Written by The NSW Court of Appeal’s decision in Sydney Metro v G & J Drivas Pty Ltd [2024] NSWCA 5 clarifies how compensation should be determined in compulsory land acquisitions, particularly where landowners continue development despite the prospect of acquisition. The Court ruled that landowners cannot claim compensation for losses caused by their own decisions to halt or slow development in response to the proposed acquisition, rather than the public purpose itself.
The landowners had started a 25-storey office development on land earmarked for acquisition by Sydney Metro for the Sydney Metro West project. Upon learning of the proposed acquisition, they stopped development. The Land and Environment Court initially awarded compensation based on the assumption that the development would have increased the land’s market value if completed, even though it was abandoned. On appeal, the Court of Appeal found that the decrease in land value was not directly caused by the public purpose (the Sydney Metro project) but by the landowners’ own decision to halt construction. Justice Kirk emphasized that the Just Terms Act aims to compensate for losses directly attributable to the acquisition itself, not to decisions made by landowners in response to the potential acquisition. The ruling discourages landowners from continuing development in the hopes of inflating compensation, as such costs may be deemed “wasted” if the land is acquired and the development needs to be demolished. The decision reinforces that compensation should reflect the land’s value at the time of acquisition, excluding any speculative increases from halted or abandoned development.
The Court’s decision in Drivas narrows the scope of compensation in compulsory acquisition cases, urging landowners to reconsider their development strategies considering potential acquisition. The ruling also serves as a reminder that compensation under the Just Terms Act is meant to reflect market value, not hypothetical gains from uncompleted projects.