by Tim O’Dwyer

A David-and-Goliath legal battle recently took place in the High Court of Australia. Davidson Pty Ltd* sought compensation under the Acquisition of Land Act from the Phillistia Coast Regional Council* after the council resumed a small strip of land (412 m2) for road works. No worries if the resumed land had been owned by Davidson. Rather, the resumption was from a parking lot in a shopping centre where Davidson leased supermarket premises.

The lease gave Davidson (and its customers) access to and use of the parking lot in common with other tenants and customers.

No way would Phillistia squander ratepayers’ money in compensating a mere lessee. Especially as Davidson’s lease referred to “common areas’ in a Lot 6 which the centre owner had later amalgamated (with an adjoining Lot) into a new Lot. The resumed land had never been part of the original Lot 6.

After trying unsuccessfully to negotiate with the council Davidson initiated Land Court proceedings seeking compensation on the basis that it had gained an interest in the resumed land upon registration of the subdivision plan creating the new Lot. In the alternative Davidson claimed its interest in that Lot arose because the definition of “common areas” in its lease was inconsistent with, and should be substituted by, a broader definition of “common areas” in the Retail Shop Leases Act (RSLA).

After the Land Court found for Davidson, the council appealed to the Land Appeal Court. And won. That Court held that the amalgamation had not conferred on Davidson any interest beyond the land contained in the former Lot 6.

Davidson then appealed to the Court of Appeal. And won.

acquisition of land, acquisition of land act, council resuming land, land resumption by council, land acquisition compensationUndeterred, Phillistia appealed to the High Court where both parties were represented by Queen’s Counsel. Four judges of the Court unanimously allowed the appeal by ruling that Davidson had not acquired an interest over the entire amalgamated Lot. Accordingly Davidson was not entitled to compensation in respect of the resumption, and was ordered to pay the council’s appeal costs. “They won’t get any costs out of us,” Davidson’s disgruntled director later told me. “The court fundamentally got it wrong, the council spent a million dollars of ratepayers’ money to that end,” he added.

After some complex legal reasoning, their Honours explained how it did not follow that the lessor and lessee here intended that, if the “Land” as defined in their lease was amalgamated with other land to form a new expanded Lot, that “Land” should be read as extending to the new Lot. Moreover, it was contrary to business common sense to suppose that, if the “Land” was to be amalgamated with other land, the lessee should automatically and without additional consideration acquire any interest over the other land.

At the same time the High Court disagreed with the lower courts’ statutory interpretations, and held the RSLA definition of ‘common areas’ did not supplant “common areas” as defined in the lease to give Davidson a compensable interest in the resumed land.

Nowhere in any of the written reports of the various courts’ decisions was there mention of how much compensation this little supermarket proprietor had tried to legally wrest from the big bad regional council. I wondered how Davidson had converted into dollars and cents the loss of what appeared to be a few additional customers’ parking spaces. So I telephoned the solicitors who had acted for it throughout, and put my burning question: “What was the amount of the claim which necessitated both your client and the council being prepared to argue all the way to the High Court?”

After taking instructions from their client about disclosing the amount to me, the solicitors gave me the magic number: $710,982!

Legal colleagues have remarked that, unlike in the movie The Castle, here “the little guys didn’t have the ‘vibe’ on their side.” More seriously this firm made this observation: “If there is any chance of a Lessor’s amalgamating with nearby lots, lease agreements should be clear on the landlord’s and tenants’ (post-amalgamation) rights.”

Hence, if tenants gain a right to use the common areas of a new larger lot, should the calculation of their outgoings under the lease be affected?

What The Acquisition of Land Act Says

In Queensland, the Acquisition of Land Act 1967 authorises constructing authorities to acquire land for public purposes related to their business.

If your property is required for a road or transport project, you will receive a ‘Notice of intention to resume’.

If you agree, you can negotiate for compensation or may choose to object.

As the landowner, you have the right to object, have the objection heard, and have your proposal considered by the government.

Your objection must:

  • be in writing
  • be made within a specified time
  • provide supporting details for your objections.

acquisition of land, acquisition of land act, council resuming land, land resumption by council, land acquisition compensationAfter considering your objections, we may:

  • go ahead with the resumption
  • change the portion of your property required for the project
  • change the project so we do not require your property.

You can claim compensation if you are the legal owner, lessee or licensee of the property.

You must make the claim within 3 years from the day we publish the ‘Taking of land notice’ in the gazette.

You will receive a copy of the gazette notice, and a compensation claim form to complete and return to us. You may engage a registered valuer and/or solicitor to assist you.

We will reimburse reasonable costs as part of the overall settlement of compensation.

If you have any questions about any aspect of real estate law, please contact us for a free, 10-minute phone consultation.

*All names have been changed for privacy purposes.