NSW Government courts WestConnex success against Desane Properties in Court of Appeal

Eakin McCaffery Cox partner Greg Ross previews the expedited NSW Court of Appeal hearing, scheduled for June 28 and 29, where the NSW Government will appeal against the NSW Supreme Court judgement handed down in favour of Desane Properties on May 1, relating to the proposed compulsory acquisition of Desane’s 5274m2 flagship property at 68-72 Lilyfield Road, Rozelle, by Roads and Maritime Services (RMS) – a key part of the Government’s WestConnex infrastructure project.

Gregory Ross

Desane decision, disaster or opportunity for change to the Law?

The decision in May 2018 in Desane Properties Pty Limited v State of New South Wales[2018] NSWSC 553 (the Desane Decision) has already begun to demonstrate its potentially huge implications as a costly embarrassment for Government, public relations wise, commercially and legally.

The Desane Decision, relevantly, held that an exercise for the compulsory acquisition power had to be both within power and for a proper purpose to be valid. Whilst the power to acquire for road purposes was notdoubted in the Desane Decision, the purpose of the particular acquisition was found to be for “parks and gardens”, not road purposes

Media Report about Concerns

The Sydney Morning Herald article of 12 June 2018 “Major delay risks for hospital, transport projects due to legal tussle”[1] touches on some of the issues relevant to acquisition notices to property owners for projects including the Prince of Wales Hospital redevelopment, and a major upgrade in the proposed Badgerys Creek airport. The article also suggest doubt has been cast on another 86 properties that relevant authorities plan to acquire in the very near future in respect of the Parramatta Light Rail line, the new Metro Train Line and some road upgrade projects.

The Sydney Morning Herald suggests that the Government is so concerned that it has successfully applied to the Court of Appeal to fast track the hearing in its appeal in respect of the Desane Decision, lest many existing acquisition notices be found to be invalid and that some acquisition notices might lapse waiting for a hearing of the appeal.

The concern is that some of these major infrastructure projects could suffer adverse consequences if their respective Acquisition Notices suffered the same defect is that in the Desane Decision, assuming that decision stands or even if it just significantly delays activity pending clarity on the Law by the Court of Appeal.

Whilst the SMH article refers to the impact on a number of high profile and high cost State Government initiatives, Local Government projects may well be affected by the Desane Decision as the same law applies to them.

What Will the Court of Appeal Decide

The Court of Appeal will, no doubt, be aware of the large amounts of money involved in the potential delays to projects and costs blowout of the Desane Decision but will most likely give a decision strictly reflective of existing established law.

Given the reasoning of Hammerschlag J in the Desane Decision, I doubt the Court of Appeal will decide that the pre-existing law relied upon was wrong and/or needs to be significantly reviewed.

I would have thought the more likely tack, and I’m not privy to the arguments being put to the Court of Appeal, would be to argue that the actual wording used in the acquisition notices challenged in the Desane Decision is flexible enough to be valid.

The power to acquire for road purposes was not doubted in the Desane Decision. However, the purpose of the particular acquisition was found to be for “parks and gardens”, not road purposes and so invalid.

So the wording used in notices is all important.

With proper design elements being an important part of major projects of all type, in this day and age I would see “road purposes’ as including a degree of landscaping and beautification work.

Whether and to what extent landscaping and beautification might end up “parks and gardens” is, of course, a question of degree and one which the Court of Appeal will now have to deal with but only if it reads the general acquisitions power more flexibly than the Judge at first instance.

The Law

Even in the old High Court decision of Samrein Pty Limited v Metropolitan Water, Sewerage and Drainage Board (1982) 56 ALJR 678 (Samrein) it was fairly clear that some wriggle room existed under the then resumption power.

In Samrein, the issue was whether an acquisition, in conjunction with another entity, of a particular property to add to an amount of land MWS&DB already owned to build office accommodation in joint venture with Government Insurance Office was valid. The Court held the need for office accommodation was a primary driver of MWS&DB and the actual means (via a joint venture) was simply a means to that end. Accordingly the acquisition was valid.

The High Court, in Samein, distinguished the earlier case of Thompson v Randwick Corporation (1950) 81 CLR 87.

In the Thompson case, Randwick Corporation sought to resume certain lands, ostensibly for road widening. However, Council sought to resume more than was necessary for the road widening with a view to selling the surplus to offset the cost of the works. The NSW Supreme Court held the proposed resumption invalid as for an ulterior purpose of profit making by sale:-

Upon consideration of the scheme as a whole, the conclusion seems irresistable that, with respect to so much of the land included in the scheme as is not required for the new road, profit-making by sale is a substantial purpose actuating the Council in deciding upon the proposed resumptions”.

The question becomes, “how much wriggle room is permitted in the wording of an acquisitions notice under the law?

In the Desane decision, the Court said:-

it will be an abuse of RMS’ powers of the ulterior purpose is a substantial purpose in the sense that no attempt would have been made to acquire the land if it did not been desired to achieve the unauthorised purpose”[2].

Given the strict way the Courts have interpreted compulsory acquisition powers in the past, I doubt the Court of Appeal will consider “parks and gardens” purposes to be so indispensably a part of the proper exercise of the acquisition power for “road works” by a “roads authority”, due to the exact wording of the legislation and the acquisitions notice used in the case.

More broadly, the issue will, of course, depend of the particular wording of the legislation applicable to any agency whose exercise of powers involves resorting to compulsory land acquisition powers but the primary need is to check the main purpose against the wording in relevant notices and whether it is wide enough or narrow enough to achieve the relevant statutory purpose.

Given the scrutiny and strict compliance with the letter of the Law the Courts usually attach to the exercise of powers by the State, I incline to doubt whether the State will be successful before the Court of Appeal.

What if the Court of Appeal Decides Against the State?

Should the State not win at appeal, it is faced with a decision whether to appeal to the High Court of Australia?

Political and commercial imperatives attaching to the State Government’s infrastructure projects (as well as the needs of Local Government) for certainty in the Law may well warrant, if the Court of Appeal decides against the State of NSW, a further appeal to the High Court of Australia.

However, probably the quickest remedy will be some minor legislative refinement to deal with the issue, especially if, as was the case in the Desane Decision, fluidity of concept requires a tad more room to move than the old caselaw suggests.

The text of the paper is only a summary and discussion of particular facts and principles. It is not to be taken as legal or commercial advice as to any particular factual circumstances. Gregory can be contacted, if readers have any issues with the above.


Gregory Ross has been a Partner at Eakin McCaffery Cox Lawyers since 2010 and was Special Counsel at the firm between 2001 and 2008. Prior to his return as Partner he was Special Counsel at Shaw Reynolds Bowen & Gerathy and has had a part-time appointment with the Independent Commission Against Corruption.

Gregory’s legal practice reflects his many years of legal, commercial, policy and probity experience in NSW and beyond. As an Accredited Specialist in Government and Administrative Law, Gregory advises government bodies to develop legislation, contracting and process arrangements.Contract Gregory at Ross@eakin.com.au