The case of Antonino Gaudioso v Transport for New South Wales [2022] NSWLEC 4 concerned Class 3 proceedings in the New South Wales Land and Environment Court (Court) commenced by Transport for New South Wales (TfNSW) against the Applicants' entitlement to statutory interest on the compensation amount determined in the substantive Court proceedings in the case of Antonino Gaudioso v Transport for New South Wales [2021] NSWLEC 91 (Substantive Proceedings), and an advance payment made by TfNSW under section 68 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act).

The Court considered the following two key issues:

1. Did the Court have power to make the orders sought in the Notice of Motion?

2. What is the correct interpretation of the Court's discretion under section 66(4) of the Just Terms Act, which allows the Court to cancel or reduce interest on the compensation in certain circumstances?

The Court relevantly held the following:

1. It did not have the power to cancel or reduce the interest payable on the compensation amount because TfNSW had not made any such application in the Substantive Proceedings. 

2. Section 66(4) of the Just Terms Act requires something more than the amount of compensation awarded by the Court to not exceed more than 10% the amount of compensation offered by the Valuer-General. Therefore, even if the Court did have the power in this case to cancel or reduce the interest payable, importantly, it would not have exercised its discretion to do so. 

3. The Notice of Motion be dismissed, and TfNSW pay the Applicants' costs of the Notice of Motion.

In the Substantive Proceedings, the Court awarded compensation under the Just Terms Act in the amount of $10,781,707.60 plus statutory interest. The amount determined by the Valuer-General was $10,392,626. 

By Notice of Motion, TfNSW sought orders to cancel or reduce under section 66(4) of the Just Terms Act the accrued statutory interest payable, and orders for the Applicants to pay the costs of the Notice of Motion. 

Under section 49 and section 50 of the Just Terms Act, an acquiring authority must pay interest on any amount of compensation from the date of the acquisition of land until the payment of that sum is made. This interest is calculated at a rate determined by the Treasurer from time to time, and is added to the total amount of compensation payable. 

As at 12 January 2022, the applicable rate of interest payable was 2.5% per annum for sums below $50,000, and 2.68% per annum for sums above $50,000. 

Under section 66(4) of the Just Term Act, the Court has a discretion to cancel or reduce the interest payable by the acquiring authority if the compensation amount awarded is within 10% of the amount determined by the Valuer-General in the statutory offer of compensation. 

TfNSW argued that section 66(4) of the Just Terms Act granted the Court broad discretionary powers which ought to be exercised, and that the designation of a 10% threshold (at [14]):

"…[evinced] a legislative intention to identify a threshold below which the legislature has recognised that it is or may be appropriate or just not to require the payment of interest that has accrued during the proceedings." 

TfNSW referred to the objects of the Just Terms Act in section 3(1) and argued that section 66(4) was a direct legislative encouragement to an applicant not to pursue claims that are marginal. 

Importantly, however, TfNSW did not contend that the Applicants had acted unreasonably in the conduct of the Substantive Proceedings. 

The Applicants argued that the Court had already exercised the discretion to award statutory interest, and there was no other available power to permit the subject order to be amended (see [20] to [21]). 

The Applicants submitted that even if the Court did have the power to vary the orders, it should not be exercised in this case (at [22]). 

The Court's power under section 66(4) of the Just Terms Act to cancel or reduce the interest payable was discretionary. Therefore, there was no automatic disentitlement to interest, nor was it mandatory that interest be either cancelled or reduced where the threshold was satisfied. 

TfNSW had not identified any reason to cancel or reduce the statutory interest other than the failure to achieve more than 10% of the amount offered by the Valuer-General. 

Although the Court-ordered compensation amount exceeded the amount offered by the Valuer-General by only 3.74%, the Court held that the decision in the Substantive Proceedings made it clear that compensation was determined to include a requirement to pay interest (see [28] and [162] of the decision in the Substantive Proceedings). 

The Court stated that the order could only be varied in accordance with a relevant power identified in the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) (at [28]). 

Since no application had been made by TfNSW under the UCPR, the Court did not have the power to make the orders sought. The Court observed that TfNSW might have overcome this issue if it had requested in the Substantive Proceedings that the issue of interest be reserved until the publication of the reasons for the decision. 

The Court agreed with the Applicants' submissions, and reaffirmed that merely satisfying the 10% threshold in section 66(4) of the Just Terms Act is insufficient to alone justify the making of a discretionary order to cancel or reduce an award of statutory interest. 

The Court held that the discretion under section 66(4) of the Just Terms Act is broad and unconfined, which indicates that there must be something more than the 10% threshold to justify an order of the kind sought, otherwise the legislature would have provided for a mandatory reduction in interest. The Court held that when interpreting section 66(4) it would be inappropriate to refer to the payment of interest as a "windfall" or an exercise of its discretion as a "penalty" (at [33]), as was suggested by both parties based upon their reading of the honourable Sheahan J's decision in Ray Fitzpatrick Pty Limited v Minister for Planning (No 5) [2008] NSWLEC 183. 

The Court at [33] explained in what circumstances the discretion might be utilised: 

"Having regard to the legislative context that has as one of its objects (as confirmed by s 54) that a disposed owner be justly compensated, the discretion conferred by s 66(4) must relate to some circumstance in the context of the bringing or maintaining of proceedings that would indicate that the achievement of such just compensation would not include the payment of interest determined at the usual rate or the payment of interest at all."

The Court was not satisfied that TfNSW had identified any matter of substance that would justify the exercise of its discretion under section 66(4) of the Just Terms Act to cancel or reduce the accrued interest payable. 

The Court's decision will provide some limited comfort to applicants pursuing their compensation claims in Class 3 proceedings. The decision clarifies that the power under section 66(4) of the Just Terms Act to cancel or reduce statutory interest is discretionary; it does not automatically apply when the determination by the Court of compensation is less than 10% of the statutory offer. This is of particular importance for claims where issues between the applicant and an acquiring authority go to the heart of the valuation, including, for example, a dispute over the highest and best use of land. 

The outcome in this case also sits harmoniously with the established case law on costs in Class 3 proceedings, which provide that a dispossessed landowner is entitled to access the Court and present an arguable and well-organised case without being deterred by the prospect of having to pay costs if the case proves unpersuasive (see for example, Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2010] NSWLEC 27 [35]). As the case makes clear, an applicant may still receive interest on the compensation amount even when the compensation determined in Court is less than 10% of the statutory offer. Cancelling or reducing the statutory interest requires something more than simply being unsuccessful at obtaining more than 10% of the statutory offer.