It is a prime parcel of land near Sydney’s planned second airport. Now, its owner wants a supersized price.
The state government is facing a multimillion-dollar compensation bill after losing a legal fight with a developer whose land around Badgerys Creek in Sydney’s west was compulsorily acquired for the M12 Motorway to the new airport.
The decision of NSW’s top appeal court has implications for other landowners in the so-called Western Sydney Aerotropolis.
At the heart of the case was a dispute about how the market value of compulsorily acquired land is determined.
Property development group Goldmate bought 32 hectares of land at Luddenham, near Western Sydney Airport at Badgerys Creek, for $33 million in November 2020. The airport, under construction, lies about four kilometres from the land.
Months later, in June 2021, Transport for NSW compulsorily acquired almost half the site (46 per cent).
Construction work at Western Sydney Airport in Badgerys Creek.Credit: Janie Barrett
Goldmate filed proceedings in the NSW Land and Environment Court, objecting to the amount of compensation offered. In May 2022, the Valuer General had issued a $130,112 compensation notice for loss attributable to disturbance. Market value had been assessed at $0.
Just before Goldmate bought the land, the site’s value had increased because it had been rezoned under a new state planning policy for the aerotropolis from rural to enterprise, permitting a wide range of development.
In court, the transport agency contended Goldmate was entitled to $4 million in compensation, while the company argued for $55.6 million. Goldmate had rebuffed a $24 million offer from Transport for NSW before the compulsory acquisition.
The court awarded $9.8 million in April, and Goldmate filed an appeal.
The NSW Court of Appeal found in Goldmate’s favour last week, and has sent the case back to the Land and Environment Court to redetermine the compensation payable. This is expected to result in a higher figure.
“A lot of landowners have been waiting with bated breath for this decision to be handed down,” said Tom White, a partner at law firm Lander & Rogers.
When state authorities compulsorily acquire land, its market value is calculated by explicitly disregarding any increase or decrease in its value linked to “the public purpose” for the acquisition, such as building a new rail line.
In this case, the stated purpose for the acquisition was a road.
The appeal court found the Land and Environment Court fell into legal error by disregarding the recent rezoning. It did so on the basis that the public purpose for the acquisition was not just for a road but for the broader aereotropolis infrastructure plan.
The court said this was wrong because Transport for NSW was not empowered to acquire land for purposes including wider objects, such as to promote economic development around the airport.
White said Goldmate “may see an increase in their compensation because the market value of their land could be assessed having regard to the fact that it is zoned enterprise, rather than disregarding that zoning, although that is ultimately a decision for the Land and Environment Court”.
“For other landowners in the area, there could be a similar sort of outcome.”
Other landowners had “effectively had stalled negotiations” over compensation because “the offers that were being made were relatively small, relying upon the earlier … decision”, White said.
“Now, following the Court of Appeal, they’ll be pressing for much larger sums of compensation for the acquisition of their land, particularly in western Sydney but across NSW, really.”
White said there would be “some pretty happy people across landowner circles” but the decision was also positive for acquiring authorities because it provided certainty.
Sydney barrister Patricia Lane, property law expert and senior lecturer at the University of Sydney, said the decision shed “quite significant light” on how market value would be calculated where land was compulsorily acquired for specific purposes as part of a broader government initiative.
“‘Market value’ is a very technical concept, and the compensation law requires specifically that ‘the public purpose’ [for which the land was acquired] must be disregarded in that calculation,” Lane said.
“A lot depends on the powers of the acquiring authority – if they have narrow powers to acquire, the public purpose is likely to be narrowly defined.”
The Court of Appeal decided that only the narrow purpose of the acquiring authority should be disregarded, and that any “broader government purpose” relating to the land – for example, rezoning to permit particular land uses – should not be disregarded in arriving at market value.
“In this case, the land was acquired for a road and the court should not have disregarded the economic effects of the broader government policy on the land. This meant that the landowners could expect a higher market value if the effects of the broader policy on land value could be taken into account.”
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