Recent Supreme Court decision determines that the loss suffered from selling land subject to a road reservation was not a natural and direct result of the reservation

16 December 2020


The Supreme Court of Victoria dismissed a claim for compensation where land subject to a road reservation was sold for approximately 45% under market value because it found that the link between the reservation and loss was broken.


Brompton Lodge Pty Ltd and others (the Claimants) made a claim for compensation under ss 98(1)(a) and 106 of the Planning and Environment Act 1987 (Vic) (PE Act) for financial loss as a result of the reservation for road widening of part of 101.31 hectares of land in Cranbourne South (Subject Land).

In 2013, the Claimants entered into a joint venture agreement to develop the land with Urban Development Investments Australia Pty Ltd (the Purchaser) (the Development Agreement).

In 2017, the Purchaser acquired the land for $55,101,400 (Sale Contract). The Sale Contract extinguished the rights and obligations arising out of the development agreement and assigned the proceeds of a compensation claim for the reservation to the Purchaser.

The Claimants then brought their compensation claim for the benefit of the Purchaser. Transport for Victoria denied that any compensation was payable.

Issues before the Court

The Claimants had to prove:

  1. Under s 98(1), that they suffered financial loss, that the loss was the natural, direct and reasonable consequence of the reservation; and
  2. Under s 106(1)(a), that they sold the subject land at a lower price than they might reasonably have obtained if part of the subject land had not been reserved.

Valuation evidence

The valuer engaged by the Claimants determined that the net present value of the loss to them, occasioned by the reservation, was $25,203,543.

Reasoning for decision

Garde J held that the Claimants had not proven that they sold the subject land at a lower price than they might have expected to receive if part of the land had not been reserved (s 106(1)(a)).

His Honour considered that the price was the negotiated value for the transfer of the subject land together with the assignment of the proceeds of the compensation claim and the extinguishment of the parties’ rights under the Development Agreement. There were no submissions made that the price in the Sale Contract would have been different if the subject land was not reserved.

In interpreting the section 98(1)(a) language as to whether the financial loss was a ‘natural, direct and reasonable consequence of the reservation’, Garde J applied Batt J’s reasoning in Halwood Corporation Ltd v Roads Corporation (1995) 89 LGERA 280 (at 287), being:

  • ‘natural’ means arising according to the usual course of things;
  • ‘direct’ means without intervening agency or intermediate; and
  • ‘reasonable’ means not going beyond the limit assigned by reason or not extravagant or excessive.

Garde J accepted that the sale of the subject land was well below the market value. However, the assignment of the proceeds of compensation to the Purchaser and the extinguishment of the parties’ rights to an existing commercial contract for the development of the subject land were all unusual and extraordinary intervening causes.

Additionally, due to the Development Agreement, the Claimants could not sell the subject land to another party without obtaining the Purchaser’s (as developer) consent.

By reason of these intervening factors, Garde J held that the loss suffered was not a natural and direct result of the reservation, but rather by the particular commercial circumstance between the Claimants and Purchaser.

How we can help

HWL Ebsworth Lawyers has extensive experience in compulsory acquisition matters. If you would like to discuss how this decision affects a claim for compensation, or any other matter, please do not hesitate to contact us.

This article was written by James Lofting, Partner and Matthew Senn, Law Graduate.

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