‘Genuine attempt’ to acquire land by agreement: the scope of pre-PAN negotiations under the Just Terms Act

The NSW Supreme Court has provided further guidance on what constitutes ‘genuine’ negotiations prior to the issue of a proposed acquisition notice in Elmasri v Transport for NSW [2021] NSWSC 929 (Elmasri).

Elmasri concerned the proposed compulsory acquisition of part of the land owned by the plaintiffs in Kemps Creek for the purposes of the M12 Project. The plaintiffs argued that Transport for NSW (TfNSW) failed to make a genuine attempt to acquire the land by agreement for a number of reasons, all of which were rejected by the Court.

NSW land acquisition process

Prior to compulsorily acquiring land or an interest in land in New South Wales, an acquiring authority must make a ‘genuine attempt to acquire the land by agreement for at least six months’, unless a shortened period is agreed.[1]

The negotiations must occur before the acquiring authority gives a notice of intention to acquire the land or interest in land by compulsory process, known as a proposed acquisition notice (PAN).

As section 10A is still a relatively new provision in the Land Acquisition (Just Terms Compensation) Act 1979 (Just Terms Act), to date, there has been limited case law on these pre-PAN negotiations.

The decision in Elmasri, involving difficult, expedited litigation, provides some additional guidance to acquiring authorities and affected interest-holders on what constitutes ‘genuine’ negotiations under section 10A.

Key takeaways

Consideration of the acquiring authority’s conduct during the entire pre-PAN period

The Court found that considering whether an acquiring authority has made a genuine attempt to acquire land for at least six months involves the following two-step process: 

• considering whether the conduct of the acquiring authority over the entire period before the issue of the PAN amounts to a ‘genuine attempt’ to acquire land by agreement; and
• considering whether the duration of the period in which a ‘genuine attempt’ was made was at least six months (unless a shorter period applies pursuant to section 10A(3)).

Importantly, the Court held that relying on genuine attempts to acquire the land by agreement by identifying any six-month period prior to giving the PAN does not satisfy section 10A(2), as it is necessary to consider the acquiring authority’s conduct during the entirety of the pre-PAN period.

Meaning of ‘genuine attempt’

Building on the existing case law on the meaning of a ‘genuine attempt’,[2] the Court held that an acquiring authority can be considered to have made a genuine attempt to acquire land by agreement even if it issues a PAN if negotiations fail, or in light of its acquisition timetable, particularly where the possibility of reaching agreement is remote.

Similarly, an acquiring authority can make a ‘genuine attempt’ to reach agreement even if its assessment of compensation is, ultimately, wrong (as determined by either the Valuer General’s compensation determination or Class 3 compensation proceedings).

Subject matter of pre-PAN negotiations

The Court confirmed that section 10A requires acquiring authorities to negotiate on the quantification of the compensation payable under the heads of compensation, under section 55 of the Just Terms Act. It does not require acquiring authorities to negotiate on compensation outside of those heads of compensation.

Repercussions of failing to comply with the requirement

Although the Court did not ultimately make a finding on this issue, the Court considered that section 10A(2) of the Just Terms Act appears to be a jurisdictional prerequisite to the acquiring authority having the power to issue a valid PAN.

Decision in Elmasri

In Elmasri, section 10A negotiations commenced with the issuing of an opening letter in August 2019. TfNSW then made three offers to acquire either part or the whole of the plaintiffs’ land in March, August and December 2020. The offers were based on advice from TfNSW’s external planning, valuation and environmental consultants. The PAN was issued in March 2021.

The plaintiffs argued TfNSW failed to make a genuine attempt to acquire their land by agreement for a number of reasons, all of which were rejected by the Court. The Court found that, when considering TfNSW’s pre-PAN conduct overall, TfNSW made a genuine attempt to acquire the land by agreement.

A summary of the concerns raised by the plaintiffs in relation to the pre-PAN negotiations is set out below.

• Reliance on external valuation advice: The plaintiffs argued that TfNSW adopted an overly rigid approach in wholly relying on the advice of its external valuer. However, the Court found it acceptable for TfNSW to rely on advice from its external valuer as pre-PAN negotiations need to be conducted in view of the compensation framework in the Just Terms Act.
• Delay: Although the Court considered there was some delay by TfNSW, particularly between the opening letter in August 2019 and the first offer of compensation in March 2020, TfNSW overall acted in good faith and the delay did not amount to a lack of bona fides.
• Reduction in the compensation offered in the second and third offer: The plaintiffs took issue with the reduction by TfNSW in the compensation offered from the first to second offers. However, the Court held that the reduction was a consequence of TfNSW receiving further planning and contamination advice, which was appropriate for it to obtain. 
• TfNSW’s unilateral approach: The Court did not agree, as a matter of fact, that TfNSW took a unilateral approach to negotiations and simply dictated the amount of compensation payable. Rather, TfNSW engaged with the plaintiffs, including encouraging the plaintiffs to engage a solicitor and valuer and make a claim for compensation and arranged various meetings with the plaintiffs. In addition, TfNSW and its valuer understood that the negotiation would require compromise within the framework of the compensation regime under the Just Terms Act.

_{[1] Section 10A(2) Land Acquisition (Just Terms Compensation) Act 1991 (NSW).}