Full length article referred to in The Stock Journal, by Andrew Goode.
There have been a number of stories recently relating to mines and proposed transport corridors to take minerals to sea ports.
If the mines are developed many farmers will lose the use of the corridor land through compulsory acquisition by way of an easement and be offered monetary compensation.
You never know when a mine, or its ancillary infrastructure may end up on your land, whether it be by the way of pipelines, railways or power grids.
You should never assume the first offer is the best one, even if the offer is based on an expert’s valuation.
You should seek legal advice, and in may cases, your own independent valuation. Your valuer will in all likelihood get more information from you than the miner/utilities valuer and it may therefore be a more accurate assessment of your loss.
A good example of why you should get your own valuation was a 1989 Supreme Court decision which is still a leading case.
In that case ETSA pursuant to the Land Acquisition Act (SA) acquired a compulsory easement over the farmer’s land to erect a high voltage power line.
The farmer’s land was a well established and managed pastoral and grazing property in the South East near Padthaway.
At the time it was apparently the first case in which the South Australian Supreme Court was asked to assess the compensation payable for the compulsory acquisition of an easement by ETSA or any other public authority.
The easement was acquired in connection with the construction and erection of a new major 275 kv transmission line from Tailem Bend to the South East. It extended for approximately 3 miles over the plaintiff’s land with an average width of the easement of 50 metres over a total agreed area of 24.675 hectares. Eleven steel pylons or towers were erected at more or less regular intervals, and the base of each tower straddled approximately the midline of the easement, with intervals between the towers of 439 to 476 metres. Seven of the towers were just over 50 metres high and the other 4 varied in height from 34.1 to 47.1 metres.
Each tower supported 6 transmission lines, with two earth wires strung on either side of cross arms. They were not small electricity towers.
Eighty major trees were felled from the path of the easement and 15 other trees were trimmed, as part of the easement through moderately well-timbered country.
Some of the pasture land within the easement was seriously damaged by excavation to accommodate the concrete bases, and partly by wheel and tyre tracks.
Prior to trial the farmer and ETSA came to a settlement in respect to that pasture damage and went to trial on the other issues as to the value of the land lost to the easement and the disturbance.
The valuer engaged by ETSA, and the valuer engaged by the farmer, according to the Judge had starkly different approaches to the task of valuation.
The trial judge, Justice Jacobs quoted with approval to comments of a Judge in an earlier case who said:
"The task of the Court was to ‘restore, as best it may, the claimant [here the farmer] in money form, to the position which he enjoyed prior to the taking of the easement."
He further said:
"The test is the attitude of the hypothetical prudent purchaser and the extent to which in the opinion of such a person the claimant has suffered diminution in the value of his property resulting from the erection of the transmission line over his land, the creation of the easement including where appropriate severance and injurious affection damage."
The quoted Judge further said each case must be considered "according to the terms and conditions of the easement created, and the frequency and magnitude of the disturbance likely to result in consequence to the claimant’s proprietary rights."
That Judge also said, "if grazing land only is affected by the easement the amount of disturbance will be less than in the case of arable land."
I think it is fair to say that the assessment of loss will depend in part on where the easement is located. For example, the loss is likely to be greater if the easement is close to a homestead compared to if it is a long way from it.
In the South Australian case Justice Jacobs also referred to the potential harmful health effects from electric and magnetic fields created by transmission lines and noted that the present state of knowledge was equivocal, although we are talking science from 1989, not 2013. There is no doubt more knowledge on this issue now.
There was also discussion of what was described as the scientific phenomena of "corona" and "aeolian vibration." Corona was, to quote the judge, "a crackling, popping or hissing sound discernable by the human ear, and a low frequency hum". Aeolian vibration was described as a "resilient oscillation caused by the wind which the witness [from ETSA] likened to the vibration on a violin string."
The valuer for ETSA and the valuer for the land holder were at odds even though they were both well known valuers with "impressive credentials."
The farmer’s valuer inspected the property both before and after the erection of the towers and the Court also inspected the farm. Essentially the farmer’s valuer assessed the valuation at $40,600.00, although after taking into account the settlement in relation to damage to the pasture his valuation was put at $38,400.00.
The farmer’s valuer took into account a number of matters including:
The aesthetic effect of the transmission line upon the appearance and amenity of the property;
The loss of 80 large Eucalypts;
The height of the towers, and the location in timbered country, impacting on aerial topdressing, seeding and spraying;
The obstruction of the towers to the ordinary use of farm machinery;
Interference with radio reception, particularly two-way radio;
The generation of noise as at least an annoyance;
Possible but unknown health hazards by reason of the electro-magnetic fields;
The risk inherent in periodic patrols with the transfer by ETSA vehicles or personnel of seeds or noxious of weeds.
Ongoing but identified administrative costs;
The blot on the Title by reason of the registration of an easement.
ETSA’s valuer on the other hand, in evidence given to the Court assessed the loss as $4,000.00.
The Judge preferred the approach of the farmer’s valuer and was critical of ETSA’s valuer in particular for relying on amounts accepted by way of negotiation of compensation by other farmers for their easements, his reliance on an indemnity, an assertion that the easement and the power line placed no real burden on the land and his reliance on "sales evidence".
Ultimately, the Judge reduced the valuation of the farmer’s valuer as well and awarded compensation of $20,725.00 which was still much higher than the initial offer from ETSA of $4,000.00.
The Judge noted that the amount awarded was much higher than ETSA had paid in negotiated settlements but also made the comment that the amount assessed would be viewed by "many as really quite modest compensation for the magnitude of the intrusion".
Interestingly, ETSA tendered a schedule of some 160 easements between Tailem Bend to the South East Substation and the compensation paid for those easements.
The Judge rejected that evidence and said "The fact is that ETSA has struck the best negotiated settlement possible with each land owner, but it by no means follows that they have received full compensation in terms of the Act. That has never been put to the test, for the very obvious reason that, faced with the threat of compulsory acquisition and the prospect of finding a disputed claim, most land owners have accepted ETSA’s best offer rather than incur the trouble and expense of a contest which, as in this case, far exceeds the uncertain benefit by way of increased compensation. Even the amount in issue in this case, about $32,000.00 after conceded adjustments, is minimal in relation to the overall value of [the farm]."
Therein lies the flaw in the compensation system that applies when dealing with miners, public utilities and others. While government of the day may say people whose property is compulsory acquired will receive full compensation for their acquisition that is often not the reality.
Land owners will often face the situation where if the acquirer offers a compensation sum, albeit in the lower range of possible values, they will face strong financial pressure to accept it rather than run the risk of losing a Court case.
It is not surprising that many people who face a compulsory acquisition of their land feel resentful.
In my opinion the amount payable to land owners in cases of compulsory acquisition should have an added component such as 1.25 – 1.50 of the value otherwise determined to try and balance negotiation positions. The reality otherwise is that the land owner is under substantial pressure to accept a much lesser sum than that otherwise potentially payable.
If a miner or public utility cannot afford to pay compensation at a level of 1.25 – 1.5 times the potential value then they cannot afford to fund their project anyway.
I am not suggesting that ETSA took advantage of the situation in this case as they were entitled to rely on their own expert valuation, but the Judge noted that the reality that land owners when faced with different valuations often accept a lesser sum because of potential risks of Court litigation. That was the case in 1989 and it remains the case now.
Further information: Andrew Goode Ph: 8414 3400 or email: email@example.com
Practice Area: Farm Law