Taking the Castle – Latest Case on Compensation to Landowners

Compulsory acquisition of land under the Acquisition of Land Act 1967 (“ALA”) has long been an important tool in the arsenal of local governments and other constructing authorities to complete major infrastructure projects.  

In a new case, the Land Court of Queensland considered a constructing authority’s liability to pay compensation to a landowner. 

While Lim v Moreton Bay Regional Council [2019] (“Lim”) does not contain any significant new law, it provides a comprehensive outline of the current “lay of the land”, and is a useful reminder of the wide and varied bases on which a landowner can claim compensation. 

Heads of Compensation 

Section 20 of the ALA lists the various “heads of compensation” which can be claimed by a landowner for the resumption of their land.  These heads of compensation include: 

  • the value of the land that has been taken; 
  • damages arising as a result of severance, or injurious affection. These are outdated legal terms that refer to any further loss the landowner suffers to their existing parcel of land because of the acquisition. 

For example, if a slice of land is taken through the middle of a landowner’s lot, that may result in the reduction of the value of the land on either side of that slice.  The landowner should be compensated for that reduction in value; 

  • “costs attributable to disturbance”, which exposes constructing authorities to a very wide range of compensation matters, including: 
  • legal fees and valuation costs; 
  • removal and storage costs associated with the landowner needing to relocate; 
  • loss of profits resulting from the interruption of any business located on the land; 
  • other economic losses “that are a direct and natural consequence of the taking of the land”. 

Development potential of the Land 

One of the issues considered in Lim’s case at length was the development potential of the taken land. 

It is a long-standing principle in the law of compulsory acquisition in Queensland that a landowner is entitled to be compensated for the value of their land by reference to the “highest and best use” of that land.  

In other words, if the development potential of the land is high, the owner is entitled to be compensated as if that development potential was fully realised. 

There are some limits to this, of course – the development potential needs to be consistent with any applicable planning schemes, and within the realm of possibility.  There is law suggesting that the owner, to be successful in a claim, needs to show that they were at least aware of, if not working towards, realising the potential of the land.  So compensating a landowner for the lost potential of a profitable five-star hotel may be off the cards unless there is an actual possibility that it would be a reality. 

What evidence is required? 

Much of the evidence in Lim turned on valuation evidence. This continues to be one of the most important planks of any compensation case. In Lim, the Council’s valuation evidence was preferred to that of the landowner’s, which meant a difference of about $600,000. 

Lim’s case is also a lesson in the importance of obtaining good town planning advice.  In Lim, the local government’s town planning evidence successfully showed that the development proposal made by the landowner (which was being used as a reason why the landowner’s valuation was so high) had so little chance of being approved by Council that it was not a realistic tool to measure compensation with.

Managing expectations 

If you are a constructing authority, then you need to navigate two legal minefields when acquiring land compulsorily. 

The first minefield is actually taking the land – issuing the notice of intention to acquire, conducting objection hearings and dealing appropriately with objectors, and successfully resuming the land.  A misstep here and the process could be subject to a judicial review in the Supreme Court and dragged back to square one. 

The next minefield is compensation. Compensation can be assessed within three years after the land is actually taken. 

Obtaining good valuation and town planning evidence at a very early stage – even before a resumption is even commenced under the ALA – is the best way of managing expectations about compensation.  

Our approach is to help constructing authorities carefully manage the strategy behind its major projects, including acquisitions, and ideally from “Day 1”.  This helps avoid nasty surprises when the compensation claim arrives.  

Preston Law’s experienced team of Government lawyers have assisted constructing authorities throughout Queensland with major infrastructure projects that involve acquisitions of land under the ALA, including complicated compensation claims.   If you require assistance with any project, please contact our team.

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