The relevance of the Just Terms Act to acquiring land by agreement

Summary

As with most issues to do with the Just Terms Act, the apparently simple formulation of words can prove elusive. A number of clients and counterparties have put to us that the effect of the power to acquire land being expressed as “by agreement or by compulsory process in accordance with the Land Acquisition (Just Terms Compensation) Act 1991” has the effect that either the concept of an agreement is limited to those agreements provided for in the Just Terms Act or the consideration for an agreed purchase must be compliant with the heads of compensation specified in the Just Terms Act.

The power is to acquire land in one of two ways:

By agreement By the compulsory process in the Just Terms Act

In each case the Just Terms Act needs to be considered and complied with to the extent it applies. However, where the acquisition is by agreement the relevance of the Just Terms Act is limited. In particular, s38 requires the authority to “consider” certain matters when negotiating price. The Act does not otherwise provide a general fetter on the form of agreement or the consideration negotiated.

Discussion

Over a number of years it has been put to us that an authority of the State can only acquire land under and in accordance with the Just Terms Act – including that, unless the acquisition is excluded by s5 or s6, acquisitions must be by compulsory process or that the compensation must be paid for the acquisition in accordance with Part 3. The reason for this has been said to be:

• the enabling power to acquire land is written as: the authority may acquire land “by agreement or by compulsory process in accordance with the Land Acquisition (Just Terms Compensation) Act 1991”
• section 5(1) of the Just Terms Act says: This Act applies to the acquisition of land (by agreement or compulsory process) by an authority of the State which is authorised to acquire the land by compulsory process.

The starting point for the analysis is to recognise that the Just Terms Act is not itself a source of power to acquire land. Section 7 provides:

7 Act not to empower authority to acquire land

(1) This Act does not empower an authority of the State to acquire land if it does not have the power (apart from this Act) to acquire the land.

(2) The power of an authority of the State to acquire land under another Act is affected by sections 7A and 7B of this Act. Any such acquisition to which section 7A or 7B applies remains, for all purposes, an acquisition of land under and subject to that other Act.

The power of the authority to acquire land must be found elsewhere.

Examples are:

• Sections 12, 35F, 36E, 37E, 101, cl 11 Sch 1, 13A of sch 6A of the Transport Administration Act 1988, which are typically in the following form:

[Authority] may, for any purposes of [Authority], acquire land (including an interest in land) by agreement or by compulsory process in accordance with the Land Acquisition (Just Terms Compensation) Act 1991.

• s187 (1) of the Local Government Act

(1) Land that a council is authorised to acquire under this Part may be acquired by agreement or by compulsory process in accordance with the Land Acquisition (Just Terms Compensation) Act 1991.

The formula of words “by agreement or by compulsory process in accordance with the Land Acquisition (Just Terms Compensation) Act 1991” is used throughout NSW legislation

What this means is that there are two methods of acquisition:

• By agreement; and
• By the compulsory process in the Just Terms Act.

In Port Stephens Council v Fidler 94 LGERA 298 at 303.4, Powell JJA (Sheller and Shepard agreeing) observed:

In the present case, given the provisions of s187 of the Local Government Act 1993 (NSW), which provides that a council may acquire land by only two means, that is, by negotiated agreement or private treaty, on the one hand, and by compulsory acquisition pursuant to the provisions of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW), on the other

See also the decision in Central Coast Council v Pastoral Investment Land & Loan Pty Ltd [2020] NSWSC 777 at [41].

However, the power to acquire land is of course subject to those provisions of the Just Terms Act that apply to the particular mode of acquisition. Section 5 provides that that Act applies to acquisitions by agreement. However, this does not mean that the only method of acquisition is by the publication of an acquisition notice. It simply means that, where there is an acquisition by agreement, those provisions of the Just Terms Act that apply to an acquisition by agreement, apply.

The most relevant provision that does apply to an acquisition by agreement is s38. Section 38 provides:

An authority of the State is to take into account, in connection with any proposed acquisition by agreement of land not available for public sale, the same matters as are required to be taken into account under this Part in determining the compensation payable for an acquisition by compulsory process.

The matters that are required to be taken into account are specified in s55:

In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division):

(a) the market value of the land on the date of its acquisition,

(b) any special value of the land to the person on the date of its acquisition,

(c) any loss attributable to severance,

(d) any loss attributable to disturbance,

(e) the disadvantage resulting from relocation,

(f) 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.

Notably s38 does not impose an obligation that the purchase price must be the equivalent of the amount of compensation that would have been awarded had the land been compulsorily acquired. This is sensible because the transaction to which s38 applies is a negotiated agreement – the price is to be agreed.

That said s38 serves the obvious public purpose that where an authority is acquiring land by agreement it should take the heads of compensation into account when negotiating the purchase price and not:

• by clever dealings or by pressure or by the ignorance of the counterparty seek to take advantage of the vendor’s willingness to enter into an agreement; and
• be constrained by value for money considerations to ratchet the purchase price to the lowest possible amount.

Section 38 is subject to s5 and s6. Those sections provide that the Act does not apply to certain acquisitions.

Section 5 provides:

The obvious public utility of the provision is that if a property is on the market then the authority should be entitled to it as anyone else can.

Section 6 provides:

This Act does not apply to an acquisition of land if:

The reason for these carve outs is obvious: paragraphs (b) and (c) dealing for example with interests that arise in the context of other commercial transactions and (d) dealing with the oddities of those burial arrangements.

In terms of the proposition that s38 is the only section that applies to an acquisition by agreement we have considered the other provisions of the Just Terms Act as follows:

• Part 1
  • Sections 1 to 4A are preliminary and interpretative provisions
  • Section 5 we have discussed above
  • Section 6 deals with acquisitions to which the Act does not apply
  • Sections 7 and 8 deal with compulsory process
  • Section 9 simply says the Act binds the Crown etc
  • Section 10 deals with acquisitions “under” the Just Terms Act – ie compulsory process, and s10A deals with negotiation before compulsory acquisition
• Part 2 deals with acquisitions by compulsory process
• Part 3 deals with compensation for compulsory acquisition
  • Section 37 provides that the person whose land is acquired or extinguished by an acquisition notice is entitled to be paid compensation in accordance with this Part. An acquisition notice only is published for a compulsory acquisition;
  • Section 37A deals with compulsory acquisition for native title
  • Division 2 deals with the process for making claims for compensation “under this part” and is therefore limited by s37 to the compulsory acquisition process
  • Division 3 similarly only applies to compensation for compulsory acquisition
  • Division 4 similarly is limited to a claim for compensation under this part and so applies only to compulsory acquisition. Indeed if the compensation provisions in Part 3 Division 4 applied to an acquisition by agreement then s38 would be redundant.
  • Division 5 deals with appeals in the context of compulsory acquisition
• Part 4 deals with revocation of PANS
• Part 5 deals with miscellaneous matters and is not relevant here.

The result is that an authority that has power to acquire land by agreement or by compulsory process in accordance with the Land Acquisition (Just Terms Compensation) Act 1991:

• can acquire by agreement but:
  • if the land is not excluded by ss5(2) or s6 of the Just Terms Act then must comply with s38 of the Just Terms Act
  • if the land is excluded by ss5(2) or s6 of the Just Terms Act does not have to comply with s38
• is not limited to an acquisition by agreement under those provisions of the Just Terms Act that provide for agreement as part of the compulsory acquisition process, such as s30. It is wrong to assume that a normal process of negotiation and agreement does not apply
• in the alternative, can acquire land by compulsory process (including in accordance with those provisions of the Just Terms Act that provide for agreement in the compulsory acquisition process such as s30).