Australia: Injurious affection may be available for affected new owners after a new planning scheme

Last Updated: 2 February 2015
Article by Philip Mavor

The Supreme Court of Western Australia recently confirmed that compensation for injurious affection may be available for persons who subsequently purchased property from the owner at the time a scheme came into effect, in the case of Leith v Western Australian Planning Commission [2014] WASC 499.

Injurious affection generally

Under section 173(1) of the Planning and Development Act 2005 (WA) (PD Act) any person whose land is injuriously affected by the making or amendment of a planning scheme is entitled to claim compensation in respect of the injurious affection from the responsible authority.

Section 174 of the PD Act provides that land is injuriously affected by reason of the making or amendment of a public scheme if that land is reserved for a public purpose, the scheme permits development on the land for no purpose other than a public purpose, or the scheme affects the non-conforming use of the land in the way described in section 174(1)(c).

Under section 177(1) of the PD Act, a landowner has a right to claim compensation for injurious affection for a reservation where:

  1. the land is first sold following the reservation at a reduced value; or
  2. an application to develop the land is refused or granted subject to conditions unacceptable to the applicant.

Under section 177(2) of the PD Act, compensation for injurious affection to any land can only be payable once under subsection (1), and is so payable:

  1. under subsection (1)(a) to the person who was the owner of the land at the date of the regional reservation; or
  2. under subsection (1)(b) to the person who was the owner of the land at the date of the application for development,

unless after the payment of that compensation further injurious affection to the land results from an alteration of the existing reservation of the land; or the imposition of another reservation of the land.

The Leith decision

The plaintiffs in the Leith Decision were owners of land that was reserved under the Peel Regional Scheme (PRS) for regional open space. Neither plaintiff was the owner of the land at the time the PRS came into effect.

Subsequent to the PRS coming into effect, the plaintiffs purchased the land and then made an application for development that was refused. The plaintiffs then claimed compensation for injurious affection under sections 177(1)(b) and 177(2)(b) of the PD Act. The Western Australian Planning Commission (WAPC) rejected the plaintiffs' claim. The plaintiffs brought the action in the Supreme Court.

The question examined by the court was whether a person to whom section 177(2)(b) of the PD Act would otherwise apply can be entitled to compensation pursuant to section 173 and 177(1)(b) of the PD Act, in circumstances where the land has been sold following the date of reservation, and where no compensation has previously been paid under section 177(1) of the PD Act.

The plaintiffs contended that, on a proper construction of the statutory scheme, a person who purchases land after it was reserved under a scheme is entitled under section 177(2)(b) of the PD Act to claim compensation if there has been an unsatisfactory response to a development application , so long as no compensation has been paid to the seller.

The position of the WAPC was that section 173, not 177, created an entitlement to compensation, and it is only a person whose land is injuriously affected by the making or amendment of a planning scheme who is entitled to claim compensation. The injurious affection must be by the making or amendment of the scheme, not by its continuing existence. Section 177 works a deferment of the entitlement to obtain payment of compensation to avoid a deluge of claims arising from the making of a planning scheme.

The WAPC argued that the plaintiff's construction would allow compensation for a purchaser who has suffered no loss, thereby permitting a windfall gain. A purchaser may have paid a lower price and may be expected to have paid a lower price, given that the existence of the reservation is publicly available information and therefore taken into account when fixing a price.

The court dismissed the arguments of the WAPC, and in considering the proper interpretation of sections 173 and 177 of the PD Act Justice Beech stated:

"In my opinion, however, to read s 173 as imposing an unqualified temporal restriction on the entitlement to compensation is not consistent with s 177(2)(b). The language and structure of s 177(2) make it clear beyond doubt that compensation under s 177(1)(b) is not restricted to the person who was the owner at the time of the reservation. If it were so restricted, there would be no need for, or point in, the two differently worded paragraphs of s 177(2).

In my view, the language of s 177(1) and 177(2), read together, is consistent with the creation of two alternative but otherwise independent rights. The first is a right of the owner of the land at the date of reservation to claim compensation when the land is first sold. The second is the right of the owner of the land at the date a development application is made and refused (or granted on unacceptable conditions) to claim compensation."

The findings of the Court

The court held that Part 11 of the PD Act gave rise to two independent rights to compensation. The owner of the land at the date of reservation has a right to claim compensation when the land is first sold. The owner of the land at the date a development application is made and refused, or granted on unacceptable conditions, has a right to compensation.

Any claim must be made within six months of the event which triggers the entitlement to claim. Compensation is payable only once. Once compensation has been paid, no further claim can be made by any party.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Philip Mavor
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