Kilmaley Investments: Putting the brakes on the assignment of statutory compensation

The recent decision of the Supreme Court of Western Australia in the Kilmaley Investments Pty Ltd v City of Wanneroo [2019] WASCA commercial litigation case is an interesting development in case law relating to the assignability of a right to statutory compensation.

One of the issues contested in the appeal was whether s.208 of the Land Administration Act 1997 (WA) (“LA Act”), on its proper construction, permitted the assignment of a right to claim compensation under either s.20 of the Property Law Act (WA) 1969 or under the general law. 

The facts of the case are that part of the land known as lot 6 was taken by the State, at the request of the City of Wanneroo, on 3 November 2010. On this date, lot 6 was owned by the first appellant, Kilmaley Investments Pty Ltd (“Kilmaley”) and Mannor Holdings Pty Ltd (“Mannor”) as tenants in common. By a deed dated April 2013, Mannor purportedly assigned its interest in lot 6 to Kilmaley and its entitlement to compensation for the taking of land by the State (at the request of the City) to the second appellant, Shean Pty Ltd (“Shean”). Shean was the mortgagee of a registered mortgage granted in April 2009 over Mannor’s interest in the land, which secured loans of $2.8 million made by Shean to Mannor.

The appellants contended that primary judge had erred in finding that Mannor had ‘not validly assigned its chose in action’ under s.202 of the LA Act in that s.208 of the LA Act does not, on its proper construction, preclude the payment of compensation to an assignee with the interest of Shean, being a genuine commercial interest in taking the assignment, and not a bare right to litigate (i.e. a personal right of action for a breach of contract or in tort).

The Court held that the LA Act did not permit the assignment of a right to statutory compensation under s.202 of the LA Act and that the only persons entitled to compensation are those persons already having an interest in the land at the time it is taken or those persons falling within the special categories in s.208 of the LA Act (i.e. executors, administrators, trustees and guardians of a deceased person, infant, ward, beneficiary or incapable person who has an interest in the land at the time it is taken). Shean, having been assigned the right to compensation after the City’s compulsory acquisition, was therefore not entitled to compensation.

The Court considered Dawson v Great Northern and City Railway Co [1905] 1 KB 260, where it was held that the landholder’s right to compensation was assignable as property in equity, but did not apply it having found that entitlement to statutory compensation and whether it was assignable ultimately depended on the proper statutory construction of the LA Act.

This decision highlights that, even where a statute does not expressly prohibit assignment, statutory interpretation will play a pivotal role in determining what rights can be assigned, and in what circumstances.

For more information, contact our Construction Law team today.

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