AMP Capital Investors Limited and Anor v Transport Infrastructure Development Corporation - [2007] NSWLEC 397 - NSWLEC 1996 case summary — Zoe

NSWNSWLEC

AMP Capital Investors Limited and Anor v Transport Infrastructure Development Corporation

[2007] NSWLEC 397

Land and Environment Court (NSW)|1996-12-05|Before: Pain J, Bignold J, Mr J

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Source facts

Court

Land and Environment Court (NSW)

Decision date

1996-12-05

Before

Pain J, Bignold J, Mr J

Source

Original judgment source is linked above.

Judgment (53 paragraphs)

[1]

Background 2 TIDC acquired a leasehold interest in the terms set out in Lease Memorandum No 8708752B, in the lands known as Lot 3 in Deposited Plan 1047085 and Lot 12 in Deposited Plan 1047085. The acquisition was pursuant to the Transport Administration Act 1988. Both lots were created as a result of the acquisition notice which was published in the NSW Government Gazette on 11 April 2003. The two lots and the leasehold interests in these lots were created at the same time by virtue of the notice of acquisition. Part of the PRL project is the construction of a railway station at Macquarie Park next to the Macquarie Centre on Lot 12. 3 Lot 3 is a stratum of air 3m above the existing slab above part of the emergency exits from the cinemas which form part of the Macquarie Centre and has an area of 528m2. Lot 12 comprises land used for the railway station on the corner of Herring Road and Waterloo Road, and is 1797m2 in area. At the time of the acquisition 14 car parking spaces (out of the 4100 spaces in the Macquarie Centre) and landscaping were located on it.

[2]

What amount is being claimed? 4 Pursuant to s 42 of the Just Terms Act, the Valuer General determined the amount of compensation to which AMP was entitled in the amount of $683,150. In the Further Amended Points of Claim, dated 2 November 2006, AMP claims $21,465,352 calculated as follows: (a) market value (s55(a)): $2,345,000 (considered in Part A of the judgment) (b) disturbance (s 55(d)): $5,745,352 (agreed but subject to betterment argument) (c) decrease in value to residue land due to injurious affection (s 55(f)): $13,375,000 (considered in Part B of the judgment). 5 TIDC argued there will be substantial betterment as a result of the public purpose of the acquisition and no compensation should be payable (considered in Part B of the judgment).

[10]

AMP 18 AMP argued that market value is defined by s 56(1) which is concerned with the sale of physical (freehold) land, not the sale of any particular interest in land. The Spencer test (Spencer v The Commonwealth [1907] 5 CLR 418) requires the determination of the price that would be paid by a prudent hypothetical purchaser to a prudent hypothetical vendor in a willing but not anxious sale of that land. Lots 12 and 3 have been created as separate lots as a result of the acquisition. The capital/freehold value must be determined first. The second step is the determination of the amount of compensation to which AMP is entitled under s 55(a). At this step the leasehold interest acquired by the resuming authority is considered. 19 Applying this approach to market value the following approach to determine compensation is correct: (i) The sites the subject of the acquisition (Lots 3 and 12) are a small area when compared to the balance of the shopping centre; (ii) The first issue is the highest and best use of the acquired lands, as that informs the valuation; (iii) As a small site within the shopping centre precinct the highest and best use should be seen as part of the site of a regional shopping centre, made up of component parts (shops, aisles, car parks, manoeurvring areas, et cetera): (Mr Davis, valuer called by AMP, transcript of 21 November 2006 p 15.28 - 16.16); (iv) When considering the value of the land (and hence the value of the interest acquired) one is to regard it as forming part of the shopping centre; (v) One values the interest by asking what people pay for such land, either (a) as a piece of land acquired (by the shopping centre) for amalgamation with the shopping centre (b) what someone would pay for an area of land which had the attraction of being adjacent to a regional shopping centre (vi) Someone acquiring the subject land does not say "I am acquiring a car park", but rather commercially zoned land with either of the above two attributes. The land use is not broken up into component parts.

[11]

TIDC 20 TIDC argued the correct approach to s 56(1)(a) and s 55(a) requires the determination of the value of the interest acquired. Section 4 of the Just Terms Act defines "land" to include an interest in land. This definition envisages that there will be an acquisition of interest in land which is less than the estate in fee simple. This definition applies in Pt 3 of the Just Terms Act which concerns entitlement to compensation. "Land" means freehold land or the interest in land acquired under Pt 2 of the Act. It is the "land" or "interest in land" vested in the acquiring authority upon publication of the acquisition notice in the Government Gazette: s 20(1). The argument that "land" in s 56(1) has a different meaning and must mean the freehold interest in physical land only is incorrect. 21 The Court must, under s 55(a) and s 56(1) of the Just Terms Act, determine the amount of compensation for the acquisition of the land by determining the amount that the hypothetical lessor who was willing but not anxious to lease would have accepted and the hypothetical willing but not anxious lessee would have been prepared to pay for the interest in land acquired, that is, the six year lease of land for car parking for 14 car spaces in the case of Lot 12. This was the approach adopted, according to TIDC, by the Court in Prince Alfred Park Reserve Trust v State Rail Authority of New South Wales (1997) 96 LGERA 75 at 82 and 84, and Roads and Traffic Authority of New South Wales v Hurstville City Council (2001) 112 LGERA 223. Unlike Prince Alfred Park and Hurstville City Council, which both involved the acquisition of leasehold estates in land in public ownership and use, the present case involves two relatively small areas of private land used for airspace, parking, landscaping and access. In this case, it has been possible to assess rental value of comparable commercially leased areas used for car parking. In Prince Alfred Park and Hurstville there was no acceptable evidence of commercial value because the statutory restrictions on use under the community land provisions of the Local Government Act 1993 (in the Hurstville City Council case) and of the Crown Lands Act 1989 (in the Prince Alfred Park case) denied significant commercial exploitation. 22 This means that the valuation in the present case can and should be undertaken by reference to comparison with comparable commercial lease transactions in a conventional manner. That approach is the preferred method; River Bank Pty Ltd v Commonwealth of Australia (1974) 48 ALJR 483 at 484, Redeam Pty Ltd v South Australia Land Commission (1977) 40 LGERA 151 at 156. (ii) Planning evidence on highest and best use 23 A principle of valuation is to value land in accordance with its highest and best use (see Alan Hyam, The Law Affecting Valuation of Land in Australia (3rd ed), The Federation Press Sydney, 2004, p 122). AMP relied on the evidence of Mr James Harrison, town planner, who swore a statement of evidence dated 11 February 2004 (exhibit U), and two statements in reply dated 26 May 2004 (exhibit V) and 24 November 2005 (exhibit W). TIDC relied on the evidence of Mr Anthony Rowan, town planner, who swore three statements of evidence, dated April 2004 (exhibit 3), September 2005 (exhibit 4) and an amended report of 31 January 2006 dated 1 February 2006 (exhibit 6). Mr Harrison and Mr Rowan produced two joint reports dated 7 June 2004 (exhibit AF) and 12 May 2006 (exhibit AG). 24 The planners Mr Rowan and Mr Harrison gave evidence about what were the highest and best uses of Lot 12 and Lot 3. At the date of acquisition under the Ryde Planning Scheme Ordinance 1979 the land is zoned 3(a) Business General. A wide range of commercial uses are permitted subject to obtaining development consent. These include shops and retail activities up to 1000m2 which are permissible with consent from the Ryde City Council. A key issue to consider is the extent to which the lots should be regarded as separate or part of the Macquarie Centre in determining highest and best use. They have been created as separate lots and Lot 12 in particular could, in theory, be sold. Rowan evidence 25 In relation to the highest and best use of the property, Mr Rowan stated that the Macquarie Centre, including Lot 12 (and Lot 3), has been fully developed pursuant to the 1998 development consent. At the time of acquisition and under the planning controls existing at that time it was highly improbable that any further extension would be permitted. In his opinion, any development that sought variation of the planning controls, especially the FSR provisions, would be unlikely to be supported by the council or the Department because: (i) the 1998/9 extension achieved the maximum FSR ratio, (ii) the traffic and parking implications on the Macquarie Park Corridor, (iii) the scale of a retail extension would have wider regional implications, (iv) an increase in floor area would be inconsistent with the provisions of State Environmental Planning Policy No 1 - Development Standards (SEPP 1).

[16]

Davis evidence 34 The argument of AMP on the meaning of market value underpinned the approach of its valuer Mr Davis. He calculated a freehold value for Lot 12 and adopted 20 per cent percent of that value to arrive at the value of Lot 3. He then applied a capitalisation rate of 10 per cent as the rate of return its owner would anticipate over a six year period as the appropriate methodology to apply. This required a three step approach. 35 Firstly, Mr Davis considered the highest and best use would be to include the lots as part of the shopping centre and therefore ask what would a small site adjacent to a regional or larger shopping centre bring on the market when acquired to amalgamate with an existing centre, or when located adjacent to a centre which has the attraction of being located close to the centre and able to capitalise on the trade draw of that centre (transcript 21 November 2006 p 15.28-16.16, 22.6-22.20, 37.7-37.19 and 53.26-53.42). From that information he calculated a rate per square metre for those sales and determines where, relatively speaking, those sales fit in with the subject land, making appropriate adjustment to derive a rate per square metre for the subject land at Macquarie Centre. He analysed five comparable sales of sites adjoining existing shopping centres at Brookvale, Miranda, Baulkham Hills and Castle Hill acquired for amalgamation with an existing centre. The values he derived ranged from $1,175/m2 (Brookvale) to $5,588/m2 (Castle Hill) as identified in the tables and text at par 114-122 of exhibit AJ. From this analysis he adopted a rate adjusted for the Macquarie Centre of $2,500/m2 for Lot 12 and $500 (20 per cent of $2,500) for Lot 3. This provides for land values of $4,492,500 and $264,000 respectively. 36 Secondly, he calculated an appropriate rate of return to rent the land. Considering a number of ground leases, which are generally long term, Mr Davis adopted a rate of return of 10.5 per cent. In adopting this figure Mr Davis acknowledged that the normal rate of return is around eight per cent, however because of the onerous terms of the lease a higher figure was justified. 37 Thirdly, Mr Davis calculated the market rental value of Lot 12 and Lot 3 using a capitalisation rate of 7.5 per cent and a six year lease at $471,713 per annum for Lot 12 and $27,720 per annum for Lot 3. Mr Davis therefore calculated the market value for Lot 12 and Lot 3 at $2,345,000.

[19]

Findings on market value 42 The basis of TIDC's argument is that when s 55(a) refers to the market value of the land on the date of the acquisition, in this case a leasehold interest in land, that interest is key to determining the market value of land under s 56(1). AMP argued the opposite, that is, that market value in s 56(1) must first be considered and then compensation under s 55(a) for the interest in that land assessed, based on market value. The acquisition created two separate lots of land and Lot 12 in particular could be sold separately. 43 Although TIDC submitted that Prince Alfred Park and Talbot J in Hurstville City Council v Roads and Traffic Authority [1999] NSWLEC 100 at [43] - [45] adopted the approach advocated by it, those cases do not demonstrate that approach. In Hurstville City Council the valuers agreed that the correct assessment was the calculation of a premium rental determined at a certain percentage of the land value capitalised for the term of the lease. 44 In determining compensation in Prince Alfred Park Pearlman J considered the amount which a hypothetical willing but not anxious lessor would require and a hypothetical lessee would pay. Her Honour assessed compensation at a premium rental determined at six per cent of the land value capitalised for the term of the lease at ten per cent. Her Honour held the lease terms were relevant but not determinative of the market value of the resumed land. She considered that a hypothetical lessor at the time of acquisition of the resumed land would have proceeded on the basis that the land was to be reinstated, after considering the EIS and the development consent for the proposal. In relation to highest and best use her Honour adopted the approach of the valuer who had regard to the highest and best use of the resumed land, not the approach of the potential loss of revenue to the applicant for the lease term. That approach while expressed differently in some respects supports the approach argued for by AMP and is the approach of the valuer Mr Davis relied on by AMP. The approach she rejected is similar to that argued for by TIDC, that is, that the market value is the loss of revenue of leasing 14 car parking spaces for six years. 45 The other cases relied on by TIDC (River Bank/Redeam) continue the well settled general principle that valuation is undertaken by comparing similar sales of comparable land. These cases do not directly support TIDC's approach in this case. 46 I consider the capital value of the freehold land of Lot 12 calculated on the basis of its highest and best use must be determined as that lot has been created separately as a result of the acquisition. The capital value of Lot 3 should be calculated as a percentage of that value. The rental value is then determined. This approach is supported by the application of s 56(1) of the Just Terms Act and as applied in cases such as Prince Alfred Park. Highest and best use 47 In determining 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 I have had regard to the evidence of Mr Rowan and Mr Harrison on the potential use of the land. Lots 12 and 3 are separate lots and must be so considered. I am not satisfied that the potential for further development of the land can be as easily dismissed as suggested by Mr Rowan. While the existing development consent for the Macquarie Centre includes the acquired land there is no specific requirement under the development application about the use of the land that is now Lot 12. Further, there is no barrier to a new development application separate from the Macquarie Centre being submitted. Obviously any additional development would be subject to the council's planning controls. SEPP 1 is available to enable a variation of the application of development standards where appropriate and I note has been used in the past for variations to the FSR control for the Macquarie Centre (see joint planners' report exhibit AF par 9). 48 Mr Harrison is correct in that the acceptance of a SEPP 1 objection will depend solely on the merits of the particular application and without any specific application to consider, it is not possible to determine the success or otherwise of a SEPP 1 objection. In saying this, the potential use of the land would be more certain if a SEPP 1 objection was not required. 49 The highest and best use of land in planning terms is generally controlled by the zoning of the land and other council requirements. While the zoning provides for a range of specific land uses, the particular characteristics of Lot 12 are also an important consideration and will ultimately affect the use of the land. In this case, the land is constrained by its leasehold tenure, location on a busy intersection, size and relationship with the Macquarie Centre. There are commercial uses that may be suitable for the land, but such uses are likely to be limited. Nevertheless some commercial development beyond a car park use is feasible given the separate Lot 12 created by the acquisition. Lot 3 I consider is substantially constrained even taking into account that the lease requires access to the lot to be provided. 50 The incorporation of both lots into the Centre is also quite likely given their existence as separate lots next to the substantial regional shopping centre.

[20]

Valuation 51 I have indicated that Mr Davis' approach to the valuation is the correct approach and one that I will adopt with some alteration. Mr Wood also considered that approach in exhibit AJ (see par 40, 41) and derived different values for Lot 12 and Lot 3 based on different comparable sales, rate of return and capitalisation rate. 52 In relation to comparable sales, Lots 12 and 3 are commercially zoned land and would attract different considerations to industrial land. The comparable sales adopted by Mr Wood of industrial land in the vicinity of the Macquarie Centre are not comparable for this reason. This view is reinforced by the fact that he adjusted those sales substantially up by a factor of 25 per cent to arrive at $745/m2. Comparable sales of commercially zoned land near shopping centres are more appropriate, as Mr Davis considered. However those sales must still be comparable. The criticism by Mr Wood of Mr Davis' sales, that the two sales in the shopping strip at Castle Hill (showing values of $5,588 and $7,168m2 although Mr Davis did not rely on the latter sale) are simply not comparable because of their superior location and relative size in that location, is accepted. I also accept his criticism that the two Miranda sales near Westfield Miranda are for much smaller improved sites and are also not particularly comparable. 53 The constrained characteristics of Lot 12 mean that I consider a lower figure than that derived by Mr Davis should be applied. I adopt the figure derived by Mr Davis from the Baulkham Hills sale of $1189m2 to calculate the capital value of the land. It is at the lower end of Mr Davis' comparable sales and this reflects the constraints of the subject land and that there is limited evidence to suggest the extent to which the land can be used for higher return commercial activities than car parking. 54 The rental value must be determined next by adopting the appropriate rate of rental return on the freehold market value. The rate of return of 10.5 per cent applied by Mr Davis based on ground rent is high and I note that Mr Wood's figure of eight per cent is the more usual figure used to arrive at the rental value. I also note that part of Mr Davis' reasoning for adopting that figure as identified at par 65 -71 of exhibit AJ includes the onerous nature of this atypical lease. I consider therefore his higher figure is appropriate. 55 The capitalisation rate to apply over the six year period of the lease must also be considered. Mr Woods applied 6.5 per cent to derive the rental value over six years while Mr Davis adopted 7.5 per cent for various reasons he identified at p 108 of exhibit AJ. Those reasons include the onerous nature of the lease as identified at par 73. I consider I should adopt that reasoning and therefore consider 7.5 per cent is the appropriate capitalisation rate. 56 I also consider these figures take into account constraints on Lot 12 such as that any commercial use cannot require any significant structure to be built and must involve little alteration to the land, consistent with a six year leasehold tenure. The use must not require any costs to be incurred for the removal of any works at the end of the lease. Any use must be largely consistent with the existing approval for the Macquarie Centre and would have to be able to minimise time delays in obtaining approval, particularly considering the limited time of the lease. 57 I have not adopted completely either valuer's calculations. As their full calculations are not set out in exhibit AJ it is difficult to arrive at a final exact figure in this judgment. I will identify an approximate figure only and will ask the parties to provide an exact amount. The appropriate calculation should be carried out generally as follows for Lot 12: Capital value - $1189 x 1797m2 = $2,136,633 Rental value @ 10.5% = $ 224,346 Present value of $224,364 for 6 years at 7.5% = $224,364 x 4.69532 (inexact figure) = $ 1,053,461 58 The lease requires that access be provided to Lot 3 so that theoretically development is possible albeit, unlikely in my view. The stratum is much less desirable as a potential development site than Lot 12 and would require some form of construction for its use. This has disadvantages in terms of time needed for approval, construction and removal within the six year term of the lease as well as maintaining the access from the cinemas. The potential uses are more limited than those available for Lot 12. Applying Mr Davis' approach I note that he calculates Lot 3 on the basis it is worth 20 per cent of the capital value of Lot 12. Mr Wood adopts an amount of 25 per cent. I will adopt 20 per cent in view of the substantial site constraints. 59 I will identify an approximate figure only for Lot 3 and the parties will need to identify the exact amount.

[23]

(i) What is the public purpose of the acquisition? TIDC's submissions 64 According to TIDC the public purpose is: (a) as described in the acquisition notice, namely "being for the Parramatta Railway Link". This simply gives in short form the name of the proposal without giving details of the content of it. (b) it is settled law in NSW that the gazette notice does not need to state the particular purposes for which the resumed land (or other land affected by the public purpose) is to be used: Shaw v State Planning Authority of New South Wales (No 2) (1972) 27 LGRA 94 following Tinker Taylor Proprietary Limited v Commissioner for Main Roads (1960) 105 CLR 334. Evidence of the proposal and of the carrying out of the public purpose will be found in the documents of the authority, in particular, in the present case, the EIS for the PRL, the draft structure plan and the draft master plan for the station precinct as well as the approval of the Minister to the PRL under Pt 5 of the EP&A Act. (c) as described and particularised in the Pt 5 approval granted by the Minister (exhibit 1, tab 11, page 221) the proposal is described as: The proposal contained in the Environmental Impact Statement (EIS), and as modified by the Representations Report. 65 This requires an identification of the purpose from the EIS. That purpose includes encouraging the development and intensification of the development and economic activity in the Parramatta Railway Corridor including Macquarie Park through changes in planning regulations to allow more density of development. This was an integral part of the proposal. It is necessary to refer to additional materials to identify that purpose; D & C Dwight v Sydney Water Corporation Limited [1995] NSWLEC 72 (unreported, Bignold J, 10 May 1995), Roads and Traffic Authority of New South Wales v Perry & Anor (2001) 52 NSWLR 222, Sydney Harbour Foreshore Authority v Walker Corporation Pty Limited, (2005) 63 NSWLR 407, San Sebastian Pty Ltd v Housing Commission of New South Wales (1977) 37 LGRA 191. 66 This increase in value was "by reason of" the public purpose referred to in par 64 above, whether (a) or The causative link or connection required by the words "by reason of" is the "but for" test: see Walker Corporation, Nasser v Roads and Traffic Authority of New South Wales (2006) NSWLEC 181, Housing Commissioner of NSW v San Sebastian Proprietary Limited (1978) 140 CLR 196 at 206-207.

[24]

AMP's submissions 67 The PRL is the public purpose identified in the gazetted notice of acquisition. The planning changes in the Macquarie Park area argued for by TIDC are outside the relevant public purpose for the purposes of the Just Terms Act. 68 On the "but for" argument of TIDC, where the relevant judicial inquiry is whether something was caused by the public purpose, the relevant test is not simply the "but for" test. Decisions dealing with the concept of disregarding increases in the value of land "caused by" the pursuit of the public purpose had been concerned to look for some clear connection between the scheme or proposal pursuant to which the land was acquired and the cause of the increasing value; see Walker Corporation [32] - [42] and especially [40]. 69 Next, as required by s 55(f), what is to be considered is any increase or decrease in the value of other lands "caused by" the carrying out of the public purpose. The words "by reason of" have been held to require a relationship of cause and effect and a practical application of the ordinary principles of causation; see for example Blacktown City Council v Lasseter [1996] NSWCA (unreported, Priestley, Cole and Beazley JJA, 5 December 1996). 70 The language of the statute "by reason of the carrying out of … the public purpose" directs attention to a causal relationship between the particular public purpose and the increase or decrease in value. The language of the statute does not expressly contemplate some intervening step between the public purpose and the increase or decrease, the causal connection is required to be between the public purpose and the increase or decrease. Put another way, the increase or decrease must be the consequence of the public acquisition and not some intervening step, even if the intervening step is itself caused by the public purpose. The planning process is controlled by entities other than TIDC, namely the Council, the Department of Planning and the Minister for Planning. The decisions relating to the planning process were made (and are being made) by entities vested with discretionary powers required to be exercised by reference to a wide range of considerations. Even assuming that the carrying out of the public purpose of the PRL was "vital to" or the "cause of" the changes to the planning regime contemplated by the Structure Plan, those facts nevertheless do not fit within the statutory phrase in s 55(f). Section 55(f) captures increases or decreases in value which are a direct and inevitable (in the sense of unrelated to any intervening decision by a third party) consequence of the carrying out of the public purpose and not increases or decreases in value which flow from an intervening exercise of discretion by some entity or person other than the acquiring authority. As submitted, the relevant public purpose is a public purpose stated in the notice of acquisition. The public purpose is the PRL.

[26]

74 In Dwight the Court examined documents other than the gazettal notice to ascertain more precisely the public purpose for which the land in that case was acquired. The nature of the public purpose as stated in the gazette notice was for the purposes of the Water Board Act 1987, but in order to know the specific works and the specific uses to which the acquired land was to be put, the authority's documents and correspondence had to be examined. The facts of that case are unlike this case because the scope of the project which required determination was within the area of responsibility of the acquiring authority. 75 Perry concerned land acquired for the construction of a highway on the north coast of NSW near Coffs Harbour. At issue was the ambit of the highway scheme and whether road works going beyond a certain point could be included in the meaning of "public purpose" when determining compensation. It was held that the determination of the public purpose requires identification of the scheme for the purposes for which the acquisition was made. Hodgson JA, agreeing with Handley JA's leading judgment (Powell JA also in agreement), stated at [99 ]- [100]: In a case such as the present, it is necessary to determine what is the public purpose for which the claimant's land was acquired, including the appropriate level of generality at which the purpose should be identified. In this case, at the most general level, the purpose could be identified as the upgrading of the Pacific Highway between Sydney and the Queensland border; and there are other possible identifications, including the Raleigh Deviation generally, or particular versions of the Raleigh Deviation, or the extension of the Raleigh Deviation to Perry's Hill. I do not think there are any clear rules determining how the relevant purpose or the appropriate level of generality is to be determined. Factors to be taken into account would, in my opinion, include the degree of continuity and consistency of various elements of what is proposed and done, and fairness to both the claimant and the acquiring authority.

[30]

Harrison/Rowan 80 Mr Harrison, town planner, stated that the existing Macquarie Centre as at April 2003 was well serviced by many bus routes (transcript 16 November 2006 p 85.30 - 86.37), the train to Parramatta or Chatswood would not increase numbers of patrons because there are other substantial shopping centres at Parramatta and Chatswood also on the railway line (transcript 16 November 2006 p 86.39 - 87.40) and the purpose of the PRL was to ease congestion on the main line and to afford a greater opportunity for commuters to travel to the city (transcript 16 November 2006 p 89.2 - 89.29). 81 Mr Rowan's view was the opposite, namely that there would be an increase in patronage as a result of the PRL being introduced. His evidence on the patronage of the Macquarie Centre was: (i) the area is currently frustrated in terms of public transport and the existing bus network do not assist in the potential for employment growth. The intention of the PRL was to release the pent up demand and provide for an alternative to car transport. (ii) he believes that there would be an increasing commuter population into the area. There would be an enhanced employment attraction into the area and, once in the area, employees can then utilise the shopping centre. This would mean that there would be an increased patronage of the Macquarie Centre. 82 Mr Rowan's view was based in part on the employment growth planned for the Macquarie Park area which this station would service (transcript 16 November 2006 p 88). His view is linked to the increase in FSR changes planned for the area which I have held is not part of the public purpose I can consider under the Just Terms Act. Hack/Smith 83 AMP also relied on the evidence of Mr Smith, a consultant retail expert/adviser to investors, who gave a statement of evidence dated June 2005 (exhibit L), a supplementary statement dated October 2005 (exhibit M), and a statement in reply dated November 2005 (exhibit N). TIDC relied on the evidence of Mr Hack, land economist and planner, who produced a statement of evidence dated 31 January 2006, (exhibit 7), and two additional tables (exhibits 19 and 21). Mr Hack also produced a joint report with Mr Smith, dated 27 April 2006 (exhibit AC). 84 In the Hack/Smith joint report three ways in which patronage of the Macquarie Centre could be affected by the PRL were identified: (i) the trade area of the Macquarie Centre would be expanded along the main northern railway line (positive impact meaning increase in numbers) (ii) Macquarie Centre patrons would use the train to travel elsewhere, for example Chatswood (negative impact meaning decrease in numbers) (iii) patrons would switch from cars to public transport (neutral impact) 85 Mr Smith and Mr Hack disagreed on the extent to which the impact was likely to be negative or positive on patron numbers, and whether extra patrons would result in increased turnover value for the Macquarie Centre. Mr Hack considered there would be a substantial increase in the number of commuters and patrons arriving by rail and consequently a substantial increase in the Macquarie Centre's turnover. Mr Smith considered the impact overall would be neutral. 86 Mr Smith stated that shopping at centres like the Macquarie Centre perform three general functions. These are large volume food shopping at a supermarket, speciality shopping and leisure shopping. The Macquarie Centre is different from other regional shopping centres which were established near an existing railway station. In this case a railway station is coming to a centre which has operated successfully as a car-based shopping centre based on easy car accessibility and parking with an existing customer base. It has operated profitably over a long time and substantially exceeds industry benchmarks for the performance of such a centre. Supermarket shopping is generally car based because people buy perishables. Convenience and retail offer are significant factors in determining how and where specialty and leisure shopping is undertaken. 87 Mr Smith's opinion is that once the railway is operational there will be little change in turnover at the Macquarie Centre attributable to rail commuters. Rail commuters fall into three categories, those travelling to the Macquarie Centre from outside the centre catchment area, those living in the centre catchment area travelling to other destinations and commuters travelling past the Macquarie Centre station who may stop in transit at the Macquarie Centre station. The first two categories represent those changing the mode of transport from their current mode to the railway system. Since these commuters currently have the option of shopping at the Macquarie Centre, the change in mode of transport will not significantly alter the turnover at the Macquarie Centre. There may be some "convenience" shopping by rail commuters at Macquarie Centre rather than the local corner store. This would provide some additional turnover at the Macquarie Centre that would not exist without the railway station but the amount of "spend" increase would not be large overall. The number of students at Macquarie University and employees in the surrounding Industrial Park are unlikely to change significantly as a result of the availability of the rail service. 88 Any significant increase in turnover at the Macquarie Centre would depend on attracting customers from outside the centre's existing catchment area who do not currently have the option of shopping at the Macquarie Centre. Considering that Chatswood, Hornsby and Parramatta shopping centres are accessible by rail and that the station at Macquarie Centre is part of the Chatswood to Epping line, attracting significant customers would be difficult unless the Macquarie Centre offers a choice of goods not available elsewhere. Mr Smith acknowledged that the ice rink at the Macquarie Centre is a unique feature but the fact that it is unique means that it already attracts those people interested in ice skating. 89 Mr Hack, land economist and statistician, gave evidence for TIDC that a prudent hypothetical purchaser in April 2003 would consider, in light of the PRL announcement, the value of future cash flow "capitalising the forecast sustained income" likely to result to the Macquarie Centre as a result of the PRL (exhibit 7 p 8). He considered in his evidence the EIS which states that the railway is expected to increase the proportion of trips into the Macquarie Park/North Ryde Employment Area by public transport from six per cent to 15 per cent at the opening of the railway in 2006 (the date assumed for the opening) and from seven per cent to 17 per cent in 11 years from the opening. The Macquarie Park Transport Plan prepared by Maunsells forecasts 21 per cent to 23 per cent of workers arriving by rail. Mr Hack considered a large percentage of workers would shop at the Centre and stated in oral evidence that he would apply an expenditure of $3,000 per annum for those workers.

[31]

90 Mr Hack considered that the station would be a major public transport node for the Macquarie Centre by drawing in a large number of patrons who do not drive and/or do not possess a car. This is particularly the case for teenagers and elderly people. Some of the businesses in the Macquarie Centre attract large numbers of these people such as the ice rink, food hall, cinemas and medical centre. Mr Hack distinguishes between the terms "patrons" and "shoppers". This distinction is necessary because regional centres such as the Macquarie Centre have been expanding to incorporate an increasing number of non-retail or quasi-retail entertainment uses including cinemas, restaurants, tenpin bowling, soft play, gymnasiums, libraries, community services, et cetera. Such centres are destinations for shopping and also for recreation and entertainment, health and community services. Mr Hack considered the Macquarie Centre was presently at a disadvantage because it did not have a railway station as the two major considerations for attending a shopping centre are convenience and retail offer. He compared the Centre to the two major shopping centres at Chatswood being located close to a railway station. 91 Surveys of transport use at Westfield Chatswood (Masson Wilson Twiney -Transport Review of the Master Plan) indicate that some 20 per cent of patrons travel by public transport. This is a much higher proportion than the eight per cent for the Macquarie Centre currently. If the level of private transport is maintained (motor vehicle and walking) and the proportion of public transport increases from eight per cent to 20 per cent, this would result in an overall increase in patrons to the Macquarie Centre by 15 per cent. Accepting that this is likely to be on the high side, Mr Hack stated in oral evidence that an increase in patronage of at least five per cent but likely closer to 10 per cent could be expected because of the PRL being built. In oral evidence he stated this would lead to a $30 to $50 million increase in the value of the Macquarie Centre. A five per cent increase in turnover will lead to a five per cent increase in value of the Macquarie Centre, in his opinion. 92 Mr Hack stated in oral evidence that there was an undersupply of retail floor space in the Centre's trading area. He considered this was reflected in the Centre's strong economic performance and that there was likely to be 'escape' expenditure to other shopping centres. When asked in cross-examination whether the introduction of the railway line would make it likely that shoppers would 'escape' to Chatswood he stated that was possible but did not alter his conclusions on the substantial numbers of additional patrons likely to arrive as a result of the PRL. Hack/Hynes 93 Mr Hack stated that there is a correlation between the performance of shopping centres and their proximity to railway stations that supports his conclusions. The table in Annexure B of his statement of evidence (exhibit 7) as originally prepared by Mr Hack showed 20 regional and major regional centres in the Sydney Statistical Division (Castle Towers, a major regional centre at Castle Hill, was not included) and their retail gross lettable area (GLA) and total GLA turnover expressed as dollars per square metre and whether the centres were located near a railway station. Mr Hack concluded that the centres averaged just over $5,000/m2 (of GLA) in 2003, which was about 8.3 per cent greater than for centres away from a railway station. 94 During the hearing Mr Hack expanded the table to show the same information for a much larger number of centres (exhibit 19). The classification of shopping centres is undertaken by the Property Council of Australia which identifies centres as super regional, major regional, regional and subregional in the Sydney Statistical Division. The amended table identified 53 shopping centres across all these categories. Mr Hack considered that the amended Annexure B table also showed a correlation between better performance for those centres close to a railway station of about four per cent. While less than his original analysis, a positive correlation still existed and was valid. 95 AMP relied on the evidence of Mr Bryan Hynes, AMP Divisional Manager. Mr Hynes disputed the statistical analysis undertaken by Mr Hack in both the original and amended versions of Annexure B. This was because of the selection of shopping centres by Mr Hack which he considered distorted the outcome and were not comparable to the Macquarie Centre. He also undertook his own analysis (table in exhibit AO) which demonstrated the difficulty in his view in drawing any conclusions based on proximity to a station due to the large number of variables that affect shopping centre performance. His table of 12 major regional centres, seven close to railway stations and five more distant, suggested the opposite conclusion to that drawn by Mr Hack, namely that the average "spend" per customer near a railway station is lower than for centres away from railway stations. In oral evidence he interpreted his table in exhibit AO to suggest that while a railway station at the Macquarie Centre may result in more people coming their relative spending per head (unit) is less than for customers arriving by other means so that there could in fact be a reduction of the income of the Macquarie Centre. 96 In response to this evidence Mr Hack produced a further table and graph (exhibit 21) which he stated provided a statistical correlation between the average unit sale per patron at ten regional shopping centres and plotted that against median weekly personal income to show that there is a correlation between average spend per person and average weekly income. In Mr Hack's view the reason for the lower average spend per patron at some centres near railways stations is their income level and the trade areas of those particular centres. Mr Hack's evidence was that this analysis did not affect his conclusions based on Annexure B because that considered a different correlation of location near a railway and turnover of a shopping centre.

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Finding on additional patrons/value 102 The potential hypothetical purchaser likely to be interested in the Macquarie Centre would be a well resourced institutional buyer. It is very likely that professional advice from the disciplines of the experts before the Court would be obtained by such a purchaser. The EIS for the PRL exhibited in 2000 is an important document which a prudent hypothetical purchaser would be likely to consider also. The development consent conditions for the PRL and supporting documents would also be available. Inquiries could and would be made of TIDC for additional information if needed. The issues a prudent hypothetical purchaser would be focussed on are what is the likelihood of an increase in shoppers/patrons, including commuters, of the Macquarie Centre as a result of the PRL and what value, if any, that would represent. The prudent hypothetical purchaser would consider that the PRL was likely to be built but would be mindful that the PRL was likely to be delayed in completion given the large infrastructure project. At the date of acquisition the expected completion date was 2006. Smith/Hack 103 A key issue for determination is whether there will be increased numbers of commuters and will they shop at the Macquarie Centre and will more shoppers/patrons come to the Macquarie Centre. The EIS has substantial information about the numbers of people anticipated at the Macquarie Park station. The EIS does not differentiate between commuters and shoppers/patrons coming to the Macquarie Centre. I note that Mr Smith did not have regard to it at all. His evidence was not informed by any detailed understanding of the PRL proposal as contained in the extensive EIS, a major omission given the level of detail available in that document. Mr Smith's evidence was focussed on whether there were likely to be additional shoppers at the Macquarie Centre as a result of the PRL. He generally concluded there would not be, apparently in the absence of any detailed understanding of what the anticipated level of service of the PRL to the Macquarie Centre was likely to be. Mr Smith was unable to advise when asked orally (transcript 17 November 2006 p 78, 79) what percentage of commuters would become shoppers and his response on this key matter were therefore unhelpful in assisting to resolve what information a prudent hypothetical purchaser would be likely to be aware of if appropriate inquiries were made. He did state that there was such expertise available but he did not have it. 104 Mr Hack did have regard to the EIS although not in its entirety but certainly in relation to patronage number forecasts to inform his evidence. As referred to by Mr Hack, the EIS predicts a substantial increase in commuters, and this was considered by Mr Hack separately from the issue of increased FSR changes in the area surrounding the railway station at the Macquarie Centre. Mr Hack considered that a substantial percentage of these commuters were very likely to shop at the Macquarie Centre. 105 As identified above in the summary of Mr Smith's evidence at par 86-88 he also considered in his written evidence that there would not necessarily be additional shoppers/patrons drawn to the Macquarie Centre by the PRL. Subsequent to his written evidence, Mr Smith agreed in oral evidence with Mr Hack that there might be an increase in arrivals via the PRL Macquarie Park station of five to ten per cent. The issue is then whether that increase is likely to result in an increase in value due to increased turnover, which in turn affects levels of rent paid by Macquarie Centre tenants as income to the owner. Mr Hack's evidence that there would be a five to ten per cent increase in the value of the Centre ($25 to $50 million) was disputed by Mr Smith (and Mr Hynes). 106 As noted by AMP's witnesses in particular, there is uncertainty in predicting whether there would be any additional patronage to the Macquarie Centre and consequently a measurable increase in value for the Macquarie Centre. That is clearly a matter of which a prudent hypothetical purchaser would be aware. I am satisfied that the evidence of Mr Hack suggests that there will be some additional patronage by additional commuters and shoppers at the Macquarie Centre and that will be considered by a hypothetical purchaser as likely to add value to the Macquarie Centre. Firstly, the undisputed evidence was that there was likely to be some additional patronage from commuters within the Macquarie Centre although Mr Smith limited this to convenience shopping in lieu of shopping at the local corner store, meaning not "big ticket" buying of expensive items such as white goods. Secondly, I accept Mr Hack's evidence that the railway will attract patrons who do not drive and/or do not possess a car, particularly teenagers and elderly people. I understood there to be general agreement that rail was a more attractive form of public transport compared to other modes. Thirdly, I agree with Mr Hack that the Macquarie Centre is more than a focus for shopping given the existence of cinemas and an ice skating rink for leisure outings. I accept that the PRL will provide a more attractive and accessible means of visiting the Macquarie Centre for some patrons likely to use these and other non-retail facilities. 107 Fourthly, and contrary to Mr Smith's evidence, I am not satisfied that additional new shoppers will not be attracted to the Macquarie Centre by the introduction of the railway even though some shoppers may travel through the Macquarie Centre station to Chatswood because of the greater opportunity for comparison shopping. The Macquarie Centre provides an extensive range of retail shops and is currently operating above industry standards according to Mr Hynes. It is already a very successful centre economically. In my view, it will attract additional shoppers because of this and the greater convenience offered by the PRL. 108 Fifthly, the Macquarie Centre has a significantly lower proportion of shoppers who travel by public transport than Chatswood shopping centre, which has 20 per cent of shoppers travelling to Chatswood. While this does not necessarily mean that the Macquarie Centre could achieve the same level as Chatswood shopping centre this nonetheless indicates that an increase in public transport usage to the Macquarie Centre is highly likely as Mr Hack stated.

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Hynes/Hack 109 Mr Hack's and Mr Hynes respective expertise and qualifications do not directly overlap. Mr Hack is a land economist with graduate and post-graduate academic qualifications and many years practical expertise in his discipline including extensive statistical training and analysis. His work as a consultant in the area of land economics includes statistical analysis in the area of retail trading albeit not extensively in the area of major regional shopping centres. 110 Mr Hynes has experience and expertise in operational, acquisition and development issues related to major shopping centres due to many years spent in management positions at major shopping centres including as the centre manager of Castle Towers and Warringah Mall. He has risen to a senior position in AMP where he is presently the Divisional General Manager. His qualification of Certified Shopping Centre Manager's Accreditation was obtained from the Property Council of Australia. He also has an advanced degree in shopping centre management but I am not aware which body awarded this qualification. Mr Hynes does not have any formal qualifications in statistical analysis or land economics and AMP employs statisticians to advise him in this area of his job. He stated that he utilised that information in commercial decisions. I note that Mr Hynes referred to the Expert Witness Practice Direction in the written evidence he prepared in the proceedings on another issue. I allowed his evidence in relation to Mr Hack to be brought forward during the hearing on the basis that he had relevant expertise despite being an employee of AMP. On further reflection, I consider Mr Hynes no doubt did his best to provide independent truthful and accurate advice to the Court but given his senior roles with AMP whether he can be considered a truly independent witness is questionable. He cannot be considered to have the same degree of independence as an expert as Mr Hack in my view. 111 Mr Hack's original evidence was based in part on a statistical analysis of Annexure B, a table which identified 20 regional shopping centres, their various economic performance indicators and whether the centres were near railway stations, as identified above in par 93. He concluded, based on the table, that the weighted average return being the turnover per square metre of GLA for those centres near railway stations was 8.3 per cent higher than for those not near stations. He also identified various other factors which affect centre performance. Mr Hynes criticised the original table because it did not include a number of other centres, including the large and profitable Castle Towers Shopping Centre at Castle Hill, which is not near a railway station. I allowed the evidence from Mr Hynes about the Annexure B table to be adduced for the first time in the course of the hearing, which did mean it was very late in being admitted and resulted in Mr Hack having to respond to it during the hearing. An amended Annexure B table was prepared by Mr Hack (exhibit 19) which showed the same information for a larger number of shopping centres, 53 in total, ranging from super regional centres (eight in total) to subregional centres. According to Mr Hack, the amended Annexure B table demonstrated an average turnover expressed as dollars per square metre of centres at railway stations as four per cent greater compared to centres away from railway stations. This was a smaller increase than found in the original Annexure B table (8.3 per cent) but considered by Mr Hack to have greater statistical validity due to the larger number of centres in the amended Annexure B table. 112 Mr Hynes sought to show in his oral and written evidence (exhibit AO) that Mr Hack's original and amended Annexure B tables indicated the opposite, in that centres closer to railway stations performed poorly when compared to centres not near railway stations. He prepared his own table (exhibit AO) which was a list of 12 major regional shopping centres only, as he considered these to be comparable to the Macquarie Centre. I note that Mr Hynes' table had fewer centres identified than in either of Mr Hack's tables. While not conclusive, this suggests that Mr Hack's analysis in both his tables is a statistically more valid. I also do not accept the logic of the conclusions drawn by Mr Hynes as identified in his oral evidence (transcript 22 November 2007, at pp 77-81), summarised above in par 95, that because there is a lesser spend per person for those arriving by rail to a shopping centre, according to exhibit AO, that this could result in a loss of value to the Macquarie Centre if the proportion of its customers arriving by rail is not increased very substantially. Mr Hack stated in oral evidence that he did not agree with that logic and the customers who come by car to the Macquarie Centre will continue to do so and their shopping habits will not be changed by the arrival of people from the railway station. He did not consider, unlike Mr Hynes, that the impact of controlled parking would be negative, the next issue I will consider. 113 Mr Hack also provided evidence in the table and graph (exhibit 21) that the correlation derived by Mr Hynes based on exhibit AO that there was a lower spend per person arriving by train was not relevant. What was more relevant was the relationship between income levels of people in a shopping centre's trade area and the average spend per person. 114 I accept that Mr Hack has extensive academic qualifications and practical expertise in the application of statistical analysis which Mr Hynes lacks. I do not therefore give any weight to the comments he made about the statistical validity of the amended Table B and accept Mr Hack's analysis taking into account the stated caveats from him about its limitations given the large number of variables affecting shopping centre performance according to Mr Hack. His evidence suggests that there is a correlation between location near a railway and increased turnover for a shopping centre. That finding is separate from the issue of average spend per person at a shopping centre based on disposable income. 115 Mr Hack was subjected to extensive cross-examination about the original and amended table B and the table in exhibit 21. While that attempted to elicit that opposite conclusions could just as readily be drawn contrary to the conclusions of Mr Hack if the statistical data is considered in different ways, I consider that this did not undermine the value of his evidence. He conceded readily some of the matters put to him but maintained that did not affect his expert opinion about the conclusions he had drawn in any significant way, which opinion I accept. 116 As was clear from the oral evidence of Mr Hynes and Mr Hack there are a number of factors such as the socio-economic base and demographics of the trade area which affect the turnover of a large shopping centre. It is difficult to isolate the impact of being near a railway station as a single determinant of increased turnover and hence value, as Mr Hack correctly conceded. Nevertheless, a prudent hypothetical purchaser (and vendor) receiving such advice would consider there was a likely correlation between increased patronage of the Macquarie Centre if a railway station was located next to it and greater turnover from extra patrons/shoppers including additional commuters. That correlation means that an amount representing that value would be considered as likely to have to be paid by a prudent hypothetical purchaser to a prudent hypothetical vendor, who would also be aware of the potential for greater value. 117 Mr Hack's evidence confirms that there is likely to be increased value as a result of the PRL being built, but that the amount of increased value attributable to the Macquarie Centre must be considered as an approximate figure.

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Conclusion 120 I am satisfied that on any reasonable assessment regardless of particular expert opinion a shopping centre with the potential for a railway station next to it would be considered more valuable by a hypothetical purchaser than a shopping centre without that potential. Mr Smith and Mr Hynes both stated that this is the first time they are aware that a railway station has been built next to a successful shopping centre in NSW rather than vice versa and considered this was likely to be negative rather than positive. Mr Hynes final evidence was that the impact of the PRL would be negligible as the Macquarie Shopping Centre is already operating very successfully as a car-based shopping centre. As a starting point the opposite conclusion that there would be positive economic impacts is just as open, as reflected in the evidence of TIDC's experts which I have accepted. 121 It is difficult to estimate precisely the likely increase in value of the Macquarie Centre for which a prudent hypothetical purchaser would be likely to pay. There is no specific evidence from either party about the precise numbers of people using the railway station at the Macquarie Centre becoming shoppers. I have accepted Mr Hack's evidence that the percentage will be substantial. I consider that a hypothetical purchaser is likely to consider there would be an increase in value as a result of the PRL being built which will bring greater patronage to the Macquarie Centre. The lower estimate of Mr Hack of a five per cent increase in value results in an annual increase in turnover of $25 million calculated in relation to an annual turnover of $500 million. Mr Wood valuer agreed with that figure also. Mr Hack considered this was due to the increase in value due to more rent paid by tenants based on more turnover and therefore more income for the owner of the Macquarie Centre. Given the analysis of the Annexure B tables by Mr Hack and his acknowledgment of the many variables that contribute to the performance of a shopping centre, as is self evidently the case, a more conservative estimate of the likely increase due to increased patronage is justified. A prudent hypothetical purchaser would consider that there is likely to be an increase in value of the Macquarie Centre as a result of the PRL being built and that this should be considered to be in the range of $15 to $25 million. Because of the uncertainty about when the PRL is likely to be completed, which I refer to next, and the many variables that contribute to the successful performance of a shopping centre, a conservative approach to the value is warranted. I therefore adopt $15 million as the amount of value for which a prudent hypothetical purchaser is likely pay. 122 One reason why a prudent hypothetical purchaser would take a conservative approach is that the PRL had obviously not been built at the date of acquisition. While it had been given development consent by the relevant Minister in 2002 and construction had started on part of it, suggesting completion was likely, there must be uncertainty with such a large project as to when it would be completed. In August 2003 for example, the NSW government announced that the project was only funded to Epping, at that stage, not to Parramatta. This is obviously not a matter of which a prudent hypothetical purchaser could be aware and is clearly a matter which occurred after the date of acquisition and not a matter which can be taken into account. It does however demonstrate why the caution expressed by Mr Smith and Mr Davis is likely to be part of the advice given to a prudent hypothetical purchaser in relation to the timing of larger government infrastructure projects. While I have not accepted that such cautious advice would lead to there being no allowance for value a conservative approach to the increase in value is warranted, as I have identified in the previous paragraph.

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Mr Petschack 129 Mr Petschack was the Retail Manager of the Macquarie Centre from November 1998 to July 2000 and Centre Manager from July 2000 to July 2003. His evidence deals with AMP's previous consideration of controlled parking at the Macquarie Centre. The issue of controlled parking was addressed on two occasions, the first by a report in December 1999 prior to the completion of major extension works at the Macquarie Centre and the second time when the proposed railway station became known to AMP. 130 The first report in December 1999 by Mr Barry Smallwood recommended the implementation of controlled parking. This recommendation was not adopted by the Macquarie Centre management. While still under consideration, the desire to implement controlled parking was not strong due to the experience of the introduction of controlled parking at Warringah Mall. This had caused negative feedback from customers and the need to renegotiate a lease from a major tenant. In late 2001 a decision was made not to proceed with controlled parking as free parking was seen as a competitive advantage for the Macquarie Centre. 131 Mr Petschack maintains that the introduction of controlled parking (in the absence of the rail line) would be viewed negatively by shoppers and should be deferred for as long as possible. This conclusion is based on: (i) general feedback from customers about car parking (ii) an exit study in 2001 of shoppers pointing to the free parking as a favourable attribute, (iii) observations of the introduction of controlled parking at Warringah Mall, (iv) observations of the introduction of controlled parking at Westfield Hornsby, (v) an obvious preference people have for not paying for something that is currently free. Mr Hynes 132 Mr Hynes' written evidence filed before the hearing dealt largely with controlled parking. Mr Hynes swore three statements of evidence, dated 11 November 2004 (exhibit J), August 2005 (exhibit K) and 17 November 2006 (exhibit AM) which dealt with controlled parking. 133 Mr Hynes was the General Manager of Warringah Mall from 1999 to 2002 when the final stages of a controlled parking installation were completed. He stated that uncontrolled car parking allows customers to determine how, when and for how long they shop. Controlled parking places limits on customers and alters customers retail habits. This in turn affects spending and turnover. He sees no benefits flowing from the implementation of controlled parking unless the shopping centre already has a pre-existing parking problem which is affecting customers' shopping habits. The Macquarie Centre is a high performing regional shopping centre when measured against its competitors. The Moving Annual Turnover (MAT) is the key determinant of the sales productivity and the MAT per square metre for the Macquarie Centre is only exceeded by eight other shopping centres in Australia. In the circumstances, the only reasonable conclusion which can be drawn is that the Macquarie Centre's functioning (including the provision of car parking) is servicing the requirements of the tenants. 134 For this reason, controlled parking has little or no role to play in assisting further sales productivity growth at the Macquarie Centre. Accordingly, any decision to implement controlled parking flowing from the opening of the railway station is essentially a defensive strategy to protect the current high sales productivity. He was concerned that the introduction of controlled parking would be a major risk to the Macquarie Centre which would erode its competitive edge. 135 If a controlled parking system were implemented, based on his experience at Warringah Mall where a Zeag controlled parking system was used, Mr Hynes' view was that system would be appropriate. The system at Warringah Mall operates at a loss and he would expect the system at the Macquarie Centre to do the same. Mr Smith 136 Mr Smith, retail industry consultant, considered that the availability of parking directly affects customer numbers and the turnover performance of the Macquarie Centre. (ii) type of controlled parking system and cost 137 Mr John Brandon, engineer and AMP's project manager for controlled parking, provided evidence on the lead time for procurement of the controlled parking equipment and the installation and commissioning of the Zeag system considered necessary by AMP. Mr Brandon estimated that it would take about 17 months for the system to become operational.

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TIDC's evidence and submissions 140 TIDC argued that controlled parking was not necessary as a result of the PRL. In 2003 a hypothetical purchaser would recognise that it may have to install controlled parking at some stage in the future. The expected completion date was 2006 and the level of commuter demand for parking unknown. If it was found to be necessary a much less expensive system than the Zeag system was feasible and all that should be compensated for. (i) whether controlled parking necessary? Mr Hallam 141 Mr Hallam, traffic engineer, stated that the Smallwood study in 1999 found that 38 per cent of the available space at the Macquarie Centre was used by non-centre customers or staff. The need for controlled parking was recommended in this study although not introduced by the Macquarie Centre management. The Smallwood study also identified on p 10 that the gross income would be in the order of $1.7 million and the car park use likely to generate a net income of $500,000. The study also stated that controlled parking would increase the value of the shopping centre by $6.5 milllion for the first full year of operation. 142 Mr Hallam also took into account the EIS estimates of "park and ride" (meaning commuter) numbers at the proposed station of 320 cars in 2006 and 370 cars in 2021. These numbers include the current commuter parking of 300 cars. Based on the estimate of 300 commuters parking at the site at present, additional commuter parking of 20 - 70 spaces would be required for an overall parking demand of 320 - 370 spaces. Mr Hallam described this as a small element in the wider picture of parking at the Macquarie Centre. In his assessment, the opening of the railway might increase the number of public transport commuters from the Macquarie Park area, but many of these commuters would already be travelling by bus to key destinations. 143 The opening of the railway does not necessarily give rise to a need for controlled parking, although Mr Hallam accepts that the railway station may have an effect on parking at the Macquarie Centre. He recommended a "wait and see" approach before deciding that a controlled parking system was essential to limit commuter parking and recommended monitoring impacts after the PRL commences operation. He also identified "soft" options he considered feasible such as making areas of the car park off limits until certain times, which did not require a large capital outlay.

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(iii) impact on market value 147 Mr Wood valuer considered in exhibit AJ that controlled parking was the norm for most regional centres because it provides security for motor vehicles for patrons, decreased the number of spaces occupied by non shoppers already using the Centre for parking, provides potential income for its operation, attracts more patrons to the Centre, and most customers will accept controlled parking as they accept a centre's ability to provide under cover secure parking for up to 3 hours free, the usual arrangement in place. He considered it would have a positive impact on sales productivity. It is likely that a prudent purchaser will consider it would be necessary to introduce controlled parking at the Macquarie Centre as a result of the PRL. Mr Wood's evidence was that controlled parking would increase the value of the Macquarie Centre because it would become part of the capital assets of the Macquarie Centre. Further based on Rawlinson 2005 the cost of construction of car parking spaces is $17,000. $13.5 million is equivalent to providing 770 car spaces (I note Mr Hallam stated the cost per car parking space is generally considered to be $20,000. Finding (i) whether controlled parking is necessary due to the PRL 148 As set out above I have before me conflicting views of various experts and AMP employees as to whether the introduction of controlled parking would be necessary as a result of the PRL. I have to consider what a prudent hypothetical purchaser would consider likely at the date of acquisition given that the level of commuter parking was unknown, as identified by the evidence of Mr Masson. That purchaser would be likely to have access to AMP's internal reports such as the Smallwood report referred to in evidence. That report identifies a number of benefits from the introduction of controlled parking at the Macquarie Centre. They would also be likely to receive conflicting advice from experts about the necessity for the introduction of controlled parking. It is also not immediately clear that this will result in a loss of value to the Macquarie Centre calculated as the cost of the automated Zeag system AMP considers will be necessary to implement. 149 I accept that the decision to implement controlled parking is ultimately a commercial one and it is highly likely that the Macquarie Centre will seek to maintain its competitive commercial advantage. This means the maintenance of the car park for customer use. It is likely that the Macquarie Centre will need to respond to the convenience of the Macquarie Centre for commuters using the railway. I accept the evidence of Mr Masson that there is a strong tendency for rail commuters to drive and park at railway stations before catching a train to work or some other destination. It is unlikely that the prudent hypothetical purchaser would adopt a "wait and see" approach, such as Mr Hallam suggested, but rather introduce controlled parking in response to the PRL being built. In my view, a prudent hypothetical purchaser is likely to consider there would be a need for some form of controlled parking when the PRL opens. 150 AMP's submissions were dismissive of the "soft" options suggested by Mr Hallam in particular without really stating why. Nor was it stated why Mr Hack's view that the parking station hours could be restricted. Having said that, it is also likely that in the case of major regional centre such as the Macquarie Centre there is an understandable preference for more than the "soft options" identified by Mr Hallam as being necessary to manage parking over a large car parking site. I have already held however that AMP's views are not necessarily synonymous with that of the hypothetical purchaser so that its views about what it considers necessary expenditure on a particular system is not conclusive on this issue. Adverse impacts on patronage/loss of competitive edge? 151 The loss of value claim is based on Mr Hynes' evidence that there would be a major risk of loss of competitive advantage if controlled parking were introduced as a result of the PRL. On AMP's case that risk is the loss in value of the Macquarie Centre which should be quantified as the cost of installing an automated controlled parking system. I do not accept that the introduction of controlled parking is likely to be considered by a prudent hypothetical purchaser as so likely to have such a negative impact on existing and potential Macquarie Centre customers that it would impact on the patronage of the Macquarie Centre. 152 As identified by Mr Wood and Mr Hack controlled parking in major shopping centres is common throughout Sydney (Castle Towers being an exception) and consequently accepted by shoppers over time who use those centres. The evidence suggests that most comparable commercial centres near railway lines have introduced controlled parking. While a change to controlled parking from free parking may initially meet with some resistance by shoppers who have been used to uncontrolled parking, such as occurred at Warringah Mall over a two year period according to Mr Hynes, I am satisfied that this would only be temporary and shoppers would adapt to the controlled parking situation as they have in other similar centres, as identified by Mr Hack and Mr Wood. There will be added benefits for shoppers in terms of security for parked cars also identified with the introduction of controlled parking. 153 Another suggestion made by Mr Hack was that the controlled parking need not operate on weekends as occurs at other major regional shopping centres. This would ameliorate, if necessary, the concerns raised by Mr Hynes about the change to customers shopping habits on Saturday and Sunday at Warringah Mall after the introduction of controlled parking that customers did not stay as long and bought fewer "big ticket" purchases such as whitegoods. 154 In these circumstances it is debatable whether the cost of introducing an automated controlled parking system is a loss of value at all to the Macquarie Centre. The valuers also provide their respective conflicting opinions on this issue below. (ii) The type of controlled parking and the cost 155 AMP argued that as it was an operator of very large shopping centres and owner of the Macquarie Centre it should be regarded as the prudent hypothetical purchaser and therefore its view of what would be the appropriate system for its needs should be accepted. I do not accept that AMP should be so considered. Accordingly, the view of its current and past employees, Mr Hynes and Mr Petschack, that the appropriate controlled parking system would be a Zeag system, is not conclusive of the view that a prudent hypothetical purchaser or vendor would adopt. I must also consider that the hypothetical vendor will also have a view about whether there is any loss of value and the extent of that loss. 156 A prudent hypothetical purchaser would obtain advice about the various options available to it and this would include the "soft options" which are clearly substantially less expensive than automated controlled parking systems. Apart from Mr Hynes who is not an expert in the design and construction of such systems, stating that the Zeag system implemented at Warringah Mall is the system that should be implemented at the Macquarie Centre, there is not much information provided about the appropriateness of any particular system from an engineering point of view. Mr Hynes' involvement has been directed to the commercial decisions made on the basis of appropriate engineering advice. Mr Martin's letter in exhibit 22 suggests that the Ski Data system is one that could be considered at the Macquarie Centre given its implementation elsewhere.

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157 The quantity surveyors' evidence addressed what each system, Zeag or Ski Data, would cost to implement at the Macquarie Centre. There is limited evidence on the merits of the Zeag system as opposed to the Ski Data systems. Both systems provide for controlled parking. The Zeag system provides for a greater level of management through implementation of manned booths. The Zeag system also provides for greater management of the car park overall through signs directing cars to areas of the car park where vacant spaces are located. 158 However, the question to be answered is whether, for the purposes of s 55(f), it is appropriate to make allowance for a controlled parking system that would deny non-shoppers access to the car parking area (subject to appropriate time limits), such as the Ski Data system, or a more complex controlled parking scheme that would achieve the same objective, and also other additional benefits, such as the Zeag system. 159 In my view, any decrease in the value of the Macquarie Centre (if indeed there be any) should be limited to the consideration of a scheme that satisfies the purpose for which the decrease in value relates. In this case, the decrease in value relates to the use of the Macquarie Centre car park by non-shoppers who use the railway to commute to other areas. It may well be that the Zeag system is more desirable to AMP for the operation of the Macquarie Centre however for the purposes of s 55(f) I accept that the potential cost to the Macquarie Centre to install controlled parking is $2,941,227, say $3 million. I will not make any allowance for operating costs, as income may well be derived from its operation. (iii) Effect on value? 160 Whether this level of expenditure would affect the value of the Macquarie Centre being $750 million is debatable. Mr Davis the valuer called by AMP, gave oral evidence that the Zeag system cost of approximately $13 million was so large that it would have to be deducted from the capital value of the Macquarie Centre. Mr Davis also gave oral evidence that a negligible amount that would have no impact on market value was anything from $0 to $1 million.

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161 He also stated that there may be offsetting issues such as additional patronage which would cancel out that cost. It is a cost which could be offset by income from running the system but he doubted that there would be much income. Mr Wood considered there would be an increase in the capital value of the Macquarie Centre as a result of the controlled parking system being implemented. 162 I consider a $3 million cost is likely to be considered negligible by a prudent hypothetical purchaser considering the $750 million agreed value of the Macquarie Centre. The addition of controlled parking will be a capital improvement to the Macquarie Centre, as identified by Mr Wood, valuer. I also note that Mr Wood gave evidence that $13.5 million equates to the cost of providing 770 car spaces, suggesting that figure is excessive compensation to cure a potential car parking problem. 163 In conclusion, in order to succeed in a claim under s 55(f), part of the inquiry is whether or not a prudent hypothetical purchaser would consider that expenditure is necessary because of the compulsory acquisition. I have accepted that expenditure on a controlled parking system is likely to be considered necessary. In order to succeed however a second step is necessary which is that it must be shown that the expenditure would cause a decrease in the value of the Macquarie Centre. For the reasons identified at par 152 -154, I do not consider that equates to a loss of value to the Macquarie Centre. Further, given that I consider $3 million is the appropriate amount a prudent hypothetical purchaser is likely to consider as necessary expenditure AMP has not demonstrated that the capital cost of a controlled parking system is likely to result in a decrease in the value of the Macquarie Centre. I do not consider the claim under s 55(f) for a decrease in value should succeed. Conclusion 164 As argued by TIDC, cases such as Brell v Penrith City Council (1965) 11 LGRA 156 confirm that where betterment exceeds other heads of compensation then nil compensation is payable. This was also considered in Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales (2004) NSWLEC 612 where compensation was reduced downwards due to the beneficial effect on the area in which the resumed land was located as a result of the M7 motorway being built. 165 I have held that there is betterment to the Macquarie Centre in the amount of $15 million under s 55(f). I have also held that the introduction of controlled parking would not give rise to a reduction in value of the Macquarie Centre, also under s 55(f). I have held that market value is approximately $1,115,000 under s 55(a). I would ask that the parties provide an exact figure shortly. As betterment clearly exceeds the market value and disturbance agreed of $5,745,352 there is no compensation payable to AMP under the provisions of the Just Terms Act for this compulsory acquisition claim. I will reserve costs.

Parties

Applicant/Plaintiff:

AMP Capital Investors Limited and Anor

Respondent/Defendant:

Transport Infrastructure Development Corporation

Cases Cited (12)

CITATION : AMP Capital Investors Limited and Anor v Transport Infrastructure Development Corporation [2007] NSWLEC 397 This decision has been amended. Please see the end of the judgment for a list of the amendments.

Blacktown City Council v Lasseter [1996] NSWCA (unreported, Priestley, Cole and Beazley JJA, 5 December 1996); Brell & Anor v Penrith City Council (1964) 11 LGRA 156; D & C Dwight v Sydney Water Corporation Limited [1995] NSWLEC 72 (unreported, Bignold J, 10 May 1995); Housing Commission of NSW v San Sebastian Proprietary Limited (1978) 140 CLR 196; Hurstville City Council v Roads and Traffic Authority [1999] NSWLEC 100; Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales (2004) NSWLEC 612 ; Nasser v Roads and Traffic Authority of New South Wales (2006) NSWLEC 181; Prince Alfred Park Reserve Trust v State Rail Authority of New South Wales (1997) 96 LGERA 75; CASES CITED: Redeam Pty Ltd v South Australia Land Commission (1977) 40 LGERA 151; River Bank Pty Ltd v Commonwealth of Australia (1974) 48 ALJR 483; Roads and Traffic Authority of New South Wales v Hurstville City Council (2001) 112 LGERA 223 ; Roads and Traffic Authority of New South Wales v Perry & Anor (2001) 52 NSWLR 222; San Sebastian Pty Ltd v Housing Commission of New South Wales (1977) 37 LGRA 191; Shaw v State Planning Authority of New South Wales (No 2) (1972) 27 LGRA 94; Spencer v The Commonwealth [1907] 5 CLR 418; Sydney Harbour Foreshore Authority v Walker Corporation Pty Limited (2005) 141 LGERA 243; Tinker Taylor Proprietary Limited v Commissioner for Main Roads (1960) 105 CLR 334

(1978) 140 CLR 196

(1997) 96 LGERA 75

(1977) 40 LGERA 151

(1974) 48 ALJR 483

(2001) 112 LGERA 223

(2001) 52 NSWLR 222

(2005) 141 LGERA 243

(1960) 105 CLR 334

(2005) 63 NSWLR 407

[1999] NSWLEC 100

Cited By (4)

AMP Capital Investors Limited and Anor v Transport Infrastructure Development Corporation

AMP Capital Investors Limited v Transport Infrastructure Development Corporation

Ballina Waterways Pty Limited v Roads and Traffic Authority of New South Wales

Everest Project Developments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 & The Roads and Traffic Authority of New South Wales