NSW Department of Finance, Services and Innovation Redress for Central Register of Restrictions Errors

Professor Allan Fels AO and Dr. David Cousins AM

March 2017

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Contents Executive Summary ........................................................................................................................... 2

1.1 0 Background to the Report ......................................................................................................... 4

1.2 The CRR errors ......................................................................................................................... 4

1.3 Government response .............................................................................................................. 4

1.4 Terms of reference ................................................................................................................... 5

2.1 Impact of the CRR errors .............................................................................................................. 6

2.2 The properties affected ............................................................................................................ 6

2.3 Submissions ............................................................................................................................. 7

2.4 Discussion ................................................................................................................................ 9

3.1 Existing Compensation Arrangements ........................................................................................ 11

3.2 Avenues for compensation ..................................................................................................... 11

3.3 Land Acquisition (Just Terms Compensation) Act 1991 ............................................................ 12

3.4 RMS Exceptional Hardship Land Purchase Policy ..................................................................... 15

3.5 4 Appropriate Redress for Maladministration ......................................................................... 16

4.0 Recommended Redress for CRR errors ....................................................................................... 17

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Executive Summary

This report was commissioned by the NSW Department of Finance, Services and Innovation

(DFSI). Land and Property Information (LPI) is a division of the Department.

In late 2016, errors were detected in the Central Register of Restrictions (CRR), a data base

operated by LPI using information provided to it by government authorities, including Roads

and Maritime Services (RMS). The CRR provides essential information for potential buyers to

determine whether authorities have interests in the land they are considering.

The Minister and Department responded quickly in correcting the errors, communicating

with property owners, identifying the causes of the errors and effecting improvements to

prevent further errors occurring in the future.

The Minister has indicated the Government is considering some form of payment to affected

property owners who performed a CRR search and received an incorrect response,

purchased the property and currently own the property. In line with this, our advice, as

consumer advocates, is specifically being sought on whether some form of payment should

be made to eligible property owners; if so, whether the same amount of monetary payment

should be offered to all affected property owners or should be tailored to individuals, and to

recommend the appropriate amount that should be offered.

The report outlines the background to this issue, the Government’s response to date and

provides information on the affected properties. It discusses the 51 submissions from

affected property owners received by the consultants. These indicate the severity of the

impacts experienced by many people, especially related to the uncertainties created for

them.

Existing avenues for property owners to seek compensation are briefly considered, including

the operation of the Land Acquisition (Just Terms Compensation) Act 1991 and the RMS

Exceptional Hardship Land Purchase Policy.

The report draws on the work of the NSW Ombudsman and practice in other jurisdictions in

supporting the need for property owners to receive redress, including the payment of

financial compensation, for the maladministration of the CRR data base and the detriment

and uncertainty experienced as a result of the CRR errors. This compensation needs to be

significant given all the circumstances.

We also consider it important that the Government moves quickly to settle the

compensation payments, particularly for people who may wish to re-locate.

The report recommends a hierarchy of compensation payments as follows:

$500 poor service penalty to apply when a person acquired an incorrect CRR

certificate relating to a particular property, but did not buy that property.

$5,000 compensation for buyers who purchased a property after receiving

inaccurate advice through the CRR, but who suffered negligible detriment and on-

going uncertainty.

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$30,000 compensation for buyers who purchased a property after receiving inaccurate

advice through the CRR, and suffered significant detriment and/or on going uncertainty.

Voluntary re-sale of properties

Where property owners consider they have suffered significant detriment and/or on-

going uncertainty, as an alternative to the payment of the one off $30,000

compensation payment, they should have the right to sell their properties to the

Government. The sale price should be the original purchase price paid by the owner

plus $75,000. Stamp duty, legal, conveyancing and lenders mortgage insurance costs

paid on the property should, in addition, be paid by the Government.

Compulsory purchase of property

If any property purchased on the basis of inaccurate CRR information is later

compulsorily acquired, the terms of the Land Acquisition (Just Terms Compensation)

Act 1991 will apply. However, we consider that the maximum payment for

disadvantage for relocation should apply in these cases.

We consider that property owners should, in addition, be paid for the reasonable costs of

any legal advice sought in responding to notification of the CRR errors.

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1.0 Background to the Report

1.1 The CRR errors

The Central Register of Restrictions (CRR) provides prospective purchasers with information

about potential and actual government or authority interests in a parcel of land. Land and

Property Information (LPI) maintain the CRR on behalf of participating organisations, which

includes Roads and Maritime Services (RMS). CRR searches are accessed via information

brokers.

RMS provides files to LPI for upload to the CRR flagging their interest in parcels of land for

potential or actual future road projects. When a CRR search is conducted on a property that

is flagged with an RMS interest, LPI provides a positive response to the CRR enquiry1. The

enquirer, or information broker, may then contact RMS, which provides a response

identifying the exact nature of the interest in the land at that time. Alternatively, the search

may result in a negative response indicating that the RMS has no current proposal to acquire

interest in the land. This response may be qualified in circumstances where design and

construction plans are still developing. For example, the response may indicate that the

land is in a broad area currently under investigation in relation to a proposed project. Until

the investigations are further advanced, more definite advice cannot be given and the

possibility that the land will be affected by the project cannot be dismissed.

Late in 2016, it became apparent that LPI did not immediately upload some RMS files to the

CRR so that for the time the files were not uploaded potential property buyers who had

searches conducted may have been mislead as to whether RMS had any interest in the land

concerned.

There have been two incidents where failures to upload current data occurred. The first

covered the period 27 June 2016 to 24 October 2016 (the 2016 incident) when interests

relating to the Southlink (F6) project should have been flagged. This prompted a detailed

review of earlier experience which highlighted the second incident covering the period 18

September 2014 to 11 November 2016 (the 2014 incident) where data, which would have

flagged RMS interests relating to the Westconnex stage 2 (new M5) project, was not

uploaded to the CRR system.

1.2 Government response

The then Minister for Finance, Services & Innovation, Dominic Perrottet MP, was advised of

the 2016 incident shortly after it had been identified and the CRR was corrected by LPI. The

Minister recognised the concern this was likely to cause for people who had recently

purchased a property and immediately initiated efforts to ensure affected residents were

contacted, provided the right information and given what assistance could be provided. The

Customer Service Commissioner was asked to ensure that those who may be affected were

1Typically the note is in the following form: “The following authorities have a possible or actual interest in this property. Your inquiry has been referred to them for direct response. Roads and Maritime Services Sydney Office.”

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contacted and provided with assistance. The Secretary of the DFSI was also instructed to

conduct an immediate investigation into the issue2.

The investigation found that “the process for uploading files into the CRR was informal and

at times inconsistent with no formal policies or procedures.” Further, in relation to the 2016

incident LPI had not followed past practice. The 2014 incident was caused by an error made

by LPI in manually updating a program specification, a system limitation, and absence of

manual control to ensure the upload was successful3.

The Minister indicated that all of the investigation’s recommendations for improvement in

processes and controls would be adopted. He also advised that all RMS files dating back to

2009, when the CRR was introduced, had been checked and that RMS interests on the CRR

were now fully up to date.

Importantly, the Minister acknowledged that “people who conducted searches had a right

to expect the CRR information to be accurate” and he acknowledged and apologised for the

uncertainty that may have been caused.

In addition, the Minister advised: “Because the circumstances of the CRR errors are unique, I

have asked consumer advocates Professor Allan Fels AO and Professor David Cousins AM to

provide to the Government in the first quarter of 2017 advice on what a fair and reasonable

outcome for property owners might be.”4

1.3 Terms of reference

The provision of inaccurate information may have resulted in different decisions being made

than would otherwise be the case. These decisions may have resulted in people incurring

costs or losses they did not anticipate. These costs may be both financial and non-financial in

nature. This raises the issue as to whether there should be some redress paid to those

affected to offset these unanticipated costs or losses.

The Government has indicated that it is considering some form of payment to affected

property owners who performed a CRR search and received an incorrect response,

purchased the property and currently own the property. In line with this, it is seeking advice

specifically on the following questions:

1. Whether or not Government should provide some form of payment (i.e. whether that be

in the form of compensation or goodwill payment or other type of payment) to eligible

property owners;

2. Whether the same amount of monetary compensation should be offered to all affected

property owners or should be tailored to individual circumstances, cognisant of the RMS

impact to the property; and

2 Dominic Perrottet, Minister for Finance, Services and Property, “Statement on LPI Central Register of

Restrictions”, Media Statement 28 October 2016; and “Update on Central Register of Restrictions”, Media Statement, 2 November 2016. 3 PWC, Summary of Investigation into Land Property Information Central Register of Restrictions, 12 December 2016, pp.3-4. 4 Dominic Perrottet, Minister for Finance, Services and Property, “Outcome of Investigation into CRR Error”, Media Statement, 19 December 2016.

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3. If it is advised to provide a payment, considering the circumstances, recommend the

appropriate amount to offer to eligible property owners and the basis for the recommended

amount.

It was indicated the advice should take into consideration any relevant precedents where

Government (State, Federal or international) have proactively offered payment in similar

circumstances of incorrect information being provided.

It was considered that individual or public meetings with affected property owners would

not be required, but written submissions from affected property owners should be

considered.

We note that the terms of reference were limited to cases where incorrect certificates were

obtained for properties which were subsequently purchased by the people on whose behalf

the certificates had been sought. This leaves out of consideration those people who

obtained incorrect certificates for properties that they did not subsequently purchase. In

considering the questions above, we think it is also necessary to add some comments on

this latter group.

2.0 Impact of the CRR errors

2.1 The properties affected

The Minister’s initial advice on 29 October 2016 was that 309 enquirers may have received

an incorrect response to their 2016 CRR search affecting at least 140 recent transactions.

These properties were potentially affected by the proposed F6 Motorway and the

Werrington Arterial project. The Minister’s update of 2 November indicated that the 309

enquiries related to 205 unique properties. For one of these properties, the land beneath

the property was required for a proposed tunnel as part of a current project, the remaining

204 properties were within a broad area identified for a planned or potential project. It was

confirmed that at least 140 of these properties had been subject of a transaction. No

incorrect certificates had, in fact, been issued for the Werrington Arterial project.

The Minister provided a further update of the situation on 19 December 2016. He indicated

that 377 properties in the vicinity of the New M5 were affected by the 2014 error. This

project was by then well underway and “the vast majority of the involved properties now sit

outside the designated route and are not directly affected by its construction.”5 The Minister

advised that there were 20 properties affected by the 2014 error and none of these

properties were required for surface acquisition.

As design and construction planning for these projects proceeds, the status of the relevant

projects becomes clearer. The most recent data provided to us is that there were 952 cases

where incorrect certificates were issued relating to 582 unique properties, which had been

subject of a transaction. Title transfers on 547 of these properties had occurred by 21

February 2017. Of the full list of unique properties:

5“Ibid.

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- 189 related to the proposed F6,

- 377 related to the new M5, and

- 16 related to both the F6 and the new M5.

The proposed F6 project is still to be approved for funding and there remains uncertainty as

to its exact route. The correct advice from the CRR would have indicated that the property

was in a broad area currently under investigation, even if it also said there was not a current

proposal requiring the property.

The M5 project is more advanced and the correct advice may have given greater comfort to

buyers that the properties in the vicinity would not be greatly affected. Often the advice

would be in the following form: ‘the contractor for this project has been announced and the

current design for this project does not require the subject property. Please note, however,

the detailed design for the project has not been finalised and land requirements may

change’.

2.2 Submissions

Owners of properties affected by the CRR errors were contacted just prior to Christmas

2016 and invited to provide a written submission to this review. A number of specific

questions were asked to assist respondents:

As the owner of a property involved, what is your view of the CRR error?

Please provide any documentation or information you may have to support your comments above?

What do you consider to be a fair and reasonable outcome?

Do you have any other comments?

By the 28 January 2017, 49 submissions had been received. Two further letters were

received after this time and they have also been treated as submissions. One of these raised

concerns about a more recent project (M4-M5), which was not directly affected by the CRR

errors considered in this report, but may not have been an issue if the CRR errors had not

occurred.

As could be expected, there were many common themes expressed in the submissions.

However, the circumstances relating to each property owner are unique and this is reflected

in their responses

Property owners expressed disappointment that an error like this could have occurred and

not been advised to them sooner. Their expectation was that the information they obtained

should have been right and that they had been let down by the Government. Many had a

general awareness of plans for new road developments and had sought to make sure they

were not buying in affected areas. Unacceptable, appalling, negligent and inexcusable were

how it was expressed in numerous submissions. Some suggested the errors reflected poor

processes and lack of quality assurance, which needed to be rectified.

Many submissions expressed concern and upset as to the impact they perceived they had

suffered as a result of the CRR errors. Nearly one-half considered that their property values

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would have been negatively impacted. One-third indicated that they would not have

purchased the property had they known the true picture, and others suggested they had

suffered a loss because they had been denied the opportunity of negotiating a lower price

or of buying another property. Often they pointed to other costs they had also incurred

when purchasing their properties, including legal and conveyancing fees, stamp duty and

lenders mortgage fees. In some cases, significant costs had been incurred in further

developing their properties since purchase.

A significant issue mentioned by more than one-third of the property owners was the stress

and upset experienced as a result of not knowing definitely what was going to be the impact

on their properties of RMS activities. Where corrected advice had been obtained, this often

indicated that although not subject to any current proposal, the property concerned was in a

broad area under investigation. Whilst this may have been appropriate in giving maximum

warning of any future possible land interest, it meant uncertainty for owners and for many it

put a hold on their future property development plans. Property owners were frustrated that

they could not get more specific information from RMS; some saw the process by which

they had been advised of the CRR as adding to their uncertainty rather than dealing with it.

In response to the question of what was considered to be a fair and reasonable outcome, a

significant number of property owners said that they wanted to see the issue resolved

quickly by them being given certainty as to what would be the impact on their properties.

Until this impact was known, it was difficult to comment on other forms of redress. A few

mentioned that they wanted to see the issue fixed and a proper apology given.

The great majority, however, expressed the clear view that they should be paid financial

compensation for the errors affecting them. Compensation was seen to be necessary to

offset the losses that had been caused by them acting on the basis of the inaccurate

information and purchasing a property which they would otherwise never have done or only

done so at a lower price. The loss included particularly reduced market value of their

property, but other costs were also highlighted. Frequently mentioned in this regard were

the cost of stamp duty paid on the property, legal and conveyancing costs and search costs

for the property, including the time spent. Some suggested that they should be

compensated for the lost opportunity they had experienced by not purchasing a different

property. Financial compensation was also considered justified due to stress and anxiety

and other adverse health impacts which had been suffered. Some property owners had

sought legal advice in relation to their position following notification of the CRR errors, and

some had had legal advisers prepare material for their submissions.

While most submissions did not attempt to nominate an actual amount of compensation

they felt was warranted, a few did, and figures quoted ranged from 3 per cent to 5, 10 and

15 per cent of the property value. One person suggested $75,000, a figure seen quoted in

the media, which, in fact, related to the increased maximum payment for solatium6 where

land is acquired by a Government body. One property owner suggested the compensation

figure could be in excess of $500,000, reflecting impacts on property valuation, health

6 The word solatium has now been replaced in the Land Acquisition (Just Terms Compensation) Act 1991 by the

more understandable expression ’disadvantage resulting from relocation’.

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consequences and disturbance. Some property owners suggested the Government should

offer to re-purchase their property at a negotiated price that would take account of their

original price and inflation since purchase, and compensate them for the associated costs of

stamp duty, legal and conveyancing fees.

Not everyone affected by the CRR errors provided a submission in response to the invitation

for them to do so. They should not be penalised in any way on this account. There are many

reasons why a property owner may not have provided a submission. However, it is

considered that a sufficient number of submissions were received to give a good indication

of the range of experiences and views held by those who have been affected. We consider

the submissions are persuasive that more needs to be done by the Government to provide

redress for the problems caused by the CRR errors.

2.3 Discussion

Government proposals to build new road infrastructure inevitably have impacts on people

who own property in the vicinity of the proposed route. These impacts will depend on the

exact location of the properties in relation to the new road infrastructure and the specific

design of the road. Road works may run directly through some properties necessitating

demolition of buildings and other structures and compulsory acquisition of the land. Where

tunnels are constructed for the roads, there may still be some surface impacts on land and

properties through cracking etc. Other properties, although not directly in the path of the

roadway, may be affected by road connections and by increased congestion, noise and

vehicle exhausts. Some properties may be negatively affected by the construction works,

even if they are not greatly affected by the road after construction. A new road will also

provide benefits for many motorists, those who live relatively close by and have easy access

to it may especially benefit.

Under the Roads Act 1993, the Government has power to acquire land which adjoins or lies

in the vicinity of other land proposed to be acquired for the purpose of opening, widening or

constructing a road or road work.7 Land may be acquired by agreement or by compulsory

process in accordance with the Land Acquisition (Just Terms Compensation) Act 1991.

Compensation is not, however, paid if land is compulsorily acquired for constructing a

tunnel, except in some particular circumstances.

The impacts on properties affected by major road construction, where they have not been

subject to compulsory acquisition, are likely to be reflected over time in the market values

of these properties. Typically, no compensation is paid to those who suffer negative effects.

Equally, benefits experienced are not directly taxed, although rates may rise if property

valuations rise.

Existing owners of properties affected by road construction projects have no opportunity to

avoid these impacts. They could sell their properties before the construction begins, but in

all likelihood, in an informed market, the price they obtain for their property will be

impacted by the works expected to be undertaken.

7 Section 177

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The CRR plays a vital role in ensuring market participants are well informed of possible road

infrastructure works. Potential property buyers can obtain information about possible

projects affecting the properties they are looking at and can adjust their offers according to

their judgements of possible impacts. This may or may not affect the actual market price,

which will be influenced by many other factors affecting demand and supply in the area and

alternative locations. A potential buyer may be willing to pay the same price with the road

construction as without it, if the utility provided by the property exceeds that price. The net

utility gained from the purchase may, however, be lower if the road had negative impacts

for the property.

The failure to upload information about new road projects which may have impacts for

particular properties meant that potential buyers were not as informed as they could have

been. This could have affected their willingness to purchase these particular properties or at

least the prices they were willing to pay for them.

People who obtained incorrect information but did not purchase one of the properties

affected were unlikely to have suffered significant detriment as a result, except that they

paid for an incorrect certificate and may have incurred other costs in pursuing the

properties, such as requesting inspection reports, attending auctions etc.

Some detriment may have been suffered by those people who purchased properties on

which an incorrect certificate had been provided. This detriment may be reflected in

market prices, although it may not always be fully disclosed in this way. The market prices

for these properties may have been higher than if the correct information had been

available. When the correct information did become available, this impact might have been

reflected in adjusted market values. This effect may have been avoided by these people if

they had sold the properties before the correct information was available to the market. It is

understood there were, in fact, six properties relating to the 2014 error that were in this

category, five of which were sold by developers. In effect, any detriment associated with the

purchase of these properties due to the CRR errors would just have been transferred to the

new buyers.

The adverse effects perceived by property owners when advised of the CRR errors may not

eventuate. For example, any road construction may end up being well away from the

property concerned. And mitigation works implemented during the construction phase may

reduce other effects, for example from noise or loss of visual amenity. Any financial

detriment associated with perceived reductions in property values in the short term may

then not ultimately be realised. In the meantime, however, other psychological detriment

associated with stress and uncertainty may well have been incurred by the owner. This non-

financial detriment is likely to be greater the longer the period of uncertainty.

The CRR errors arose because information relating to particular projects was not uploaded

to the register. If these projects were linked to other projects, then it is possible that the

effect of these errors could also extend to these other projects. For example, the 2014 error

related to the M5. Initially some people were advised that RMS had no interest in their

properties and may have purchased in a particular area because of that. They were

subsequently advised that their properties would not be affected by the M5, but were in an

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area of interest in respect of the M4-M5. If they had not been led into error in the first place

they may not have been in an area which may be affected by M4-M5.

In considering the level of detriment property owners may have suffered, some caution is

needed in avoiding double counting of detriments. For example, a road that is located close

to a property may result in higher levels of noise and emissions than previously. It could be

expected that these costs will ultimately be reflected in the market values of the affected

properties. It would be double counting then to take into account the loss in market value as

well as the amenity costs causing the drop in market value.

Identified detriments need to be verifiable and real if they are to be used as a basis for

claiming compensation. Some submissions raised concerns about lost opportunities as a

result of purchasing the properties they did as opposed to other properties. However, lost

opportunities are hypothetical and not readily measurable. It is more appropriate to

consider compensation as returning a person to where they were rather to where they

might have been.

In normal circumstances the burden for demonstrating detriment should be fully on the

land owner. In this case, however, some level of detriment might be assumed to be

associated with the provision of inaccurate information. Beyond this low level, property

owners should be able to provide reasonably strong evidence to substantiate their claims of

detriment.

3.0 Existing Compensation Arrangements

3.1 Avenues for compensation

Under existing arrangements, property owners could possibly take action against the

Government, either individually or as a class, in the courts to seek compensation for the

losses they perceive they have suffered. Most likely this would be based on alleged

negligence by the relevant bodies. Such actions could be determined by the courts, or

possibly settled with the relevant bodies before any court determination was made. The

likelihood of claimants being successful and the likely magnitude of any determination

would no doubt influence the outcome of any settlement. It is not the purpose of this report

to comment on the likely outcomes of any legal action other than to note that affected

property owners are always able to pursue such action.

One submission, prepared by a legal firm, referred to section 129 of the Real Property Act

1900 under which “any person who suffers loss or damage as a result of the operation of

this (emphasis added) Act in respect of any land, where the loss or damage arises from (a)

any act or omission of the Registrar-General in the execution or performance of his or her

functions or duties under this Act in relation to the land, ….. or (c) any error, misdescription

or omission in the Register in relation to the land, …… is entitled to payment of

compensation from the Torrens Assurance Fund”. It was suggested that the CRR errors

came within the scope of this provision and that the client was therefore entitled to

compensation from this Fund. However, it is our understanding that the CRR is established

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under section 24 of the Conveyancing Act 1919 and operates outside of the Real Property

Act.

An alternative route for property owners to pursue would be to lodge a complaint with the

NSW Ombudsman about maladministration of the CRR by LPI. Under the Ombudsman Act

1974, the Ombudsman in its general administrative review role can investigate

maladministration. This term has a wide scope and includes what is referred to as

unreasonable conduct, which includes the provision of wrong, inaccurate or misleading

advice. The Ombudsman can prepare reports and make appropriate recommendations,

including for the payment of compensation. The Act provides for the authorisation of

payments of compensation subject to approval by the Minister and Treasurer.

Apart from this, the NSW Government does not appear to have a formal administrative

scheme like the Australian Government’s Scheme for Compensation for Detriment caused

by Defective Administration (CDDA Scheme). This scheme operates where there is no legal

liability to pay compensation, but allows compensation to be paid where persons have

experienced detriment as a result of defective action or inaction by non-corporate

Commonwealth entities8. Ministers or authorised offices have discretion to make payments

under the Scheme. Three types of detriment are recognised under the Scheme, including

personal injury loss, pure economic loss and detriment relating to damage to property9.

However, in NSW, Ministers, department and agency heads have responsibility for the

efficient provision of public services and for dealing with cases of maladministration.

Reliable service delivery is a core value articulated by the Code of Ethics and Conduct of the

DFSI. Compensation for maladministration could, therefore, be claimed directly from the

Department. The Department is an agency of the Treasury Managed Fund, the NSW

Government’s self-insurance scheme10.

Another potential avenue for property owners to obtain compensation may be to seek an ex

gratia payment from the Government. These are discretionary payments determined by

Ministers for individuals having regard to all the relevant circumstances. They may be made

to persons “who Ministers consider have suffered a financial or other detriment as a result

of the workings of government”11. Ex gratia payments are not made where Government is

considered to have a legal liability or possible legal liability.

3.2 Land Acquisition (Just Terms Compensation) Act 1991

Acquisition of land by a NSW government authority, including RMS, is subject to the Land

Acquisition (Just Terms Compensation) Act 1991.

8 Australian Government Department of Finance, Scheme for Compensation for Detriment caused by Defective Administration (CDDA Scheme), n.d. 9

Details of specific payments made under the scheme do not appear to be disclosed and annual reports only appear to publish the number of claims. A Freedom of Information request revealed that four departments paid out over $6 million under the Scheme in 2014-15. See “Public servants’ bad advice costs taxpayers $6m in compo, The Australian, 11 August 2015. 10 The TMF is managed by the NSW Self Insurance Corporation. The latter was established under the NSW Self Insurance Corporation Act 2004. 11.NSW Treasury Circular, ‘Ex-Gratia Payments’, TC 11/02 1 February 2011.

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The objects of this Act are:

“(a) to guarantee that, when land affected by a proposal for acquisition by an authority of

the State is eventually acquired, the amount of compensation will be not less than the

market value of the land (unaffected by the proposal) at the date of acquisition, and

(b) to ensure compensation on just terms for the owners of land that is acquired by an

authority of the State when the land is not available for public sale, and

(c) to establish new procedures for the compulsory acquisition of land by authorities of the

State to simplify and expedite the acquisition process, and

(d) to require an authority of the State to acquire land designated for acquisition for a public

purpose where hardship is demonstrated, and

(e) to encourage the acquisition of land by agreement instead of compulsory process”12.

The Act has recently been amended to “better balance the needs of land owners and the

development of public infrastructure”13 following an independent review by David Russell

SC and a review by the NSW Customer Services Commissioner. This is in the context of a

significant expansion in road infrastructure construction in Sydney, including the projects

which the CRR errors concerned.

The Act requires the relevant authority to attempt to acquire any property of interest

through negotiation in the first instance rather than compulsory acquisition. A minimum six

month period for negotiation is provided for, but this does not apply to tunnel construction,

which is a significant impact issue in relation to the properties affected by the CRR errors.14

A landowner must be given at least 90 days-notice of a compulsory acquisition and the

acquisition must be completed as soon as practicable. If there is a delay in land being

acquired which causes hardship to the land owner, application can be made by the owner

for its early acquisition15. An independent review process in relation to these hardship

applications arranged by the Secretary DFSI has now been added to the legislation16.

The Valuer-General determines the level of compensation to be offered. The owner has a

right to object to this amount and can lodge an objection with the Land and Environment

Court.

Interest is paid on the compensation amount at a rate determined by the Treasurer covering

the period from the date of compulsory acquisition to when the payment is made.

The Act requires that the Valuer-General “must have regard to the following matters only in

determining the amount of compensation to be paid:

(a) the market value of the land on the date of its acquisition,

12 Section 3

13 NSW Hansard Legislative Council Land Acquisition (Just Terms Compensation) Amendment Bill 2016, Second

reading, The Hon. Duncan Gray, Minister for Roads, Maritime and Freight, 20 October 2016.

14 Section 10A 15

Section 24(2) 16

Section 27A

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(b) any special value of the land to the person on the date of its acquisition,

(c) any loss attributable to severance,

(d) any loss attributable to disturbance,

(e) the disadvantage resulting from relocation,,

(f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out

of, or the proposal to carry out, the public purpose for which the land was acquired.”17

Terms used in section 55 are defined in the Act as follows:

Market value is the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer disregarding the impact of the proposed project18.

Special value means the financial value of any advantage, in addition to market value to the person entitled to compensation which is incidental to the person’s use of land19.

Loss attributable to severance means the amount of any reduction in the market value of any other land of the person entitled to compensation which is caused by that other land being severed from other land of that person20.

Loss attributable to disturbance of land means any of the following:

(a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land, (b) valuation fees of a qualified valuer reasonably incurred by those persons in connection with the compulsory acquisition of the land (but not fees calculated by reference to the value, as assessed by the valuer, of the land), (c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs), (d) stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired), (e) financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage), (f) any other financial costs reasonably incurred (or that might reasonably be incurred),

17 Section 55

18 Section 56

19 Section 57 20

Section 58

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Land affected by CRR errors could be voluntarily or compulsorily acquired by RMS subject to

the above legislation. Land which is not subject to acquisition would in normal

circumstances not be eligible for compensation under the Act.

3.3 RMS Exceptional Hardship Land Purchase Policy Where land owners are able to demonstrate exceptional hardship, the RMS may at its absolute

discretion purchase properties which are not within the construction footprint of a road project, or

otherwise required for the project, but are within the vicinity of a road project. The circumstances in

which the RMS may do this are outlined in its Exceptional Hardship Land Purchase Guideline.24 This

scheme does not fall within the Land Acquisition (Just Terms Compensation) Act 1991.

RMS notes that “In almost all cases, impacts on properties are temporary, or can be appropriately

managed through mitigation measures in the design or as part of the conditions of approval of a

project. These measures may include improvements such as noise insulation of homes (for example

installing double glazing windows, or noise walls) and landscaping for visual screening.” Where this is

not the case the hardship scheme may apply.

However, the scheme has stringent requirements. These include that it only applies to private

residential properties where the owner(s) have a serious and pressing need to sell their property due

to demonstrated exceptional personal circumstances, but they cannot sell because of the negative

impact of the road project. There must be real and disproportionate hardship shown. Negative

environmental impacts from a project such as noise or visual impact would not generally be regarded

as constituting real and disproportionate hardship. It is considered they could be dealt with

by mitigation measures. Applications, which can be made up to 12 months after completion of a

project, are assessed by a committee with an independent chair, but are ultimately determined by

the CEO of the RMS. An offer of purchase is based on an estimate of market value without the

project and is dependent on the availability of funds.

Property owner(s) under this scheme are required to pay their own costs of sale, including legal fees,

conveyancing, mortgage discharge fees, and provide a current land survey and sale certificate. If an

independent valuation is sought, the owner must pay 50% of the cost. RMS may impose any other

terms and conditions it considers appropriate on its purchase of these properties.

21 Section 59 22 Section 60 23 This figure is subject to escalation by movements in the CPI. Prior to the recent amendments the figure had escalated from $15,000 to $27,235. 24 Available at: http://www.rms.nsw.gov.au/documents/projects/planning-principles/exceptional-hardship- land-purchase-guidelines.pdf; accessed 23 February 2017.

relating to the actual use of the land, as a direct and natural consequence of the acquisition21.

disadvantage resulting from relocation means non-financial disadvantage resulting from the necessity of the person entitled to compensation to relocate the person’s principal place of residence as a result of the acquisition22. The maximum amount of compensation in respect of the disadvantage resulting from relocation is $75,00023.

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3.4 Appropriate Redress for Maladministration

The NSW Ombudsman has commented that “agencies have an obligation to act fairly and

reasonably toward members of the public who have suffered detriment arising out of

maladministration25 for which the agency is responsible. If a person suffers detriment arising

out of maladministration, agencies need to consider appropriate redress.”26 This position

was in part based on a proposition that it was more equitable for the community as a whole

rather than the affected individuals to bear the costs of maladministration, and also that “if

errors are tolerated there will be less inclination to amend systems to prevent similar errors

from recurring.” 27

The Ombudsman has reiterated these views in more recent times and suggested the

following principle should guide redress:

“Any person detrimentally affected by maladministration should, wherever practicable, be

put back in the position that they would have been in had the maladministration not

occurred.”28

We consider that the views expressed by the Ombudsman are appropriate and should guide

the DFSI in its consideration of redress to apply in response to the CRR errors. The LPI

provided inaccurate information, because of the failure to upload certain RMS data to the

CRR. Many customers experienced significant detriment as a result.

The Ombudsman has also commented on the nature and scope of the redress that should

be offered for maladministration.29 In summary it is suggested redress should be:

Fair and reasonable

o Reflecting moral considerations as well as legal considerations

o Providing equal treatment for equal circumstances

o Decided without taking advantage of relative position of strength

o Proportional to the maladministration and detriment suffered

A comprehensive resolution of the issue

o Address all justified issues raised

o Consider detriment to all affected whether or not they have complained

Properly responsive and procedurally sound

o Adherence to ethical principles

o Full explanation given

25 The Ombudsman uses term maladministration to describe the types of conduct outlined in section 26(1) of the Ombudsman Act 1974 which the Ombudsman can report on. Section 26 (1)(b) covers conduct considered unreasonable, which the Ombudsman considers includes the provision of ‘wrong, inaccurate or misleading advice.’ NSW Ombudsman, Maladministration, Public Sector Agencies Fact Sheet, 13 November 2010. 26 NSW Ombudsman, Complaint Handler’s Toolkit, 2004, p.260. 27 Ibid. 28

NSW Ombudsman, Good Conduct and Administrative Practice: Guidelines for state and local government (second edition), May 2006. 29

Ibid., pp260-265.

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o Consideration given to the views of the persons suffering detriment

o Use of precedent and guidelines

o Accountability and review

Provided in a timely manner

The Ombudsman also noted some factors which might limit the redress provided

Time elapsed since the maladministration

Remoteness of the damage or detriment

Degree of contributory responsibility

Mitigation of damage

Avoidance of unwarranted enrichment

A range of options for redress can be considered. The following redress categories are

identified with relevant actions in this case:

Communication with the person suffering detriment, including providing explanations or giving apologies

Rectification of the maladministration, including correcting the original error

Mitigation of the adverse consequences of the maladministration, including repairing any systems or process errors, refunding or waiving relevant fees

Satisfaction of the reasonable concerns of the person suffering detriment through non-material means, including an apology on behalf of the agency, a public acknowledgement of the error and

Compensation, including restitution for financial and non-financial detriment suffered, reimbursement of other costs arising from the maladministration,

The Ombudsman has noted “where maladministration has led directly to detriment that can

be readily quantified in financial terms, compensation is generally the core of the

appropriate response.”30

4.1 Recommended Redress for CRR errors

The Minister and his department appear to have followed an appropriate path in

responding to the CRR errors when they were identified. They moved quickly to identify

those who were provided with inaccurate information and those who subsequently

purchased properties. The cost of the inaccurate certificates has been refunded to those

who have not acquired properties and the accurate advice has been given without cost to

those who did subsequently buy properties. The problems have been acknowledged and

investigated and their causes identified and rectified. Property owners and others have

been informed about these steps and the independent investigator’s report has been made

public. The Minister has publicly apologised for the CRR errors and has privately contacted

30 Ibid., p.240

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many of the affected property owners31. In terms of the range of options for redress set out

by the Ombudsman, it could be said that all have been implemented so far except that

relating to compensation, which is the main subject of this report.

However, one area where it would be useful if more could be done is in relation to

communication. This needs to be done promptly and sensitively. Some of the submissions

clearly were distressed to be door knocked and contacted just before Christmas. Many

expressed frustration in finding the right people to contact and getting answers to their

questions. The fact that they were not given definite advice as to the possible future

impacts on their properties was a major cause of concern. It is suggested that this matter be

reviewed by RMS. The principle should be that property owners are given as much certainty

as is possible. We discuss further below the issue of uncertainty in relation to the payment

of compensation.

It is our clear view that property owners who have purchased properties after receiving

inaccurate advice should be compensated appropriately for the detriment they have

suffered. Whilst it might be suggested that some people would have purchased their

properties in any event and may well have been willing to pay what they did knowing the

correct information, they will still have suffered some loss of utility and hence detriment.

We consider that compensation should be paid for being provided with inaccurate

information and for the financial and non-financial detriment incurred by property owners.

We consider that this needs to be done without delay.

If all property owners experience a similar level of detriment, it would be appropriate to

determine an amount of compensation that was the same for all who were provided with

inaccurate information. However, this is not the case and a more tailored approach to

determining compensation should be considered.

A number of different circumstances can be distinguished.

1. Potential buyers who acquired an incorrect CRR certificate in relation to a

particular property but who did not buy that property.

Aside from the cost of the certificate, which we understand has already been

refunded to these people, there is also the possibility that at least some of these

people incurred costs in pursuing their interest in the property, which they may

otherwise not have done. For example, costs may have been incurred in obtaining

expert advice as to the state of the property and in attending an auction for the

property.

2. Buyers who purchased a property after receiving advice of no RMS interest in the

property, but who were subsequently advised of an interest.

31 Section 69 of the Civil Liability Act 2002 specifies that “(1) An apology made by or on behalf of a person in

connection with any matter alleged to have been caused by the person: (a) does not constitute an express or implied admission of fault or liability by the person in connection with that matter, and (b) is not relevant to the determination of fault or liability in connection with that matter; (2) Evidence of an apology made by or on behalf of a person in connection with any matter alleged to have been caused by the person is not admissible in any civil proceedings as evidence of the fault or liability of the person in connection with that matter.”

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(a) In numerous cases it seems that property owners have been able to be given

reasonable assurances that their properties will not be required for the relevant

road projects and will experience negligible short term impacts at most. This

seems to be particularly the case in relation to the M5 project.

(b) There may be cases where clarification has been obtained from RMS and the

land owner considers that there has been a significant loss of amenity or other

detriments.

(c) There are also cases where property owners continue to have a high degree of

uncertainty as to the future development and the impact on their properties.

This is particularly the case with those potentially affected by the F6.

(d) There are a relatively small number of other cases where the sub-strata of

properties will be required for tunnel construction

(e) There have been no cases so far where properties above ground have been subject to compulsory acquisition, but this always remains a possibility in the

future depending on confirmation of design and construction plans32.

The level of financial compensation that we recommend for each of these categories is as

follows:

1 $500 Compensation for errors when persons affected did not acquire the

properties concerned

We are of the view that a payment of $500 should be made available to potential

buyers on whose behalf certificates were acquired which were inaccurate. The

accuracy of the information contained in the CRR is critical to the effective operation

of the property market and this penalty for poor performance will reinforce this

point.

In some cases, people will have incurred costs in pursuing a property on which they

had obtained an inaccurate certificate. The compensation figure here has been set at

a level which will generally cover these costs.

We are mindful of the administrative costs likely to be associated with making

payments to the potential buyers concerned. It will be necessary for DFSI to contact

those affected through brokers and solicitors. Setting the penalty at a common

figure will reduce the need to assess evidence of cost impacts in each case and help

to make the process manageable.

We note again that this group of people were not specifically included in our terms

of reference and note that Government may wish to consider the broader

implications that this recommendation may possibly raise.

2a $5,000 Compensation for errors when properties purchased, but only minor

detriment and level of uncertainty experienced

32 The Minister did advise that there was one property where the land beneath a property was required for a

tunnel. Perrorret Media Release, 2 November 2016.

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This level of compensation recognises that the land owner may have been led into

error in purchasing the property as a result of a CRR error. However, since the land

owner may only have experienced minor detriment and no extended period of

uncertainty as a result of this error, no additional compensation beyond this amount

is required.

2b and 2c $30,000 Compensation for loss of amenity and/or uncertainty

In ordinary circumstances no compensation would be available for detriment due to

loss of amenity, which may cover things like increased noise and emissions as well as

loss of convenience and outlook. However, the circumstances here are unique with

people being led into error by inaccurate information supplied by a government

agency.

Financial compensation is also warranted for property owners who have faced

significant on-going uncertainty as to the impacts of proposed projects Uncertainty

has in many cases caused a high degree of stress and anxiety. Again this is through

no fault of the land owners, many of whom relied on the CRR to avoid any adverse

impacts from road developments.

In principle, we would want the level of compensation paid to be related to the level

of detriment demonstrated by the land owner. However, in many cases it will be

difficult for property owners to provide adequate evidence to support their claims of

detriment and significant costs may be involved for the property owners and the

Government to make these assessments.

In these circumstances we consider it would be appropriate to provide a common

level of compensation for property owners who can reasonably demonstrate a

significant detriment and/or on-going uncertainty. We consider $30,000 to be an

appropriate figure for this purpose.

Compensation for the reasonable costs of any legal advice sought in response to

notification of the CRR errors should be additional to this figure.

People adversely affected by new road projects, which are correctly advised to them

under the CRR, are not under existing arrangements entitled to any compensation,

except in extreme cases. There is a problem, however, if someone finds themselves

in an area of interest for another RMS project because they were mislead on account

of the CRR errors. This may be the case with some people affected by the M4-M5

project. We would not want to exclude these people from the possibility of also being

paid compensation as recommended, although it may be seen by some in

Government as creating awkward precedent. Each of these cases may need to be

examined individually. We would urge the Government to adopt a pro-consumer

perspective in reviewing these cases.

2d Owner option to have the property purchased

Where property owners consider they are or will be severely impacted by road

projects not properly disclosed to them by the CRR, they should, as an alternative to

21

receiving the $30,000 compensation payment, be given the option of having their

properties purchased by the government authority. This includes also instances

where tunnels impinge on the sub-stata of land titles.

We consider the sale price of these properties should be based on the purchase

price paid by the owner plus $75,000. This will facilitate and encourage a quick

resolution of these matters. It will avoid the potentially fraught process of trying to

determine a current valuation. Where prices are rising, the incentive for property

owners who are significantly disadvantaged will be to sell quickly. If their detriment

is less substantial, they will be less likely to sell and more likely to settle for the

immediate $30,000 compensation payment.

Compensation for the payment of stamp duty, lenders mortgage insurance, legal and

conveyancing fees on the owners property should also be paid to property owners who wish

to sell their properties as these expenses will have to be paid again on any replacement

property they purchase.

The reasonable costs of any legal advice sought in responding to notification of the

CRR errors should also be paid to them.

We do not consider that the RMS Exceptional Hardship Land Purchase Policy is

appropriate to dealing with this situation where property owners have been led into

error by government mis-information. The terms of this Policy are too stringent in

the circumstances.

2e Compulsory purchase of property

If there are any cases of compulsory acquisition, we would expect the land owner to

be fully compensated through the operation of the Land Acquisition (Just Terms

Compensation) Act 1991. However, the maximum payment for disadvantage due to

relocation should be paid in these cases.