizi would be entitled to the statutory maximum compensation for the disadvantage resulting from his relocation with no discount. 

The Court relevantly held that the Subject Land had a future development potential that was different to that contended for by the parties, which triggered the application of section 61(b) of the Just Terms Act, denied the application for costs associated with the loss attributable to disturbance in respect of stamp duty under section 59(d) of the Just Terms Act, and held that Mr Azizi was entitled to the statutory maximum for the disadvantage resulting from his relocation from the Subject Land.