- Much of the major infrastructure development in the bush will traverse established agricultural land, causing stress and interruption to farming families and businesses.
- The Land Acquisition (Just Terms Compensation) Act 1991 codifies much of the common law surrounding the power to resume land, the compensation payable for its loss and how the market value of the land is to be quantified.
- It is important for lawyers to have an in-depth understanding of the legislation, the types of fees that are compensable and how the courts have been construing the legislation.
- The courts appear to be adopting a narrower construction of the Act, in particular with respect to the identity of the claimants and availability of certain heads of compensation.
There is a new wave of major infrastructure spending in the bush with projects like the Inland Rail, new high voltage power lines, renewable energy hubs, and new and widened highways. Much of this development will traverse established and productive agricultural land causing significant stress to farming families and interruptions to farming businesses. This article provides some general guidance to practitioners advising affected landowners with particular emphasis on three areas of special relevance in rural resumptions:
- Who is entitled to compensation?
- What experts may be required in the assessment of compensation and when are their fees recoverable?
- How do the concepts of ‘injurious affection’ and ‘severance’ apply to partial acquisitions?
Project and acquisition types
There are currently two main types of projects likely to affect rural lands in NSW:
- transport (chiefly road and rail); and
- energy (principally power lines).
In many cases, the interest in land sought to be acquired will be freehold (e.g. for a new road), but in others, a lesser interest such as an easement or lease may be needed (e.g. for the construction and installation of power lines). In some projects, multiple interests may be required. Interests in land can also be resumed for many other types of public infrastructure such as hospitals, sewage treatment plants and prisons.
The Just Terms Act
Unless an agreement as to the terms on which the acquisition of the necessary interest can be struck, the public authority carrying out the project will normally compulsorily acquire the requisite interest in land leaving the determination of compensation to the Valuer-General or, on appeal, to the Land and Environment Court. A minimum period of six months negotiation must precede the service of ‘Proposed Acquisition Notice’, which is a precondition to any presumption (Just Terms Act, s 10A).
The Land Acquisition (Just Terms Compensation) Act 1991 (‘Just Terms Act’) codifies much of the common law which developed during the 20th century around the power to resume land, the heads of compensation for its loss and, critically, how the market value of land is to be quantified.
Although the statute has been interpreted to give dispossessed owners the benefit of the doubt in certain cases, the courts (in particular the NSW Court of Appeal) now appear to be adopting a much narrower construction of some important elements of the Act, especially around the identity of claimants and the availability of certain heads of compensation (see Bligh Consulting Pty Limited v AusGrid  NSWLEC 75; James N Kirby Holdings v Transport for NSW  NSWLEC 111 (see also Andrew Beatty and Marlon Shou ‘Dispossessed owners see a narrowing of just compensation’ 55 Law Society of NSW Journal, May 2019, 88-89).
Lawyers advising clients whose land may be affected by resumptions need not only a good working knowledge of the mechanics of the Just Terms Act (including, critically, the timelines provided under it), but also how acquiring authorities and the Valuer-General are applying what the courts have decided in construing it.
Who has a ‘compensable interest’?
The starting point in any assessment of compensation for the resumption of an interest in land is to determine who has a compensable interest.
Although seemingly defined very broadly by the Act, the courts have increasingly confined the concept to a proprietary right (as opposed to one rooted solely in contract or conduct), and any ‘right, power or privilege’ must also be capable of alienation rather than being personal to the holder (Dial A Dump Industries Pty Ltd v Roads and Maritime Services  NSWCA 73 at  (Beazley P)). Section 4(1) of the Just Terms Act defines an interest in land as ‘a legal or equitable estate or interest in the land, or… an easement, right, charge, power or privilege over, or in connection with, the land’.
In many family run farming operations, personal intergenerational agreements exist by which costs and revenue are shared. However, unless those agreements take the form of, for example, leases, there may be a risk that persons actively farming the land will not be compensated when some or all of it is resumed.
A case in point helps illustrates this. Separate paddocks are owned by different members of the same family, but together all the land is operated as a single, aggregated business. Critical and valuable improvements (such as shearing sheds, stockyards and silos) are used by all family members and are located on one parcel with its own title which is owned by one family member. That paddock and those improvements will be affected by a resumption. To ensure that compensation can be claimed by all the family members who may suffer a loss, it will be necessary to demonstrate that each member has a proprietary, rather than merely informal, interest in the affected land.
What other experts may be needed and are their fees recoverable?
Under sections 55(a) and 56 of the Just Terms Act, apart from the market value of the interest in the land taken, compensation is also available for ‘disturbance’ which includes the costs of legal advisors and valuers (Just Terms Act, s 59(1)(a) and (b)).
In rural resumptions, however, the impact of a taking on the productivity of land (including residual land) may require advice from experts in agronomy or farm management. The professional fees of these types of experts are not listed as recoverable disturbance costs and courts have historically been unwilling to allow a dispossessed owner to recover the fees of experts other than lawyers and valuers (See SNS Pty Limited v RMS  NSWLEC 7 at  (Pain J)).
In considering the recoverability of the fees of an urban designer, Duggan J found in Antonino Gaudioso v Transport for NSW  NSWLEC 91 (‘Antonino’) that:
‘It was a necessary incident of the giving of the relevant legal advice that the legal practitioner obtain advice from a third party expert advisor to enable the relevant advice to be formulated and provided’ (at ).
Legal practitioners representing soon to be dispossessed owners should ensure that any advice they procure from agronomists or experts in farm management is directly related to the assessment of compensation rather than, for example, what the client should do with any compensation received by them.
Partial acquisitions of rural land: severance and injurious affection
Unless the whole of a farm is to be resumed, where residual land remains after a partial acquisition, two similar but separate heads of compensation may also be recoverable under the Just Terms Act.
Section 58 of the Just Terms Act defines ‘loss attributable to severance’ as ‘the amount of any reduction in the market value of any other land of the person entitled to compensation which is caused by that other land being severed from other land of that person’. The concept of ‘injurious affection’ is captured in s 55(f) as ‘any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired’.
The valuer of rural land will need to consider how the value of any residual land may be diminished where it is severed from the part to be resumed. This may, for example, necessitate an examination of the added costs to the farmer of new fencing, stock crossings, irrigation or dams as well as extra travel times required to reach paddocks located on the other side of roads or rail lines. As noted, some or all of these costs may be informed by advice provided to the lawyer by expert farm management consultants engaged by him or her.
Resumptions of rural land in New South Wales are likely to increase over the next few years as large transport and energy projects are rolled out. Legal practitioners, and experts whose advice they will require in representing affected landowners, should keep a close eye on how the courts are interpreting the Just Terms Act.
The Chief Judge of the Land and Environment Court (whilst sitting as a Judge of Appeal) adopted this telling observation when considering and applying a new, much narrower interpretation of what had until then been described by the courts as a ‘catch all provision’ for the benefit of dispossessed claimants: ‘the matter does not appear to me now as it appears to have appeared to me then’.