El Boustani – Where to from here for Compulsory Acquisitions?

El Boustani – Where to from here for Compulsory Acquisitions?

Double trouble in compensation

El Boustani v The Minister administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33 (El Boustani) marks a significant change in the approach to how compensation is awarded in compulsory acquisitions.

In the Land and Environment Court (LEC), the El Boustanis received compensation for the market value of the property, disturbance and legal/valuation fees. What was in issue before the Court of Appeal was whether an extra $920,000 was payable to the El Boustanis on account of them having to relocate their business that was operating on the acquired land. Justice Pepper in the LEC held that the $920,000 to relocate the business was not payable because the El Boustanis had been compensated for a higher use, that of urban development.

The NSW Court of Appeal rejected the decision in the LEC and allowed the additional compensation, overturning the law against double recovery.

The law against double recovery

The High Court in 19531 outlined the principle that when land is acquired that was being used not for its best use (for example, land used for farming when a residential subdivision development would bring a higher value) the disposed landowner is entitled to either the higher potential use or the disturbance costs associated with moving the business (the farm). The argument so goes that it is inconsistent to compensate the disposed landowner both as if the land was used for its increased use (residential subdivision development) and then also for its original use (farming). This scenario has been described as the principle against double recovery.2   This principle had been common law for a long time before the High Court outlined the principle.3

In 1991, the NSW parliament enacted the Land Acquisition (Just Terms Compensation) Act (NSW) which holds:

s.61 Special provision relating to market value assessed on potential of land If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:

  1. any financial advantage that would necessarily have been forgone in realising that potential,
  2. and any financial loss that would necessarily have been incurred in realising that potential.

NSW Court of Appeal

The Court of Appeal overturned the decision in the LEC and ruled that the El Boustanis were to be compensated for the relocation costs of moving their business as well as the increased economic use of their land for urban development. Chief Justice Preston of the LEC who sat as part of the Court of Appeal (with President Beazley and Acting Justice Gleeson agreeing), held that that s.61 of the Act operated differently to the common law and the Act provided multiple and importantly separate heads of compensation.

Chief Justice Preston of the LEC, gave extensive consideration to s.61 of the Act. His Honour held that the threshold in s.61: “that the land had potential to be used for a purpose other than that for which it is currently used” was not satisfied in this case, for a variety of reasons. Some of these reasons were:

Different purpose

Section 61 requires that the potential purpose of the land must be different to its current purpose. If the purpose is the same then s.61 isn’t triggered and compensation is to be paid for both the relocation and the upgraded use. The Court of Appeal held that Justice Pepper failed to identify the “purpose” for which the land was to be used.

Temporally proximate

Section 61 will only be satisfied if the potential for the development is “temporally very proximate” (at [99]). This means the land must be ready for development at the date of acquisition. Justice Pepper found that the development would not occur until 10 years after the date of acquisition which the Court of Appeal held was not temporally proximate.

Applications of El Boustani

Since El Boustani was handed down on 28 February 2014 it has already been applied in New South Wales in the following cases:

Attard & Ors v Transport for NSW [2014] NSWLEC 44

Justice Biscoe applied the “temporally proximate” test. His Honour held that the 2.5 years between the acquisition date and the date when the land would be ready for redevelopment was not temporally proximate and thus s.61 was not triggered. Therefore relocation costs, as well as the upgraded use, were payable ([149]-[152]).

De Battista v Transport for NSW [2014] NSWLEC 39

Justice Pain held that the purpose of the use of the land had changed from its current rural residential use to low-medium residential development (at [111], [118]). Secondly, Her Honour held the temporary proximity test was satisfied (at [119). However, in this case, s.61 did not apply because s.61(b) was not satisfied, namely that the costs would not have been necessarily incurred in realising the upgraded potential of the land. Transport for New South Wales was required to pay disturbance for the financial costs reasonably incurred in connection with the relocation and stamp duty costs associated with the purchase of land for relocation.

Chircop v Transport for NSW [2014] NSWLEC 63

Justice Biscoe held that the land did have a different purpose (residential subdivision) and that the land was ripe for redevelopment as at the date of acquisition, therefore passing the temporally proximate requirement. His Honour then went on to find that s.61 was engaged and accordingly did not allow various disturbance claims under s.59(c), s.59(d) and s.59(f).

El Boustani marks an important change in the law relating to compulsory acquisitions. The “temporally proximate” test is novel and will have a substantial effect on claims in NSW and perhaps also right across Australia.

Victoria, Tasmania, the Northern Territory, the ACT and also the Commonwealth all have statutes with similar provisions.4 It will be interesting to see if, and how, other jurisdictions treat the decision in El Boustani.

1Commonwealth v Milledge [1953] HCA 6; (1953) 90 CLR 157 (6 March 1953).

2See for example Jacobs, Marcus “Law of Compulsory Land Acquisition” (2010), 557-566.

3 See for example Horn v. Sunderland Corporation (1941) 2 KB 26; and Standard Fuel Co. v. Toronto Terminals Railway Co. (1935) 3 DLR 657.

4Land Acquisition And Compensation Act 1986 (Vic), s.41; Land Acquisition Act 1993 (Tas), s.27; Land Acquisition Act (NT), Lands Acquisition Act 1994 s.66; Lands Acquisition Act 1994 (ACT), s.47; Lands Acquisition Act 1989 (Cth), s.57.