Legal and valuation costs in NSW compulsory acquisition

Obtaining legal and valuation advice is often necessary when land or an interest in land is compulsorily acquired. The Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Just Terms Act) recognises some of those professional costs as compensation.

That does not create an automatic or unlimited indemnity. The statutory question is whether the particular cost falls within section 59, was reasonably incurred and has the required connection with the compulsory acquisition.

Acquisition-related legal and valuation costs claimed under section 59 must be kept distinct from the costs of conducting a compensation case in the Land and Environment Court. The distinction matters from the point advisers are engaged.

Section 59 governs acquisition-related professional costs

Section 55 identifies loss attributable to disturbance as one of the matters used to determine compensation. Section 59 then defines that loss by reference to specified categories.

For professional costs, section 59(1)(a)–(b) identifies:

“(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)”

The other paragraphs of that provision address different items, including relocation, replacement-property stamp duty, mortgage costs and other financial costs meeting the test in paragraph (f). An accountant’s, planner’s, engineer’s or other expert’s fee is not converted into a paragraph (a) or (b) cost merely because the work assisted a compensation claim. Any such cost needs its own statutory basis and evidence.

Reasonableness must be proved

Reasonableness is assessed in context. A useful record should show:

• why the adviser was engaged and the scope of the work;
• the stage of the acquisition at which the work was required;
• the rates or fee basis agreed;
• the work performed and time charged;
• how the advice or valuation related to the compulsory acquisition; and
• whether work was duplicated or could have been undertaken more proportionately.

The amount paid is evidence of the cost, but it is not conclusive of recoverability. An acquiring authority may question scope, duplication, rates, proportionality or the connection between the work and the acquisition. The Court can also determine those issues if the compensation amount is contested.

For valuation fees, section 59(1)(b) adds two express requirements. The valuer must be qualified, and the fee cannot be calculated by reference to the value the valuer assesses. Subject to the regulations, section 59(2) defines a qualified valuer by membership of the Australian Valuers Institute, the Australian Property Institute or the Royal Institution of Chartered Surveyors (each subject to stated conditions), or as a person of a class prescribed by the regulations. Before engaging a valuer, confirm that they meet section 59(2), including the class of membership they hold. The engagement letter should make the fee basis clear.

The work must be connected with the acquisition

Acquisition-related legal work may include advising on notices, identifying compensable interests, reviewing an offer, coordinating evidence, negotiating with the authority and preparing the compensation claim. Valuation work may include inspecting the property, identifying the appropriate valuation method, analysing comparable sales and assessing the acquired and retained land.

The statutory connection still needs to be shown. Work on an unrelated property transaction, a broader commercial restructure or a dispute independent of the compulsory acquisition is not recoverable under section 59 merely because it occurred at about the same time.

Similarly, engaging multiple advisers does not establish that every invoice was reasonable. The purpose and division of work should be documented, particularly where there is a change of solicitor or valuer, a second opinion, or overlapping legal, planning and valuation tasks.

Keep acquisition-related costs separately identified

A compensation claim should identify legal and valuation costs separately from the other compensation heads. A practical schedule can include:

Field	What to record
Date	date the work was performed or the liability incurred
Adviser	firm, practitioner or qualified valuer
Category	section 59(1)(a), section 59(1)(b), or another identified basis
Work	concise description of the task
Connection	why the work was required by the acquisition
Amount	fees and disbursements incurred, amount paid or owing, and goods and services tax (GST) treatment
Evidence	engagement, invoice, time record, report or correspondence

Update the schedule as the acquisition progresses. This makes it easier to distinguish acquisition work from later Court work and to explain why each item was incurred.

Class 3 proceeding costs follow a different pathway

Court costs are distinct from legal and valuation costs claimed as disturbance under section 59. Claims for compensation by reason of the acquisition of land fall within Class 3 under section 19(e) of the Land and Environment Court Act 1979 (NSW). In Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328, Basten JA held that there is no presumption in Class 3 compensation proceedings that costs follow the event, because the ordinary rule to that effect in the Uniform Civil Procedure Rules 2005 (NSW) does not apply to them: [60]. That exclusion remains in Schedule 1 of those Rules. His Honour said at [70] that a claimant “should usually be entitled to recover the costs of the proceedings”, having acted reasonably and not conducted them in a way that causes unnecessary delay or expense. The discretion remains fact-sensitive: [71]–[72]. Macfarlan JA agreed at [84] and Handley AJA at [85].

Where Stone & Pillar Legal conducts the proceedings, the costs sought will include the firm’s professional fees, together with applicable counsel and expert costs. Recovery is not necessarily dollar for dollar. Costs remain within the Court’s discretion, may be agreed or assessed, and can be affected by unnecessary work, delay, offers and the way issues are run.

Formal offers of compromise matter in particular. Once proceedings are on foot, either party may make an offer of compromise under Part 20, Division 4 of the Uniform Civil Procedure Rules 2005 (NSW). Those rules, and the costs rules for offers in Part 42, Division 3, are not excluded from Class 3 compensation claims. So an offer of compromise that is not accepted can change the costs orders made at the end of the proceedings, unless the Court orders otherwise. The offer in the compensation notice is not an offer of compromise under those Rules; its statutory consequence is the interest rule discussed below.

These costs are dealt with through the Court’s costs jurisdiction, not added to compensation under section 59. The current Practice Note: Class 3 Compensation Claims, which commenced on 12 November 2025, governs case management. It requires each party’s contentions to include a schedule of disturbance losses under section 59(1)(a) to (e) and a separate schedule of other financial costs under section 59(1)(f), with the factual foundation for each where appropriate.

Once litigation becomes likely, invoices and expert scopes should identify whether work concerns the acquisition claim itself, the preparation and conduct of Class 3 proceedings, or both.

An objection creates its own costs consequences

Section 66(1) of the Just Terms Act provides:

“A person who has claimed compensation under this Part may, within 90 days after receiving a compensation notice, lodge with the Land and Environment Court an objection to the amount of compensation offered by the authority of the State.”

An objection puts the compensation assessment before the Court, including any disputed section 59 legal and valuation costs. It also starts a proceeding with its own costs consequences. The compensation claim and the proceeding-costs claim should remain separately identifiable even if some advisers work across both phases.

There is also an interest consequence. Under section 66(4), if the Court decides that the compensation payable (without interest) does not exceed the authority’s offer by more than 10 per cent, the Court may cancel or reduce the interest that has accrued on the compensation since the proceedings began.

The records should disclose purpose, connection and proportionality

Keep the engagement, invoice, itemised time and payment records, together with the valuation material and correspondence showing why the work was required. Once proceedings are contemplated, use separate matter descriptions or invoice narratives for acquisition work and litigation work. Record any change of adviser, duplication or unusually intensive work.

Clear records do not guarantee recovery. They allow the statutory connection, reasonableness and correct costs pathway to be assessed.

For the wider compensation framework, read just terms compensation in NSW. For non-professional disturbance items, read disturbance loss in compulsory acquisition. A shorter summary is on our page on legal and valuation costs in compulsory acquisition.