Compensation for Tunnels

One of the objects of the Land Acquisition (Just Terms Compensation) Act 1991 is to “ensure compensation on just terms” for the land holders affected by Government infrastructure projects.

But in the case of proposed road tunnels, water pipes, sewers or electrical cables to be laid underground, the legislation allows compensation only in some circumstances. Those circumstances are that:

• the surface is disturbed by construction or operation; or
• underlying or sub lateral support is compromised; or
• an adjacent ‘underground working’ is adversely affected.

The purpose of denying compensation for tunnels and underground utilities is to protect government agencies from compensation claims for development potential involving deeper foundations, underground car parks, subterranean shafts and the like.

A NSW Court has recently considered, for the first time, a claim for compensation in respect of a road tunnel. RMS compulsorily acquired substratum lots in aid of the NorthConnex public/private partnership for a tolled motorway linking the M1 Freeway with the Hills M2 Motorway.

The tunnel will be about 60 meters below the existing house, so its stability was not in question. The only issue was whether the substratum lot was acquired “for the purpose of constructing a tunnel” within the meaning of the legislation.

The landowners argued the acquisition was in aid of a commercial enterprise promoted by Transurban and the Westlink M7 shareholders. That argument was rejected because the fundamental purpose of acquisition was to accommodate a tunnel, which happened to be funded by a private consortium and financed by a toll concession.

Statutory rights to compensation are preserved in the event of actual damage to overlying structures or existing ‘underground workings’. That includes any ‘financial costs relating to the actual use of the land’, and which are likely to arise as ‘a direct and natural consequence of the acquisition’. If there is any collapse, fracture, inundation or other physical damage to a surface structure, a claim can also be made for all the consequential financial losses caused by the loss of passing trade, restricted access, damage to stock or lost customers annoyed by noise, dust, vibration or other emissions.

Action can also be taken under the ordinary law to prevent or compensate for damage if noise, dust, vibration or other emissions escape from the tunnel or if a loss is traceable to the negligent design, operation or maintenance of the tunnel.

Landowners and business operators should be comforted to know that they will have some recourse if road, rail or utility tunnels affect their premises or business.