Any interest? Understanding who has an interest in land!

Understanding who has a compensable interest has become considerably more complex following the decision of Olde English Tiles Australia v Transport for New South Wales [2022] NSWCA 108. 

The NSW Court of Appeal has confirmed that personal interests that cannot be legally enforced are not a compensable interest.

It has also given consideration to disturbance claims. Put simply, to open the door to disturbance claims, the claimant must prove they first have a market value interest. Bare licences or permission to occupy the land, terminable at will by the owner, have no foundation or interest and therefore a person cannot build a claim for compensation for losses attributable to disturbance.

Read more below.

Background

In 2018, a parcel of land on Parramatta Road in Camperdown was compulsorily acquired by Transport for NSW (‘Acquired Land’). The registered proprietors of that land were Mr Antonio and Mrs Carmel Gaudioso, who were also the sole directors and shareholders of Olde English Tiles Australia Pty Ltd (‘OETA’). OETA occupied the land under a bare licence.

OETA challenged the adequacy of their compensation – the company made no claim for market value of its occupancy right and only claimed compensation for disturbance of its relocation costs under s 59(1)(c) of the Land Acquisition (Just Terms Compensation) Act 1991 (‘Just Terms Act’).

In the case of Olde English Tiles Australia Pty Ltd v Transport for New South Wales [2021] NSWLEC 90, Duggan J held that the right of occupation was a personal right and it did not constitute a right, power, or privilege over, or in connection with, the Acquired Land. Accordingly, OETA did not satisfy the prerequisite to compensation as they had no ‘interest’ in the land as defined under s 4(1) of the Just Terms Act.

Duggan J further clarified that the bare licence was not capable of alienation and therefore, no interest had been divested, extinguished or diminished by the acquisition of TfNSW. As the parties were related, the bare licence was built on the foundation of goodwill, should this goodwill be extinguished then the arrangement in place would also be extinguished. This is a personal relationship rather than one that relates to property and therefore only confers a permission of a personal nature.

The argument of whether this was a fair decision was also addressed by Duggan J noting that the language in the Just Terms Act left no room to “permit fairness” and that there should only be a determination of whether the arrangement between the parties can be characterised as an interest for the purposes of the Just Terms Act.

Relying on the authorities of Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2017] NSWCA 73 and Hornsby Council v Roads and Traffic Authority of New South Wales (1997) 41 NSWLR 151, Duggan J dismissed the claim.

OETA appealed the decision to the Court of Appeal.

The Appeal

The primary issue on appeal was whether OETA had a “privilege over, or connection with, the land” to satisfy the definition of “interest” in the Just Terms Act and to give rise to a claim.

The five-Judge bench of the Court of Appeal unanimously dismissed the claim and held the following:

1. Meaning of “interest in land”

This must be a legally enforceable interest, such as the type of interest discharged under s 20 of the Just Terms Act. In agreeance with Duggan J, the interest must be capable of being divested, extinguished, or diminished by the acquisition.  

Although the statutory definition of interest in land should not be given any narrow or constrained reading, and whilst the definition can encompass a wide range of interests, they must all be in, privilege over or in connection with land. Interests which are dependent upon personal relationships are distinguishable from proprietary interests and there is no obligation for compensation of interests based on personal relationships. As held by Spigelman CJ in Leichhardt Council v Roads & Traffic Authority of NSW [2006] NSWCA 353, the Just Terms Act provides “an objective test to which considerations entirely personal to the owner are not material”.

Accordingly, the Court of Appeal were not satisfied that the approach taken and adopted by Duggan J was incorrect.

2. Compensable interest

The definition of “compensable interest” has been subject to much controversy in practice and the media.

The Court of Appeal found that the primary purpose of the Just Terms Act was to guarantee compensation assessed as the market value of the land. This means, the right to obtain compensation under s 55(d) and s 59(1) of the Just Terms Act is contingent upon the owner of the interest having a right to compensation for the market value of the interest.

On one view, if there is no interest with a market value under s 55(a), then it does not have a freestanding right to recover compensation for disturbance under s 59, such as the costs of relocation or stamp duty.

The Court clarified that claimants must begin with the foundation of a market value claim, they can then access the right to claims for compensation for losses attributable to disturbance only once the former has been proven.

In simple terms, to open the door to disturbance claims, the claimant must prove they first have a market value interest. For example, bare licences or permission to occupy the land, terminable at will by the owner, have no foundation or interest. Therefore, they cannot claim disturbance.

3. Inappropriate to overrule existing authority

The decisions of Dial A Dump and Hornsby Council instigated Parliament to legislate substantial amendments to the Just Terms Act in 2016, without overturning or making amendments inconsistent with the decisions of the Court. These decisions have gone towards clarifying the scope and operation of the Just Terms Act and gives the Court even more reason to not overturn them.

Takeaways

Although a bare interest was in question in this case, the decision has flow on effects to leasehold interests.

Claimants must show that the rent paid in accordance with their lease was at market rent, otherwise the door for disturbance is not opened and no disturbance under s 59 of the Just Terms Act is claimable. This will certainly have an impact on related parties and moving forward, how they choose to enter into their agreements.

Put simply, a business that does not have an interest with a market value has no foundation or interest upon which to claim compensation for disturbance under s59 of the Just Terms Act.

The Applicant has since applied for special leave to the High Court of Australia. As it stands, the ramifications are significant particularly if the Court of Appeal’s decision stands.

Author: Dennis Loether