While we wait for information on what the Government intends to do following its review of the Land Acquisition (Just Terms Compensation) Act 1991, the year ahead nevertheless looks set to be a busy year in the class 3 jurisdiction of the Land and Environment Court. Sixteen class 3 matters were listed for the first directions hearing of the new year on 7 February 2014, which were comprised of three new matters filed in 2014, one existing 2012 matter and twelve 2013 matters.
The NSW Government’s infrastructure focus will necessarily entail further compulsory acquisitions, and with that the possibility of new litigation in the Court’s class 3 jurisdiction.
One of the Court’s decisions, handed down late last year, (Tempe Recreation (D.500215 & D.1000502) Reserve Trust v Sydney Water Corporation  NSWLEC 221) has implications for acquiring authorities as they consider infrastructure pathways to be acquired (i.e. for road, pipelines, or rail).
In this case the Court considered the interaction between section 106A of the Crown Lands Act 1989 (NSW) (CL Act) and the Land Acquisition (Just terms Compensation) Act 1991 (JTC Act) for the first time.
The facts of the case involved Sydney Water Corporation’s 2011 compulsory acquisition of four easements over public open space within Tempe Reserve (Reserve). Marrickville Council is the trust manager of the Reserve. The easements were acquired for the purpose of a water supply pipeline (Pipeline) from the desalination plant at Kurnell to the Sydney water distribution facility at Erskineville, these assets having been subsequently transferred to a third party.
The Trust claimed approximately $5 million based on their interpretation of some of the easements, which in the Trust’s view permitted permanent works, such as a large pipeline, to be built above the surface therefore ‘severing’ the land, whereas Sydney Water claimed $6000 to be the appropriate compensation based on the opposite interpretation i.e. the rights under the easement were subterranean.
Sydney Water was ordered to pay $100,000 in compensation and $6000 for disturbance.
Points of relevance
The Court’s reasoning provides some important considerations for acquiring authorities:
Justice Biscoe held that the easements, aside from the “Works easement”, did not allow construction above the ground and therefore there could be no severance – this meant the basis for the Trust’s $5 million claim fell away. The Court’s commentary on the interpretation of the terms of easements serves as a timely reminder to authorities that the terms are to be construed by reference to its registered terms and not by reference to extrinsic material, except for the physical characteristics of the dominant and servient tenements at the time of creation. In line with the Court’s decision in Besmaw Pty Ltd v Sydney Water Corporation (2001) 113 LGERA 246, consideration is to be given to what the dominant owner could possibly do in the exercise of its rights. It is therefore critical to ensure the terms of any acquired easements do not go beyond their intended purpose to avoid exposure to compensation, as well as so that an acquiring authority does not obtain more than is necessary.
The second point of relevance for acquiring authorities was that the Trust had an “interest” in acquired land for the purposes of section 4 of the JTC Act. This should come as no surprise considering the expansive definition of ‘interest’ under the JTC Act. Accordingly, acquiring authorities should not ignore the fact that certain areas of open space will fall within the control and management of a reserve trust, and that the trust manager has an interest in land.
The third point of relevance is that where the acquired interests are in certain types of reserves (see s106A(2) of the CL Act), the typical heads of compensation under section 55 are replaced with only those matters set out in section 106A(3) of the CL Act, namely:
- the value to the reserve trust of any improvements (including structures) erected or carried out by the trust on the land being acquired or vested, or over which the easement is vested, on the date the land is acquired
- the amount of any loss attributable to the reduction in public benefit from any loss of public open space that arises from the acquisition or vesting of the land
- the amount of reduction in the value to the trust, as at the date the land is acquired or vests, or the easement vests, of any other improvements (including structures) erected or carried out by the trust on other land that is caused by the land acquired being severed from other land of the trust
- the cost to the trust of acquiring additional land having environmental benefits that are comparable to the land being acquired or vested
- any loss attributable to disturbance (within the meaning of section 59 of that Act), other than loss arising from the termination of a lease or licence over the whole or part of the land being acquired.
After recanting the submissions of each party in respect of this section, Biscoe J considered that “there is or will potentially be realistic reduction in public benefit from all such works [under the easement]”. In the next sentence, his Honour went on to state that assessing the extent of the reduction in public benefit was “incapable of mathematical precision”.
Although not agreeing with the ‘blot on title’ description by the Applicant’s valuer in determining an amount of $100,000 in compensation, Biscoe J considered the Applicant’s valuer to be ‘in point’ in his evaluation. Drawing an analogy with general law damages, his Honour assessed the loss at $100,000. While the judgment does not close the door on other valuation approaches for assessing the extent of the reduction in public benefit or attributable loss arising from the acquired easements, it appears that acquiring authorities should expect acquisitions of interests in reserve land to be valued in accordance with the general law on damages.
One of the ironies of the case not lost on Biscoe J was the fact that the dispossessed were arguing “width”, and the acquiring authority arguing “narrowness” in respect to the proper interpretation of the easement terms. Ordinarily an acquiring authority would want an easement to be interpreted in its most expansive sense, whereas the dispossessed would prefer a limited interpretation.
This is the first in a series of blog entries in relation to acquisitions. Next week, we will discuss Willoughby City Council v Roads and Maritime Services  NSWLEC 6 which related to open space acquisitions for the Gore Hill Freeway.