Government Business Compensation Guidelines a Mockery

The NSW Government has recognised that businesses are frustrated about compensation when they are forced out of their premises to make way for infrastructure projects.

Submissions for the Australian Property Institute and the Law Society of New Wales to the Russell inquiry suggested that the legislation should be amended to provide a more detailed framework for assessment of business claims. Mr Russell’s report recommended that consultation be held with interested parties to ascertain whether the Land Acquisition Act provides adequate compensation in the assessment of business claims, and if not, what amendments should be contemplated to properly compensate such claims.

The Government however, did not adopt that recommendation. It did not consult with business or the professions.

The report from the Customer Service Commissioner did not address business claims. The Government thinks the existing law allows adequate compensation for “any other financial costs reasonably incurred (or that might reasonably be incurred) relating to the actual use of the land, as a direct and natural consequence of the acquisition.”

Guidelines about compensation for business have been circulated in an effort to make government decisions more transparent and more accountable.  The Government’s line is that the only issue for business is the inconsistent assessment of compensation.  It thinks the guidelines will ensure business owners will be properly engaged throughout the process and empowered to make informed decisions.  In summary, they:

• examine the legal status of a business claimant;
• describe the concept of profit rent;
• repeat the statutory list of disturbance costs;
• propose five (5) tests of whether a business can be successfully re-established in another location;
• list some examples of relocation costs that are compensable;
• catalogue some of the costs where a business is destroyed; and
• looks at how GST should be treated.

There is a great danger that acquiring authorities will overlook the legislation and, instead, treat the guidelines as an authoritative statement of the entitlements of displaced businesses. That will undoubtedly lead to missed opportunity for compensation and unfair outcomes.

In comparison, the standard text (Jacobs, Law of Compulsory Land Acquisition, 2nd ed., 2015, Thomson Reuters) runs to 937 pages plus appendices and tables.

The guidelines, or example:

• don’t discuss the many kinds of tenure that business may have to their premises;
• don’t recognise businesses structured as partnerships or unit trusts;
• don’t address the ‘special value’ that locational advantages bring to some businesses;
• fail to emphasise that the listed relocation costs are only examples and not an exhaustive list; and
• don’t reflect GST Ruling 2006/9 esp. [80] – [91].

Displaced business owners will only be sure of getting ‘just compensation’ if they take expert advice from lawyers, valuers and accountants with specialist experience.