Antonino Gaudioso v Transport for New South Wales

Relevant legislative provisions

1. Sections 49 and 50 of the Just Terms Act make provision for the payment of interest in the following terms: 49 Interest on compensation (1) Interest is payable (subject to subsection (2)) on any amount of compensation under this Part from the date the land is acquired until the payment is made. Any such interest becomes part of the amount of compensation payable. (2) Interest under this section is not so payable on any amount of compensation paid into a trust account under this Part or into the Consolidated Fund by the authority of the State. However, money earned from the investment of any such trust account becomes part of the compensation concerned. 50 Rate of interest on compensation (1) The rate of interest payable on any payment of compensation under this Part is such rate as the Treasurer may from time to time determine by notification published in the Gazette. (2) Different rates of interest may be determined under this section. (3) The Treasurer is to have regard to the rates of interest paid by banks when determining rates of interest under this section. (4) Rates of interest determined under this section apply even though the compensation is payable under an order of a court.
2. Section 66(4) of the Just Terms Act relevantly provides: 66 Objection against amount of compensation offered … (4) If the Land and Environment Court decides that the amount of compensation payable (without the addition of interest) does not exceed by more than 10% the amount of compensation offered by the authority of the State, the Court may cancel or reduce the amount of interest that has accrued under this Act in respect of the compensation since the institution of the proceedings.

TfNSW's submissions

1. The principles to be applied in the determination of an application for the cancellation or reduction of interest under s 66(4) of the Just Terms Act have not been fully described in decided cases. The discretion is wide and the factors to be considered in the exercise of such a discretion should be determined having regard to the statutory context in which the section is found.
2. The objects of the Just Terms Act at s 3(1), particularly objects (a) and (e) are of assistance in determining the object and purpose of s 66(4). Those relevant objects provide: 3 Objects of Act (1) The objects of this Act are - (a) to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and … (e) to encourage the acquisition of land by agreement instead of compulsory process.
3. The designation of the percentage threshold in s 66(4) evinces a legislative intention to identify a threshold below which the legislature has recognised that it is or may be appropriate or just not to require the payment of interest that has accrued during the proceedings. The indication of a threshold suggests that if the Court awards compensation below that threshold then the overall utility of those proceedings may be doubted. In such circumstances it would be unfair to an acquiring authority, and something of a windfall to an applicant, to award compensation automatically to an applicant.
4. The power to reduce or cancel interest is not conditioned on any express terms other than the failure to achieve the nominated threshold. The power seems directed to doing justice in a case that is on foot for a considerable period but turns out not to lead to a substantially different amount of compensation.
5. Where there is the object of the Just Terms Act to expedite the acquisition process, this provision can be seen as a direct legislative encouragement to an applicant not to pursue claims that are or turn out to be marginal.
6. TfNSW does not contend that the Applicants acted unreasonably in the conduct of the proceedings.
7. TfNSW conceded in oral address that if by the making of the orders in Gaudioso (No 1) the discretion in s 66(4) was exercised there is no longer any power to make the orders sought in the Notice of Motion.
8. TfNSW summarised the circumstances that it submitted would constitute the reasons for the cancellation or variation of the interest at [28] of its written submissions in the following terms: 28. In summary, in this case, it is appropriate to cancel (or in the alternative, significantly reduce) interest that was incurred during the currency of the proceedings because: a. the preconditions in s 66(4) are satisfied in this case; b. the proceedings had a lengthy duration and consequently the amount of the accrued interest is substantial (over $121,000); c. the result (compensation determined by the Court) was only marginally higher that the amount offered (compensation determined by the Valuer General), being only 3.74% greater than the offer of compensation; d. the applicants already have the benefit of an order that the respondent pay their costs of the proceedings. The applicants can thereby be taken not to have pursued their claim unreasonably (within the meaning of the principles about costs in Class 3 proceedings) but the exercise of power in s 66(4) stands quite separately from the consideration of the costs of the proceedings; e. there was no issue or set of issues raised by the applicants that identified any material error or inaccuracy in the Valuer General's overall assessment of compensation f. the Court's determination of compensation, and the Court's order as to the costs of the proceedings, are sufficient for the just compensation of the applicants; g. in all the circumstances, if compensation to the applicants included an amount for interest that accrued during the proceedings, that would constitute an unjustified windfall to the applicants.

Applicants' submissions

1. By the determination of compensation in Gaudioso (No 1) the Court has determined that interest is payable. Accordingly, the Court has exercised the discretion and absent the identification of some power to permit the order to be amended the Court has no power to make the orders sought in the Notice of Motion.
2. There are powers that permit the variation of the Court's final orders, the Applicants identifying those powers in rr 36.15, 36.16(1)-(3A) and 36.17 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Due to the nature and timing of the present application there is no power, in the circumstances of these proceedings, that would permit a variation pursuant to those rules. Accordingly, the Notice of Motion should be dismissed.
3. If the Court does have power to vary the final orders, the discretion under s 66(4) to reduce or cancel the interest should not be exercised.
4. The usual position is that an applicant is entitled to interest on any amount of compensation from the date of acquisition until the date the compensation is paid and such sum representing the interest becomes part of the amount of compensation paid: s 49(1) of the Just Terms Act. This provision recognises that whilst the owner of the acquired land has been deprived of the land at a certain date, the determination of the amount of compensation and the payment of any such amount is often later than the date of acquisition. The payment of interest forms part of the compensation as the acquired landowner has been deprived for a period of time of the value of the acquired asset, being the land. Such a statutory arrangement is part of the statutory scheme as expressed in s 54(1) of the Just Terms Act to ensure a disposed owner is justly compensated. In this context it is inappropriate to express, as TfNSW does in its submissions, that interest is a "windfall", it is compensatory.
5. The provision contained in s 66(4) is not mandatory in its operation, that is, whilst the power is triggered by the threshold it is not an automatic disentitlement to interest, nor is it mandatory that interest be either cancelled or reduced where the threshold is satisfied. The discretion is broad and includes the discretion to make no order to vary or cancel. In this context there is no limit to the discretion except that it must be exercised judicially.
6. There being no express considerations nominated in s 66(4), the statutory scheme should inform relevant considerations. In this case, as the discretion is broad, there must be something more than the mere failure to meet the threshold that would warrant the exercise of the discretion. If something more was not needed then the discretion would have no work to do and the operation of the provision, contrary to the statutory language, would limit the manner of the exercise of the discretion.
7. The factors that would arise for consideration would necessarily be those that indicate that it would be "unjust" for an applicant to obtain interest in Court proceedings where the amount achieved on determination was less than 10% more than that offered. In this case, TfNSW has not identified any factor apart from the engagement of the discretion, that is, it has identified nothing apart from the arithmetic failure to achieve more than the 10% offered.
8. To the contrary TfNSW accepts that the Applicants did not act unreasonably in the maintenance or conduct of the proceedings. With that concession and no further discretionary considerations raised, the Court would not exercise the discretion in s 66(4). To exercise the discretion as contended for by TfNSW would be to impose an unwarranted penalty upon the Applicants of the type referred to by Sheahan J in Ray Fitzpatrick Pty Limited v Minister for Planning (No 5) [2008] NSWLEC 183 at [23] (Fitzpatrick): 23 I reject the Respondent's submission that the Court should fashion its orders so as to impose a penalty on the Applicant (whether it be loss of interest, and/or an order for costs) for the delay caused by pursuing an "unmeritorious case".

Power to make the orders sought in the Notice of Motion

1. It is clear from the determination made in Gaudioso (No 1) that the compensation was determined including a requirement to pay interest. This order was made notwithstanding that the Applicants had not achieved a sum of compensation greater than 10% of that offered by TfNSW. Whilst I accept that there were no express reasons given as to the making of that order, it not being raised as an issue between the parties, the determination does in terms find that interest is payable. Accordingly, the order so expressed can only be varied in accordance with a relevant power identified in the UCPR. As accepted by TfNSW, in such circumstances there being no such application made, there is no power to make the orders sought in the Notice of Motion and, accordingly, must be dismissed. This situation could have been addressed by TfNSW requesting that the issue of interest (like costs) be reserved until publication of the reasons for the decision. It did not do so. There being no communication that interest was an issue between the parties (either by submission or pleadings) the Court was entitled, and obliged, to determine the issues in dispute, of which interest was not one.

Discretion under s 66(4) of the Just Terms Act

1. Notwithstanding that I have determined that, in the circumstances of this case, there is no power to make the orders sought in the Notice of Motion. If there was power, I would not have exercised the discretion conferred by s 66(4) in the circumstances of this case.
2. The discretion conferred by s 66(4) is engaged when the nominated circumstances are met, namely a determination of less than 10% more than that offered. The threshold sets the circumstances in which the discretion can be exercised and not the circumstances that dictate the exercise of the discretion. That is, the mere fact that the preconditions in s 66(4) are met is insufficient of itself to justify the making of an order provided for in s 66(4).
3. The Just Terms Act provides a scheme to ensure that a disposed owner receives just compensation for its acquired land. The scheme has dictated that interest on any compensation determined is to form part of that just compensation. That is, justice dictates that a person entitled to compensation should not suffer further loss where there is a period of time between the acquisition and the payment of compensation. Such interest is determined by the scheme to form part of the compensation.
4. The provisions of s 66(4) only arise where an applicant exercised the right conferred by the legislative scheme to object to the amount of compensation offered. Such a limitation to the application of s 66(4) indicates that there must be something that relates to the bringing or maintaining of Court proceedings that warrants a potentially different approach to interest. Again, however, that "something" must be more than merely the quantum of compensation determined, otherwise the provisions of s 66(4) would have provided for a mandatory reduction in interest - the only discretion relating to whether the rate should be varied or the totality cancelled. The fact that the discretion is broad and unconfined in such a manner indicates that something relating to the bringing or maintaining of proceedings, in addition to the threshold fixed by s 66(4) is intended by the legislative scheme to justify the exercise of the discretion.
5. Having regard to the legislative context that has as one of its objects (as confirmed by s 54) that a disposed owner be justly compensated, the discretion conferred by s 66(4) must relate to some circumstance in the context of the bringing or maintaining of proceedings that would indicate that the achievement of such just compensation would not include the payment of interest determined at the usual rate or the payment of interest at all. In this context it is inappropriate to refer to the payment of interest as a "windfall" or the exercise of the discretion conferred by s 66(4) as a "penalty". In passing I do note that both parties suggested that Sheahan J in Fitzpatrick had determined that the exercise of the discretion in s 66(4) was a "penalty". On my reading of his Honour's comments in the relevant paragraph of Fitzpatrick he was not making a finding of the character of the discretion but rather rejecting a submission that had been put to him. He rejected the submission on the basis that the Applicants having accepted the Offer of Compensation made in accordance with the sum determined by the Valuer-General the Court had not made a determination of a sum of compensation and, therefore, the discretion conferred by s 66(4) had not been engaged. In any event, the determination of the relevant question of just compensation is not assisted by the emotive language of "penalty" and "windfall".
6. The nature and scope of the discretion and the variety of circumstances that may arise will turn on the facts of each particular case. In this case, the circumstances relied upon by TfNSW as summarised in [19] have not identified any matter of substance apart from the engaging of the discretion having regard to the quantum of compensation determined as justifying the exercise of the discretion in s 66(4) (see [28] (a) and (c) of the submissions at [19] above). The matters identified by it in its summary are either matters that are ordinary incidents of litigation such as the length of time spent in hearing and disposing of the matter [28(b)], or relate to the separate and independent question of an entitlement to costs of the litigation [28(b) and (f)] which matters identify no foundation for suggesting that the payment of interest would produce an injustice in circumstances where TfNSW conceded that the Applicants had not commenced, maintained or conducted the proceedings unreasonably. The reference in [28(e)] to the Applicants not identifying an error in the approach of the Valuer-General to the determination of the compensation offered is misplaced where proceedings such as the present in no part relate to a review of the Valuer-General's determination.
7. For those reasons, TfNSW has failed to identify any reason that would justify the exercise of the discretion conferred by s 66(4) in the circumstances of this case.

Costs

1. The parties agreed that costs should follow the event. As TfNSW has been unsuccessful in its application it will be ordered to pay the Applicants' costs of this Notice of Motion.

Conclusion and orders

1. For the reasons outlined above, the Court orders that: 1. The Notice of Motion filed on 17 September 2021 is dismissed; and 2. Transport for New South Wales, the Applicant on the Motion is ordered to pay Mr Antonino and Ms Carmel Gaudioso's costs of the Notice of Motion.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 January 2022