The caseload reported in the most recent Land and Environment Court (LEC) statistics shows class 3 proceedings continuing to increase. Given this trajectory, it is not surprising to see a number of novel legal issues arising from some of these compulsory land acquisition cases. This article considers select cases from the NSW Land and Environment Court and the NSW Court of Appeal in 2024, and the outlook for 2025.

A number of important decisions were handed down in 2024 which considered how the public purpose of an acquisition is to be determined, and how the statutory disregard in section 56(1)(a) applies when determining compensation for "market value". In essence, that provision requires the disregard of any increase or decrease caused by the public purpose, or the proposal to carry out the public purpose, as at the acquisition date (statutory disregard). The cases explored are: 

• Sydney Metro v G & J Drivas Pty Ltd [2024] NSWCA 5 

• Coffs Harbour City Council v Noubia Pty Ltd [2024] NSWCA 19 

• Goldmate Property Luddenham No. 1 Pty Ltd v Transport for NSW [2024] NSWLEC 39

• oOh!media Fly Pty Ltd v Transport for NSW [2024] NSWCA 200

Our previous article reported how the NSW Court of Appeal's decision in Sydney Metro v G & J Drivas Pty Ltd [2024] NSWCA 5 will encourage landowners to continue pressing on with their redevelopment plans in the shadow of a compulsory acquisition, despite the fact that such expenditure could generate considerable waste. The key fact in that case was that upon learning of the upcoming compulsory acquisition, the landowner made decisions to slow and then stop work on the redevelopment. This resulted in a loss of value for the claimants, which they said was caused by the public purpose. The Court of Appeal found that those decisions were independent decisions of the landowners, and were not directly caused by the Sydney Metro project. This meant that the claimed decrease in value could not be taken into account.

Coffs Harbour City Council v Noubia Pty Ltd [2024] NSWCA 19 was the second Court of Appeal decision this year to consider the statutory disregard following Drivas. 

The facts were slightly unusual in that they did not involve a compulsory acquisition, but employed compulsory acquisition compensation concepts as part of a land transfer to the Council by a developer. In summary, the landowner had obtained a development consent in 2003 to develop a 160 lot residential estate near Coffs Harbour. One of the conditions in the development consent required the landowner to transfer certain land to Council, on which artificial lakes had been constructed as part of the development. The transfer occurred in 2007. Compensation for the transfer was to be determined by reference to the Just Terms Act, but a dispute arose on how the Just Terms Act was to apply in determining compensation for the transferred land, seeing as this was not a compulsory acquisition. 

In the Land and Environment Court, the primary judge had determined the public purpose broadly as "for water quality and stormwater management purposes", and had disregarded a decrease in value caused by the Council's "public purpose". $2,965,000 was awarded in compensation on the basis that the transferred land could have been developed for residential subdivision. The Council appealed the primary judge's decision. 

On the causation ground, the Court of Appeal overturned the findings of the primary judge and found that the value of the transferred land (on the basis of the artificial lakes constructed) was a result of the choices made by Noubia in seeking development consent in 2003 (see [88]).

The Court of Appeal went on to find at [109] that the public purpose should have been characterised by the primary judge as being limited to the management of stormwater arising from the developed upstream catchment, and not the management of flows from Noubia’s own development or the natural flow of upstream water from undeveloped land. The narrower public purpose favored the Council because it meant that the market value of the transferred land was not ascertained by reference to its hypothetical residential development potential. 

Following this, the Court of Appeal made a declaration that the value of the transferred land was $110,000. 

Paragraphs [62]-[65] of the judgment stand out for Payne JA's citation of Hogson JA in Roads and Traffic Authority v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251, where it was explained that "there are no “clear rules” determining how the relevant public purpose at the appropriate level of generality is to be determined. Factors to be taken into account include the degree of continuity and consistency of various elements of what is proposed and done, and fairness to both the claimant and the acquiring authority."

In oOh!media Fly Pty Ltd v Transport for NSW [2024] NSWCA 200, the Court of Appeal applied the decision in Drivas to an acquisition of a lease. 

In September 2020, TfNSW acquired land in Mascot over which oOh!media had a leasehold interest adjacent to Qantas Drive for advertising billboards. oOh!media had commenced plans to digitise six out of 18 billboards on the land, but abandoned the project in 2016 when it became aware the land may be acquired under the Sydney Gateway Project. In the Land and Environment Court, oOh!media was awarded approximately $2.7 million, which was less than the $3.8 million awarded by the Valuer-General (and a mere fraction of the $52.2 million claimed). 

On appeal, oOh!media argued that:

• had the digitisation proceeded, the market value of its lease would have increased; and

• its decision to not pursue the digitisation of the signs was caused by the public purpose and not the proposed acquisition, and thus fell outside the statutory disregard and the Court of Appeal's decision in Drivas. 

The Court of Appeal dismissed oOh!media's appeal, and determined that the case was "relatively indistinguishable" from Drivas. At [74], the Court of Appeal summarised:

"This is a case, like Drivas CA, where the claimant sought compensation for a putative increase in market value not in fact achieved because of its own choices made prior to the date of acquisition, being choices made because of the possibility or certainty of its interest in the land being acquired. The fact that the market value did not actually increase because of that choice is not required to be disregarded by s 56(1)(a) of the Act. The land was to be valued as it was, including all its potentialities for development."

[Disclaimer: Colin Biggers and Paisley acted for the landowner] 

The decision in Goldmate Property Luddenham No. 1 Pty Ltd v Transport for NSW [2024] NSWLEC 39 has attracted considerable interest given it is the first of many cases involving acquisitions of land in the Western Sydney Aerotropolis, and how the statutory disregard is to be applied given the planning changes in the area that occurred in late 2020. 

The facts were that TfNSW acquired 46% of a parcel land under the Roads Act 1993 for the M12 Motorway. That motorway is currently midway through construction. Approximately 8 months before the acquisition, the Aerotropolis SEPP commenced, which rezoned vast swathes of land for various uses including agribusiness, enterprise, environment, recreation and mixed use. Goldmate's land was one of many parcels rezoned from a rural use to an 'Enterprise' use. 

The primary judge adopted an expansive characterisation of the public purpose at [51]: 

Having regard to the evidence that there was a unified goal that characterised the actions subsequent to the announcement of the construction of the [Western Sydney Airport (WSA)], that goal was to facilitate the operations of the WSA and to facilitate commercial, industrial and employment uses around the WSA to leverage the economic opportunities provided by the WSA. This was the public purpose (Public Purpose).

The effect of this was that the rezoning was disregarded when determining the market value of the acquired land, such that it was valued on the basis of a hypothetical rural zoning. 

The implications of the Goldmate decision being felt by the landowners near Badgerys Creek have been articulated by the State Member for that area before the Legislative Assembly - see New South Wales, Parliamentary Debates, Legislative Assembly, 19 September 2024, 42 (Tanya Davies, Shadow Assistant Minister for Jobs and Small Business).

The Goldmate decision was appealed to the NSW Court of Appeal, and the parties await judgment.

Sydney Metro v C & P Automotive Engineers Pty Ltd [2024] NSWCA 186 

The Court of Appeal's decision in Sydney Metro v C & P Automotive Engineers Pty Ltd [2024] NSWCA 186 is yet another decision narrowing the scope of disturbance costs that can be claimed under relocation under section 59(1)(c) of the Just Terms Act.

Following the Sydney Metro acquisition of its lease at Clyde, C&P Automotive Engineers (C&P) relocated its business to alternative premises. The primary judge awarded compensation of approximately $2.5 million which included costs to ‘fit out’ the new premises and the rental difference between the new and the old premises. Sydney Metro appealed that determination to the NSW Court of Appeal. 

Sydney Metro's appeal was successful, and resulted in compensation being reduced to approximately $416,000. The main implication of the Court of Appeal's judgment are that: 

• Compensation under the disturbance head of compensation for "relocation" does not extend to replacing the physical characteristics of leased premises (i.e. the buildings). That is because the buildings belong to the landlord, and are only available for use as part of the lease (see [85]). 

• The Just Terms Act does not provide compensation for relocating something that a claimant never had any right to relocate [111].

• The Just Terms Act does not provide for relocation to "like-for-like" premises, and "does not guarantee that the relocation premises will have the same fixtures" [115]. 

• Compensation is not payable for the difference in market rents between the old premises and new premises. The choice of premises is in the lessee's hands [150].

Dibb v Transport for New South Wales [2024] NSWCA 157 (Dibb) 

The case of Dibb concerned compensation for land acquired for the Coffs Harbour Bypass Project. On appeal and cross-appeal, two substantive matters of interest were: 

• claims of adversarial bias on behalf of the expert witnesses retained by TfNSW (including its valuer); and

• whether the primary judge's award for stamp duty compensation was consistent with the recently handed down Court of Appeal judgement in Drivas. This was the subject of TfNSW's cross-appeal.

Regarding the claims of adversarial bias, the Court of Appeal dismissed this ground (see 128] - [136]). The particulars of this contention were long. One example was that TfNSW's valuer Mr Lunney (who is often retained by acquiring authorities) had selectively avoided using certain properties when assessing comparable sales, and had fabricated evidence about his site inspection. For each witness, the Court of Appeal found that there was no basis for the contentions raised, and no evidence that there had been non-compliance with the Expert Witness Code of Conduct. 

Regarding the stamp duty issue, the trial judge had awarded the landowners stamp duty under section 59(1)(f) of the Just Terms Act. The Court of Appeal allowed the cross-appeal on the basis of the Court of Appeal's judgment in Drivas at [115]-[121]). The effect of this was that the order for the payment of stamp duty compensation in the amount of approximately $57,000 was deleted. 

Pacific Bay Beach and Golf Resort Association Incorporated v Transport for NSW [2024] NSWLEC 9 

In this case, TfNSW sought to restrain Pacific Bay from accepting an offer of compensation for the compulsory acquisition of land. TfNSW argued that overpayment could ensue if the offer were accepted due to competing interests in the land. However the Court held that it lacked jurisdiction to grant the interlocutory application, and in any case, there was no legal basis to interfere with the statutory process of accepting a Just Terms Act offer. Citing the lack of jurisdiction and TfNSW’s failure to articulate a substantive basis for the competing interests, the injunction was dismissed.  
 
City of Parramatta Council v Sydney Metro [2024] NSWLEC 23 

Sydney Metro acquired Council land in Parramatta offering compensation valued at approximately $117 million. The Council then brought proceedings seeking approximately $312 million. This case epitomises the incredible complexities of determining large scale commercial valuations particularly in lucrative financial districts.

At issue was the parties competing perspectives as to what the “highest and best use” of the land was, and thus what market value is to be attributed to the acquired land. Various hypothetical developments were proposed, which the Court partitioned into numbered ‘scenarios’. The Court ultimately determined that market value was to be based off ‘scenario 3’ (redevelopment including two commercial towers) as it was seen as the most realistic development proposal based on achievable land uses under the applicable planning controls (Parramatta Local Environmental Plan). The scenario was seen to best avoid over-speculation of “highest and best use” while still acknowledging potential land use for high-value developments. Compensation by the court was determined by the Court at $201,417,049.
 
North Sydney Council v Transport for New South Wales [2024] NSWLEC 100 

In 2021, TfNSW acquired a leasehold interest over Crown parkland of which North Sydney Council was the crown land manager. North Sydney Council objected to the $35,003 determined as compensation.  

The issue was determining the appropriate method for quantifying the reduction in public benefit from the temporary loss of open space. The Court ultimately rejected the Council’s cost-benefit analysis and land valuation approach, instead determining compensation based on a "recreational rental value" approach, applying a rate of $3/m² derived from the rental value of the Cammeray Golf Course lease. Disturbance costs under s59(1) of the Just Terms Act were also awarded for legal and valuation fees, but not for replacement of trees and infrastructure given the land would be restored as required under the lease terms. In doing so, the decision clarifies the application of the Crown Land Management Act 2016 in assessing compensation for Crown land managers. 

In additional dicta, the Court discussed how there was no obligation to accept an expert's conclusions simply because they were the only expert witness on particular subject matter. In this case, Council provided an expert witness while TfNSW did not. The Court considered that Council’s expert witness failed to substantiate many of his claims and lacked a clear rationale as to why the framework he employed applied to the facts. The Court affirmed Makita (Australia) Pty Ltd v. Sprowles (2001) 52 NSWLR 705 in holding that evidence must be robust and a representation of foundational opinion rather than a mere collection of pronouncements. 

The biggest changes in the year ahead will arise from the findings of the Land Acquisition Review. A large body of submissions were prepared including by this Practice built off experience following the last reforms following the Russell and Pratt review. 

We expect to see more rural acquisitions proceed through to the Courts due to various linear infrastructure projects taking place for rail and transmission lines. In addition, the next round of Metro acquisitions will impact some Sydney properties, but due to subsurface rights acquired these are less likely to be litigated. 

These cases highlight risks on both sides, but particularly for dispossessed landowners who need to carefully consider appealing due to the risk the Court may determine compensation less than what the Valuer-General has determined notwithstanding that generally the acquiring authority will pay costs for the proceedings on the ordinary basis. However, as the City of Parramatta case shows, compensation may also be determined by the judicial valuer (the Court) substantially more than what the Valuer-General determined, highlighting the potential upside objecting to the determination can bring for dispossessed owners. Claims therefore need to be carefully prepared, analysed and evaluated pre-acquisition and post-acquisition in light of the latest jurisprudence given what is at stake with compensation increasingly involving vast sums of money.