New South Wales Court of Appeal narrows the gateway to compensation for acquisition of substratum land for underground rail facilities

In brief

The case of Sydney Metro v Expandamesh Pty Ltd [2023] NSWCA 200 concerned an appeal by Sydney Metro to the New South Wales Court of Appeal (Court of Appeal) against the judgment of the Land and Environment Court of New South Wales (Land and Environment Court) in the case of Expandamesh Pty Ltd v Sydney Metro (No 3) [2022] NSWLEC 137.

These cases related to the compulsory acquisition of land for underground rail facilities, specifically for the construction of two tunnels to serve the Sydney Metro City and Southwest Project in preparation for the construction of the new Waterloo railway station.

Compensation legislation

Compensation under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act) is not payable for subsurface acquisitions involving underground rail facilities under schedule 6B of the Transport Administration Act 1988 (NSW), unless one of the exceptions in clause 2(1) of schedule 6B exists.

The rule, and the three exceptions, are set out in clause 2(1) of schedule 6B of the Transport Administration Act 1988 (NSW) as follows:

"No compensation for acquisition of land for underground rail facilities
(1)  If land under the surface is compulsorily acquired under the Land Acquisition (Just Terms Compensation) Act 1991 for the purpose of underground rail facilities, compensation is not payable under that Act unless—

(a)  the surface of the overlying soil is disturbed, or
(b)  the support of that surface is destroyed or injuriously affected by the construction of those facilities, or
(c)  any mines or underground working in or adjacent to the land are thereby rendered unworkable or are injuriously affected."

Both of these cases related to exception (a), being whether "the surface of the overlying soil [was] disturbed".

Findings of the Courts

At first instance, the Land and Environment Court held that 1.5mm of soil settlement enlivened exception (a).

However, the Court of Appeal in the joint judgment of Leeming JA and Griffiths AJA has now held that the disturbance needs to be "…in a way which has practical significance or is not trivial…" (see [53] and [62]) and is not "trifling" (at [54]).

Whilst Simpson AJA agreed with the majority, Her Honour's judgment noted at [96] the oxymoron of "imperceptible disturbance" as follows (emphasis added):

"In other respects I agree with the joint judgment and add only this. I have difficulty with the notion that 'disturbance' may be 'imperceptible'. The very concept of a 'disturbance' ordinarily, and, indeed, inherently, connotes something that is perceived; certainly something that is 'perceptible'. 'Imperceptible disturbance' is an unfamiliar, and somewhat jarring, collocation of words."

There still remains some ambiguity as to what level of soil settlement would constitute "disturbance" to satisfy exception (a), due to contextual factors the decision mentions. In this regard, at [64] (extracted below), the Court of Appeal indicates that it depends on what is occurring above the surface of the soil as to whether the disturbance would be "non-trivial" (emphasis added):

"Whether or not a particular effect is non-trivial for the purposes of cl 2(1)(a) will depend upon the particular factual context. As was pointed out during the hearing, a subsidence of 1.5mm might appropriately be described as trivial if a tunnel is constructed under land which has sheep grazing on it. This could be contrasted with the situation where subsidence of that degree is caused by tunnelling under land on which is located a semiconductor factory or a chemical laboratory with sensitive equipment which is very susceptible to any form of disturbance or destabilisation. To put it another way, how land is currently being used or might be used in the future may be relevant to an assessment of the triviality or otherwise of disturbance to the surface of overlying soil. The circumstances relating to Expandamesh's land are far removed from the example concerning the chemical laboratory."

Conclusion

Those who are affected by the compulsory acquisition of substratum land for the purposes of underground rail facilities should continue to bear in mind that there are three available exceptions to the general rule that compensation under the Just Terms Act is not available.

This Court of Appeal decision narrows the circumstances in which the exception in clause 2(1)(a) might exist. There needs to be a level of practical significance to the disturbance that has occurred. Even if there is evidence of disturbance, one needs to consider the significance of that disturbance to the actual use of the property above the surface of the soil in determining whether exception (a) is enlivened.