The Just Terms Act applies to the acquisition of land, by compulsory process by an authority of the State that is authorised to acquire the land by compulsory process (section 5).
The case of Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd (2015) NSWCA 100 considered the competing interests between a registered proprietor of land and a purchaser under a contract for the sale of land.
Does the purchaser under a contract for sale of land have an interest under the Just Terms Act?
On 14 September 2007, on the application of the Commissioner of Stamp Duties, an order was made for the winding up of Golden Mile, as a result of Golden Mile's indebtedness to the Commissioner and a liquidator was appointed.
Golden Mile defaulted on its mortgage repayments, and the first mortgagee, Stacks, exercising a power of sale entered into a contract for sale of the Resumed Land with Cudgegong for the price of $2,250,000 settlement to occur on 1 June 2012, some four years later (First Contract).
On 31 May 2012, TfNSW wrote to Stacks, enclosing a Proposed Acquisition Notice (PAN) for the Resumed Land under section 11 of the Just Terms Act. On the same day, TfNSW sent Golden Mile (care of the liquidator) and Cudgegong a copy of the PAN.
Cudgegong then entered into an agreement for the rescission of the First Contract and Stacks and Cudgegong entered into a further contract to purchase the Resumed Land for a price of $2,888,648 (Second Contract). Apart from a number of minor differences relating to the payment of interest and additional clauses, the terms of the Second Contract was otherwise identical to the terms of the First Contract.
Having received the PAN, Cudgegong submitted a claim for compensation to TfNSW and a similar claim was submitted by Stacks and RTS.
On 21 September 2012, Transport for NSW (TfNSW) compulsorily acquired the Resumed Land for the purposes of the North West Rail Link project. The Acquisition Notice was published in the Government Gazette by TfNSW.
At the time of the acquisition, Golden Mile was the registered proprietor of the Resumed Land, although as at that date, it had been deregistered under section 601AB(2) of the Corporations Act 2001 (Cth).
On 19 December 2012, Stacks and the RTS executed a Deed of Release and Indemnity in favour of TfNSW (Deed of Release).
The evidence indicated that, as at 1 July 2012, the amount owing to Stacks and RTS was significantly more than the amount Stacks and RTS received under the Deed of Release.
The Valuer General determined that the compensation payable under the Just Terms Act was $4,223,400. The sum of $3,043,760, being part of the compensation so determined, had been paid by TfNSW to Stacks and RTS Super Pty Ltd (RTS), the mortgagee under a second registered mortgage over the Resumed Land (the Second Mortgage).
The Valuer General's determination recorded that the claimants were Golden Mile, as registered proprietor, and Stacks and RTS as mortgagees. No reference was made to the possible interest of Cudgegong under the Second Contract.
Having paid Stacks and RTS their entitlement, TfNSW sought ASIC's direction as to whether the surplus should be paid to ASIC (as a result of Golden Mile's deregistered status) or to Cudgegong.
On 21 March 2013, court orders were made that ASIC reinstate the registration of Golden Mile and the liquidator continue as the liquidator of Golden Mile upon its reinstatement.
In the meantime, on 7 March 2013, Cudgegong had lodged a claim for compensation with TfNSW, claiming an equitable interest pursuant to the Second Contract claiming $16,382,108.80 (including disturbance). Section 46 of the Just Terms Act gives TfNSW 60 days after receipt of that claim to deal with it.
Cudgegong subsequently made an application for the advance payment of compensation under section 48 of the Just Terms Act. The dispute between Cudgegong and Golden Mile concerned the balance of the compensation payable by TfNSW of $1,179,640.
In order to determine whether such a payment should be made to Cudgegong, it was necessary for the trial judge to determine whether or not Cudgegong had a relevant interest in the Resumed Land.
Each of Golden Mile and Cudgegong claimed that it had an equitable interest that trumps the other in order of priority after the interests of Stacks and RTS. Each therefore, claimed to be entitled to the balance of the compensation held.
Golden Mile argued that specific performance under the Second Contract would not have been ordered immediately before the day of acquisition, because Stacks had breached its duty as mortgagee in exercising the power of sale conferred by the First Mortgage. The breach was said to consist of a failure by Stacks to obtain a price for the Resumed Land that was not less than market value or the best price reasonably obtainable in the circumstances.
"Interest in land means:
On appeal, the judge concluded that the breadth of the definition of "interest" is such as to cover the rights of a purchaser in an uncompleted contract for the sale of land, even if it cannot yet be said that the purchaser would be entitled to a decree of specific performance.
The judge concluded that Cudgegong had the relevant equitable interest in the Resumed Land, because specific performance of the Second Contract would have been ordered at the time of the compulsory acquisition. The judge accordingly ordered that the advanced payment be paid to Cudgegong.
The Court noted that the trial judge reached her decision based on the fact that Golden Mile did not exist (as it was deregistered). However, the property of a deregistered company vests in ASIC. Accordingly, ASIC could have enforced the rights of Golden Mile as mortgagor.
The Court concluded that the effect of the acquisition of the Resumed Land by TfNSW was to convert the interest and rights of Golden Mile, as mortgagor (and of Cudgegong, as purchaser), into a right to receive compensation.
To the extent, if at all, that the value of the Resumed Land, as determined by the Valuer General, or by the Land and Environment Court in the Cudgegong Appeal exceeded the amounts secured by the First Mortgage and the Second Mortgage, that excess represents the value of the interest of Cudgegong.
On the other hand, of course, if the exercise of the power of sale by Stacks was not valid and effective, (if it is found to have breached its duty in exercising its power of sale) that excess represents the value of the interest of Golden Mile in the Resumed Land.
The appeal was allowed and the matter remitted to the Land and Environment Court for the purposes of hearing and determining according to the law, the question of the respective interests that Golden Mile and Cudgegong had in the Resumed Land as at 12 September 2012.
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