Almona Pty Ltd v Roads and Traffic Authority of New South Wales

Land and Environment Court (NSW)|2008-03-03|Before: Jagot J, Mr P

CITATION : Almona Pty Ltd v Roads and Traffic Authority of New South Wales [2008] NSWLEC 112

APPLICANT Almona Pty Ltd PARTIES : RESPONDENT Roads and Traffic Authority of New South Wales

KEY ISSUES: Compulsory Acquisition of Land :- compensation - partial acquisition - market value of acquired land - impact on value of residual land - disturbance - method of valuation where before and after valuation yields nil value - whether loss alleged to be the result of carrying out of the public purpose is compensable as disturbance - direct and natural consequences of the acquisition - interaction between s 55(f) and s 59(f) of the Land Acquisition (Just Terms Compensation) Act 1991

LEGISLATION CITED: Land Acquisition (Just Terms Compensation) Act 1991

AMP Henderson Global Investors v Valuer General (2004) 134 LGERA 426 Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259 Blacktown City Council v Roads and Traffic Authority (NSW) (2006) 144 LGERA 265 Bronzel v State Planning Authority (1979) 44 LGRA 34 Caruana v Port Macquarie-Hastings Council [2007] NSWLEC 109 Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited and Others (1947) 74 CLR 358 Dessent v Commonwealth of Australia (1977) 13 ALR 437 Doherty and Doherty v Commissioner of Highways (1974) 7 SASR 57 CASES CITED: Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) (2000) 108 LGERA 417 Marshall v Director General, Department of Transport (2001) 205 CLR 603 Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 McBaron and Others v Roads and Traffic Authority of New South Wales (1995) 87 LGERA 238 McInnes and Another v Commissioner of Highways (1992) 78 LGERA 410 Mir Bros Unit Constructions Pty Ltd v Roads & Traffic Authority of New South Wales [2006] NSWCA 314 Roads & Traffic Authority of New South Wales v Peak [2007] NSWCA 66 Spencer v The Commonwealth of Australia (1907) 5 CLR 418 The Commonwealth of Australia v Morison (1972) 127 CLR 32 Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5

APPLICANT Mr G Miller QC with Mr Turvey To SOLICITORS Minter Ellison LEGAL REPRESENTATIVES:

RESPONDENT Mr P Tomasetti SC SOLICITORS Corrs Chambers Westgarth

THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

ROADS AND TRAFFIC AUTHORITY OF NEW SOUTH WALES Respondent

JUDGMENT Jagot J: A. Introduction 1 On 26 May 2006 the Roads and Traffic Authority of New South Wales (the RTA) compulsorily acquired part of a large parcel of land owned by Almona Pty Limited (Almona) for the purpose of the North-West Bus Transitway project. The large parcel, lot 300 in deposited plan 1024047, is the Parklea Markets site at Parklea. The acquisition involved two strips of land along the Sunnyholt Road frontage of the site (which became lots 102 and 103 in deposited plan 1092236).

2 The Valuer-General determined the amount of compensation to be offered to Almona in the sum of $1,182,000 (s 42 of the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Compensation Act)). Almona objected to this amount, with the consequence that the Court must hear and dispose of Almona's claim for compensation (s 66 of the Just Terms Compensation Act).

3 Almona claimed compensation as follows: - (i) $3,000,000 on account of the market value of the acquired land (s 55(a) and s 56(1) of the Just Terms Compensation Act), and (ii) $3,190,736 on account of disturbance by reason of decreased rental income and loss of opportunity for rental increases from market stalls (s 55(d) and s 59(f) of the Just Terms Compensation Act). The parties agreed on the amount payable for other disturbance (s 55(d) and s 59(b) and (f) of the Just Terms Compensation Act) in the sum of $18,200.

4 Leaving aside the agreed amount for other disturbance, the RTA claimed that Almona was entitled to compensation of $439,129 on the following bases: - (i) the market value of the acquired land at the acquisition date was $1,500,000 (s 55(a) and s 56(1) of the Just Terms Compensation Act), but (ii) the value of the residual Parklea Markets site at the acquisition date increased by reason of the proposal to carry out the public purpose for which the land was acquired (s 55(f) of the Just Terms Compensation Act), and (iii) the increase in value of the residual Parklea Markets site was $1,060,871, which amount must be offset against the market value of the acquired land.

5 Almona's entitlement to compensation must be assessed in accordance with the provisions of the Just Terms Compensation Act, in particular ss 55, 56, 59, and 61. Those provisions are as follows: 55 Relevant matters to be considered in determining amount of compensation

In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division):

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

(1) In this Act: market value of land at any time means 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 (for the purpose of determining the amount that would have been paid): (a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and (b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and (c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law.

(2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition.

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 reasonably incurred by those persons in connection with the compulsory acquisition 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), relating to the actual use of the land, as a direct and natural consequence of the acquisition.

61 Special provision relating to market value assessed on potential of land

If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:

(a) any financial advantage that would necessarily have been forgone in realising that potential, and (b) any financial loss that would necessarily have been incurred in realising that potential.

6 Further, it was common ground that where a genuine doubt relevant to value remains it should be "resolved in favour of a more liberal estimate" (Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited and Others (1947) 74 CLR 358 at 373 - 374).

7 The hearing included an inspection of the site, the acquired and surrounding land, and sale sites as nominated by Mr Eccleston and Mr Dempsey, valuers.

B. Some uncontentious information 8 The Parklea Markets site contains four sections of land and had a total area of 22.052 hectares before the acquisition. Two of the sections (the southern parking section and the main section accommodating the markets building within which stalls are located) front Sunnyholt Road. The acquired land (lots 102 and 103) consists of long strips along the Sunnyholt Road frontage. Lot 102 is a strip along the front of the southern parking section with a length of about 293m and a depth ranging from about 5m to 10m, having a total area of 1947m2. Lot 103 is a strip along the front of the main section with a length of about 530m and a variable depth of between 10m to 12m (and a wider area of 25m near the Transitway or T-way stop), having a total area of 8722m2. The acquired land was not occupied by any structure but contained a landscaped frontage with some informal at grade parking.

9 The total area of the acquired land is 10,669m2 (1.0669 hectares). Accordingly, after the acquisition, the Parklea Markets site has an area of 20.985 hectares. The other sections of the site are the dog track section and the service section. A watercourse (Caddies Creek) and surrounding strip vested in Sydney Water separate the dog track section from the main markets section but there is no physical or insuperable legal impediment to access across this land. The service area fronts Old Windsor Road and is to the east of the dog track section. The service section accommodates a service station, fast food restaurant, car wash, and steakhouse restaurant. No part of the dog track section or service section was acquired or affected by the acquisition.

10 At the acquisition date the acquired land was (and remains) zoned 5(b) (Special Uses - Arterial Road and Road Widening Zone) under the Blacktown Local Environmental Plan 1988 (the LEP). The balance of the Parklea Markets site was (and remains) zoned 5(a) (Special Uses - General Zone) under the LEP. In the 5(a) (Special Uses - General Zone) development permissible only with consent includes the purpose indicated by black lettering on the zoning map. The vast majority of the balance of the Parklea Markets site has the purpose "markets" so indicated. A small area at the southern end of the southern parking section is designated for drainage purposes. The acquired land would have been subject to the special uses zoning permitting the markets purpose but for the public purpose. Limited development is otherwise permissible in the 5(a) (Special Uses - General Zone) under the LEP.

11 The LEP contains special provisions with respect to the Parklea Markets site (cl 31 and cl 31A) as follows: 31 Parklea Markets

(1) This clause applies to the land shown edged heavy black on the map marked "Blacktown Local Environmental Plan 1988 (Amendment No 1)".

(2) In this clause: appointed day means the day on which Blacktown Local Environmental Plan 1988 (Amendment No 1) took effect. designated building means the building situated, as at the appointed day, on the land shown hatched on the map marked "Blacktown Local Environmental Plan 1988 (Amendment No 1)". stall area means a marked-out area, not exceeding 10 square metres of the floor of the designated building, in respect of which a number has been permanently assigned and on which that number is displayed. week-end market means a place (other than a shop) where goods (including food) are sold by 2 or more persons from temporary stalls, booths, benches or tables on a Saturday or Sunday, or on any public holiday which occurs on a Monday, between 7.30 am and 6 pm.

(3) Except as otherwise provided by this clause, the carrying out of development on the land to which this clause applies is prohibited.

(4) A person may, with the consent of the council, use designated building for the following purposes: (a) a week-end market, (b) a plant nursery, (c) a cultural, recreational, sporting or entertainment facility, including exhibitions, trade shows and the like.

(5) Development consent for the purpose specified in subclause (4) (c) authorises the use of the designated building for the particular purpose concerned on one occasion only or, if the council specifies a particular period for which the use is authorised, for the period so specified.

(6) The council shall refuse consent to an application to use the designated building for a purpose specified in subclause (4) if it is not satisfied that adequate provision have been made in relation to the following matters: (a) carparking on the surrounding land, (b) services (including water, drainage, sewerage and roads) to the land comprising the site on which the designated building is situated, (c) protection of the amenity of adjoining land.

(7) The council may grant consent to an application to alter the designated building, except if the alteration would result in an increase in the gross floor area of the designated building as at the appointed day.

(8) A person shall not use the designated building for the purposes of a week-end market if there are more than 500 stall areas occupied by temporary stalls, booths, benches or tables within the designated building.

(9) No direct vehicular or pedestrian access is permitted between the land to which this clause applies and Old Windsor Road.

(10) A person shall not use the designated building for a purpose specified in subclause (4) (c) after 5 pm in any calendar year if it has been used on 12 occasions in that calendar year for such a purpose after that time or, if the council specifies a particular number of days in any one calendar year within which the designated building may be so used, it has been used in that calendar year for that number of days for such a purpose after that time.

(11) A person shall not carry out development on the land to which this clause applies unless: (a) arrangements satisfactory to the Water Board have been made with that Board for the provision of water services to the land, and (b) arrangements satisfactory to the council have been made with the council for the provision of sewerage services to the land.

(12) In carrying out development on the land to which this clause applies, a person must comply with the requirements (if any) specified in respect of the development: (a) by the Manager of the Theatres and Public Halls Branch of the Department of Local Government, and (b) the State Pollution Control Commission.

(13) If the sale or disposal of farm produce at any week-end market constitutes a public market within the meaning of section 15 of the Sydney Market Authority Act 1968, a person shall not carry out development on the land to which this clause applies for the purposes of a week-end market unless written permission from the Sydney Market Authority has been obtained in accordance with that section.

(14) Nothing in this clause: (a) prevents the council from granting consent to an application to carry out development relating to a matter specified in subclause (6), or (b) prevents the use within the designated building of the refreshment room known, as at the appointed day, as the "Golden Nugget", or (c) prevents the use within the designated building of the eight shop structures, as shown in the locations identified by survey on the drawing marked "Plan Showing Shop Structures within Parklea Markets", reference 2345/1 and dated 9 October 1989, deposited in the office of the Council for the purpose of retailing of food when the designated building is being used for a purpose referred to in subclause (4).

31A Development of land for markets administration building, Parklea Markets

(1) This clause applies to so much of Part Lot 300, DP 1024047, Sunnyholt Road, Glenwood, as is shown edged heavy black on the map marked "Blacktown Local Environmental Plan 1988 (Amendment No 173)" deposited in the office of the Council.

(2) A person may, with the consent of the Council, carry out development on the land to which this clause applies for the purpose of a markets administration building, subject to the gross floor area of the building not exceeding 1,000 square metres.

(3) In this clause: markets administration building means a building used only for office or business purposes (or both) ancillary to the operation and management of the Parklea Markets. 12 Clause 47 of the LEP is also relevant and is in these terms: 47 Service centres

(1) The council shall not grant consent to the carrying out of development for the purpose of a service centre in any zone unless it is satisfied that: (a) there is a separation distance of at least 2 kilometres between the proposed service centre and any established service centre or service station, or proposed service centre or service station that has received development consent, except where any such established or proposed service centre or service station is located on the opposite side of the road within Zones Nos 5 (b) or 5 (c) adjoining the proposed service centre, and (b) the proposal would not result in unacceptable traffic delays or have a great impact on the operation of intersections in the vicinity, and provides safe access to and from the site, based on a comprehensive traffic study prepared by a suitably qualified person.

(2) In determining an application to carry out development for the purpose of a service centre, the council must consider the following: (a) the potential cumulative impact of the proposed service centre on like uses such as service stations in the locality, (b) whether the operation of and access to and from the service centre is likely to cause disturbance to residents or impinge on existing lawful uses in the vicinity, and (c) whether or not the service centre is likely to substantially alter the character of its locality.

(3) Notwithstanding the provisions of subclauses (1) and (2), where the council is of the opinion that the local community is not likely to be provided with adequate convenience retail facilities in the foreseeable future, the council may grant consent to a service centre which is at variance with the criteria set out in subclauses (1) and (2).

13 Clauses 31 and 31A of the LEP are the result of the site's unusual planning and zoning history. The markets use commenced without consent in the 1980s. At that time the site was within a rural zone and had been approved for use as a wholesale and retail plant nursery. The rural zoning was maintained when the LEP commenced in 1988. About a year later the markets use was permitted by a site-specific amendment that did not alter the rural zoning. The principal consent for use of the site for a weekend market of 500 stalls was granted in 1990. The special use zone was imposed in 1991 (with markets as the use nominated on the map). The markets have operated on the site for about 17 years. Condition 10 of the principal consent requires provision of 3000 off-street car spaces.

14 On subsequent occasions attempts have been made to increase the hours of operation of the markets beyond that permitted by cl 31 of the LEP. In 1999 a Commission of Inquiry was held with respect to one of these proposals (involving trading on Fridays). The Commission recommended rejection of the proposed extended hours of operation on nine grounds, including inconsistency with other planned retail centres and poor public transport access, with transitways and other public transport options being uncertain at that time.

15 The North-West Transitway project involves key links between Blacktown, Parramatta and Rouse Hill. A link to Castle Hill originally proposed has not proceeded. The T-ways involve dedicated high-speed bus lanes connecting to centres and other bus and transport feeder services. The RTA acquired the land from the Parklea Markets site to accommodate part of the T-way and one of the T-way stations or stops (Stanhope (Parklea Markets) station). The Parklea Markets site is also close to the T-way running along Old Windsor Road. The intersection of Burns Road and Sunnyholt Road east of the Parklea Markets site is an interchange between the two T-ways.

16 The expert evidence traversed numerous issues. However, certain matters addressed in that evidence were ultimately either agreed, not pressed by Almona, or did not meaningfully relate to the parties' competing claims about compensation.

17 Mr Ryan and Mr Sanders, planners, addressed the development potential of the markets site disregarding the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired (namely, the North West T-way). Mr Nettle and Mr Brogan, traffic planners, considered the effects of the acquisition on the markets site in terms of available parking spaces, accessibility and (in Mr Brogan's case) potential patronage of the T-way system and the markets site. Mr Duane and Mr Hack, land economists, dealt with the effects of the North West T-way on the patronage of the markets site. Mr Zoras and Dr Ferrier, accountants, analysed the effects of construction of the North West T-way on the rental income derived by Almona from the operation of the markets. Mr Eccleston and Mr Dempsey, valuers, provided valuation evidence about Almona's entitlement to compensation in accordance with the Just Terms Compensation Act. Mr Constantine (the managing director of Almona) and Mr Elters (the manager of the markets) gave evidence about factors affecting the operation of the markets.

18 I propose to deal with the evidence insofar as it bears upon the issues requiring resolution. The issues relate to the heads of compensation claimed by Almona and the RTA's claim that the value of the residue land at the acquisition date increased as a result of the proposal to carry out the public purpose for which the land was acquired. It is convenient to deal with these issues in the following order: (1) What was the market value of the acquired land on the date of its acquisition (s 55(a) of the Just Terms Compensation Act)?

(2) Is Almona entitled to $3,190,736 (or any sum) on account of disturbance by reason of decreased rental income and loss of opportunity for rental increases from market stalls (s 55(d) and s 59(f) of the Just Terms Compensation Act)?

(3) Was there any increase in the value of the residue of the markets site by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired (s 55(f) of the Just Terms Compensation Act)? Market value of acquired land (s 55(a))

19 Mr Eccleston assessed the market value of the acquired land on two bases. His principal method involved capitalising the income stream of the entire site (including the service centre section) from which he deducted the depreciated value of all of the improvements to yield a residual land value of land zoned to permit the markets. His secondary method involved assessment of a wide range of retail, employment lands, and residential sales.

20 In his principal valuation, Mr Eccleston used the net income of the entire site averaged over four years ($5,101,371) capitalised at a rate of 6.5% to determine the capital value of the site ($78,482,633). He assessed (by an undisclosed process of reasoning) the depreciated value of all of the improvements in the amount of $14,846,482. He deducted this amount from the capital value, giving a residual land value of $63,636,151. Mr Eccleston divided this amount by the total area of the site (220,520m2) resulting in a land value per m2 of $289. He applied this rate per m2 to the acquired land (10,669m2) to determine the market value of the acquired land as $3,078,787.

21 For his secondary method, Mr Eccleston concluded that there were no sales capable of meaningful comparison to the site. Accordingly, he considered sales of three bulky goods or retail development sites, five industrial development sites, and six en globo residential sites. His analysis (without any adjustments) showed a range of $304 to $710 per m2 for the bulky goods or retail development sites, $220 to $319 per m2 for the industrial development sites, and $274 to $345 per m2 for the en globo residential sites. Mr Eccleston considered that these ranges supported a rate of $275 per m2 for the site (or $2,933,425 for the acquired land). The claim of $3,000,000 for market value of the acquired land represents the mid-point between the results of Mr Eccleston's two valuation methods.

22 Mr Dempsey considered Mr Eccleston's principal method to be inappropriate in the circumstances of the case and incapable of reliably yielding the acquired land's value. Mr Dempsey emphasised the uncertainties associated with the depreciation exercise (which had not been explained in Mr Eccleston's report). In Mr Dempsey's view, these uncertainties could translate into many millions of dollars to the final result. He also gave an example of a buyer considering purchase of the site without the improvements. In any such case, many factors would affect the bargain struck with the seller including anticipated costs of construction and obtaining approvals, risks associated therewith, and time delays. Mr Dempsey noted that Mr Eccleston's principal method did not take into account these factors.

23 Mr Dempsey said that partial acquisitions are usually assessed by the before and after method. As this site involves an income-producing asset, the before and after approach would involve comparing the capitalised net income being produced before and after the acquisition. The acquisition involved a landscaped area with some car parking. The acquisition had no effect on the income produced by the markets or the service centre on the Old Windsor Road frontage and thus no effect on the site's income producing capacity (a conclusion with which Mr Eccleston agreed). Accordingly, applying the traditional before and after approach to the net present value of the capitalised income stream yielded a nil value for the acquired land. Mr Dempsey considered this result inconsistent with the fact that land usually has value and his task of assessing just compensation. In consequence, Mr Dempsey considered an alternative approach.

24 Mr Dempsey agreed with Mr Eccleston that there were no sales comparable to the Parklea markets site. By analogy to his understanding of the process of reasoning adopted in Blacktown City Council v Roads and Traffic Authority (NSW) (2006) 144 LGERA 265, Mr Dempsey observed that the land surrounding the markets site (at least along the Sunnyholt Road frontage, where the main markets and southern parking sections are located) was zoned and used for residential purposes. He also took into account that any future rezoning and redevelopment of the main markets site most likely would be for residential purposes. On that basis, Mr Dempsey assessed sales of en globo residential sites, adjusted to take into account the costs and risks associated with rezoning and redevelopment of the site. This analysis led Mr Dempsey to adopt a value of $140 per m2 for the acquired land (or a value of $1,500,000 for the 10,669m2 acquired). Mr Dempsey also considered that, properly analysed, Mr Eccleston's sales of residential land along Sunnyholt Road supported this conclusion.

25 Mr Eccleston thought Mr Dempsey's alternative method inappropriate because it did not relate to the value of the site for its present (and agreed highest and best) use as markets.

26 Four observations may be made immediately. First, although the Parklea markets site contains the four sections described above, the acquisition involved land fronting the main markets and southern car park sections only. Mr Eccleston's approach involved the entire site (because the land is not held in subdivision), but the service centre area and dog track area were unaffected by the acquisition. Secondly, the valuers agreed that the current markets use was the highest and best use. Thirdly, the planners agreed that the site has been fully developed for the markets purpose having regard to cl 31 and cl 31A of the LEP. Fourthly, and as the valuers accepted, there are no sales capable of meaningful comparison with the site as used for the markets purpose.

27 The site is unusual and the acquisition presents difficulties for the valuer attempting to assess the value of the land taken. I accept that both valuers have attempted to apply methods capable of providing assistance to the Court in all the circumstances. Given the lack of comparable sales, the caution of Wells J in Bronzel v State Planning Authority (1979) 44 LGRA 34 at 38 is apt. Wells J observed that: …this Court should be slow to reject any method that, in expert hands, is capable of yielding a result within bounds that are not unreasonable. The limitations of every method must, of course, always be kept clearly in mind. I am of the opinion that the approach likely to result in the most direct and reliable resolution of the outstanding differences between the valuations is to consider the particular features of each valuation that are capable of yielding to adverse criticism.

28 I am satisfied that Mr Eccleston's approaches have not yielded reliable results. Mr Eccleston's principal method did not adequately reflect the significance of the fact that the relevant income-producing activity takes place in the main markets building (within which stalls are rented). The site will not produce that income without the building. The value of the site to a buyer and seller for the purpose of the agreed highest and best use is dependent on the activity within the building continuing. Notionally removing the depreciated value of the building does not capture the residual value of the two strips of land acquired. It captures the value of the site assuming that the site without the building has the same immediate income producing potential as the site with the building. This concern reflects the RTA's reference in submissions to the observations in the Australian Property Institute's publication, The Valuation of Real Estate, 12th ed (2007) that the residual approach "is generally applicable when the building's contribution to total property value is relatively small and easy to identify" (at 260). Neither condition is met in this case. Further, and as Mr Dempsey said, "small variations" in the variables "can result in a dramatic change in land value" (at 265).

29 The problems with the approach in this case are apparent.

30 First, and as Mr Dempsey suggested, a buyer and seller of the site at the acquisition date (with the site assumed to be vacant and zoned to permit the markets) would not reach a bargain about price by merely adding a depreciated building cost to the land value. The markets site is not analogous to a dwelling house (where, as the High Court observed, the depreciated value of improvements are routinely deducted to assess land values: Maurici v Chief Commissioner of State Revenue (2003) 212 CLR 111 at [19]. See also the caution expressed in AMP Henderson Global Investors v Valuer General (2004) 134 LGERA 426 at [48]). The buyer and seller would take into account the costs, risks (if any) and time associated with erecting a building on the land and for the site to become an income-producing asset, as well as costs and expenses in the interim (such as rates, holding charges and the like). Mr Eccleston did not factor in these components. Mr Dempsey did not attempt to do so either because he considered the exercise inherently unreliable.

31 Secondly, Mr Eccleston adopted a capitalisation rate of 6.5% having regard to: - (i) the undeveloped state of the dog track area, (ii) the capacity to enlarge the existing markets, (iii) the income from the service centre being secured by long-term leases, and (iv) the yields for investment grade regional shopping centres and large industrial properties (being 6 to 7% and 7 to 7.5% respectively). Mr Dempsey, when dealing with the RTA's claim of increased value of the residue land, adopted a capitalisation rate of 14%. Mr Dempsey did not consider the markets site to be an investment grade asset. He described the markets as bearing no resemblance to a large regional shopping centre or industrial property (the markets' income being dependent on individual stall holders rather than head lessees, with no long-term leases secured by bank guarantee). Mr Dempsey also noted the agreement of the planners that the site was fully developed for the markets purpose.

32 Some part of this difference between the valuers may be a result of Mr Eccleston's focus on the whole site and Mr Dempsey's on the main markets and southern car parking sections. Irrespective of that source of difference, Mr Dempsey's analysis of this issue was persuasive. The markets generate most of the income. The income produced by the markets is dependent on individual stall holders. This business cannot be compared to a regional shopping centre or large industrial site. The markets site is not an investment grade property of that character. Mr Dempsey's relatively high capitalisation rate of 14% fairly and reasonably reflects the nature of the markets business and the income it produces. Mr Dempsey calculated a capital value of $43,505,543 (on an operating profit of $6,090,776) and $39,733.014 (on an operating profit of $5,562,622). Adopting this approach to the capital value of the markets site would lead to a materially different (and lesser) value even if Mr Eccleston's residual land value approach were otherwise accepted.

33 Thirdly, Mr Eccleston nominated a figure for the depreciated value of all improvements ($14,846,482). This figure relates to all of the buildings on the whole site (including the buildings on the service area unaffected by the acquisition). Mr Eccleston's report does not provide any explanation of this depreciated value of improvements. As Mr Dempsey observed, it is questionable whether the main markets building has suffered any functional obsolescence. Mr Eccleston's approach to physical deterioration and functional and economic obsolescence remained undisclosed and thus his depreciated building values could not be meaningfully assessed.

34 The assessment of compensation for this acquisition presents a conundrum. The RTA acquired relatively large strips of land (over one hectare) from a far larger site. The valuers agreed that the acquisition did not affect the dog track or service centre sections. Accordingly, insofar as relevant, the site was used for the business of conducting markets. The valuers also agreed that the acquisition did not affect the income producing potential of the markets. Further, and contrary to an observation of Mr Eccleston, the acquisition did not remove any land capable of accommodating an expansion of the markets business. The site is zoned so as to permit the markets use at a certain level of intensity measured by stall numbers (which the site met at the acquisition date). The planners agree (and I accept) that there was no capacity for any expansion of the markets under the existing or any reasonably anticipated planning controls at the acquisition date.

35 A conventional analysis of the value of the site as an income-producing asset before and after acquisition, on these facts, yields a nil value for the acquired land. Yet, as Mr Dempsey properly accepted, the land has value and an attempt must be made to apply recognised valuation techniques to capture that value at the acquisition date. Accordingly, and consistent with the object of the Just Terms Compensation Act to ensure just compensation (ss 3(1)(b) and 54(1)), it is necessary to consider Mr Eccleston's secondary method and Mr Dempsey's alternative approach.

36 With respect to his secondary method, Mr Eccleston agreed that none of the retail, industrial or residential sales he used were capable of meaningful comparison with the markets site (assuming continued use for the markets).

37 Consideration of the retail and industrial sales supports this conclusion. They bear no resemblance to the markets site. I also do not accept that buyers and sellers at the acquisition date would assume that the site has any potential for those uses in the future. Mr Ryan's evidence to this effect was unpersuasive (and Mr Ryan's specific hypothetical development proposals of alternative uses appear to have played little, if any, role in Mr Eccleston's secondary analysis). The site (or, at the least, the site as it fronts Sunnyholt Road) is surrounded by residential development. It is isolated from other major facilities. The planning history of the site recorded above, and the character of surrounding development, would not give buyers and sellers at the acquisition date any reasonable basis to anticipate a possible future rezoning for ordinary retail, commercial or industrial purposes. However, they would give buyers and sellers a reasonable basis to anticipate a possible future rezoning for residential purposes.

38 Mr Ryan's evidence about the potential for the site to be developed for seniors living under State Environmental Planning Policy (Housing for Seniors or People with a Disability) 2004 (without any rezoning) did not particularly assist in resolving the issues in dispute. Neither Mr Ryan nor Mr Sanders could point to any similar development in this area. One reason for this might be that the 2(a) Residential zone in Blacktown is very flexible. Residential flat buildings are prohibited but all other forms of medium density development are permissible in the 2(a) zone. As Mr Sanders said, Mr Ryan's evidence did not support a conclusion that potential development of the site for this purpose was "feasible, viable, practical, or realistic" at the acquisition date. Irrespective of the permissibility of development for seniors housing, the evidence did not support an inference that buyers and sellers would have had any interest in the site for this purpose. Further, Mr Eccleston appears to have placed little, if any, weight on Mr Ryan's evidence in his actual analysis of market value.

39 Mr Eccleston characterised his secondary approach (assessment of retail, employment lands, and residential sales) as very much a check method for good reason. The approach did not yield conclusions capable of meaningful application to the site. First, and as noted, the retail and industrial sales bore no resemblance to the site in terms of its current use and (given the location, context and planning history of the site) would not have been seen as relevant to any potential of the site at the acquisition date. Secondly, the residential sales also bore no resemblance to the site in terms of its current use (as Mr Eccleston acknowledged). Mr Eccleston said that his residential sales were equally incapable of meaningful comparison with the site (given its highest and best use for the markets purpose). Thirdly, Mr Eccleston's secondary approach did not involve dealing with the site as having residential potential (whether by reference to Mr Ryan's evidence or otherwise). Mr Eccleston's rate of $275 per m2 (the outcome of his secondary approach), for example, appears not to reflect any particular comparison between the site and any of the residential sales or take into account any costs burdening redevelopment of the site for residential purposes (being costs not burdening the sale sites due to their former rural zoning and use). Accordingly, I do not accept Mr Eccleston's opinion as to value based on his secondary approach.

40 It also follows from these conclusions that Almona's submission about the making of an allowance of 25% over and above residential values for the site to reflect the potential for a future rezoning to permit non-residential uses (which, I note, was not supported by Mr Eccleston's evidence) is unsustainable.

41 Mr Dempsey's response to the difficulty presented by the facts of this case was to consider the residential development along Sunnyholt Road, being the location of the main markets and southern parking sections (affected by the acquisition). Mr Dempsey reasoned that, irrespective of the nil value yielded by a traditional before and after analysis of the site on the basis of its highest and best use for markets, a buyer and seller at the acquisition date would have recognised the residential context of the site and its potential for use as residential land (and, hence, its value for that use). Accordingly, he considered sales of en globo residential parcels, adjusted to take into account the characteristics of the site compared to those parcels.

42 In the unusual circumstances of this case, I accept Mr Dempsey's method as providing the most reliable indicator of the value of the acquired land.

43 Mr Eccleston identified three sales Mr Dempsey did not accept as comparable or reliable. The sale at Lalor Road, Quakers Hill is a very dated sale (August 2002). The sale at Perfection Avenue, Stanhope Gardens involved Landcom as seller and the Minister for Education as buyer. It was purchased for a school. The sale at 133 Fyfe Road, Kellyville Ridge involved Landcom in a purchase of land essential to the opening up of another large residential development area. I consider Mr Dempsey's concerns about the unreliability of each of these sales to be well founded.

44 Mr Eccleston's range of values for the residential sales on Sunnyholt Road (which Mr Dempsey agreed should be considered) did not take into account any potential costs of bringing the site into a condition of general equivalence to the other (undeveloped) sites analysed as en globo residential sales (such as demolition of the markets building and pavement areas). Nevertheless, Almona submitted that those sales show a value about 15% greater than the Kellyville sales relied on by Mr Dempsey. Accordingly, it is necessary to consider the residential sales.

45 Mr Dempsey analysed four sales at Kellyville Ridge as showing an unadjusted rate of between $174 and $213 per m2. He considered the Kellyville Ridge location about 5% better than the site, giving an adjusted range of between $165 and $202 per m2. Mr Dempsey considered that, if the site had been zoned 2(a) and was physically ready for residential development at the acquisition date, then it would have attracted a rate of $190 per m2. Mr Dempsey made a 10% reduction of value on account of the size of the site compared to the sales and then deducted the rezoning and costs of site works to make the site suitable for residential development as advised by Mr Gardner, surveyor. Although Almona initially objected to Mr Gardner's evidence on the basis of a failure to acknowledge the expert witness code of conduct in his report, Almona accepted that adjustments had to be made to the sales generally consistent with Mr Dempsey's reliance on Mr Gardner's evidence. Mr Gardner explained his compliance with the requirements for experts in a subsequent letter dated 26 February 2008, with the lack of the required acknowledgement of the expert code being a result of mere inadvertence. I consider Mr Gardner's evidence admissible and accept it. Mr Dempsey's analysis resulted in a derived land value of $140 per m2 for the site at the acquisition date.

46 It is true that the Sunnyholt Road sales show a higher range of values than those at Fyfe Road, although Mr Dempsey considered that (with adjustments) those sales supported his initial analysis of $190 per m2. Two of the Sunnyholt Road sales occurred at a time much closer to the peak of the market in late 2003. The adjustments for time with respect to those sales are far greater than the adjustments required for the Kellyville sales. Three of Mr Dempsey's sales occurred shortly after the acquisition date, but he made no adjustment for time on the basis (I infer) that the market decline was entrenched well before the acquisition date.

47 Although Almona referred to greater densities being achieved on the Sunnyholt Road sales and the advantages of the site's location, the different densities were not a product of zoning requirements but the developers' perceptions of the market. The Kellyville sales used by Mr Dempsey could have been developed at the higher densities apparent along Sunnyholt Road. Indeed, the view disclosed that other sites close to the sales used by Mr Dempsey had been developed at higher densities.

48 If the Sunnyholt Road sales suggest a higher starting point than $190 per m2, Mr Dempsey's analysis of $140 per m2 is nevertheless a liberal estimate in Almona's favour. The site is far larger than any of the comparable sales (which ranged in area from about 0.8 to about 2.7 hectares) and would carry significantly more risk for a developer. Accordingly, Mr Dempsey would have been justified in allowing a much greater discount on account of size than 10%. The sales evidence as a whole compared to the site supports Mr Dempsey's starting point of $190 (reduced to $140 per m2 when adjusted).

49 For these reasons, I am satisfied that Mr Dempsey's assessment of market value in the sum of $1,500,000 fairly and reasonably reflects the market value of the acquired land.

The claims under s 55(f) and s 55(d) - some observations

50 The RTA's claim is that the T-way, over the longer-term, will increase patronage to the residue site and, thereby, improve the income-producing capacity and value of the site. It will do so, according to the RTA, because the T-way system provides a stop directly outside the site, and represents a significant investment of public resources specifically directed at improving public transport access and efficiency in this developing area of Sydney. The RTA's claim is framed by reference to s 55(f) of the Just Terms Compensation Act, namely, that the carrying out of the public purpose (the T-way) increased the value of the residue site at the acquisition date. Because s 55(f) deals with the concept of value, it must contemplate (in common with the definition of market value in s 56) the price agreed in a hypothetical transaction at arm's length between buyer and seller as posited in Spencer v The Commonwealth of Australia (1907) 5 CLR 418.

51 Almona's claim is that the construction works for the T-way, over the short-term, caused (and will continue to cause until December 2008) an increase in vacancy rates for casual stall holders and prevented Almona from implementing its usual rental increase for those stall holders, thereby reducing its total operating profit for the years 2006 to 2008. Almona's claim is framed by reference to s 59(f) of the Just Terms Compensation Act, namely, that these financial losses related to the actual use of the acquired land for the purpose of a market and were a direct and natural consequence of the acquisition.

52 The RTA submitted that Almona's claim under s 59(f) was not available on the facts of this case. The acquired land was used for the purpose of the market (in the sense that it had ancillary landscaping and some car spaces on it), but the market activity proper took place in the main markets building where all the stalls are located. Mr Nettle and Mr Brogan agreed that 27 car spaces only had been lost. Almona had abandoned its claim for over $700,000, being the cost of a multi-storey car park, after it emerged from Mr Nettle's evidence that the main car park was only 50% full in peak periods. The markets use continued unaffected by the acquisition. That use was not in any way dependent on the acquired land or any use made of it. Almona's claim in substance, said the RTA, was for losses associated with the construction of the T-way (that is, the carrying out of the public purpose) and not as a direct and natural consequence of the acquisition. Such a claim could only be made under s 55(f) by reference to a decrease in the value of the residue. Yet the claim was made under s 59(f) and not s 55(f). The different language of the two provisions had to be given effect. Moreover, s 59(f) had to be construed as dealing with costs of the same class dealt with in s 59(a) to (e).

53 Almona submitted that a direct and natural consequence of the acquisition within the meaning of s 59(f) included the construction of the T-way on the acquired land. Almona emphasised the function of s 59(f) as a "catch all" provision that should not be read down having regard to the beneficial purpose of the Just Terms Compensation Act (referring to Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) (2000) 108 LGERA 417 at [20] and Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259). As a "catch all", s 59(f) could not be read as dealing with costs limited to the classes identified in s 59(a) to (e). That approach to s 59(f) was contrary to the Court of Appeal's recognition of the potential for overlap in the operation of s 55 (Mir Bros Unit Constructions Pty Ltd v Roads & Traffic Authority of New South Wales [2006] NSWCA 314 at [55]). The same reasoning applies to s 59(f).

54 Although aware of the RTA's submissions about s 59(f), Almona did not make an alternative claim for the same losses in the form of a decrease in the value of the residue land under s 55(f). Accordingly, it is necessary to resolve the competing approaches of the parties to Almona's claim as made by reference to s 59(f).

55 There is an obvious causal connection between the acquisition of land for a public purpose and the carrying out of that public purpose. Land is acquired to enable the public purpose to be implemented. "Public purpose" itself is defined in s 4(1) as "any purpose for which land may by law be acquired by compulsory process under this Act". Looked at in isolation, the carrying out of the public purpose for which the land was acquired seems a most obvious consequence of the acquisition. However, the focus of s 59(f) is the costs incurred or that might be incurred. It is those costs which must relate to the actual use of the land and be a direct and natural consequence of the acquisition. A number of matters indicate that s 59(f) is not available to support Almona's claim for lost rental income.

56 First, s 59(f) must be construed in the context of all of the provisions of the Just Terms Compensation Act. Each of the heads of compensation in s 59 involves a causal relationship between the fact of the acquisition (that is, the taking of the land as effected by publication of the acquisition notice, referred to in s 20) and some cost. This suggests that the focus of s 59 is costs connected in some way to the acquisition itself.

57 Secondly, this impression is reinforced by the fact that the statutory provisions expressly deal with compensation in connection to the public purpose in both s 55(f) (dealing with residue land) and s 56(1)(a) (dealing with the acquired land). The formulae the statute uses when it seeks to identify a connection between compensation and the public purpose are "by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired" (s 55(f)) and "caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired" (s 56(1)(a)). In contrast, there is no reference to the "public purpose" at all in s 59(f).

58 Thirdly, in Roads & Traffic Authority of New South Wales v Peak [2007] NSWCA 66 at [74], the Court of Appeal observed that the "public purpose was the reason for the acquisition. Section 59(f) focuses on costs reasonably incurred relating to the actual use of the land as a direct and natural consequence of the acquisition" (emphasis original). Although a matter may be both a cause and a consequence (in the sense that the proposal to carry out the public purpose is the cause of the acquisition and the carrying out of that purpose a consequence of the acquisition) this suggests that the Court accepted a distinction between the acquisition and the public purpose. Further, while the Court of Appeal accepted in Peak that there may be a sufficient factual connection between the use of the acquired land and the residue land in particular cases to engage s 59(f) (at [71]), the Court did not suggest that such a finding (that use of the residue was intimately connected with or dependent on use of the acquired land) removed the need also to find a consequential relationship between the costs (or losses) claimed and the acquisition.

59 Fourthly, other decisions analysed in Peak support an approach to s 59(f) focusing on a relationship between the acquisition (that is, the taking of the land) and the claimed costs. For example, in McBaron and Others v Roads and Traffic Authority of New South Wales (1995) 87 LGERA 238 the acquisition severed the dairy farm, making milking at the existing dairy impractical. Talbot J allowed for the cost of a new dairy on the residue land under s 59(f) even though a claim under s 55(f) (for decreased value of the residue) was also available. In Peak itself, the Court of Appeal intervened because the trial judge had not asked whether the use of the acquired land was sufficiently connected with the use of the residence on the residue land as part of the cattle breeding activity carried out on the whole of the land, and thus had not answered the specific question posed by s 59(f) (at [90]).

60 Fifthly, the relevant costs are limited to costs "relating to the actual use of the land, as a direct and natural consequence of the acquisition". The actual use of the acquired land in this provision is the use by the dispossessed owner, not the use by the acquiring authority for the public purpose. The words "the acquisition" direct attention to the fact of the taking of the land. The words "direct and natural consequence of the acquisition" direct attention to the nature or degree of the required causal relationship (see, for example, Caruana v Port Macquarie-Hastings Council [2007] NSWLEC 109 at [52]). Costs incurred or that might be incurred as a direct and natural consequence of the acquisition are potentially captured. The carrying out of the public purpose is possible because of the acquisition, but that does not mean that costs incurred because of the carrying out of the public purpose are themselves a direct and natural consequence of the acquisition. They are a result of the public authority, in pursuit of its statutory powers, deciding to carry out the public purpose for which it acquired the land.

61 Sixthly, although the language of the Just Terms Compensation Act must be construed on its own terms rather than by reference to any pre-conceived principles (Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5 at [31] and [35]), the distinction between the consequences of "the acquisition" and "the carrying out of the public purpose" is both reflected in the particular statutory scheme (by use of the different phrases in ss 55(f) and 56(1)(a) and s 59(f)) and is well-known in compensation law. The distinction underpins the debate in The Commonwealth of Australia v Morison (1972) 127 CLR 32 (as succinctly explained in McInnes and Another v Commissioner of Highways (1992) 78 LGERA 410). In McInnes the statute required compensation to be determined so as to adequately compensate the owner "for any loss that he has suffered by reason of the acquisition of the land", including loss by way of "injurious affection". The Full Court of the Supreme Court of South Australia held that a diminution in hotel trade caused by the public purpose (a highway deviation) was not suffered "by reason of the acquisition of the land".

62 Marshall v Director General, Department of Transport (2001) 205 CLR 603 involved a different statutory scheme. The statute authorised compensation for "the exercise of any statutory powers by the constructing authority otherwise injuriously affecting" other land of the claimant. That formula is not analogous to the terms of s 59(f) (being more akin to s 55(f)).

63 Section 55(f) and s 59(f) may each be potentially engaged by a single set of facts (as in McBaron). In that event, the different operation of the sections may lead to different outcomes. For example, if a buyer of the residue site at the acquisition date perceived that a likely short-term reduction in the net income generated by the markets business would result from the T-way construction (as claimed by Almona in this case), any decrease in the value of the residue site would relate to the value of the lost income at the acquisition date capitalised at the appropriate rate (14% given the conclusions above) over the period of loss (about two and a half years according to Almona). This is clearly different from the claim as formulated under s 59(f) for the alleged loss of rental income itself. As noted, Almona did not make a claim in the alternative under s 55(f).

64 One further (unrelated) observation is necessary. Almona acknowledged that if market value was determined on the basis of an alternative use of the site and not the capitalisation method, its claim for loss of rental income was not available. This acknowledgement reflects s 61 of the Just Terms Compensation Act. I do not consider the acknowledgment applicable for three reasons. First, Mr Dempsey and Mr Eccleston agreed that the current market use was the highest and best use of the site. This is why both valuers first approached the valuation task by reference to the present value of the net income capitalised at an appropriate rate. Secondly, their alternative approaches (or, at the least, Mr Dempsey's, which I have accepted) should be understood as an attempt to identify just compensation recognising the highest and best use of the site. Thirdly, the RTA did not rely on s 61 to exclude the claim.

65 If the claim under s 59(f) is available then the claim in this case fails on its facts for the reasons given below.

66 The acquired land was used for landscaping and car parking ancillary to the markets. The taking of the acquired land has had no effect on the functioning of the markets. The 27 car spaces removed by the acquisition can readily be provided elsewhere on the site (consistent with Mr Brogan's evidence and as the view disclosed). In any event, the site (after acquisition) has far more car parking than required by the markets use and ample room for additional spaces. This is so despite the fact that the site has never provided 3000 spaces as required by the consent. This requirement has never been enforced and could readily be answered (if necessary) by a modification application based on the proven parking demand of the markets. A 2005 report prepared by Mr Nettle estimated peak parking demand as only 50% of the main car park and 17% of the southern car park. As the RTA pointed out, after Mr Nettle gave evidence Almona abandoned a claim for over $700,000 on account of an asserted need to construct a multi-storey car park. Given the abundance of car parking available on site after the acquisition, Mr Nettle's approach (and the claim based on it) was obviously unsustainable. Nor could it be suggested that the operation of the markets was in any way dependent on the landscaping. The acquired land formed part of the periphery of the site but, in substance, was surplus to the operation of the markets (as disclosed by the shared opinion of Mr Dempsey and Mr Eccleston that the acquisition made no difference to the net income of the markets business).

67 In other words, the acquisition had no consequences whatsoever relating to the actual use of the acquired land or the residue site other than that the acquired land was taken. Leaving aside the market value of the acquired land, there is no cost or loss that Almona has incurred or might incur (reasonably or otherwise) relating to the actual use of the acquired land or the residue site, or relating to the residue site as connected to the acquired land, as a direct and natural consequence of the acquisition.

68 For these reasons, Almona's claim for loss of rental income cannot be brought within s 59(f). This conclusion does not deny the function of s 59(f) as a "catch all" provision. The section operates in accordance with its terms. Nor does it involve reading s 59(f) as limited to the classes of costs dealt with in s 59(a) to (e). I do not accept the RTA's submission to that effect. I do accept that the essential difference in wording between s 55(f) and s 59(f) has to be given effect. Almona's claim related solely to the effect of the carrying out of the public purpose on the income able to be derived from the residue land in circumstances where that income producing capacity was wholly unconnected to, and unaffected by, the use of the acquired land (despite the use being for the same markets purpose as explained above). This claim, to be sustainable, had to be brought within s 55(f). Consistent with the principal approach of Mr Eccleston and Mr Dempsey, s 55(f) would have required the valuers to assess the difference in the value of the income stream at the acquisition date with and without the construction works. Neither valuer did so, as Almona made no such claim. It is possible for this exercise to be done on the available evidence. However, it is unnecessary for the exercise to be carried out because I have also determined that the evidence supporting the claimed loss of rent should not be accepted on the facts. Further, if the claim had been made under s 55(f) as an alleged decrease in value of the residue site then the potential interaction with the RTA's claim for an alleged increase in value of the residue site would have to be considered. I consider both issues below.

69 Mr Constantine, Almona's managing director, said that various circumstances affected the markets' stall occupancy rate from 2005 onwards. He identified these circumstances as construction works on the M7, inadequate signage on the M2 for the Sunnyholt Road exit, construction of a bus lane on Old Windsor Road, and (thereafter) construction of the T-way outside the front of the site (including removal of signage for the construction works). In addition to increased stall vacancies, Mr Constantine observed an increase in rental arrears after the construction of the T-way commenced. Further, Almona usually increased rents every 5 years. Mr Constantine said it would have imposed a $10 per week increase in January 2006 but did not do so due to the anticipated construction of the T-way (which commenced in June 2006 and was completed in October 2007). He thought the decline in the business would continue for a minimum period of twelve months after completion of the T-way. Mr Elters, the manager of the markets, also considered that patronage had decreased as a result of the construction of the T-way, leading to increased stall vacancies and rental arrears, as well as complaints about traffic delays, noise, dust and other construction impacts. Photographs and a DVD show the nature and extent of the construction works immediately out the front of the site along the Sunnyholt Road frontage.

70 Mr Zoras relied on this information and Almona's financial and other records to assess Almona's loss of profits caused by the construction of the T-way. His initial calculation involved the following steps: - (i) determine the vacancy rate for stalls before the construction works commenced by using the records for 2003 to 2005, (ii) determine and estimate the stall vacancy rates from 2006 to December 2008, (iii) multiply the additional stall vacancies by the weekly rental charge as advised by Mr Constantine ($231 per week), and (iv) add the lost rental income by multiplying the $10 increase Mr Constantine identified as foregone by the number of stalls but for the construction of the T-way. This gave a claim of $3,421,638.

71 Following comments from Dr Ferrier, Mr Zoras accepted that the 2005 stall occupancy records could not be reconciled with Almona's financial records. Mr Zoras made inquiries and determined that the 2005 stall occupancy records were incorrect. He therefore removed the 2005 year from his assessment of the vacancy rate before the construction of the T-way (relying on the 2003 and 2004 years only to establish the before rate).

72 Dr Ferrier was not satisfied that Mr Zoras' analysis accurately identified any loss caused by the construction of the T-way. Dr Ferrier disagreed with many of Mr Zoras' assumptions. He pointed out that Mr Zoras' analysis assumed that all trading impacts on the markets since 2004 could be attributed to the construction of the T-way. He noted that Almona's financial records disclosed a decrease in rentals from $7,084,484 for the year ended June 2005 to $5,415,574 in the year ended June 2006 (a 24% decrease), when the construction of the T-way only commenced in June 2006. Dr Ferrier considered that this demonstrated a trend of decreasing rental income irrespective of the T-way construction works. Mr Zoras explained this decrease by reference to the M7 works, the bus lane works on Old Windsor Road, and the removal of signage as referred to by Mr Constantine and thought these should be recognised as atypical and thus disregarded.

73 Dr Ferrier did not accept the 12 month recovery period after the completion of construction as valid, particularly having regard to Mr Brogan's evidence about the advantages the T-way presented. Dr Ferrier noted that comparison of the stall records with the financial statements disclosed unexplained and substantial discrepancies for 2004, 2005 and 2006 (not just 2005). The rental income implied by Mr Zoras' analysis of stall records exceeded the rental income disclosed by the financial records for all years. Dr Ferrier could not say which records were correct or incorrect. Dr Ferrier also noted that Mr Zoras initially accepted that certain expenses would be reduced but had resiled from that in his final calculations. Finally, Dr Ferrier said that Mr Zoras had applied the $10 per week increase to all stalls when it could only apply to causal stall holders given that the licences with permanent stall holders restricted increases to CPI.

74 Mr Zoras prepared a further report in response in which he identified that (contrary to Mr Constantine's affidavit) there are two rental rates (one for permanent and one for casual stall holders with more than one stall). Applying these rates ($231 and $175 per week) reduced the discrepancies identified by Dr Ferrier (but did not eliminate them, with the discrepancy in 2006 remaining over $1.6 million). This amendment led to a reduced claim for $3,190,736.

75 Almona acknowledged the difficulty of reconciling the information relied on by Mr Zoras but submitted that it was obvious that it had suffered loss by reason of the construction works. Almona contended that the Court could not ignore the loss due to difficulties in the evidence but had to do the best it could (citing Doherty and Doherty v Commissioner of Highways (1974) 7 SASR 57 at 83 and Dessent v Commonwealth of Australia (1977) 13 ALR 437). Further, Almona noted that Dr Ferrier did not deny the possibility of loss but Mr Zoras had given the only evidence of quantification.

76 Dr Ferrier's evidence did not quantify losses but I am satisfied it set out cogent and persuasive reasons why Mr Zoras' conclusions should not be accepted. Dr Ferrier's evidence was also relevant to an assessment of the weight that should be given to the anecdotal evidence of losses contained in the affidavits of Mr Constantine and Mr Elters.

77 One problem with Mr Zoras' evidence is that (as Dr Ferrier said) it assumed that every impact on the trading position of the markets since 2004 (and until December 2008) must be a consequence of the construction of the T-way. When Mr Constantine identified other sources of impact (the M7, signage on the M2, and a new bus lane on Old Windsor Road) Mr Zoras treated those events as abnormalities to be disregarded in identifying a baseline position for the markets. Mr Zoras did not, for example, allow for the possibility that those events may have any permanent impact or even a temporary effect after the T-way construction commenced (even though he allowed a 12 month recovery period after completion of the T-way construction works). Another, related, problem is that Mr Zoras did not sufficiently consider the significance of the magnitude of the fall in income between the 2005 and 2006 years (a fall of 24%). It is difficult to accept that the three factors extraneous to the T-way construction (the M7, signage on the M2, and a new bus lane on Old Windsor Road) could have had such a significant effect. This strongly suggests that the decline in stall holders at the markets is being affected by influences other than these factors and the T-way construction (because the decreases were well underway before the T-way construction commenced). It is even more difficult to accept that, if the three extraneous causes were the source of the decline, their effect would be removed immediately upon commencement of construction of the T-way. A further major difficulty is that Mr Zoras' analysis is dependent on the accuracy of records for stall holders in 2003 and 2004 so as to establish a baseline. For the reasons given by Dr Ferrier, the financial statements and stall holder records are irreconcilable. Disregarding the 2005 year (as Mr Zoras has done) confirms rather than removes the problem.

78 In summary, I accept Dr Ferrier's principal criticisms of Mr Zoras' evidence and his conclusion that it is an unreliable basis upon which to attempt to identify any losses. It is not possible to modify Mr Zoras' evidence to ascertain some cogent basis upon which loss may be assessed. Mr Zoras' evidence does not provide a reliable assessment of losses or losses reasonably incurred or that might be reasonably incurred. The evidence of Mr Constantine and Mr Elters, when considered in the light of Dr Ferrier's evidence, also does not found a rational conclusion of substantial lost rentals by reason of construction of the T-way.

79 For the same reasons I do not accept that the evidence demonstrates a sufficient basis to found the claim for the $10 increased rent said to be foregone. There was a 24% decrease in income from rentals before the T-way construction was materially underway. Mr Constantine identified three causes of that decline unconnected to the T-way. As noted, if those three matters were the cause of the decline, it is inconceivable that their effects would have ceased immediately on commencement of the T-way construction. The decline in stall holders before the T-way must have influenced Almona's decision not to increase the rent. Any foregone rental was not a direct and natural consequence of the acquisition but, rather, a consequence of a commercial decision that must have been materially influenced by factors other than the acquisition. Moreover, Mr Constantine's evidence about the rents was that every stall holder paid $231 per week with no discounts, with Almona imposing a $10 per week increase every five years (said to have been foregone due to the anticipated construction of the T-way). Mr Zoras' inquiries ultimately disclosed that Mr Constantine's evidence was incorrect (with second stalls apparently offered at a discount of $175 per week). Mr Elters, in an undated letter tendered late in the hearing as exhibit O, also said that most stall holders had more than one stall. This information was inconsistent with Mr Constantine's evidence and the information originally given to Mr Zoras by Mr Constantine and Mr Elters (and, apparently, to Dr Ferrier and Mr Duane). None of the evidence explained whether or how the $10 increase would operate given the new information about the discounted rate for second stall holders. The evidence about the $10 rent increase from January 2006 being foregone due to the construction of the T-way is so unsatisfactory that it cannot be accepted.

80 If Almona's claim had been framed by reference to s 55(f) then other factors would have been relevant. For example, although I have not accepted Almona's claim for rental losses, I accept that it is possible that the construction of the T-way might have caused some decrease in the number of patrons visiting the markets which, in turn, might have discouraged some stall holders, thereby leading to some decrease in Almona's rental income. However, I consider that any such possible effect is likely to have been of a fairly small order having regard to the evidence of Mr Hack and Mr Duane about the extensive trade area of the markets, the dominance of cars as a mode of transport to the markets, the weekend operation of the markets, and the irregular rather than routine nature of most visits. These factors also suggest that the trading trend downwards since 2005 (before construction of the T-way) has been greatly affected by factors other than the construction of the T-way. Any claim under s 55(f) would have been for a decrease in value of the residue land at the acquisition date by reason of the construction of the T-way. Such a claim could not have been determined in isolation from the RTA's claim that the value of the land increased at the acquisition date by reason of the operation of the T-way, the issue to which I now turn.

81 Mr Dempsey offset an increase in the value of the residue land of $1,060,871 against the market value of $1,500,000. In so doing he relied primarily on the evidence of Mr Hack. In his principal report Mr Hack analysed the trade area of the markets and use of public transport for trips to shopping centres. He concluded that the T-way would be likely to increase the number of patrons to the markets by 6.5% to 7% compared to a situation where the markets had no public transport. Mr Hack estimated that this increase in patronage would translate into increased turnover of between 4% and 5%.

82 The primary difficulty with this initial analysis by Mr Hack is that the markets enjoyed public transport access before the acquisition. Before the acquisition there was a bus stop immediately outside the markets on Sunnyholt Road close to the new T-way stop. On weekends a total of 114 buses serviced this bus stop. There is a bus stop (called a T-way station) in a similar location after the acquisition. However, the number of buses servicing the new bus stop was reduced from 114 (before the T-way) to 58 (after the T-way). It is proposed (and I accept) that the number of weekend buses servicing this stop will be restored to original levels (114 buses) in May 2008. Although Mr Brogan identified other bus stops also incorporated within the T-way system (at Old Windsor Road and Stanhope Gardens) those stops are not as convenient as the stop immediately outside the site and should be given less weight in the assessment of the RTA's claim.

83 Mr Hack, when apprised of the bus services before and after acquisition, revised his conclusions. Mr Hack observed that if (as Mr Duane surmised) only about 1% of the existing patrons used public transport, 1% should be deducted from his 6.5% to 7% range (giving an increased patronage of between 5% to 6% per annum). Mr Hack estimated that the 5% to 6% per annum increase in patrons would translate into an increased turnover of at least 3% and more likely 3.5% to 4%. Deducting 1% from the initial analysis does not resolve the problem because the initial analysis was based on an incorrect premise (no public transport to the markets before the acquisition).

84 Another difficulty with Mr Hack's initial and revised analysis is that it cannot be reconciled with Mr Brogan's evidence. Mr Brogan considered that about 3000 people visited the markets by bus before the acquisition and another 3000 additional people would visit the markets by bus as a result of the T-way. If it is assumed that each and every one of these additional 3000 people would not have visited the markets at all but for the T-way (rather than the T-way persuading some of those people to shift their mode of transport from car to bus for a trip to the markets they would have made anyway), the additional T-way induced patronage constitutes a very small percentage of the overall patronage. There were various (and irreconcilable) sources of information about total patrons per annum at the acquisition date, ranging from a low of 300,000 visits to a high of 2,500,000 visits. The additional patrons would be 1% on the 300,000 visits per annum base and 0.12% on the 2,500,000 visits per annum base. Mr Hack estimated visits of about 550,000 to 600,000 per annum. On that basis, 3000 additional patrons would represent about 0.5% additional patronage. In other words, none of the figures support Mr Hack's estimate of 5% to 6% additional visits per annum. Mr Duane made these points persuasively in his joint report with Mr Hack and in oral testimony.

85 The RTA acknowledged that reconciling Mr Hack's opinions with the evidence of Mr Brogan was not straightforward. The RTA submitted, however, that their evidence consistently indicated the benefits that the T-way would offer the markets as a retail destination. Consistent with the general tenor of Mr Duane's evidence, I accept that retailers, including the markets, would see the T-way as a positive infrastructure development. All infrastructure improving public transport, in this general sense, would be treated as a benefit. However, I do not accept that a buyer and seller of the residue site at the acquisition date would approach the T-way in the manner of Mr Brogan or Mr Hack. Mr Brogan appears to have assumed that the predictions of patronage in the documents should be accepted as a given (even though, for example, the Castle Hill branch of the T-way has not been implemented and bus service levels along Sunnyholt Road decreased for about 18 months after the T-way was completed). To the extent that Mr Brogan purported to give evidence in his report about the increased value of the site, I do not accept that he was relevantly qualified to do so. Mr Hack's analysis, even disregarding the fundamental problems to which I have referred, assumed an induced demand in terms of patrons far larger than the other evidence could support and that such a demand would automatically result in increased rentals (despite the fact that the maximum number of stalls is fixed under the LEP, the markets presently has the maximum number of available stalls, and that rents for the stalls are not directly related to turnover but operate on a fixed price per week). Neither approach is persuasive or bears much resemblance to the likely considerations of a buyer and seller of the residue site at the acquisition date.

86 The buyer and seller would be unlikely to take predictions of public transport use in 2011 at face value. They would recognise the uncertainty of the T-way creating a material increase in new patrons (as distinct from a mode shift in transport) in the short-term. Taken with the restrictive provisions of the LEP these factors are strong indicators against the RTA's claim that the carrying out of the public purpose substantially increased the value of the residue site at the acquisition date.

87 Having regard to the observations above about the operation of s 59(f) and the obligation to ensure that Almona is justly compensated for the taking of its land, I consider it appropriate to make one further observation despite the fact that Almona did not rely on s 55(f). In short, I am satisfied a buyer and seller of the residue site at the acquisition date would have recognised that: - (i) the construction of the T-way might have some short-term effect of a fairly small order on the income generated by the markets, but any such potential would be confined to the construction period and shortly thereafter (measured in weeks and not months), and (ii) the operation of the T-way might have some longer-term but material benefits for the income generating potential of the markets, and any such potential would be available for the entire life of the T-way. Neither factor would have constituted a sufficient basis to adjust the sale price at the acquisition date but (if anything) the perceived potential for the increase in rental income (given its enduring nature if achieved) would have swamped any concern about a short-term decrease of income during construction of the T-way.

D. Conclusions and Orders 88 For the reasons given above I accept Mr Dempsey's approach to the market value of the acquired land. I do not accept Almona's claim for disturbance in the form of loss of rental income. I also do not accept the RTA's claim for increased value of the residue site. Accordingly, just compensation for the acquisition of lots 102 and 103 in deposited plan 1092236 is determined in the amount of $1,518,200 (being $1,500,000 for the market value of the acquired land and disturbance agreed in the sum of $18,200). If the parties do not file a draft agreed order with my Associate reflecting this determination and an agreed costs order within 7 days, then the proceedings are to be listed for mention in the Class 3 list on the following Friday for directions and allocation of a further short hearing about costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

(2004) 134 LGERA 426

(2006) 144 LGERA 265

(2000) 108 LGERA 417

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Cases Cited (17)