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Compensation for Planning Blight

Compensation for Planning Blight

Case Note

Barilla v Roads Corporation [2017] VSC 349

This Case Note was originally published in Law Council of Australia, LPS News (Issue 3, Spring 2017) at p. 11

In Victoria, a trigger to compensation for planning blight due to a public purpose reservation can be a ‘loss on sale’ claim. A recent Victorian Supreme Court decision determined that such a claim should exclude special value.

At issue were the phrases ‘natural, direct and reasonable’ consequence of the reservation[1] and ‘value of the land’[2]. Similar phrases are found in statutory provisions throughout Australia. In Victoria, planning blight provisions rest within planning legislation: Planning and Environment Act 1987 (PEAct). The key are s104 and s98(1) PEAct.

The PEAct has an often uncomfortable linkage with, but important differences from, the compulsory acquisition regime contained in the Land Acquisition and Compensation Act 1986.

Facts

The Barillas became the owners of land in 2001 for development as a tourist attraction and also planned to live there. Development commenced, but did not finish. Two Public Acquisition Overlays were gazetted, in 2009 and 2010, affecting more than one third of the land. The judgment records the business as marginal but that, due to the land’s rezoning after 2001, the Barillas enjoyed substantial capital gains.

The Barillas triggered a compensation claim by selling the land. The loss on sale figure was agreed upon and paid.

However, Barillas also claimed losses including sale advertising, agent’s commission, sale-related valuation advice and sale legal costs. In addition, they claimed the costs of CGT advice that included obtaining an ATO private ruling and they sought interest for delayed compensation monies after sale (aHungerford claim).

Judgment

Emerton J rejected all claims. Extensively reviewing High Court, Victorian and interstate caselaw going back to Spencers Case[3], she held that a loss on sale claim involved compensation for lost ‘value of land’ and not ‘value to owner’. Whilst acknowledging that ‘value to owner’ was generally used in compulsory acquisition to include a wide range of potential losses including disturbance (which might include special value), she found the clear purpose of S104 PEAct was: ‘to cap the compensation payable for consequential losses. That cap would be compromised, if not defeated, if all manner of losses or expenditures could simply be added to the market value of the land in order to raise the cap.[4]’

She held that S104, was a ‘simple mechanism to limit’ compensation in planning blight cases[5]. Relying on the High Court in Boland v Yates[6], she rejected earlier authority that included special value in such claims. In any event, she also found the Barilla claims unrelated to land development and not forming any special value in the land.

In considering the phrase ‘direct, natural and reasonable’ of the land being reserved – the basis for the s98(1) ‘any financial loss’ claim – Her Honour found the Barillas’ motives in selling to be a relevant consideration, as their motive may have been to realize the substantial capital gain, rather than the reservation. She treated the CGT issues as personal losses incurred to secure the Barillos’ tax position. She rejected the lost interest claim as payment was made within the timing of the statutory schema.

Finally, Her Honour cited with approval, the caution of the High Court in Walker Corporation v Sydney Harbor Authority[7] as to construing modern Australian legislation by reference to principles from general caselaw where specific statutes apply, particularly in compulsory acquisition and compensation[8].

Lessons

  1. The Victorian Supreme Court recently found that the statute created a mechanism to limit compensation for planning blight.
  2. It held that s104 PEAct imposed a financial cap that excluded special value to the owner.
  3. It noted claimant motivation as relevant in determining the ‘natural, direct and reasonable’ consequence of land being reserved.

Dr Leonie Kelleher OAM and Freeman Zhong

10 November 2017

 

[1] S98(1) Planning & Environment Act 1987.

[2] S104 Planning & Environment Act 1987.

[3] Spencer v Commonwealth (1907) 5 CLR 418.

[4] Barilla v Roads Corporation [2017] VSC 349, [73], p19.

[5] Ibid. [74] p19.

[6] (1999) 167 ALR 575.

[7] (2008) 233 CLR 259, 270 [3].

[8] P18 [68].

 

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