Sydney Water Court Case Underscores Compulsory Acquisition Issues

In a time of unprecedented infrastructure spending, it is inevitable developers will have to hand over the keys to some of their kingdoms. But agency approaches to compulsorily acquiring land are under scrutiny. Heworth Property Group is currently in the midst of a compulsory acquisition case in the Land and Environment Court (LEC) against Transport for NSW, claiming $100 million from the agency over delays to its 28,000sq m mixed-use complex including an initial 173 apartments. Heworth says the proceedings have been so slow it is now considering commencing civil proceedings in the Supreme Court in parallel with the LEC litigation. And another case now making its way through the LEC and Supreme Court involves the Australian property development subsidiary of a Dutch multinational energy company over a $350-million property acquisition in the Parramatta area. The cases highlight the problems when dealing with, and recourse against, agencies all of which is making it difficult to get projects under way. The issue VE Property is, according to ASIC documents, a subsidiary of Vitol Investment Partnership, an offshoot of $400-billion Dutch multinational energy giant Vitol. The subsidiary is taking action against Sydney Water in two courts on two fronts over a land acquisition at Parramatta. The issue arose over a 27.94ha site comprising several lots at Rosehill, which VE acquired from Viva Energy in 2018, according to Supreme Court case reports. VE Property wanted to sell the site in early 2022, identifying Canberra Data Centres (CDC) as a buyer for the $350-million site. ▲ Heworth has now begun construction of its Balmain Leagues Club site as the court cases continue. However, Sydney Water was in the middle of developing the Camellia Treatment and Resource Recovery Facility, and the VE Property site had been identified as appropriate for the water treatment plant. It informed VE Property in May of 2022 that it might require the site, and the group let potential buyer CDC know of these intentions. By June of 2023 the acquisition had still not moved forward, and VE Property entered into a contract of sale for the site with CDC for $350 million plus $4.18 million for site works. Eleven days later, Sydney Water provided an update on the proposed acquisition, and also alerted CDC, at which point it rescinded the contract of sale with VE. ▲ The Camellia plant, like this plant at Penrith, will support the growing population of Parramatta, which is expected to rise by 120 per cent by 2056. Just under a year later in May of 2024, Sydney Water compulsorily acquired the site for $347 million. While this perhaps seems straightforward, VE Property is alleging that Sydney Water’s conduct with CDC and its representations to the potential buyer that it was in a position to make a genuine attempt to acquire the land by agreement were misleading. VE Property is arguing that Sydney Water was not in that position, and that Sydney Water made those representations “with the intention of preventing the sale of the property on the open market”. VE is in the Federal Court seeking damages and compensation for alleged breaches of Australian consumer law by Sydney Water. It is simultaneously challenging the valuer-general’s valuation of the site in the NSW Land and Environment Court, arguing that the correct compensation for the site should have been $552.5 million, leaving it more than $200 million out of pocket according to its own calculations. Legal quandaries Compulsory acquisitions, especially in NSW, are not unusual, law firm Bick &amp; Steele director Daniel Webster says. In a standard case the authority in question is required to negotiate with the landowner for at least six months. If an agreement falls through, an acquiring authority can issue a formal proposed acquisition notice, which sets the clock ticking for a compulsory acquisition, usually between 90 and 120 days. If no agreement is made and the compulsory acquisition goes ahead, compensation is determined by the valuer-general. Webster says this case is slightly unusual in that VE chose a two-pronged attack. “Ordinarily, if you’re challenging the valuer-general’s determination, you’d go to Land and Environment Court only, because the LEC has the power and jurisdiction to redetermine the appropriate compensation under the Just Terms Act,” Webster says. ▲ The proposed site of the Camellia Water Resource Recovery Facility, due to be delivered in 2031. Image: Nearmap The Federal Court has, however, perhaps to the surprise of VE Property, ruled that the two proceedings be merged. “It’s an interlocutory matter, an intermediate step in the proceedings, it’s not a final judgment about compensation,” Webster says. “But it is a very unusual situation.” While VE Property and its parent companies did not respond to requests for comment, Sydney Water told The Urban Developer it welcomed the decision by the Federal Court to pause proceedings until the LEC case is moved to the NSW Supreme Court, after which it expects the Federal Court matter will also be moved up. Compulsory acquisitions Major Sydney Metro upgrades and the city expansion westward has meant compulsory acquisitions have been on the rise for several years. But there could be a light at the end of the tunnel for developers with regards to compulsory acquisitions, Webster says. “Prior to the last 12 months, there was an intensification in the number of appeals to the Land and Environment Court against compensation determinations,” he says. “This was to do with the sheer number of acquisitions being undertaken by larger agencies like Transport for NSW, Sydney Water, Sydney Metro and the scale of infrastructure projects they had been undertaking.” ▲ There could be light at the end of the tunnel for developers like Heworth in future, says Webster. But there has been a step back, he says, especially with the bulk of Sydney Metro acquisitions being completed. “So now, the LEC is, at least in my experience, not as busy as the five to eight years prior.” While a decline in major infrastructure works is beginning in Sydney, the opposite is happening in such cities as Perth and Brisbane where infrastructure spending is ramping up to meet population growth and in anticipation of major events, including the Olympics. “No one wants to have their land compulsorily acquired, but development does rely on significant infrastructure projects, and those are being completed by agencies that need land for them,” Webster says. “A slowdown in the provision of infrastructure, and the acquisition of land for that purpose, could end up limiting the development potential of surrounding land.”

Sydney Water Court Case Underscores Compulsory Acquisition Issues

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