Are you sufficiently interested?

In NSW, to be eligible for compensation for a compulsory acquisition, you must be able to point to an interest in the acquired land which is divested, extinguished, or diminished. But what qualifies as an interest? In a recent judgment, the NSW Court of Appeal held that a bare licence, especially one which is undocumented, does not meet the threshold of an “interest in land” and as such, is not compensable.

The facts and issue presented

Antonino and Carmel Gaudioso owned a property in Camperdown and were the sole directors and shareholders of a company, Olde English Tiles Australia Pty Ltd (Olde English). They operated Olde English on their Camperdown property but did not have a formal written lease or any other written agreement in place to document this arrangement, relying on an implied licence to occupy. When the property was subsequently acquired by Transport for NSW, the Gaudiosos alleged that they were entitled to compensation, but not only for themselves in their personal capacity, but also for Olde English under the implied licence to occupy. They also claimed relocation costs as disturbance-based losses suffered by Olde English. The question was whether the informal arrangement between Olde English and the Gaudiosos create an interest in land that entitled Olde English to compensation under section 59 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Act)? The answer to that question was no.

The holding

The NSW Court of Appeal (Court) held that the arrangement between Olde English and the Gaudiosos was a personal relationship rather than an interest in land. It determined that Olde English had, at most, a licence that could be terminated at any time by the owners of the land.  Olde English was thus not entitled to compensation under section 59 of the Act.

The reasoning

The Court’s reasoning depended on the relationship between the sections of the Act concerning:

• the definition of interest (section 4);
• the effect of an acquisition notice (section 20);
• the right to compensation for interests that have been ‘divested, extinguished or diminished by an acquisition notice’ (section 37); and
• compensation for disturbance-based loss (section 59).  

Section 4 of the Act defines an “interest in land” as either (a) a legal or equitable estate or interest in the land, or (b) an easement, right, charge, power or privilege over, or in connection with the land. The question before the Court was whether the bare licence satisfied limb (b) of the definition. 

Section 20 describes the effects of an acquisition notice and sets out that once an acquisition is gazetted, the land is subsequently discharged of ‘all estates, interests, trusts, restrictions, dedications, reservations, easements, rights, charges, rates and contracts in, over or in connection with the land’. 

Section 37 of the Act describes compensation as being payable only for interests that have been divested, extinguished or diminished by an acquisition notice. 

The Court upheld that:

• a bare licence is a personal interest as opposed to a proprietary interest in land [76];
• an interest involves having a right, power or privilege over land which must be documented in a legally enforceable instrument or arrangement [41] for it to be divested, extinguished or diminished by the acquisition;
• an “interest” refers to a legally enforceable interest of the kind discharged under section 20 of the Act [43]; and
• a permissive occupancy, terminable at will by the owners of the land and dependent for its continuation on the personal relationship between the occupier and the owner, was not a relevant compensable interest in land [70].

Key takeaways

This is the newest in a series of cases that confirm that to have a compensable interest under the Land Acquisition (Just Terms Compensation) Act1991 (NSW), such interest must be a legal and proprietary interest in the land, rather than interests which are dependent on the personal relationship between the occupier and the owner.