The Goldmate appeal: Statutory disregard and just terms compensation for compulsory acquisition of land

The NSW Court of Appeal in Goldmate Property Luddenham No 1 Pty Ltd v Transport for New South Wales has allowed an appeal against the Land and Environment Court’s assessment of the amount of compensation payable for the compulsory acquisition of property pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Act). The decision has broad implications for the determination of the market value of land and the amount of compensation payable by an acquiring authority, such as the Transport for NSW (TfNSW) and Sydney Water in regard to current and future compulsory acquisitions of land covered by State Environmental Planning Policy (Precincts – Western Parkland City) 2021 (Precincts SEPP).

In June 2021, TfNSW compulsorily acquired part of a property owned by Goldmate Property Luddenham No 1 Pty Ltd (Goldmate) located near the Western Sydney Airport site, pursuant to TfNSW’s compulsory acquisition power under section 177 of the Roads Act 1993 (NSW) (the Roads Act) that enables it to acquire land for the purposes of the Roads Act. The acquired land was to be used for the M12 motorway, however was part of a broader state government infrastructure plan in response to the announcement of the airport.

At first instance in the Land and Environment Court

Goldmate commenced Class 3 proceedings in the Land and Environment Court of NSW to determine the amount of compensation payable to it for the acquisition. The Honourable Justice Duggan at first instance determined that:

1. The subject land would have been zoned Rural Landscape under the provisions of the Penrith Local Environmental Plan 2010 if it was not for the public purpose of the Western Sydney Airport. At the time the land was acquired by TfNSW it was zoned ENT under the former State Environmental Planning Policy (Western Sydney Aerotropolis) 2020 (repealed).
2. Her Honour had to disregard the ENT zoning of the acquired land in determining Goldmate’s entitlement to compensation under the relevant provisions of the Act and thus had to consider the zoning of the subject land before it was ‘upzoned’ to ENT.

The principal provision of the Act which Justice Duggan relied on is s 56(1)(a) which is expressed in the following terms:

‘56  Market value

(1) In this Act—

market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid)—

(a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and

……….’

This provision is commonly referred to as the ‘statutory disregard’.

The question Justice Duggan posed in her judgment is ‘was the ENT zoning caused by the carrying out of, or the proposal to carry out the public purpose, for which the land was acquired?’ Justice Duggan answered this question in the affirmative.

Justice Duggan determined the compensation payable to be the sum of $9,761,480, including $9,523,500 for market value under section 55(a) of the Act, and $100,000 for injurious affection to the portion of the property retained by TfNSW under s 55(f). Her Honour identified TfNSW’s public purpose in acquiring the property as being in furtherance of the broader infrastructure plan, rather than being confined to the construction, operation and maintenance of the M12. Therefore, the increase in value of the property which resulted from it being rezoned as part of the broader plan was required to be disregarded from the market value assessment.

On appeal in the NSW Court of Appeal

Goldmate appealed Justice Duggan’s assessment of compensation on the ground that her Honour misinterpreted section 56(1)(a) of the Act. At the hearing of the Appeal, Bret Walker SC appeared for Goldmate and Noel Hutley SC appeared for TfNSW. Mr Walker SC submitted that:

1. although the wording of the Proposed Acquisition Notice was not determinative of TfNSW’s purpose in acquiring the property, its purpose under section 56(1)(a) of the Act must fall within its power to acquire property as conferred by the Roads Act. Thus, he submitted that because the only purpose for which TfNSW could acquire property was, as provided for in s 177 of the Roads Act, ‘for any of the purposes of the Act’, its public purpose could only be one for which the Roads Act provided;
2. the only relevant source of power was TfNSW’s power in section 71 of the Roads Act ‘to carry out road work on any public road for which it is the roads authority and on any other land under its control’. Thus, he submitted that the purpose in section 56(1)(a) of the Act could be no wider than this purpose. If it were otherwise, the acquisition would be beyond TfNSW’s power since it would not be authorised by the Roads Act;
3. although there was a conceptual distinction between power and purpose, he submitted that if, as in the Roads Act, the power was constrained by the nature of the purpose for which the power was conferred, the ‘public purpose’ of the acquisition in s 56(1)(a) could not go beyond a purpose for which the legislation authorised TfNSW to acquire land.

Mr Walker relied on Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5 (Walker Corporation) in support of the following propositions, which he submitted were part of the ratio decidendi:

1. the identification of purpose in s 56(1)(a) is to be determined by reference to the applicable legislation (in this case, the Roads Act and the Act) ([35]);
2. the ‘market value disregard’ in s 56(1)(a) ‘looks to the public purpose for which the Land might by law be acquired by the [acquiring authority] by compulsory process under the [legislation which authorised the acquisition] and to ‘the proposal’ to carry it out’, which is the proposal of the acquiring authority ([53]); and
3. the ‘market value disregard’ in s 56(1)(a) reflects ‘a policy to require a disregard only of that increase or decrease … in value for which the resuming authority is responsible’ ([54]).

Mr Walker submitted that s 56(1)(a) of the Act ought be interpreted as if it read:

‘… any increase or decrease in the value of the [acquired] land caused by the carrying out of, or the proposal to carry out, the purpose for which the land was by law acquired by compulsory process under this Act.’

(Emphasis added to indicate the gloss for which the appellant contended.)

The Court held (Adamson JA, Gleeson JA agreeing and Preston CJ of LEC agreeing with additional reasons), allowing the appeal:

1. An acquiring authority’s public purpose in acquiring certain land (as the term is used in s 56(1)(a) of the Act) must fall within the public purpose or purposes for which the acquiring authority has power to acquire land, as contained in the legislation which empowers the acquiring authority to do so;
2. In this case, the only identified relevant purpose under the Roads Act for which TfNSW was authorised to acquire the property was to carry out road work for a freeway. TfNSW was not empowered by the Roads Act to acquire land for purposes which included wider objects, such as to promote economic development in the area of the Western Sydney Airport. Justice Duggan’s finding that the public purpose in s 56(1)(a) of the Act included the broader purpose for which the property was acquired was therefore legally erroneous;
3. Textual and contextual considerations, both of which emphasise the particular power of an acquiring authority to acquire land, support this construction of s 56(1)(a) of the Act.

The Court set aside Justice Duggan’s interpretation of market value under s 55(a) of the Act allowing the appeal and has remitted the matter back to the Land and Environment Court of NSW to determine the market value of the land in accordance with the Court’s reasoning.

Key takeaways

The Court of Appeal’s judgment confirms that:

1. an acquiring authority’s public purpose in acquiring certain land (as the term is used in s 56(1)(a) of the Act) must fall within the public purpose or purposes for which the acquiring authority has power to acquire land, as contained in the legislation which empowers the acquiring authority to do so. Therefore, the definition of public purpose under s 56(1)(a) of the Act is limited in scope by legislation that confers power on the acquiring authority and outlines the purpose of the acquisition;
2. the ‘market value disregard’ in s 56(1)(a) of the Act ‘looks to the public purpose for which the Land might by law be acquired by the acquiring authority by compulsory process under the legislation which authorised the acquisition and to ‘the proposal’ to carry it out’, which is the proposal of the acquiring authority; and
3. the ‘market value disregard’ in s 56(1)(a) of the Act reflects ‘a policy to require a disregard only of that increase or decrease … in value for which the resuming authority is responsible’.

The decision has broad implications for the determination of the market value of land and the amount of compensation payable by an acquiring authority, such as the Transport for NSW and Sydney Water in regard to current and future compulsory acquisitions of land covered by the Precincts SEPP. We understand that there are a large number of compulsory acquisitions of land in Western Sydney covered by the Precincts SEPP that will be affected by the NSW Court of Appeal’s decision.

For further information about the Goldmate Appeal or if you have been affected by the compulsory acquisition of land, please contact our team.

If you found this insight article useful and you would like to subscribe to Gadens’ updates, click here.

Authored by:
Patrick Holland, Partner
Ben Swain, Special Counsel