Australia: Compensation for reserved land under the WA Planning and Development Act

Key Points:

A purchaser of land in WA injuriously affected by a planning scheme reservation may apply for compensation, even if the reservation existed prior to purchase.

In a recent decision (currently subject to a special leave application to the High Court), the West Australian Court of Appeal upheld a decade old contention that purchasing land already reserved for a public purpose is no bar to claiming compensation for the reduction in value of that land resulting from the reservation.

Under the Planning and Development Act 2005 (WA), compensation claims for the value reducing effect of public purpose reservations (under planning schemes) can be made:

  • by the seller of land, if they owned the land at the time the reservation was imposed; or
  • by the landowner when a development application is adversely determined due to the reservation.

Since the 2:2 split decision of the High Court in Western Australian Planning Commission v Temwood Holdings Pty Ltd [2004] HCA 63 (with the deciding judge declining to address the question), an argument has raged as to whether the development application trigger applied where the reservation existed prior to the land's acquisition. Despite the intervening decade no case resolved this argument (until now) and Parliament failed to resolve the question when enacting the current legislation.

In Western Australian Planning Commission v Southregal Pty Ltd [2016] WASCA 53 the three member Court of Appeal unanimously upheld the first instance decision of Justice Beech in Leith v Western Australian Planning Commission [2014] WASC 499, although all four judges have acknowledged that both sides of the argument have some merit.

This decision results in a total of six High Court and Supreme Court judges having now supported the existence of a right to compensation.

Public purpose reservation: who suffers loss, and when?

The Western Australian Planning Commission contends that a purchaser in Southregal Pty Ltd and Leith's position purchases land that is reduced in value by virtue of the public purpose reservation. Any loss suffered is suffered by the vendor at the time of sale, and the vendor alone should be entitled to claim compensation. Consequently, the Commission contends, an adverse development decision causes no loss to be suffered by the current owner (as such loss was effectively priced into the sale value).

In contrast Southregal Pty Ltd and Leith claimed that whatever loss suffered by them was not quantifiable at the date of purchase, and (a restriction on future development) extends beyond the mere reduction in purchase price. Consequently, they contended that the act of purchase should not disentitle them to compensation.

Why the WA Courts agreed with the landowners

The first instance and Appeal Court's decisions acknowledge that the wording of parts of the legislation offered support to each argument. As a complicating factor, Chief Justice Martin (on appeal) considered that the history of the provisions (and their legislative amendments) offered little interpretational assistance.

Ultimately, it is clear that the WA Courts rejected the notion that a purchaser of reserved land cannot suffer loss when the reservation adversely affects a future development.

The Courts were guided by the legal principles that:

  • the intention expressed by the entire legislative scheme (ie. to provide compensation for loss) should be preferred (and individual provisions should not be interpreted in isolation);
  • compensatory provisions (such as for injurious affection) should be beneficially interpreted; and
  • proprietary rights (including rights to compensation) should only be taken away by clear legislative intent, which the Court found was not presently the case.

Together, these factors led the WA Courts to depart from the reasoning of Justices Gummow and Hayne and instead favour the reasoning of Justices McHugh and Callinan in the Temwood case.

What now?

The door is not completely closed on this issue, as we wait on the next instalment from the High Court (and depending on its outcome the potential for legislative change). However, as the law currently stands in Western Australia, a person who purchases land after it was reserved under a planning scheme can still make a claim for compensation under the Planning and Development Act if their development application fails due to the reservation.

Absent a change in law:

  • landowners of reserved land faced with adverse development decisions should give close consideration to the potential for a compensation claim; and
  • local authorities and the Western Australian Planning Commission may be more cautious in making adverse decisions, lest they leave themselves open to compensation claims (this may have implications for lobbying efforts by local community members).

If you own and intend to develop reserved land, our Environment and Planning team can help you assess any entitlement to claim compensation.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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