Owners of land reserved for a public purpose, such as future road widening, trunk drainage or public open space, must typically wait for the acquiring authority to take the necessary steps to acquire the land.  That process can take several years.  The only exception to this delay is where the land owner initiates the acquisition process under the “hardship” provisions of the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act), which involves the land owner demonstrating hardship as defined under the Act, to the satisfaction of the acquiring authority.  If the acquiring authority is unconvinced of the merits of the hardship application, the application is refused, with the land owner having limited or uncertain appeal rights.  The commencement of the Land Acquisition (Just Terms Compensation) Amendment Act 2016 (Amendment Act) in March 2017 now provides land owners with a statutory right of review in circumstances where the acquiring authority has rejected a land owner’s hardship claim.

Background

Prior to April 2006, owners of land reserved for use for a public purpose could require the relevant authority to acquire the land by:

  • notice given under either the Environmental Planning and Assessment Act 1979 (EPA Act); or
  • notice given under the Just Terms Act.

The critical difference between the two processes was that the EPA Act provided for acquisition “on demand” by the land owner (without significant qualification), whereas the Just Terms Act required the owner to demonstrate “hardship” as a consequence of any delay in the acquisition.

The Environmental Planning and Assessment Amendment (Reserved Land Acquisition) Act 2006, which received assent on 11 April 2006, effectively removed any right of the land owner to initiate the acquisition process under the EPA Act.  Owner-initiated acquisitions were thereafter restricted to hardship claims made under the Just Terms Act.

The rationale behind the amendments at the time was to restrict land owners forcibly requiring government authorities to acquire land before it was funded or otherwise required by the relevant authority.  Secondly, it was recognised at the time that there were significant portions of land reserved for various public purposes which were no longer required.  The amendments effectively precluded owners from forcing the relevant authorities from acquiring land they no longer needed.

What is hardship?

The test for determining “hardship” is set out in s24(2) of the Just Terms Act.  The test is twofold:

(2)  An owner of land suffers hardship if:

(a)  the owner is unable to sell the land, or is unable to sell the land at its market value, because of the designation of the land for acquisition for a public purpose, and

(b)  it has become necessary for the owner to sell all or any part of the land without delay: (i)  for pressing personal, domestic or social reasons, or (ii)  in order to avoid the loss of (or a substantial reduction in) the owner’s income.

The first part of the test is relatively broad.  It requires a land owner to demonstrate that, as a consequence of the public purpose designation, the land cannot be sold or, more relevantly, cannot be sold at its market value.  Where the public purpose reservation applies to a significant portion of the land, or all the land, that test can typically be satisfied.  Of course, any land can be sold at a price.  However, in most cases, few bidders will be willing to pay “market value” for land reserved for a public purpose, to be acquired at some unspecified time in the future.  The term “market value” here means the market value of the underlying zoning of the land, disregarding the “public purpose” reservation.

The second part of the test is exceedingly broad, requiring the land owner to demonstrate “pressing personal, domestic or social reasons” why the land must be sold or otherwise demonstrating financial loss associated with any delay to the sale of the land.

There is relatively little Court authority on how the test should be applied in any given set of circumstances.  The earlier decision of Aeropelican Air Services Pty Ltd v Lake Macquarie Council [2006] NSWLEC 18 provides some useful guidance for applicants and acquiring authorities:

  • The applicant bears the onus of proving to the acquiring authority that it will suffer hardship if the land is not acquired.
  • The test for establishing hardship is a subjective one, not an objective one.
  • Any opinion regarding hardship must relate to the owner of the land. The financial situation of related persons or related companies is not relevant to the acquiring authority’s decision.
  • The Court is not required to determine for itself whether the applicant will suffer hardship if the land is not acquired. Rather, the Court is required to determine whether the acquiring authority formed that opinion.
  • The hardship provisions are intended to require acquisition where an owner is in “genuine financial distress” because of the zoning of the land, not simply where some level of financial loss may be incurred if the owner has to sell the land based on the value in its current zoning.

In the case of Caristo v Campbelltown City Council [2013] NSWLEC 13, the Applicant sought judicial review in the Land and Environment Court of a hardship application rejected by the acquiring authority.  Before the matter came to trial the parties, by consent, applied to the Land and Environment Court to have the matter transferred to the Supreme Court pursuant to s149B of the Civil Procedure Act 2005.  The Court agreed with the parties, noting that the Land and Environment Court “does not have jurisdiction or ancillary jurisdiction to entertain the matter.”  The matter was subsequently transferred to the Supreme Court, but settled soon after, with no judgment rendered.

Land Acquisition (Just Terms Compensation) Amendment Act 2016

In the context of an uncertain judicial review path available to dissatisfied applicants, the legislature has seen fit to introduce a statutory right of review, as set out in s27A of the Amendment Act.

The key features of the review include:

  • applications for review are to be made to the Secretary of the Department of Finance, Services and Innovation.
  • applications for the review are to be made within 28 days after the owner of the land is notified of the decision by the authority of the State.
  • the Secretary is to refer the application to a reviewer for determination. The reviewer is to be a suitably qualified person appointed by the Minister who is not associated with the authority of the State or the applicant.
  • the reviewer is to assess the application and make a determination, either quashing the decision of the acquiring authority (requiring the authority to compulsorily acquire the land) or confirming the original decision.

In relation to the engagement of “reviewers”, according to the second reading speech, it is anticipated that the government will be establishing an independent panel of professionals to undertake this task.  These procedures will be addressed in the regulations.

Section 27A(5) of the Amendment Act stipulates that “the decision of the reviewer is final and is required to be given effect to by the authority of the State.”  It is unclear whether this provision is intended to restrict the role of the courts.  Presumably, judicial review will be able where compliance with the requirements of s27A of the Amendment Act have not been satisfied, as opposed to a merit review of the determination.

Owner-Initiated acquisitions still face restrictions to compensation

For completeness, it is important to bear in mind that the Amendment Act has not introduced any further substantive changes to the hardship provisions under the Just Terms Act.

Importantly, s26 of the Just Terms Act will continue to limit certain entitlements to compensation – for owner-initiated acquisitions – that would otherwise be available where the relevant authority is the initiator of the acquisition process, including stamp duty.

Section 26 provides:

The special value of land, any loss attributable to severance or disturbance and disadvantage resulting from relocation (as referred to in Part 3) need not be taken into account in connection with an acquisition of land under this Division, despite anything to the contrary in that Part.

At issue is the phrase “need not”, which leaves open the question of whether or not the acquiring will pay the additional heads of compensation.  In the decision of Hoy v Coffs Harbour City Council [2014] NSWLEC 1217, the Court referred to the Second Reading speech relevant to s26, at para. [183]:

However, section 26 gives an authority some discretion in assessing these additional heads of compensation. If an owner has to move for personal, domestic or social reasons, for example, a job relocation – it may not be appropriate for an authority to offer him special value, severance, disturbance or solatium because his move is for reasons other than the blight on his land. It is conceivable, however, that there may be situations which would warrant an authority exercising its discretion to pay one or more of these additional heads of compensation. Because all the problems and circumstances of landholders cannot be anticipated, the bill has this inbuilt flexibility to ensure fairness.

The so called “statutory disbenefit” is not without its critics, on the grounds that those suffering hardship in the first instance should not thereafter be further disenfranchised from certain heads of compensation under the Just Terms Act, that would otherwise be available if they could wait out the process.

Leaving aside the issues of special value and severance, the potential loss associated with foregoing “disturbance” (including legal costs, valuation costs, relocation costs, stamp duty, other financial costs) and “disadvantage resulting from relocation” (currently set at $75,000) would, on any view, be considerable.