Two recent cases give greater insight on how the Land and Environment Court (LEC) weighs up different factors when resolving disputes in relation to compensation amounts payable for a compulsory acquisition.

Section 55 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) provides that when determining the compensation amount to which a person whose interest in land is being compulsorily acquired, the following limited list of matters must be taken into consideration:

  • the market value of the lane interest (as at the date of acquisition), which is determined by the highest and best use of the land interest
  • any special value of the land interest to the person (as at the date of acquisition)
  • any losses attributable to severance and/or disturbance
  • the disadvantage of relocation
  • any increase or decrease in the value of any other land interest owned by the person as a result of the compulsory acquisition and subsequent development of the land.

Dibb v Transport for NSW [2023] NSWLEC 114 (Dibb Case)

The Dibb case related to an acquisition by Transport for NSW (TfNSW) of approximately 2.7ha of land from Dibb as part of the Coffs Harbour Bypass Project.

In determining the appropriate compensation amount, the LEC considered the following factors to be significant:

  • the underlying potential zoning of the land at the date of acquisition (assuming that no public purpose zoning applied) – this would impact the scale to which the land could be subdivided
  • the features of the land, including any hydrology, road access, and topology constraints on the land impacted potential future subdivision – this would impact the potential lot yield from future subdivisions because lots must be capable of being supported by future infrastructure, such as stormwater pipes. For example the existence of a river which could not be piped would impact the number of lots capable of being created by a future subdivision
  • profit risk – this would inform adjustments to comparable sales of subdivided land when determining the equivalent value for unsubdivided land.

The Dibb case considered how the existing physical and planning status of land could impact the assessment of the potential land use. We now compare this to another recent LEC case which provided commentary on the limited application of 'potential use' to an assessment of compensation.

oOh!media Fly Pty Limited v Transport for NSW [2023] NSWLEC 26 (oOh!media Case)

The oOh!media case relates to land owned by Rail Corporation New South Wales (RailCorp) which was leased to Australian Rail Track Corporation (ARTC) and subleased to oOh!media Fly Pty Limited (oOh!media). The land was located near the international and domestic terminals of Sydney's Kingsford Smith Airport. oOh!media owned and operated 18 billboards on the land which were erected in pairs back-to-back so that one of the two billboards would be presented to motorists travelling in either direction. Given the land's location, the billboards provided highly visible outdoor advertising opportunities to display product and other messages to passing motorists.

On 18 September 2020, the oOh!media's leasehold interest in the land was compulsorily acquired by TfNSW for the purposes of the Roads Act 1993 (NSW) in connection with the construction, operation, and maintenance of the Sydney Gateway Project. The Valuer General determined that the compensation to be paid to oOh!media was $3,797,993. oOh!media disputed the adequacy of this amount and commenced proceedings in the LEC for a judicial determination of the appropriate compensation amount.

In its judgement, the LEC considered a number of issues:

  • whether the hypothetical use of the land was relevant – oOh!media submitted that it could and likely would digitise its billboards and therefore the compensation amount should take into account the loss of potential value of digitised billboards. The LEC determined it was not relevant to consider the hypothetical value of the leasehold interest if the billboards had been digitised. Although the billboards were capable of being digitised and oOh!media could demonstrate an intention to digitise two of its billboards, it had not taken any steps of a concrete nature to implement this intention prior to TfNSW's acquisition, such as to obtain development consent for digitisation. It was not sufficient that the oOh!media's leasehold interest had unrealised potential to increase in value. Steps had to be taken to realise that potential It was further observed that, had oOh!media been able to demonstrate steps were taken, only two of its billboards would have been digitised. The LEC then turned its mind to how the value of the unrealised potential of those billboards may have been calculated if their conclusion on the irrelevance of the hypothetical digitisation of the two billboards was wrong
  • the appropriate digitisation multiple that should apply when determining the increase in value caused by digitisation – the LEC accepted the digitisation multiple range, being 3x to 4x, proposed by TfNSW. Given oOh!media's interest is being compulsorily acquired, the LEC determined it was appropriate to apply the higher end of the range, being 4x. In its decision, the LEC observed that had more than two signs been digitised, the revenue expectations for each billboard (and therefore the digitisation multiple) may have been reduced due to the increased supply
  • the appropriate methodology for determining the market value of the acquired billboards – the LEC determined the Discounted Cash Flow (DCF) methodology applied
  • the impact of the COVID-19 pandemic in determining value given the digitisation of the two billboards had not actually occurred, the LEC determined it was appropriate to only consider the impact of the COVID-19 pandemic to static billboards. The impact to digitised billboards would only have been relevant to already digitised signs and, had the signs been digitised, it would have only been appropriate to consider the impact of the COVID-19 pandemic to digitised signs in Sydney only Additionally, had the two billboards already been digitised, the relevant base revenue to apply the digitisation multiple would have been the revenue immediately prior to the acquisition
  • whether a tax gross up was applicable – the LEC determined there was no right for a tax gross up to be added to the compensation payable
  • whether the 'halo effect' was relevant to determining compensation value – the LEC considered whether oOh!media was entitled to compensation for special value as a result of a reduction to the revenue of other billboards operated by oOh!media due to a portion of its billboards being compulsorily acquired. In the oOh!media case, the LEC determined there was no entitlement to compensation for special value, however this was on the basis that oOh!media failed to establish the existence of the 'halo effect' and accordingly also failed to establish the halo effect was lost as a result of the acquisition. The oOh!media case therefore leaves it open to persons to establish entitlement to compensation for special value on the basis that revenue derived from their proprietary interest attracted premium revenue due to its packaged nature and the premium revenue would be lost if the proprietary interest was broken up by the partial acquisition of that interest.


The methodology for determining the compensation amount payable as a result of a compulsory acquisition allows for the taking into account of potential future use of the acquired land. Nonetheless, the two cases demonstrate that hypothetical arguments of highest and best use must be grounded in factual evidence. That is, it is necessary to establish that a particular use was factually capable of being realised before the owner of a proprietary interest can argue compensation is payable for the loss of that use as a result of the compulsory acquisition.

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