Applicant v Respondent

Best Practice Environmental Management Siting, Design, Operation and Rehabilitation of Landfills document

Environment Protection Act 1970

Extractive Industries Development Act 1995

Land Acquisition and Compensation Act 1986

SEPP applied to all landfill sites receiving municipal wastes, including privately owned sites; municipal wastes were defined to include putrescible wastes.

Planning and Environment Act 1987

Valuation of Land Act 1960

1 On 15 November 2001, Roads Corporation ('the Corporation')[1] acquired a 3.34 hectare strip of land running along the southern boundary of a 210 hectare property in Cooper Street, Epping, owned and in large part occupied by the respondent, Mr Love.

2 The purpose of the acquisition was to facilitate the duplication of Cooper Street. The provision of an extra carriageway required the acquisition of land in order to widen the roadway reserve.

3 The principal dispute between the parties arises not with respect to the value of the land actually acquired, but because Mr Love contends that the acquisition resulted in a consequential loss of value to the balance of his land.

4 In particular, Mr Love contends the land suffered a loss of value as the site of a potential landfill within existing and proposed quarry holes in its western-most portion. The quarry operation was at the relevant time being conducted in accordance with Works Authority 149 ('WA149') pursuant to the provisions of the Extractive Industries Development Act 1995 ('EID Act'). It was carried on by a company controlled by Mr Ron Kerr, known as Conundrum Holdings Pty Ltd ('Conundrum'), which leased the WA149 land from Mr Love.

5 In June 2001 Mr Love's land was proposed to be placed on a draft regional waste disposal plan prepared for the purposes of the Environment Protection Act 1970 ('EP Act').[2] This enlivened its potential for landfill use by designating it as potentially appropriate for works approval pursuant to the EP Act and by way of planning permit pursuant to the Planning and Environment Act 1987 ('P and E Act').

6 In July 2002, however, the EP Act was amended to require in effect that the site be included in a regional plan approved by the EPA as a pre-condition to the grant of a works approval. Mr Love's land was not so included at the time and has not been so included since. As a consequence there was what was described on behalf of Mr Love as a window of opportunity for the obtaining of land use approvals for landfill use only between June 2001 and July 2002.

7 Mr Love's case is that he missed this window of opportunity because during this period arrangements for vehicular access from the WA149 land to the realigned and duplicated Cooper Street were uncertain. He contends the uncertainty was such that no application for land use approval of a landfill was feasible.

8 The central question in this case thus concerns whether or not (and if so to what extent) the acquiring authority is required to compensate Mr Love for any lost landfill potential inherent in the WA149 land component of the Cooper Street land, by reason of the proposal for and the implementation of the Cooper Street duplication project.

9 The claim with respect to loss of landfill potential is expressed alternatively as one for market value, special value, severance or disturbance.

10 It is quantified in the sum of $10,507,000, a figure derived from the evidence of Mr Herdman, a valuer called on behalf of Mr Love.

11 Further claims for disturbance, severance or special value are also made with respect to a series of particular items, including loss of amenity, reinstatement of access and driveways, power surge damage, loss of trees, loss of Mr Love's time, reinstatement of water supply and fencing.

12 These claims were particularised on behalf of Mr Love as follows:

1. Pursuant to section 41(1)(c), (d) and (e) LAC [Act] additional claims for disturbance, severance and/or special value

Loss of amenity to dwelling & farming facilities including disturbance during construction

New internal farm track to replace access gate on gas line

Costs associated with power surge on 30 January 2003:

Deleted - incorporated under item 1 of claim

Respondent's time liaising with the Applicant and Conundrum Holdings Pty Ltd to reinstate access being 212 hours at $120 per hour

Costs associated with the proper reinstatement of water supply to 410 Cooper Street Epping

Costs arising due to the re-design of the Central Creek Culvert

Liaison with VicRoads fencing contractors - 16 hours at $120 plus 20 hours at $60

13 The claim of some $2,932,440 in respect of drainage impacts was withdrawn in the course of the hearing.

14 A claim for legal valuation and other expenses pursuant to s 41(1)(f) of the Land Acquisition and Compensation Act 1986 ('LAC Act') has been agreed in the sum of $30,334.92.

15 Mr Love also claims solatium in an amount not exceeding 10 per cent of the market value of the 'before' land.

16 The total claim (net of interest) was expressed to be 'say $16,267,000' (inclusive of the drainage impacts claim).

17 A statement of issues dated 17 April 2009 filed pursuant to direction of the Court summarised the manner in which the Corporation joins issue with the claim as follows:

1. Each of the claims set out in the respondent's amended particulars of claim as at 16 March 2009 is in issue.

Claim 1 Market value, severance, disturbance, depreciation and special value

1. The principal matters in issue are:
   1. whether the proposed duplication of Cooper Street and/or the carrying out of the Cooper Street duplication had an impact on the value of the respondent's land by adversely affecting:
      1. the prospect of obtaining approvals for the development and use of a putrescible landfill within the WA149 area on the respondent's land;
      2. the ability of the respondent to market the WA149 landfill site ("the site") whilst the reinstatement of access to the site remained uncertain and/or unresolved;
      3. its value to the hypothetical purchaser (including special value to the respondent).

1. the acquisition, and/or the carrying out of the duplication works:
   1. prevented and/or hindered the respondent from applying for the approvals by creating uncertainty as to the access to the respondent's land;
   2. removed and/or adversely affected the ability of the respondent to market the site whilst the reinstatement of the access to the site remained uncertain and/or unresolved;
   3. diminished the value of the site to the hypothetical purchaser (including special value to the respondent);
2. were it not for the acquisition or the carrying out of the duplication works, the respondent:
   1. could have and/or would have applied for and obtained the approvals;
   2. the respondent could have and/or would have marketed the site to a prospective landfill operator;
   3. the value of the site to the hypothetical purchaser (including special value to the respondent), would have reflected a price for the site's landfill potential.

1. neither the acquisition nor the duplication works created any uncertainty as to the access to the respondent's land nor had any affect on the respondent's ability to apply for or obtain approvals;
2. the respondent would not have been granted a planning permit for the development and use of a putrescible landfill.

1. The parties disagree as to the value of the land including the value of a potential putrescible landfill in the "before".

1. the respondent says that the land had no value referable to the operation of a landfill.
2. the Corporation says that the value of the landfill is unaffected from the "before".

7. The parties disagree as to the value of the land in the "after".

Claim 2(a) Loss of amenity

1. The parties disagree as to the impact on amenity and the Corporation denies any liability for this claim.

Claim 2(b) - (e) Loss of access and other access issues

1. The parties disagree as to the affect of the duplication works on the access to the respondent's dwelling and other access points to the respondent's land.

10. The Corporation denies any liability for these claims.

Claim 2(f) Power surge

1. The parties disagree as to the cause of the power surge said to have occurred on 30 January 2003.
2. The Corporation denies any liability for the claimed event and disputes the amount of damage claimed.

1. The respondent claims a value for trees on the acquired land in addition to the respondent's before and after assessments of market and special value of the acquired interest in the land.
2. The Corporation disputes the entitlement to any part of this claim and its amount.

1. The Corporation disputes the claims made for the respondent's time in their entirety, both as to the time spent and the rate claimed.

Claim 2(k) Culvert claim

16. The respondent says:

1. The carrying out of the Cooper Street duplication works, including installation of the culverts at Central Creek have increased the flood level on the respondent's land; and
2. the level of the respondent's land will need to be filled as a consequence to enable development of his land.

17. The Corporation denies any liability for this claim and says:

1. the flood level is the same in the "before" and "after";
2. the amount claimed by the respondent for filling the land is excessive;

1. the filling of the respondent's land is theoretical and would not occur in practice, that is, there is no loss suffered.

1. The respondent says that it will incur expense in fencing replacement trees for trees lost through the acquisition.
2. The Corporation denies any liability for this claim and says that the respondent has not replaced the trees or carried out the fencing and that accordingly there is no loss.

1. The respondent claims $30,334.92 in respect of legal, valuation and other professional costs necessarily incurred by reason of the acquisition.

21. The Corporation allows this amount less GST.

Solatium

1. The respondent claims an increase in the amount of compensation by way of solatium as is reasonable to compensate the respondent for intangible and non-pecuniary disadvantages resulting from the acquisition at an amount not exceeding 10% of the market value of the land, in the discretion of the Court.

18 The most substantial claim is that made for loss of market value. This claim rests on a series of assumptions, two of which give rise to fundamental threshold difficulties.

1.2 Access uncertainty - the first threshold difficulty

19 The claim asserting loss of landfill potential is first put by way of a claim for loss of market value. There is a threshold difficulty confronting this claim. At the time of the acquisition there was no approval for landfill use upon the WA149 land. The evidence shows that such access complications as arose from the Cooper Street duplication project would not have prevented the grant of land use approvals for landfill. The resolution of access issues would have been regarded by the relevant authorities as constituting a question properly resolved by a permit condition and not the refusal of approval. If approval were granted both in the 'before' or 'after' situation, it would have been subject to a condition that access to the landfill be provided to the satisfaction of the Corporation (as the highway authority). This conclusion flows from the combined force of the evidence of the town planning, traffic engineering and other witnesses. It is circumstantially supported by the report of the panel which recommended the grant of a planning permit for an additional quarry on the central portion of Mr Love's land ('WA658 land') subject to a condition in the following terms:

access to Cooper Street is to be to the satisfaction of VicRoads and the Responsible Authority and may include upgrading of the existing quarry access road and mitigating works at no cost to VicRoads and the Responsible Authority.

20 Whatever Mr Love may have perceived as the effect of uncertainty relating to access arrangements flowing from the duplication of Cooper Street, at the time, the hypothetical purchaser would not have regarded such uncertainty as existed, as preventing successful application for a planning permit and works approval either in the 'before' or 'after' situation.

21 In both the 'before' and 'after' situations Mr Love and the hypothetical purchaser:

• needed to demonstrate it was feasible to upgrade the existing access to the land if a permit for landfill was to be granted;

• needed to finalise which of a number of alternatives for such access was pursued;

• needed a planning permit to create or alter access to Cooper Street to facilitate access to the landfill; and

• needed if possible to obtain permanent access from the land via the optimal solution, ie a signalised intersection serving land owned by Whittlesea City Council ('WCC') immediately to the west.

22 A series of feasible alternative access points to the quarry road were available to a landfill located on the WA149 land in both the 'before' and 'after' situations. It was entirely feasible to create a new access point 300 metres to the east of the pre-existing quarry road access point on Mr Love's land, opposite a break in the median strip.

23 The finalisation of access arrangements in the vicinity of the quarry road would not have been regarded by the hypothetical purchaser as a necessary pre-condition to the seeking of or obtaining of approval.

24 A properly advised purchaser would not have regarded the need to finalise access arrangements as materially affecting the landfill potential of the land.

25 A properly advised hypothetical purchaser acting prudently and reasonably would not have delayed making application for approval of a landfill by reason of the access uncertainty (although other considerations may well have delayed such application).

26 It follows that the claim for loss of market value fails in the first instance because I am satisfied that the hypothetical purchaser would not have regarded access uncertainty in the 'after' situation as having affected any value the land had by reason of its landfill potential ('the first threshold difficulty').

1.3 Planning prospects - the second threshold difficulty

27 Insofar as the claim for market value is concerned, the task in considering planning approval potential is not to decide whether planning approval would in fact have been granted, but whether and if so how, a hypothetical purchaser at the relevant date would have taken the prospects of obtaining approval into account as affecting the value of the land.[4]

28 There is a further threshold difficulty facing the claim for loss of market value. The hypothetical purchaser would have considered there was no real short term prospect of obtaining approval for a landfill at the date of acquisition either by way of planning permit or works approval ('the second threshold difficulty'). This conclusion depends on an analysis of the planning and environmental evidence. Ultimately I prefer the view of Mr Milner that there was no real prospect of obtaining approval for a landfill in the short term if no need for such a landfill could be established and that the question of need was primarily to be resolved by reference to regional supply of tipping space.

29 There were other planning difficulties confronting development of a landfill and in particular the question of strategic planning for the Cooper Street precinct. I do not regard these as something the hypothetical purchaser would have considered determinative of the site's landfill potential but they reinforce the view that the site faced very serious difficulties in obtaining planning approval for a landfill.

30 In my view the hypothetical purchaser would have regarded the prospect of obtaining land use approvals in the short term as no more than 10 per cent.

31 The highest and best use generally of Mr Love's land at the date of acquisition was for the purpose of future industrial use. Mr Brown and Mr Dudakov's order of value is effectively unchallenged in respect of the potential of the land to be used for this purpose (although there was some criticism of Mr Brown by reference to his evidence in another case relating to the acquisition of land at Craigieburn and to the increase by him of his initial values).

32 Such value is deduced from analysis of comparable sales.

33 The valuers who advised Mr Love as to the value of the land for the purpose of future industrial use (Mr Hocking and Mr Kerr) were not called to give evidence.

34 The value arrived at by Mr Brown and Mr Dudakov is above that which the market demonstrates a buyer would generally pay for land with extractive industry and consequential landfill potential.

35 What is fundamentally in issue in terms of the valuation evidence is whether the WA149 land had a higher value as a potential landfill than it had as future industrial land.

36 Mr Love's valuers have undertaken hypothetical development calculations in order to demonstrate that it did. The Corporation's position is that evidence of this kind does not demonstrate the highest and best value was for future landfill use and that the land should be valued as future industrial land by reference to comparable sales.

37 Whereas the future industrial value can be deduced from comparable sales with sufficient probability, I do not accept that either primary methodology adopted by Mr Herdman or Mr Lonergan on behalf of Mr Love can be used with any confidence.

38 I do not accept Mr Herdman's methodology was shown to be that adopted in the market place with respect to comparable transactions at the relevant date.

39 I do not accept the assumptions made by Mr Herdman with respect to critical inputs into his calculation and in particular waste stream, gate price, compaction ratios, engineering costs and cumulative risk.

40 Mr Herdman's 'before' calculation should be rejected because:

(a) it does not reflect the approvals risk constituted by the second threshold difficulty;

(b) I do not accept critical assumptions as to waste stream, gate price, compaction and engineering costs; and

(c) I do not accept the cumulative risk involved in his sequential calculation is adequately taken account of.

41 Both Mr Meredith and Mr Lonergan undertook discounted cash flow ('DCF') calculations with respect to a hypothetical landfill development of Mr Love's land. Both Mr Meredith and Mr Lonergan proceeded on the basis that the results of their DCF calculations should be discounted to reflect the probability of land use approvals. If that is done utilising the 10 per cent probability to which I have referred, the calculations do not generate a 'before' value higher than the future industrial value of the land.

42 Further, the DCF methodology requires adequate proof of its assumptions if it is to be accepted.

43 I do not accept capital or operating expenditure, waste stream or gate prices can be predicted with the confidence with which they could for an established business.

44 I do not accept Mr Lonergan's assessment of the appropriate discount rate. I prefer that of Mr Meredith. I do not accept that the rate adopted by Mr Lonergan for valuation of an existing landfill in Sydney could be equally applicable to the present case.

45 I do not accept critical assumptions which favour Mr Love made by both Mr Lonergan and Mr Meredith with respect to waste stream, compaction, gate prices and costs.

46 I am satisfied the DCF analyses put forward are not sufficiently reliable in respect of critical parameters to demonstrate a positive value for the proposed landfill even if the risk as to land use approvals is disregarded.

47 It is contended that the land had special value to Love by reason of its potential for use as part of a co-ordinated package of land uses.

48 This submission is made within the framework of an overall business strategy which Mr Love described in evidence. His evidence was that from 1975 when he commenced management of the original Clonard property (which included the Cooper Street land owned by him at the date of acquisition) one of the key elements of this business strategy was:

(d) to seek other income sources including opportunities for the use of completed quarry areas for land fill waste disposal.

49 In addition Mr Love's evidence was that after he took over management of the family property in 1975 he put in place the following broad business principles:

(a) Whatever activities we engaged in were required to demonstrate a distinct commercial advantage: in that regard I adopted the business principle that when one enters a new market, you have the opportunity to select your competition and your position in that market; if one selects second place in such circumstances, the business is likely to fail;

(b) We needed to bring on a new enterprise every five to seven years to give us sufficient time to absorb capital costs and to keep the initiative in the area;

(c) The enterprises had to require low off property infrastructure costs, be of a complementary nature and be under the Love family's control. The first two points were all about having the lowest cost base. The last was derived from our past experience where we had learned that it was important to have a high degree of control over on-site activities: by way of example, a clause was inserted in the Conundrum lease as a deterrent to the land being "land banked" if that company had sold out as Blue Metal Quarries had sold to Pioneer in 1969;

(d) That business activities on or in relation to the land operate under high quality management, and preferably self-management. In this regard, the management by Whittlesea Council of the Cooper Street No 1 and No 2 landfills, and Pioneer's management of our quarries, had been unacceptable and to our commercial disadvantage; that is by association, their activities gave us a bad name in the neighbourhood. In particular, by creation of high levels of dust and off-site waste in the local area;

(e) To endeavour to maintain control over activities conducted at Clonard with regard to costs and our business goals. The funding of development activities was to be done by way of "off property" earnings (primarily mine), and progressively increasing "on property" earnings and borrowings where necessary. In this regard I had previously borrowed to purchase land in Violet Town, which was paid off by 1995. The method to finance a landfill would be to obtain relevant approvals and then put in place bankable "take or pay" contracts with waste collectors. The 1992 Conundrum WA149 quarry lease is an example of such a "take or pay" contract.

50 Mr Love's evidence was that the timing of the strategy and business plan with respect to quarrying and landfill which he developed over time was in the 'before' situation as follows:

(a) 1978 to 1984 - remove Pioneer to regain control over our assets and stop that company from further damaging the image of our business:

(b) 1981 - sell the Cooper Street number 1 landfill to Whittlesea Council for $0.4 million;

(c) 1982 - have a geological assessment done of that part of the Clonard property zoned extractive and not quarried;

(d) 1984/5 - renovate the Clonard Homestead to preserve this historic iconic site and to provide an income stream until such future time that the Love family would return to live in it following other developments on the Clonard property. The Homestead site was separated from other future developments by a watercourse;

(e) 1982 to 1990 - find and contract a new quarry lessee (Conundrum Holdings) to quarry the small extractive zoned basalt deposit between the old Pioneer quarry sites so as to create the third Clonard Landfill site. The site was contracted to be completed by 2002;

(f) 1989 - sell the Cooper Street number 2 landfill to Whittlesea Council for $2.7 million;

(g) 1993 to 1995 - explore that part of the Clonard property not leased to Conundrum to define the next (number 4) quarry site;

(h) 1995 - advise Council of the intention to build a Livestock Exchange and a fourth quarry on the Clonard property, the Exchange being a highly complementary activity to the quarry and land fill (sic) sites on and adjacent to the property;

(i) 1995 to 1997 - complete the exploration of the property sufficient to apply for a Work Authority (WA 658);

(j) 1997 to 2002 - apply for and construct the first state of the Livestock Exchange;

(k) 1997 to 1999 - apply for a quarry rezone (later permit 704078) to quarry the defined WA 658 resource and begin site works such as bund wall creation;

(l) 1998 to 2001 - notify the Northern Region of Councils Waste Management Group that the Conundrum quarry and the WA 658 site be placed on the Region Schedule of landfills as a precursor to the gaining of an EPA licence;

(m) 2001 to 2003 - apply for a landfill permit for the Clonard Number 3 landfill (Conundrum quarry/WA 149 site) and Clonard Number 4 landfill (WA 658) sites;

(n) 2003 to 2013 - conduct the Clonard Number 3 landfill operation on the WA 149 land;

(o) 2002 to 2050 - joint venture or conduct the Clonard Number 4 quarry operation on the WA 658 site together with a concurrent solid-inert waste landfill commencing at around 2010;

(p) 2009 - construct stage 2 of the Livestock Exchange;

(q) 2010 to 2020 - joint venture or undertake the development of the eastern block of the Clonard property;

(r) 2013 to 2050 - run recycling and waste processing operations on the Clonard Number 3 site which would feed intractable by-product material which could not be commercially recycled into the Clonard Number 4 site. Set up and run or joint venture a transfer station on Clonard Number 3.

51 I do not accept that the landfill potential of the land was of special value to Mr Love.

52 Any landfill would have exploited the market value of such a use and not a characteristic of the land of special value to Mr Love. This was accepted by the valuers called to give evidence on his behalf.

53 Nevertheless it is open to Mr Love to claim that the land had special value to him in certain respects relating to its residential and agricultural use to which I shall return in detail.

54 In so far as the claim for severance is concerned Mr Love submits that the claim falls within the second limb of the statutory definition, being a claim for the loss of market value of 'any interest of the claimant in other land used in conjunction with the acquired land which is caused by its severance from the acquired land.'[5]

55 The interest in other land asserted is the pre-existing one of right of access onto Cooper Street from the quarry road on Mr Love's land.

56 At common law an owner of land adjoining a highway has a right to free and uninterrupted access to the highway from any point on the land contiguous with the highway and from the highway to any point on the land contiguous with it.[6]

57 In the 'before' situation this common law right was constrained by a planning scheme requirement for a permit to create or alter access points onto Cooper Street.

58 Nevertheless severance of the right of access to the highway potentially embraces a loss of market value in the balance of Mr Love's land, occurring after the date of acquisition, and in the present case crystallising at the end of the window of opportunity which Mr Love alleges closed with the amendment to the EP Act in July 2002.[7]

59 In Tanner v Minister of Education and Training,[8] Bignold J held in respect of comparable legislation, that the right of an adjoining owner to not have an existing lawful access interfered with was:

...relevantly an "interest in land" within the meaning of the Just Terms Act which was divested and extinguished by the compulsory acquisition of School Street, in respect of which divesting or extinguishment the applicant is entitled to compensation pursuant to the Just Terms Act, s 37. [9]

60 I agree that interference with the pre-existing right of access onto Cooper Street from the quarry road was one potentially capable of causing loss falling within the statutory definition of severance.

61 The Corporation objects that there was in fact no practical severance of access to Mr Love's land during the relevant period. The Conundrum Quarry continued to access Cooper Street from the WA149 land over the WCC land during the period in issue. The balance of Mr Love's land also continued to have access to Cooper Street via driveways adjacent to his house. It seems to me however that subject to demonstration of the necessary causal link, it is open to Mr Love to contend that the severance of access to the WA149 land after the acquisition and during the window of opportunity occasioned delay in seeking approval for a landfill, which crystallised in loss of market value upon the change to the EP Act. Such a claim potentially falls within the concept of severance as statutorily defined.

62 This is not to say that the causal argument is free from difficulty. There are a series of problems in this regard to which I will return in connection with the claim for disturbance. Assuming however for present purposes that a severance claim may be raised, the fundamental problem confronting Mr Love is that severance sounds in loss of market value as at the date of the loss. Loss of market value means the amount of money that would have been paid for the relevant interest if it had been sold on that date by a willing but not anxious seller to a willing but not anxious purchaser.[10] Such a claim faces the same problems as the primary claim for loss of market value as at the date of acquisition. Access difficulties due to 'severance' did not in fact cause a loss of market value. The underlying potential for landfill use was unaffected by reason of the first threshold difficulty. Further, such potential was in any event very low having regard to the prospects of obtaining land use approval at that point in time and future landfill was not the highest and best use of the land.

63 As I have already stated, pre-existing access required alteration or replacement with new access if a landfill were to be permitted. It follows that there was no severance of access which could itself have been utilised for a landfill. The real question is whether uncertainty as to the resolution of access issues led to a loss of market value. It did not, whether that question is asked as at the date of acquisition or at the end of the window of opportunity.

64 Despite the difficulties confronting a claim for loss of market value either as at the date of acquisition, or subsequently by reason of severance, it may be accepted that if Mr Love in fact failed to obtain land use approval for a landfill upon the WA149 land within the window of opportunity as a result of a course of conduct responsive to the acquisition, then he may potentially be able to formulate a claim for consequential financial loss. In effect such a claim is one for personal financial loss flowing from the process of acquisition as it was implemented as distinct from the effect of the acquisition on market value.

65 The Corporation submits that such a loss could not be regarded as a 'natural direct and reasonable' consequence of the acquisition because it was caused by Mr Love's decision to pursue a better access solution for the WA149 land than that which existed prior to the acquisition.

66 Mr Love submits that it was reasonable for him to seek access of equivalent standards to that provided by the Corporation to the adjoining WCC land to the west. For reasons I shall elaborate I accept this submission.

67 Nevertheless, the consequential loss claim must fail because no landfill approval could have been obtained in the time available during the window of opportunity ('the third threshold difficulty'). Mr Love's strategy but for the acquisition was to obtain approvals in the period between 2001 and 2003. In practical terms it was necessary for him to resolve arrangements with Conundrum before a works approval application could be made to the EPA. In commercial terms it was also necessary for him to sort out some arrangement with a major waste source collector. In addition to these steps it was necessary to undertake site specific investigations before the works approval application was made to the EPA. In turn the EPA required time to consider the application and in the present case that consideration would have included consideration of the difficult issue of need. After the EPA's decision the matter would on the balance of probabilities have gone to the Victorian Civil and Administrative Tribunal ('VCAT') either by way of appeal by Mr Love or by way of appeal by the WCC. The EPA's approvals process would have been accompanied in parallel by an application for planning approval and the evidence supports the view that the WCC would have refused planning permission also requiring an appeal to VCAT.

68 Both the planning permit application and the works approval application would require co-ordination with the conditions governing the continuing operation of the quarry. The EID Act works authority governing WA149 would also require modification if a quarry and a landfill were to be operated on the same site simultaneously. Conditions relating to buffers between the two uses and constraints upon landfill use during blasting and similar matters would require resolution.

69 The evidence as a whole demonstrates that the landfill could not have obtained final land use approvals pursuant to the relevant legislation and most critically the EP Act in under two years.

70 Further, and in any event as I have already said, there was no practical prospect of obtaining land use approvals during this period by reason of what I have called the second threshold difficulty, namely, the requirement to demonstrate a need for the landfill having regard to the regional supply of landfill space at the relevant point in time.

71 Likewise, even if the consequential loss claim did not fail by reason of the second or third threshold difficulties I do not accept Mr Love's case as to the value of the potential approvals which he has lost.

72 It follows that Mr Love's claim for the loss of landfill potential must fail. I shall now set out my reasons for this conclusion in greater detail and also state my conclusions and reasons with respect to the further loss claims and the claim for solatium.

73 It is convenient first to set out some preliminary matters.

74 This proceeding was commenced by the Corporation by way of a Notice of Referral issued on 16 December 2005 under Part IV of the LAC Act seeking determination of the amount of compensation payable to Mr Love as a consequence of the compulsory acquisition of the Cooper Street land.

75 Interlocutory steps were complicated by the progress of other proceedings in this Court, taken in respect of Mr Love's land, and in particular, a challenge Mr Love mounted to the validity of the acquisition of part of his land for the purposes of the Craigieburn Bypass,[11] and proceedings instituted by the Corporation seeking the assessment of compensation under the LAC Act in respect of land acquired on 11 February 2002 for the purposes of the Craigieburn Bypass.[12] Both these proceedings related to a 25.6 hectare parcel of land, dividing Mr Love's land from north to south between O'Herns Road and Cooper Street. In addition, on 27 November 2003, an area of 1.9999 hectares of Mr Love's land was acquired for the purpose of an interchange with the bypass at O'Herns Road. In turn, compensation relating to this acquisition is also the subject of a Notice of Referral by the Corporation to this Court.

76 The progress of the proceedings as a whole has been complicated by pleading difficulties in relation to the acquisition validity proceeding, disputes over discovery in the proceedings generally, and disputes over expert evidence in both the bypass compensation proceeding and the present proceeding.

77 Ultimately, the trial in the present proceeding was conducted in the first instance by reference to affidavit material which was amplified to some extent in evidence-in-chief and extensively explored in cross-examination. The parties relied on some 69 volumes of very extensive documentary material and oral evidence was called in the course of a 10 week hearing.

78 The hearing was conducted on an 'issues' basis. The evidence relied on by each side was called in respect of a sequence of issues.

(a) Mr Thomas James Love

Land owner, resource-based business owner/operator

(23, 27-29 April 2009; 1, 4, 26-27 May 2009)

(b) Mrs Love

Land owner, secretary (4 May 2009)

(c) Mr Mark Wagner

Marketing manager, Conundrum Holdings Pty Ltd (5 May 2009)

For Mr Love:

(a) Mr Andrew O'Brien

Traffic engineer and consultant, O'Brien Traffic (5-6 May 2009)

For the Corporation:

(b) Mrs Katherine Partenio

Traffic engineer, consultant and director of GTA Consultants (6 May 2009)

(c) Mr John Sidney Piper

Traffic engineer and general manager of traffic and transport, John Piper Traffic Pty Ltd (7 May 2009)

For Mr Love:

(a) Mr Leigh Stone

Horticulturalist and aboriculturist, Carney and Stone (7 May 2009)

For the Corporation:

(b) Mr Robert Galbraith

Arboricultural contractor, consultant and director of Galbraith & Associates (8 May 2009)

For Mr Love:

(a) Mr Jacob Kraan

Town and urban planner (8 May 2009, 11 May 2009)

(b) Mr Phillip Borelli

Town planner and town planning consultant, SJB Planning (11-12 May 2009)

For the Corporation:

(c) Mr Robert Milner

Town planner (12-13 May 2009)

(a) Mr Mario Saliba

Engineer (14-15 May 2009)

(b) Mr Adrian Tofful

Engineer (15 May 2009)

(c) Mr Anthony Roberts

Surveillance manager (15 May 2009)

(d) Mr Graham Jones

Surveillance manager (15 May 2009)

For Mr Love:

(a) Mr Basil Natoli

Consultant geologist, Bell Cochrane & Associates (18-19 May 2009)

(b) Mr Ronald Kerr

Managing director, Conundrum Holdings Pty Ltd (19, 20 and 21 May 2009)

(c) Dr John Terrence Bellair

Environmental consultant (25 May 2009)

(d) Mr Kevin Hince

Retired civil and municipal engineer, currently employed as executive officer of North East Victorian Regional Waste Management Group (25 May 2009)

(e) Mr John Phillip Piper

Geotechnical engineer and director of Lane Piper Pty Ltd, environmental and geotechnical consultants (26 May 2009)

(f) Mr Anthony Lane

Hydrogeologist, Lane Piper Pty Ltd (26 May 2009)

(g) Mr Ross Currie

Civil engineer (25 August 2009)

(h) Mr Martin Aylward

Consultant and director, Martin Aylward & Associates, specialist waste management consultants (25 August 2009)

For the Corporation:

(i) Mr Roger Parker

Senior geotechnical engineer and principal, Golder Associates Pty Ltd ('Golders') (27-28 May 2009)

For Mr Love:

(a) Mr Rodney Alsop

Senior quantity surveyor, WT Partnership Quantity Surveyors and Construction Cost Consultants (24 August 2009)

For the Corporation:

(b) Mr Christopher Robinson

Quantity surveyor and director of Rider Levett Bucknall (24-25 August 2009)

For Mr Love:

(a) Mr Darren Herdman

Valuer, chartered mineral surveyor and director - valuation and advisory services resources and waste management, CB Richard Ellis (26-27, 31 August 2009, 1 September 2009)

(b) Mr Wayne Lonergan

Accountant and economist (1-3 September 2009)

For the Corporation:

(c) Mr Leslie Brown

Valuer and director of m3property (7-9 September 2009)

(d) Mr Brian Dudakov

Valuer and director of Urbis Valuations Pty Ltd (9-10 September 2009)

(e) Mr Gregory Meredith

Chartered accountant and partner of Ferrier Hodgson (10-11 September 2009)

30 Right to compensation on acquisition

Subject to this Act, every person who, immediately before the publication of a notice of acquisition, had an interest in land that is divested or diminished by the acquisition of the interest to which that notice relates has a claim for compensation.

1. General principles on which compensation is to be based

(1) Except as otherwise provided in this Part, in assessing the amount of compensation payable to a claimant in respect of an interest in land which is acquired under this Act, regard must be had to the following factors -

(a) the market value of the interest on the date of acquisition;

(b) any special value to the claimant on the date of acquisition;

(c) any loss attributable to severance;

(d) any loss attributable to disturbance;

(e) the enhancement or depreciation in value of the interest of the claimant, at the date of acquisition, in other land adjoining or severed from the acquired land by reason of the implementation of the purpose for which the land was acquired;

(f) any legal, valuation and other professional expenses necessarily incurred by the claimant by reason of the acquisition of the interest.

82 Section 5A of the Valuation of Land Act 1960 ('VL Act') provides an underlying framework for the valuation of land in the following terms:

5A Determining value of land

(1) Unless otherwise expressly provided where pursuant to the provisions of any Act a court board tribunal valuer or other person is required to determine the value of any land, every matter or thing which such court board tribunal valuer or person considers relevant to such determination shall be taken into account.

(2) In considering the weight to be given to the evidence of sales of other lands when determining such value, regard shall be given to the time at which such sales took place, the terms of such sales, the degree of comparability of the lands in question and any other relevant circumstances.

(3) Without limiting the generality of the foregoing provisions of this section when determining such value there shall, where it is relevant, be taken into account -

(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use;

(b) the effect of any Act, regulation, local law, planning scheme or other such instrument which affects or may affect the use or development of such land;

(c) the shape size topography soil quality situation and aspect of the land;

(d) the situation of the land in respect to natural resources and to transport and other facilities and amenities;

(e) the extent condition and suitability of any improvements on the land; and

(f) the actual and potential capacity of the land to yield a monetary return.

83 The notion of compensation envisages that an owner is entitled to be compensated fairly and fully for his loss, but is not entitled to receive more than fair compensation.[13] Quoting from Scott LJ in Horn v Sutherland Corporation[14] in Transport for London v Spirerose, Lord Neuberger referred to the underlying concept in the following terms:

'the principle of equivalence which is at the root of statutory compensation, the principle that the owner shall be paid neither less nor more than his loss', save, I should add, where the legislation otherwise provides.[15]

84 Section 40 of the LAC Act defines 'market value' in relation to any interest in land on a particular date as meaning:

the amount of money that would have been paid for that interest if it had been sold on that date by a willing but not anxious seller to a willing but not anxious purchaser.

85 This provision reflects the test formulated by the High Court in Spencer's case[16] and articulated by Isaacs J:

To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property. [17]

If less than the whole of the land in which a claimant's interest subsists is acquired or less than the whole of that interest is acquired, the market value of the acquired interest is the difference between the market value of the interest before the acquisition and the market value of the interest after the acquisition.

87 This sub-section requires the assessment of market value in the present case to be undertaken by way of a 'before and after' analysis. A before and after analysis will embrace not only the loss of the value of the land acquired but also the effect of the acquisition upon the value of the balance of the land at the date of acquisition. Loss attributable to severance as defined in the LAC Act is thus potentially embraced by the before and after analysis (at least insofar as the notion of severance applies to the balance of the acquired land).

88 Further, as s 5A of the VL Act envisages and s 41(2) of the LAC Act reflects, market value is to be assessed by reference to the potential highest and best use available to the land as at the relevant date. Such an approach is necessary to reflect the full value of the land to the owner.[18]

89 The question of highest and best use may involve enquiry into the probability of planning permission being obtained for such use. In Transport for London v Spirerose Limited the inferior tribunal had held that there was a probability of planning permission being obtained but for the compulsory acquisition and proceeded to translate that probability into a one hundred per cent certainty that approval would be obtained for the purposes of compensation. The effect of the decision was as Lord Walker said:

if there is at the valuation date a 51% chance of planning permission being granted, that should be treated as a one hundred per cent certainty.[19]

90 The House of Lords held that on the evidence valuation should be based on 'hope value'[20] and not on assumed approvals. This resulted in a valuation of £608,000 being reduced to £400,000.

91 Lord Walker observed that an assumption of the full value of permission was unsafe because such permission:

... may not enable a landowner to obtain the full development value eventually realised, both because of delay and because a developer would expect to make a good profit for itself.[21]

92 It was therefore necessary to distinguish between the 'probability' and the 'realised probability' of permission.

93 Lord Collins summarised his view (which was adopted by the other members of the House of Lords) as follows:

It seems to me to be plain on the basis of the statutory provisions and of authority going back more than 100 years, which is entirely in accordance with commercial common sense, that

(a) the value of the land is the open market value;

(b) any depression in the price which the land might be expected to fetch which is caused by the scheme is to be disregarded;

(c) the valuation must take into account the potential of the land, including its potential for development; and

(d) the development potential must be valued in the normal way, by discounting it for future uncertainties.

If that is right, it provides a clear answer to the question on this appeal, namely that the valuation on the 'hope value' basis is the appropriate one. [22]

94 The present case involves significant issues as to whether and how the value of the land's potential for landfill use should be discounted for future uncertainties. As will appear, the most significant of those uncertainties might be thought to attach to the obtaining of requisite land use approvals. The resolution of the issues falls to be determined in accordance with the terms of the LAC Act and not notions of general principle.[23] Nevertheless the English authority usefully illustrates aspects of the concept of development potential. To generally similar effect Wells J stated in Crouch v Minister for Works:

Where a court finds facts in issue in a civil case it is empowered to act, of course, on the balance of probabilities, but where the circumstances of a case yield only probabilities to a court's evaluation, leaving open doubts and misgivings, a valuer must, when dealing with the same circumstances, reflect, in his reasoning, not only the probabilities, but also the doubts and misgivings. In short, if the purchaser-developer judges that planning approval is virtually certain, the price that he will pay will be higher than that which he will pay if planning approval is no more than probable, and is attended by a real risk that it will be refused.

In my judgment, therefore, a correct application of the Spencer's[24] case test implies that, if the valuer is proceeding on the basis of a hypothetical subdivision contemplated by the willing, but not anxious, buyer and seller alike, the risk that approval of the subdivision would have been refused must be taken into account in determining the bargain price, and cannot be eliminated by attributing to the valuer the liberty to treat as certain that which, in truth and in deed, would have been no more than probable. [25]

95 The development potential of the land may affect its highest and best use. In ISPT Pty Ltd v Melbourne City Council,[26] the Court of Appeal stated:

In Commonwealth Custodial Services Ltd v Valuer-General (NSW),[27] Biscoe J elaborated the concept by reference to relevant authority in the following terms:

There is no statutory definition of "highest and best use". It has been described in the High Court as "the most advantageous purpose for which [the land] was adapted": Spencer v The Commonwealth.[28] It "is the present value alone of such advantages that falls to be determined": Cedar Rapids Manufacturing and Power Co v Lacoste.[29] In Park v Allied Mortgage Corporation Ltd[30] Hill J said at [70]: "As Spencer's case itself makes clear the valuation must proceed by reference to the best use of the property. For this purpose the valuer will take into account not only the present use to which the land is applied, but any more beneficial use to which it may reasonably be applied. This is the process which a purchaser negotiating to purchase the property would undertake. Thus, it is not inappropriate in valuing property to take into account a potential development of the property, for among the range of hypothetical purchasers can be assumed to be a person who would undertake such a development as would maximise the usage of the land". In Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources[31] Jacobs J said:

Common experience shows that land ideally suited for commercial development will fetch a higher price per unit of area than residential land, but it does not follow that the highest and best use of all land is a commercial use, for the highest and best use means exactly what it says - the most advantageous use of the subject land having regard to planning and all other relevant factors affecting its present and future potential. The first task of the valuer is to determine what that use is and then to value the land on that basis. It is not appropriate to determine the highest and best use by reference only to value. [32]

96 In applying this notion the potential highest and best use may itself be to hold the land for a potential future use. Thus, there is a distinction which may be drawn between land ripe for subdivision and land having the potential for future subdivision.[33]

97 In the present case there is a fundamental division between the parties as to the highest and best use of the western portion of Mr Love's land as at the date of acquisition. Mr Love contends that the highest and best use of this portion of the land was as a future landfill. The Corporation contends it was for future industrial use. Neither contends that its highest and best use was its actual use as at the date of acquisition.

98 Section 43(1)(a) of the LAC Act provides that in assessing compensation the following matters must be disregarded:

any increase or decrease in the market value of the interest in land which is acquired arising from the carrying out, or the proposal to carry out, the purpose for which the interest was acquired.

99 This section did not give rise to controversy in the present matter, save in one limited respect relating to the Cooper Street Precinct Strategy.

100 The section is to be interpreted in the light of the judgment of the High Court in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority.[34] That judgment was concerned with analogous New South Wales legislation and focuses upon the causal requirement postulated by the parallel provision.

101 Section 40 of the LAC Act also defines the concept of special value as follows:

special value, in relation to an interest in land, means the value of any pecuniary advantage, in addition to market value, to a claimant which is incidental to his ownership or occupation of that land.

102 The underlying concept was elaborated by Callinan J in Boland v Yates Property Corporation Pty Ltd:

The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction or some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it. ... There will in practice be few cases in which a property does have a special value for a particular owner. Obviously neither sentiment nor a long attachment to it will suffice. The special quality must be a quality that has an economic significance to the owner. A possible case would be one in which, for example, a blacksmith operates a forge in the vicinity of a race track on land zoned for residential purposes as a protected non-conforming use, the right to which might be lost on a transfer of ownership or an interruption of the protected use. Such a property will have a special value for its blacksmith owner, and perhaps another blacksmith who might be able to comply with the relevant requirements to enable him to continue the use but to no-one else.

The Australian Law Reform Commission report Lands Acquisition and Compensation, with some slight adaptations goes some way towards correctly defining special value as "that additional economic advantage which the owner obtains, by reason of his ownership ... and which is not reflected in the market value".[35] The example which I have given answers this description.[36]

103 In Arkaba Holdings Limited v Commissioner of Highways (SA),[37] Bray CJ said:

Special value must, in my view, arise from some attribute of the land, some use made of it or to be made of it or advantage derived or to be derived from it, which is peculiar to the claimant and would not exist in the abstract hypothetical purchaser. Would a prudent man in the position of the claimant have been willing to give more for this land than the market value rather than fail to obtain or regain it if he had been momentarily deprived of it? ... A typical case of special value is where the land is peculiarly adapted to a particular kind of use made of or intended to be made of it by the claimant, e.g. a doctor's consulting rooms or agricultural land worked in conjunction with a neighbouring residence or farm building ...[38]

104 In Coastal Estates Pty Ltd v Bass Shire Council,[39] Gobbo J said as to the concept of special value:

In some cases it [special value] may be an advantage, such as particular knowledge or expertise or associated good will, which advances this owner and not another owner in the market.[40]

105 In Collex Pty Ltd v Roads and Traffic Authority (NSW),[41] Talbot J observed:

Special value can only arise where, at the time of compulsory acquisition, the owner is actually putting the property to some use for which it is especially well suited.[42]

106 These observations illustrate the kind of pecuniary advantage which is potentially embraced within the definition of special value contained in the LAC Act. Ultimately however, that definition speaks for itself and the words 'any pecuniary advantage' are potentially broad ones.

107 Section 41(2) of the LAC Act potentially limits the concept of special value in cases where the highest and best use of land is not its present use:

If the market value of an interest in land is assessed on the basis that the land had potential to be used for a purpose other than the purpose for which it was used on the date of acquisition, compensation must not be allowed for -

(a) any special value in respect of any pecuniary advantage that would necessarily have been forgone in realizing that potential; and

(b) any loss attributable to disturbance that would necessarily have been incurred in realizing that potential.

108 Section 40 of the LAC Act also relevantly defines loss attributable to severance in relation to the acquisition of a claimant's interest in land as meaning:

the amount of any reduction in the market value of any other interest of the claimant in the acquired land or any interest of the claimant in other land used in conjunction with the acquired land which is caused by its severance from the acquired land.

109 It can be seen that severance may potentially result in a loss of market value crystallising subsequently to the date of acquisition itself. Unlike the definition of market value it does not necessarily crystallise at the date of acquisition.

110 Lastly, s 40 of the LAC Act defines loss attributable to disturbance as a residual category of potential pecuniary loss. Loss attributable to disturbance is relevantly defined to mean any pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of the fact that an interest of the claimant in land has been divested or diminished, being a pecuniary loss for which provision is not otherwise made in Part IV of the LAC Act. Section 41(1)(c) is not limited by words equivalent to those found in s 41(1)(a) namely 'on the date of acquisition'.

111 An interference with access may potentially give rise to a claim of this type.[43]

112 The application of the requirement that the relevant pecuniary loss be suffered as a 'natural, direct and reasonable consequence' of the divestment of an interest in land, may give rise to difficult questions of fact.[44]

113 The expression 'the natural, direct and reasonable consequence' is to be understood by the use of three adjectives in combination, to connote a very close and limited connection between the event giving rise to a right to compensation and the financial loss suffered.[45]

114 The notion of disturbance loss is 'drawn very much from common law principles'.[46] As Batt J said in Halwood Corporation Limited (Scheme Administrator Appointed) v Roads Corporation,[47] the common law principles apply to causation except as modified or supplemented by statute.

115 In Melbourne City Link Authority v Teford Pty Ltd, Batt JA with whom Tadgell and Chernov JJA agreed, proceeded on the basis that the question of whether a consequence is a 'reasonable consequence' within the meaning of the statutory definition requires the application of an objective test.[48]

116 The claimant must demonstrate an actual loss. In the present case this is contentious because a number of the disturbance loss claims relate to expenditure which has not been incurred some eight years after the acquisition. In Roads Corporation v Melbourne Estates,[49] Gobbo J observed:

It will be a question of fact in each case as to whether the expenses were in fact about to be incurred. Obviously a delay of over two years, coupled with no evidence as to ongoing search or preparations and no explanation for the inactivity, cannot provide the necessary substratum of fact.[50]

117 It is also appropriate before going to the present case in greater detail to say something about the principles governing the proper ambit of valuation evidence.

118 A valuer like any other expert must reveal the factual and intellectual basis of an opinion. The general principle is that:

In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of 'specialised knowledge'; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be 'wholly or substantially based on the witness's expert knowledge'; so far as the opinion is based on facts 'observed' by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on 'assumed' or 'accepted' facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of 'specialised knowledge' in which the witness is expert by reason of 'training, study or experience', and on which the opinion is 'wholly or substantially based', applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R,[51] on 'a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise'.[52]

119 In Smith v Eurobodalla Shire Council,[53] McClellan AJA (with whom Mason P and Santow JA agreed) said:

There is no doubt that the foundation for an expert's opinion must be adequately proved. This will include the evidence necessary to qualify the person as an expert in the relevant field and proof of the facts in respect of which the expert is requested to give an opinion. As Heydon JA acknowledges, this can give rise to difficulties in areas such as land valuation where, in many cases, the available market evidence is limited and the expert's judgment must be based upon accumulated experience. Sometimes when evidence of comparable sales is not available, alternative but less satisfactory methods of valuation may be utilised. (Various methods are discussed in Alan Hyam, The Law Affecting the Valuation of Land in Australia, 3rd ed, p 113ff). But there will be many cases, particularly in relation to sales of "unique" property, where this may not be possible and a valuer will be required to exercise his or her judgment having regard to the objective material which is available, however inadequate. If there is simply no direct market evidence in relation to a particular property, this does not mean that a valuer cannot express an opinion as to its value. As McClure J points out in the Full Court of the Supreme Court of Western Australia case in Western Australian Planning Commission v Arcus Shopfitters,[54] Makita does not mean that an opinion will be excluded where the objective material is not complete "but the valuer must reveal as far as possible the reasoning process actually employed so as to enable the court to evaluate the evidence and the expert's conclusions." [55]

120 A valuer may express an opinion of value which is founded in part upon hearsay but he cannot give hearsay evidence of disputed facts which lie outside his own personal knowledge.[56]

121 Regard may be had to evidence of events subsequent to the acquisition as confirming or tending to confirm the foresight which the hypothetical purchaser would have had at the relevant date.[57]

122 Other things being equal, if there is a doubt as to the amount properly payable by way of compensation that doubt should be resolved in favour of the more liberal estimate.[58]

123 Mr Love's land lies on the northern side of Cooper Street, Epping. It has been in his family's ownership for a considerable period of time. It comprises part of a property known historically as Clonard.

Volume 10321 Folio 252 (410 Cooper Street);

Volume 10321 Folio 255 (460 Cooper Street).

125 It may be regarded as falling into three parts. First, the western section known as 460 Cooper Street and being the land to the west of Vearings Road (an unused road at the relevant date) comprising some 56.62 hectares. This land included the WA149 land and was comprised in Certificate of Title Volume 10321 Folio 255. The title plan takes the following form:

126 The land may be thought of as comprising the north-western quadrant of a notional rectangle comprising the existing Conundrum Quarry pit ('the northern pit') and a south-eastern quadrant of the same notional rectangle containing land proposed for future quarry workings together with agricultural land.

127 It is helpful to also set out a current location plan of the western part of the site:[59]

128 The adjoining portion of the south-western quadrant (of the notional rectangle which I have postulated) comprised land formerly part of the Love property, but owned by the WCC at the date of the acquisition. This land contained the completed Cooper Street No. 1 landfill and was used for a series of low level waste processing related industries.

129 The adjoining north-eastern quadrant (of the notional rectangle) again comprised land formerly part of the Love property and again owned by WCC at the relevant date. It contained part of the recently completed Cooper Street No. 2 landfill together with a council dog pound. This landfill had extended to the east of Vearings Road in an irregular shape.[60] It was accessed during the life of the Cooper Street No. 2 landfill over the neck of land owned by Mr Love which connected the north-western and south-eastern quadrants as I have described them.

130 Prior to the acquisition Conundrum accessed the northern pit from this neck of land and principally by way of what was called in evidence the 'council tip road', running over the south-western quadrant WCC land to Cooper Street. Conundrum also to some extent used what was called in evidence, the quarry access road ('the quarry road'), being a road connecting the northern pit to Cooper Street within Mr Love's property, and running generally parallel with the western boundary of the south-eastern quadrant. It is the treatment of this access in association with the duplication of Cooper Street which underlies the major dispute in this case.

131 Conundrum operated the northern pit in conjunction with a further quarry pit upon adjoining land to the north owned not by Mr Love but by a Mr Miller.

132 Further, at the date of acquisition a company associated with the Pioneer Hanson Group operated a solid inert waste landfill in land adjoining both the northern pit and Miller's land to the west ('Alvie's pit').

133 At the date of acquisition the northern pit was thus adjoined by a former WCC putrescible landfill to the south (Cooper Street No. 1) and to the east (Cooper Street No. 2), and by a solid inert waste landfill to the west (Alvie's pit).

134 At the relevant date the western portion of the land was principally zoned Special Use Schedule 4 zone pursuant to the Whittlesea Planning Scheme ('WPS'), a zone which facilitated extractive industry.

135 The south-eastern segment of the western portion of the land was further bisected from north to south by an urban floodway zone.

136 It is useful to set out a current zoning plan of the western land and its context.[61]

137 The second section of Mr Love's land comprised the central part which (save for the excision of the Cooper Street No. 2 landfill land) extended between Cooper Street to the south and O'Herns Road to the north, and between Vearings Road to the west and the location of what was then the proposed Craigieburn Bypass to the east. It comprised lots 23 and 24 on Certificate of Title Volume 10321 Folio 252 which described the land by the following plan.

138 This land was approximately 91 hectares in area in the 'before' situation and comprised stony grazing country used to breed Angus beef cattle. It also contained Mr Love's family home and farm sheds in a complex located off Cooper Street in lot 24. It was zoned rural.

139 Prior to the acquisition an independent panel appointed pursuant to the provisions of the P and E Act had recommended the grant of a planning permit for a further substantial quarry upon this land and extending into what became the proposed Craigieburn Bypass alignment (the WA658 proposal). This permit was not thereafter granted because of the bypass proposal.

140 Nevertheless, the terms of the panel's recommendations bear on aspects of this case. Further the proposal itself sought to bring quarry traffic diagonally back from the north-east to the south-west across the property, and utilise access into and from Cooper Street at the point of the quarry road access.

141 Prior to the acquisition the frontage of this central section of the land had substantial tree plantations on and adjacent to the southern boundary of Mr Love's land. These also extended along the frontage of the western section of Mr Love's land as I have described it. In the central section of Mr Love's land the plantations complemented a further well developed set of plantations in the vicinity of Mr Love's house and farm buildings.

142 The eastern portion of the land extended to the east of the route of the proposed Craigieburn Bypass. It comprised lot 22 on Certificate of Title Volume 10321 Folio 252. It had no frontage to Cooper Street and was not affected by the acquisition but extended along O'Herns Road, to the north of an industrially zoned parcel of land owned by Northpoint Industries Pty Ltd (a company associated with one Scanlon). This land was also zoned rural, but was proximate to urban land both to the south and the east. The eastern portion comprised approximately 62 hectares.

2 Market value - the effect of uncertainty of access - the first threshold difficulty

143 An underlying premise of Mr Love's claim is that uncertainty concerning the reinstatement of access to his property at the point of the pre-existing quarry road, destroyed the prospect of obtaining land use approvals (planning permit and works approval) for a landfill as at the date of acquisition and/or thereafter.

(a) I accept that an applicant for land use approval would need to demonstrate that satisfactory heavy vehicle access could be provided to the landfill, and I further accept that such access would most conveniently be provided from Cooper Street (although it might also at least theoretically have been provided from O'Herns Road).

(b) If land use approvals were granted, access would be regulated by planning permit condition. That condition would require in substance that access to Cooper Street be provided to the satisfaction of the Corporation as the relevant road authority. The means of compliance with such a condition would be subject to a right of appeal to VCAT. Accordingly, if dispute arose thereafter as to the appropriate access treatment, the landowner would have the right to independent adjudication of the appropriate access treatment.

(c) There was a primary uncertainty as at the date of acquisition as to whether and in what form the Corporation would reinstate the pre-existing quarry road access to the duplicate roadway of Cooper Street.

(d) The pre-existing form of quarry road access to Cooper Street would not however have been regarded by the Corporation (or any independent adjudicator) as safe and adequate for the purpose of the primary access to a landfill. Accordingly, an alternative or materially upgraded access arrangement was required.

(e) As at the date of acquisition there was secondary uncertainty as to what form of an alternative or upgrade to the quarry road access would be agreed to by the Corporation, and in particular whether direct access arrangements would be achieved for the WA149 land equivalent to those proposed for the access to the adjoining WCC land to the west (reinstating the council tip road access previously used by Conundrum as its primary access to the WA149 land).

(f) There were a series of options available for the provision of access to the proposed landfill, using feasible access points alternative to the quarry road.

(g) There was a prospect of some delay in resolving optimal access arrangements to the WA149 land but there was no realistic prospect that long term access could not be resolved.

145 I will now elaborate my reasons for these conclusions. It is useful first to describe the relevant traffic conditions.

(a) Mr Love had a lawful right of access to Cooper Street at a series of points along the frontage of his property including the quarry road. In particular Mr Love had driveways to his house, and yards and sheds. The property was also bisected by Vearings Road, running north/south and providing potential access to Cooper Street (as was contemplated by Mr Kraan, Mr Love's planning consultant at one point in time).

(b) Conundrum's Works Authority pursuant to the EID Act had, since 1998, contemplated access to the quarry either over the council tip road or the quarry road (prior to this the Works Authority had contemplated access over the council tip road only).

(c) The council tip road had been used as the principal access to the Conundrum quarry for the period of 9 years.

(d) A minor access to the WA149 land was also provided by gates to the quarry road. This access was used by quarry traffic when the council tip road was closed, particularly in the late afternoon. On occasions this might involve 10 to 15 truck movements on a particular day.

(e) Mr Love's request to have the WA149 land included within the NRWMG regional waste disposal plan was made on the basis that access would be via 'the existing commercial entrance', being the quarry road access.

(f) As Mr Love, Mr Wagner, Mr Ron Kerr and Mr O'Brien all stated, the quarry road access was not safe for heavy vehicles in the 'before' situation, because of inadequate sight lines to the west and inadequate turning arrangements within Cooper Street (there was no right turn lane for west bound traffic as there was for the council tip road, or other acceleration or deceleration lane arrangement).

(g) Not surprisingly no evidence was led by Mr Love to support the view that the quarry road in the 'before' situation would have provided an acceptable access/egress point to a new landfill. Mr O'Brien's evidence was that:

... if the access across to the tip access was not available at some point then - which at that time was on the cards, then access to this site as it stood as the quarry and in the future it became a landfill then that would have been inappropriate access.

(h) Nevertheless it was potentially possible that the quarry road entrance could have been signalised at Mr Love's cost in the 'before' situation and his evidence is that he contemplated this possibility at a cost in the range of $100,000 to $125,000. Three options were subsequently prepared in 2002 by the Corporation's engineers for a signalised intersection at or about the location of the council tip road and the quarry road. Two options were principally located on Mr Love's land but also partially located on the adjoining WCC land. One option was wholly on the WCC land. No evidence was led that a safe intersection could have been constructed wholly on Mr Love's land utilising in part the quarry road alignment. Mr Saliba's evidence was that if such a proposal had been put forward, detailed design would have been considered by the Corporation before it was approved. If the quarry road intersection was not itself capable of signalisation however, I accept that a signalised intersection could have been constructed on the frontage of Mr Love's land east of Central Creek as Mrs Partenio described.

(i) If a permit had been obtained for landfill use in the 'before' situation, the probability is that it would have been subject to a condition that access to Cooper Street be provided to the satisfaction of the Corporation in similar terms to the conditions suggested by the panel which examined Mr Love's quarry permit application for the WA658 land in 1998. The final submissions made on behalf of Mr Love accept this to be so.

(j) In turn the probability is that that condition would have been satisfied either by continuing an arrangement for access over the council tip road or by providing a new upgraded access/egress point at or about the quarry road gate or at least 100 metres to the east of the quarry road on Mr Love's land on the other side of Central Creek. The latter alternative would have made it necessary to construct a new internal roadway to this point but the 1998 quarry application demonstrates that the construction of such a road was feasible (particularly for a landowner owning an adjacent quarry).

(a) A government decision had been made in late 1999 to expedite the duplication of Cooper Street.

(b) Initial plans prepared in 2000 and 2001 showed the construction of a new un-signalised intersection at the council tip road entrance.

(c) It was also contemplated the minor road access on Mr Love's land would be reinstated but with no special measures to accommodate heavy truck traffic. The quarry road could have been reinstated with a bell mouth. Mrs Partenio's evidence (which I accept) is that it would not be appropriate practice on the part of the acquiring authority to delete it without negotiating an alternative.

(d) There was a period of uncertainty as to what treatment should be adopted to provide access to the WA149 land. The Corporation entered into a contract to carry out the road duplication works which required the contractor ('Cut and Fill') to reinstate existing access points: 'Access shall be reinstated to abutting properties to match existing locations and conditions unless otherwise specified.' The contract plans provided to Cut and Fill showed the quarry road gate but substantially obscured it with the delineation of a new carriageway boundary. The position was sufficiently unclear for Cut and Fill to request clarification from the Corporation. A plan dated 19 April 2002 bears the annotation: 'VicRoads to advise whether this access is to be reinstated, if so VicRoads to advise width and location.' Mrs Partenio's reading of the sequence of plans available was that at some point prior to the final resolution of this issue the access appears to have 'dropped off' the plans for the works.

(e) The Corporation expressly indicated willingness to consider alternative access arrangements to the WA149 land. A letter of 20 February 2001 to Conundrum stated:

VicRoads would be willing to consider alternative access arrangements proposed by Conundrum Holdings that will provide no adverse impacts to the operation and safety of Cooper Street.

(f) Ultimately a fully signalised intersection was constructed at the junction of Cooper Street with the council tip road. This accommodated pressure which had been caused by growth in traffic within Cooper Street.

(g) In addition the Corporation acquired a nib of land containing the southern-most portion of the council tip road and abutting Mr Love's land. This gave Mr Love direct permanent access onto Cooper Street via what had previously been the council tip road.

(h) With the agreement of Mr Love and Conundrum the quarry road was not reinstated.

(i) This was the optimal solution for the WA149 land. Mr O'Brien stated in his report:

In my view, the Roads Corporation has ultimately done what they should have done initially i.e. create a single signalised access point on Cooper Street shared between the Council No 1 landfill and the quarry.

From a traffic engineers (sic) perspective it is difficult to understand why this did not occur at or around the time of acquisition, particularly given that:

• the quarry was already using the access road to councils No1 landfill at the time;
• this informal arrangement had been in place for many years (since around 1992) and was seemingly not being vigorously resisted by Council (beyond threats of expulsion);
• the views of Mr Love on the matter of access to the subject site and previous failed efforts on his part to secure shared access over the Council land were well known;
• the initially-proposed legal access to Cooper Street limited to left in and out was inadequate and unsafe.

... the arrangements were still being worked out virtually during construction time in to me what should have been a fairly simple and straightforward process, say, look, we've got all this activity on that site, we've got accesses very near one another, pull them together and signalise them.

(j) Another solution hypothetically available would have been to provide a new access to the east, opposite a median break some 400 metres east of the council tip road and 300 metres east of the quarry road.

(k) Mrs Partenio further stated that in the duplicated road situation (which included a new pavement height with improved view lines):

The provision of Left in/left out would have been satisfactory as a minor access but not if it were the major access to a landfill due to the need for trucks to U-turn unless specific design measures at the U-turn breaks were made to enable trucks to complete the U-turn and merge with through traffic safely.

Mr O'Brien agreed with this opinion but was of the view that it would be difficult to achieve such design measures. I accept that this solution would be materially more difficult to obtain consent to from the Corporation than either the use of the council tip road or a new intersection opposite the median break to the east.

(l) There is no traffic engineering evidence which supports the view a condition of the type referred to above (requiring access to the landfill to be provided to the satisfaction of the Corporation) could not have been satisfied by one or other of the alternatives described above. Mr O'Brien said '... you could create an access yes.'

148 Mr Love's case is that the prospects of obtaining EPA and planning approval were enlivened by the placing of the site upon the draft list of potential landfill sites in the NRWMG draft plan. This occurred in June 2001 and was communicated to Mr Love by a letter dated 4 June 2001.

149 On 28 March 2000 Mr Love had met Corporation officers Negus and Ipavec to discuss the proposed duplication of Cooper Street. He stated in part that he was intending to apply for a permit to fill his 460 Cooper Street quarry site and was awaiting formal recognition from the Northern Region of Councils which was the necessary preliminary step to be taken before a permit and EPA licence could be granted. His expectation was that the landfill site would be approved given its position in the middle of a cluster of landfills.

150 It follows that although discussions concerning the access issue at the front of 460 Cooper Street had commenced between the Corporation and Mr Love on 14 March 2000, it is the delay which occurred after 4 June 2001 which may be said to have affected the prospects of planning approval. Prior to this date there were no such prospects.

151 The date of acquisition was 15 November 2001. As I have said, the access issue was only subsequently resolved by way of acquisition by the Corporation of a portion of the council land allowing access by Mr Love over this acquired portion to a signalised intersection on Cooper Street.

152 This solution was initially put forward by Mr Saliba of the Corporation at a meeting of 30 April 2002. This meeting occurred at Conundrum's office between Mr Love, Mr Wagner and Mr Kerr of Conundrum, Mr Saliba of the Corporation, and Mr Lamers of WCC.

153 Mr Saliba proposed that access problems be solved by constructing a roundabout on the council land at a sufficient distance from the new Cooper Street alignment to allow a safe link to the quarry road within the WCC land. Mr Saliba indicated that the land containing the roundabout should become public land under the same ownership and control as Cooper Street. Mr Love and the representatives of Conundrum agreed to the proposal as providing a safer access point. WCC offered a 50 year lease for the road.

154 Thereafter discussions continued between representatives of the Corporation, WCC, Conundrum and Mr Love.

155 On 28 June 2002 there was a meeting at the offices of Conundrum attended by Mr Love and representatives of the Corporation and Conundrum. The Corporation engineers presented a proposed design for a cul de sac at the 460 Cooper Street access point which would allow both WCC and Mr Love and Conundrum unfettered access via a T intersection to Cooper Street. Mr Love agreed to this proposal and further agreed to allow the Corporation to take possession of the land that it had compulsorily acquired from him for the duplication of Cooper Street. Prior to this Mr Love had refused to give up possession of the acquired land stating that he required resolution of the access issue.

156 Further correspondence passed between the parties in which there was disagreement as to the title arrangements pursuant to which the new road access should be constructed. On 10 October 2002 however WCC wrote to the Corporation stating that it had no objection to the Corporation undertaking necessary procedures to acquire the land for the new intersection. On the same day the Corporation advised Conundrum that the Corporation would be acquiring the land from WCC which would be declared public land (in accordance with an attached plan). The Corporation stated:

Conundrum Holdings will be given unfettered access to the public land and use of the proposed signalised intersection on Cooper Street.

It is not expected that Conundrum Holdings will use the existing point of access in the future given that access will be provided through a signalised intersection.

157 On 11 October 2002 Mr Wagner wrote to the Corporation on behalf of Conundrum:

With regard to the existing point of access, we agree that, at the point of where construction access is completed, then the existing access point should be abandoned. We have contacted the landowner today and he agreed to the proposition.

We have no doubt this concludes a long exercise yielding a commonsense solution, taking into account safety and public interest. VicRoads, as the senior authority in this matter has achieved the appropriate result, applying fair principles and wisdom.

158 Mr Love was advised of this correspondence by Conundrum. He agreed in cross-examination that insofar as Conundrum's letter stated his position it was accurate.

159 On 21 October 2002 the Corporation wrote to Mr Hocking, a valuer acting both for Conundrum and Mr Love. The Corporation confirmed the agreement of WCC to acquisition of the land for the intersection. In my view by the end of October 2002 there was no material uncertainty as to the resolution of the access difficulty at the front of Mr Love's property.

160 Mr Love's evidence is that because of his previous experiences with WCC he wanted to see the access actually constructed on the ground before he sought land use approvals for a landfill.

161 Mr Love had however previously sought an 'undertaking' from the Corporation as to appropriate arrangements. By late October 2002 that undertaking had been obtained.

162 Although the access was not fully constructed until April 2004, its nature was resolved by late October 2002. Nevertheless that resolution occurred only after the closure of the window of opportunity in July 2002, upon which Mr Love's claim is premised.

163 Looked at in the broad it is not surprising there was some delay in coming to a solution which involved the additional acquisition of land to create a new public roadway in place of the southern end of the council tip road. It is plain with the wisdom of hindsight that this was the most effective solution to the problem of providing safe access to 460 Cooper Street, but it was not one that was available without entering into a further complementary land acquisition. In other words, it was not simply a question of design and construction.

164 The delay in arriving at the acquisition solution occurred in circumstances where Conundrum had used the council tip road for eight years or so. It is again not surprising that the Corporation looked to a further agreement between those associated with the principal existing access to WA149 as the easiest solution to resolution of WA149 access issue. This said however I accept the submission made on behalf of Mr Love that the time taken to arrive at the concept of an additional acquisition to create an extension of the public road into the council land took longer than a landowner in Mr Love's position might reasonably expect (a matter relevant to solatium). This view is supported by the traffic engineering evidence as a whole.

165 I am also encouraged in this conclusion by the failure of the Corporation to call as witnesses a number of its officers who were directly involved in negotiating with Mr Love and addressing the issue of access to his land (Pontefract, Turner and Negus).

166 I am not however satisfied there was unreasonable delay in implementing the concept which was finally arrived at. The implementation required the resolution of arrangements with WCC and Conundrum. These were resolved in principle by the end of October 2002, only four months after the solution was put forward by a Corporation officer. It is true that construction of the new access was not completed until about May 2004, but certainty was arrived at by October 2002.

167 Mr O'Brien gave evidence on behalf of Mr Love that he would have advised a client as at the date of acquisition, first that if a permit issued for a landfill it would be subject to a condition that access be to the satisfaction of VicRoads; secondly, that it was very likely there would be a signalised intersection at the council tip road; and thirdly, that the sensible access solution was via the council tip road.

168 I shall return to the question of whether this sequence of events can be said to have resulted in consequential financial loss to Mr Love personally. Insofar as the question of market value is concerned however, they form the context in which the effect of uncertainty as to access arrangements on such value, falls to be considered.

169 In this regard, the fundamental traffic engineering question is simply whether a hypothetical purchaser would be satisfied that it could be demonstrated in principle (despite existing uncertainties) that long term satisfactory heavy vehicle access could be provided to a landfill. The evidence shows that there is no doubt that it could. First Mr O'Brien, the traffic engineer, who was called on behalf of Mr Love, did not suggest otherwise.

170 Secondly, the traffic engineering evidence called on behalf of the Corporation establishes this to be so. In particular, Mrs Partenio described a series of viable alternatives in the 'after' situation, including a new access point some 300 metres to the east of the quarry road opposite a break in the median strip. I accept her evidence.

171 Mr J S Piper also expressed the view in answer to cross-examination that the provision was never in doubt of access in some form sufficient for approval of a landfill, either via signalised access to the council tip road, or left in/left out at the quarry road, or via a signalised intersection further to the east opposite a break in the median strip.

172 The practicality of constructing an access road from the WA149 land to other points on Mr Love's land is also implicitly demonstrated by the plans which were put forward on behalf of Mr Love in relation to the WA658 quarry proposal. These showed a road diagonally traversing Mr Love's land from north-east to south-west. I am satisfied that the hypothetical purchaser would likewise have contemplated as a real possibility that an access road could be constructed from north-west to the central or south-eastern portion of Mr Love's land in order to utilise a new access point if that were necessary.

173 Thirdly there was a realistic prospect that agreement would be reached with WCC to utilise the council tip road. After all the primary access to the Conundrum quarry had been provided over the WCC land via the council tip road since the inception of the quarry operation upon the WA149 land. There had also been serious discussions between WCC, Conundrum and Mr Love in 1992 concerning the creation of permanent access arrangements over WCC land. These discussions broke down due to disagreement as to cost sharing and not as to underlying principle. Further in January 2001 Mr Love terminated WCC's access over his land to a dog pound located on the former site of the Cooper Street No. 2 landfill (upon the expiration of a 10 year licence arrangement). At the relevant date there was thus an immediate bargaining tool available to the owner of Mr Love's land, with which to pursue reciprocal rights over the council tip road. Moreover, although I accept that the WCC had a continuing commercial interest in the Pioneer Wollert landfill because it received a royalty in respect of putrescible waste deposited at this landfill, nevertheless I am not persuaded that the hypothetical purchaser would have expected the WCC to act other than with propriety and in accordance with its obligations under the Local Government Act 1989 in respect of access arrangements over its land.

174 Mrs Partenio's view was that the design development phase of access arrangements for the WA149 land would not have prevented Mr Love or a developer from applying for a planning permit for use of the site for a landfill operation. I accept this opinion.

175 When Mr Kraan made application for a planning permit to WCC for the WA658 proposal on Mr Love's land prior to the Cooper Street acquisition, he said:

to ensure that optimal traffic management is applied to the access of the subject land, the Whittlesea landfill, the green waste recycling centre and Conundrum Holdings, it is proposed that a joint access to Cooper Street be established.

He agreed that application could have been made for a landfill permit on the WA149 land in 2001 in similar terms.

176 In turn the probability was as the planning evidence made clear, that land use approvals would be granted subject to a condition that access be resolved thereafter to the satisfaction of the Corporation.

177 As I have said, such a condition was recommended by the independent panel which considered the WA658 quarry proposal. Further, such a condition would give to the hypothetical purchaser a right of appeal to VCAT in the event of dispute.[62]

178 Mr Kraan gave evidence that he would expect any permit for landfill would issue subject to a condition along the lines of access to be to the satisfaction of Roads Corporation. He further said he would want to be confident that proper access was available in the long term, and that if he wasn't comfortable that secure access was available he would recommend to the client to employ an appropriate traffic specialist to pursue that.

While Mr Kraan states that he is unable to say whether this would have been possible, I agree with Mr Milner's view that irrespective of whether Cooper Street was duplicated, it is likely that an access solution satisfactory to VicRoads would have been achievable. Nonetheless, the access arrangements are likely to have been more elaborate as a result of the duplication and it is VicRoads (sic) standard practice to require the permit applicant to undertake such works at their own expense.

I also agree that VicRoads is unlikely to have objected to a permit for landfill, but would more likely have imposed conditions requiring a better standard of access/egress than was available from the site at that time. The permit applicant was likely to have been required to share access with the adjoining land or fund the required access roadworks, including any traffic management works, under VicRoads standard policy practices.

181 In evidence Mr Borelli said that he believed there probably would have been a solution to the access issue but how it would work was uncertain.

182 He also agreed that the prospects of obtaining a permit for landfill were materially the same in the 'before' and 'after' situation.

In my opinion the proposal to duplicate Cooper Street would have no material effect on whether a permit would be granted or not. Other strategic issues ... would be the key issues in any decision making process, with the issue of access to Cooper Street a technical matter that would be resolved to the satisfaction of VicRoads regardless of whether the road was duplicated or otherwise.

... it is self-evident to me that Cooper Street was intended to be the access to the land along Cooper Street that's used for industrial and employment purposes. And while the detail may have been unclear at points in time during that process I think that any reasonable purchaser on making enquiries with the planning authority or the road authority would clearly understand that an access solution would be found to the land. So that the degree of uncertainty was around the defined detail but not the principles.

185 Mr Hince also agreed that access to a new landfill would usually be required to be to the satisfaction of the road authority.

186 Mr Parker agreed that a works approval application would need to provide for truck access, whether at the quarry road location or somewhere else.

187 The evidence of the traffic engineers and planning witnesses taken together demonstrates the access uncertainty during the window of opportunity, was not such as to prevent either the grant of a permit or the satisfaction of a permit condition relating to access.

188 It follows that such uncertainty as existed concerning access to the WA149 land, would not have been regarded as precluding or indeed impeding a satisfactory application for land use approval. The primary uncertainty which existed as to reinstatement of the pre-existing access point was in a sense irrelevant in that such access point would not have been adequate for a landfill. The secondary uncertainty which existed with respect to the appropriate form of upgrade of access to the WA149 land was not such as to prevent a successful application for planning approval having regard to the planning and traffic engineering evidence to which I have referred.

189 Indeed I accept Mr Milner's evidence that an independent and competent town planner would have advised the landowner as at the acquisition date not to delay application for a planning permit because of traffic access considerations.

190 I do not accept Mr Love's contention that the 'maintenance' of the pre-existing commercial access via the quarry road was a pre-condition either to listing on the RWMP or the obtaining of landfill approvals. What was necessary was the demonstrable capacity to provide satisfactory heavy vehicle access by way of at least one practical option. In the case of Mr Love's land there were in fact a series of options sufficient to warrant the grant of land use approval subject to appropriate condition.

191 Mr Love's claim for loss of market value is thus confronted with an initial fundamental threshold difficulty. There is no basis for concluding that the duplication of Cooper Street, including consequential uncertainty about the final resolution of future access arrangements to the WA149 land, adversely affected the prospects of land use approval for a landfill upon Mr Love's land as at the date of acquisition. There is no other basis upon which the market value lost as a result of the acquisition can be linked back to landfill potential. Hence, Mr Love's primary claim for loss of market value fails.

192 The principal issues identified in paragraph 2(a) (i), (ii) and (iii) of the statement of issues[63] are resolved in favour of the Corporation.

1. The principal matters in issue are:
   1. whether the proposed duplication of Cooper Street and/or the carrying out of the Cooper Street duplication had an impact on the value of the respondent's land by adversely affecting:
      1. the prospect of obtaining approvals for the development and use of a putrescible landfill within the WA149 area on the respondent's land;
      2. the ability of the respondent to market the WA149 landfill site ("the site") whilst the reinstatement of access to the site remained uncertain and/or unresolved;
      3. its value to the hypothetical purchaser (including special value to the respondent).

193 The contentions summarised in paragraph 3(a)(i), (ii) and (iii) are rejected.

1. the acquisition, and/or the carrying out of the duplication works:
   1. prevented and/or hindered the respondent from applying for the approvals by creating uncertainty as to the access to the respondent's land;
   2. removed and/or adversely affected the ability of the respondent to market the site whilst the reinstatement of the access to the site remained uncertain and/or unresolved;
   3. diminished the value of the site to the hypothetical purchaser (including special value to the respondent);

2.1 The prospects of obtaining land use approvals for a landfill - the second threshold difficulty

194 At the date of acquisition a landfill upon the WA149 land required a planning permit because:

(a) the use was a permit required use pursuant to the Special Use 4 Zone affecting the WA149 land; and

(b) a small portion of the land comprising part of the Merri Creek escarpment was subject to an Environmental Significance Overlay 3; and

(c) any alteration of road access to Cooper Street required a permit.

In addition any landfill required a works approval pursuant to the provisions of the EP Act.

195 Mr Love called evidence from two town planners, Mr Kraan and Mr Borelli. Each was requested amongst other things to provide an opinion as to the likelihood of success of a planning permit application as at the date of acquisition. The Corporation called planning evidence from Mr Milner who also addressed this issue.

196 There was no dispute that landfill use was permissible within the Special Use 4 zone which governed the land, nor that it was consistent with the objectives of that zone which sought to encourage extractive industry and to 'encourage interim use of the land compatible with the use and development of nearby lands' (subject to strategic planning issues to which I shall return). It was also common ground that historically two putrescible landfills had been permitted on adjacent portions of the land formerly owned by the Love family (the Cooper Street No. 1 and No. 2 landfills). Land to the west of the northern portion of the WA149 land was also being utilised at the relevant date for the purposes of a solid inert waste landfill.

197 Further, it was not contended that the site presented environmental problems or amenity sensitivities which would have rendered the grant of land use approvals unlikely. These were matters capable of control by appropriate conditions on the works approval and planning permit.

198 Both Mr Kraan and Mr Borelli were of the opinion that having regard to these contextual matters and other related considerations, planning approval could have been obtained for a landfill in the 'before' situation.

199 Nevertheless, Mr Milner expressed the opinion that planning approval would not have been granted for a landfill at or about the acquisition date because:

(a) such use would conflict with a WCC strategy plan for the area known as the Cooper Street Precinct Strategy; and

(b) such use would be contrary to the requirements of State planning policy because no need for the facility could be demonstrated.

200 Mr Kraan and Mr Borelli both addressed the first issue in the written reports filed and served prior to the hearing, but they did not address the second because it raised what they saw as an environmental issue. That issue was however addressed by them in oral evidence and further addressed on behalf of Mr Love by Dr Bellair, Mr Hince and Mr Lane.

201 The question of State planning policy arises within the framework of the P and E Act and the WPS. Section 4(1) of the P and E Act sets out the objectives of planning in Victoria including the following:

(1) The objectives of planning in Victoria are -

(a) to provide for the fair, orderly, economic and sustainable use, and development of land;

...

(c) to secure a pleasant, efficient and safe working, living and recreational environment for all Victorians and visitors to Victoria;

...

(e) to protect public utilities and other assets and enable the orderly provision and co ordination of public utilities and other facilities for the benefit of the community;

(f) to facilitate development in accordance with the objectives set out in paragraphs (a), (b), (c), (d) and (e);

(g) to balance the present and future interests of all Victorians.

202 Section 4(2)(c) provides that one of the objectives of the planning framework established by the P and E Act is:

to enable land use and development planning and policy to be easily integrated with environmental, social, economic, conservation and resource management policies at State, regional and municipal levels;

203 In turn Part 1A of the P and E Act provides for the Victoria Planning Provisions which facilitate a consistent structure for planning schemes, including a statement of relevant State policy. Section 7 of the P and E Act requires that the State section of the planning scheme be given priority over the local section where necessary.

204 The State Planning Policy Framework ('SPPF') set out in the WPS stated as its goal:

12 GOAL

The State Planning Policy Framework seeks to ensure that the objectives of planning in Victoria (as set out in Section 4 of the Planning and Environment Act 1987) are fostered through appropriate land use and development planning policies and practices which integrate relevant environmental, social and economic factors in the interests of net community benefit and sustainable development.

205 By clause 13 it stated as one of the principles of land use and development planning:

INFRASTRUCTURE

Planning for development of urban physical and community infrastructure should enable it to be provided in a way that is efficient, equitable, accessible and timely. Growth and redevelopment of settlements should be planned in a manner that allows for the logical and efficient provision and maintenance of infrastructure, including the setting aside of land for the construction of future transport routes.

Strategic planning should facilitate efficient use of existing urban infrastructure and human services. Providers of urban infrastructure, whether public or private bodies, are to be guided by planning policies and should assist strategic land use planning. Planning authorities are to consider the use of development contributions (levies) in the funding of infrastructure.

206 More specifically by clause 18.10 it provided for waste management:

18.10-1 Objective

To assist control of the generation, transport and disposal of wastes so as to prevent pollution and land degradation.

18.10-2 General implementation

The siting and management of waste disposal facilities must be in accordance with State environment protection policy (Siting and Management of Landfills Receiving Municipal Wastes) and relevant regional waste management plans.

207 The SPPF was required to be taken into account on the assessment of any permit application for Mr Love's land. It directed the hypothetical purchaser to the significance of issues of appropriate siting of landfills, environmental management considerations and the terms of the relevant regional waste management plan ('RWMP').

208 It made plain that EPA policy and any relevant RWMP prepared pursuant to the EP Act were relevant not only to the works approval process under that Act but also to the question of planning approval.

209 The EP Act provided for State Environment Protection Policies ('SEPPs'),[64] the most relevant being referred to in the SPPF ('the Landfills SEPP'). It applied to all landfill sites receiving municipal wastes, including privately owned sites. Municipal wastes were defined to include putrescible wastes. The Landfills SEPP provided by clause 10:

In making land use planning decisions and implementing planning schemes, special attention should be given to this policy.

In the implementation of this policy, special attention should be given to statements of policy contained in planning schemes made under the Planning and Environment Act 1987.

14. Planning new landfill sites

The Authority may require at any time a municipal council or Regional Refuse Disposal Group to provide it with a Waste Management Plan which shall include:

(a) a waste minimisation and resource recovery program;

(b) a replacement schedule for all existing sites under its management and control;

(c) an evaluation of the suitability for deposition of municipal waste of potential landfill sites available to it;

(d) a schedule showing a proposed sequence for the filling of available landfill sites over the long term (minimum 10 years);

(e) a list of all equipment and facilities which are or will be necessary for the maintenance of operating standards required by Schedule A of this policy;

(f) a statement of group policy on how it is proposed to maintain the provisions of this policy, where the municipal council is a member of a Regional Refuse Disposal Group; and

(g) a program for upgrading existing landfill sites to meet the requirements of this policy.

The Authority shall require the Waste Management Plan, or part of the Plan, to be amended at any time where it is not satisfied that the Plan provides adequate long term waste management and protection of beneficial uses from landfill sites which are privately operated and those operated by municipal councils and regional refuse disposal groups.

211 The Landfills SEPP thus envisaged special attention would be given to it, in making planning decisions and that the appropriateness of a new landfill site would be assessed in a regional context within the framework of a RWMP.

212 The EP Act itself also provided for and required the formulation of RWMPs. The EP Act provided for the constitution of regional waste management groups in respect of regions constituted by municipal districts.[65]

213 Section 50H of the EP Act stated the function and powers of regional waste management groups:

Functions and powers of a regional waste management group

(1) The functions of a regional waste management group are to facilitate and foster best practices in waste management by -

(a) planning for waste management in its region including -

(i) preparing and keeping up to date a regional waste management plan;

(ii) implementing and promoting the plan;

(iii) setting performance targets for municipal waste reduction programs;

(iv) developing, implementing, supporting and promoting waste reduction and recycling programs;

(b) co-ordinating the waste management activities of its members including -

(i) introducing measures that lead to conformity of standards for waste reduction, waste management and litter prevention and control between its members;

(ii) investigating and advising on landfill disposal costs and charges in the region;

(iii) encouraging the training of staff involved in municipal waste management;

(c) promoting, commissioning and undertaking research into waste management;

(d) advising its members on best practices in waste management;

(e) promoting improved waste management technologies;

(f) promoting and co-ordinating relevant community education in its region;

(g) mediating disputes between its members.

(2) A regional waste management group may do any thing that is necessary or convenient to enable it to perform its functions.

"waste" includes -

(a) any matter whether solid, liquid, gaseous or radio-active which is discharged, emitted or deposited in the environment in such volume, constituency or manner as to cause an alteration in the environment;

(b) any discarded, rejected, unwanted, surplus or abandoned matter;

(c) any otherwise discarded, rejected, abandoned, unwanted or surplus matter intended for -

(i) recycling, reprocessing, recovery or purification by a separate operation from that which produced the matter; or

(ii) sale; and

(d) any matter prescribed to be waste;

215 At the date of acquisition s 50R relevantly provided:

Preparation and contents of plans

(1) A regional waste management group must prepare and submit to the Authority a draft regional waste management plan within 6 months of its constitution taking effect or, if it is a group to which section 50G or 50GA applies, of it becoming a regional waste management group.

(2) The draft plan must set out the objectives and priorities of the group for the management of waste generated or disposed of within the group's waste management region, and must provide a clear direction for future waste management in the region.

(3) The draft plan must include -

(a) an economic assessment of the possible waste management options;

(b) a waste management strategy covering -

(i) waste minimisation and resource recovery;

(ii) waste disposal;

(iii) waste collection and transport;

(iv) the provision of future landfill capacity;

(c) a waste minimisation and resource recovery program;

(d) measures for litter control;

(e) a schedule listing all existing and prospective landfill sites within the group's waste management region;

(f) an evaluation of how suitable the prospective landfill sites listed in that schedule are for the depositing of waste;

(g) a schedule showing a proposed sequence for the filling of available landfill sites for at least the next 10 years;

(h) a program for replacing existing landfill sites;

(ha) a schedule listing -

(i) all landfills in the region that are controlled by the group and that the group intends to close; and

(ii) all landfills in the region that are not controlled by the group and that are likely to close within the likely life of the plan; and

(iii) the intended or likely date of each closure;

(i) a list of all the equipment and facilities which are, or will be, necessary for the maintenance of the operating standards required by any relevant State environment protection policy;

(j) a program for upgrading existing landfill sites to meet the requirements of any relevant State environment protection policy.

(4) A plan must not conflict with any relevant -

(a) State environment protection policy; or

(b) industrial waste management policy; or

(c) waste management strategy published by EcoRecycle Victoria.

(5) If the Authority is not satisfied with the draft plan submitted by a group, the group must submit a revised draft plan to the Authority containing the changes specified by the Authority within 6 months of the Authority giving it written notice of the changes.

(6) If a waste management region is entirely within a single municipal district, the council of that district must comply with this section within 6 months of the declaration of the region as if it were the regional waste management group for the region.

(7) For the purposes of the enforcement of a plan prepared under sub-section (6) and approved by the Authority, the council is deemed to be the regional waste management group for the region until a regional waste management group for the region comes into existence.

216 Sub-sections 50R(2) and (3)(e), (f), (g), (h) and (ha) make clear the RWMP must plan for all existing and prospective landfill sites within the relevant region and not just those operated by or utilised by the waste management group itself or those accepting municipal waste.

217 In turn s 50RA provided that a regional waste management group and a council whose municipal district is in the waste management region of a RWMP must comply with the RWMP. Section 50RC provided for the amendment of RWMPs and s 50RD provided for the five yearly review of RWMPs.

218 Section 50RE provided that the EPA may refuse to issue a works approval for a new waste management facility within a waste management region if the facility was not provided for in the relevant RWMP.[66]

219 In addition in October 2001 immediately prior to the acquisition the EPA adopted as a policy document the Best Practice Environmental Management Siting, Design, Operation and Rehabilitation of Landfills document ('BPEM').

220 This document did not have the statutory force of a SEPP at the relevant date, but it stated the policy view of the EPA as to a series of matters including landfill siting and formulated standards with respect to best practice design which were more stringent than those then provided for in the Landfills SEPP. Likewise it provided standards for best practice operation, rehabilitation and aftercare.

221 On 4 October 2001 an EPA officer advised Mr Parker's firm that the BPEM would apply to the Bolinda Road landfill proposal then being put forward.[67]

222 It was accepted by the expert witnesses on both sides that the EPA and the responsible authority would have applied the BPEM when considering whether they accepted the siting of the proposed landfill was appropriate as at the date of acquisition. Dr Bellair described the BPEM as comprising 'good well intentioned guidelines'. In turn I am satisfied that the hypothetical purchaser would reasonably have expected the application of this document to any decision made by the EPA and in turn the responsible planning authority as to whether it was appropriate to site a new landfill on Mr Love's land at that point in time.

223 The final written submission made on behalf of Mr Love states that it is agreed between the relevant experts that the environmental planning constraints affecting the land in the 'before' and 'after' situation at the relevant date included the BPEM.

224 The BPEM identified its target audience and in the first instance made it clear that it was directed in part to regional waste management groups, particularly in the screening and ranking of potential landfill sites.

225 It then stated a waste management framework which identified disposal to landfill as the last resort after avoidance; reuse; recycling; recovery of energy; treatment and containment.

226 It dealt with best practice siting considerations by requiring the ranking of sites through the RWMP process (as envisaged by the EP Act and the Landfills SEPP).

The appropriate siting of a landfill is the primary environmental control, so a preliminary investigation of all possible landfill sites should be conducted to identify those sites with the best potential to be developed for landfilling.

The objective of this section is to establish the means and criteria for identifying and ranking those sites that are the most appropriate for future landfills, because these are the ones that require the fewest engineering and management controls to meet the objectives of all State Environment Protection Policies.

An investigation of the sites that have the best potential for landfilling is conducted in two steps:

• a broad approach to identify all potential sites for new facilities from a broader group of all possible sites; and
• a ranking of the potential sites in terms of their preference for use as a landfill.

The investigation is conducted by the Regional Waste Management Group (RWMG) in the development of the Regional Waste Management Plan (RWMP), and will result in a ranking of preferred waste disposal sites within and adjacent to the Region. This ranking should be used in the development of planning strategies for municipalities within the Region, and the development of new landfills should be in accordance with this ranking.

EPA may refuse to issue a works approval for a landfill if the site is not provided for in the relevant RWMP, or not provided for within a reasonable time frame.

EPA will require this section of the guideline to be implemented in each RWMP at its next review. Where a landfill is not provided for in a RWMP, or is to be developed before the next review of the relevant RWMP, this section is to be implemented in the developmental stage of the landfill. This section should also be implemented by planning authority (sic) in their planning around current or future landfill sites.

227 The policy plainly states that the development of new landfills should be in accordance with the ranking produced by a properly developed RWMP.

228 The BPEM went on to describe the screening process required for RWMPs.

4.1 Screening for Potential Landfill Sites

Screening for potential landfill sites starts with a list of all possible sites. As a minimum, this should include all extractive industry sites in the Region, but may also include undeveloped sites which may be suitable for trench-and-fill or mound landfills (see section 4.1.2). The hierarchy of aspects to be considered when screening for potential landfill sites is:

1. Community needs;

2. Landfill type;

3. Buffer distances;

4. Groundwater;

5. Surface water;

6. Flora and fauna;

7. Infrastructure;

8. Geology; and

9. Land ownership.

These are discussed in detail below.

Once a list of potential landfill sites has been derived from a list of all possible landfill sites, this list should be ranked to indicate the preferred order of development of potential sites as landfills.

(a) that it was intended the RWMP should list all possible sites;

(b) that community needs were the first factor governing the screening hierarchy; and

(c) the process was intended to result in a ranked preferred order of development.

230 The BPEM went on to state with respect to community needs at 4.1.1:

A landfill should not be located where it is not needed for the disposal of a community's waste. Regional Waste Management Groups are responsible for providing a framework for the orderly development of waste management facilities for both the public and private sectors, and ensure that a reliable system of waste management, including landfill airspace, is maintained within the Region.

231 In my view the first sentence of this paragraph is a clear statement of an objective. It is to be understood within the best practice framework stated in the introduction to the document:

This document is intended to provide guidance for how landfill operators can meet the environment protection objectives of the regulatory framework. This is achieved by establishing a hierarchy of objectives, required outcomes and suggested measures for each section of the document. The objectives and required outcomes are derived directly from legislation and must be achieved. The suggested measures are suggestions for how to achieve the objectives and required outcomes.

Where a landfill operator believes that alternative means to the suggested measures can be used to achieve the objectives and required outcomes, then the operator will need to provide an (sic) that demonstrates this to the satisfaction of EPA.

Alternatively, if the suggested measures contained in this document are not likely to achieve the objectives and required outcomes then EPA may require alternative measures to those suggested, which EPA will support with an assessment of why the alternative measures are required. This is most likely to occur where a landfill is located or proposed in a particularly sensitive environment.

232 The fundamental problems facing any application for land use approval for a landfill on Mr Love's land as at the date of acquisition were first that it was not provided for in a RWMP approved by the EPA and secondly that the draft RWMP documentation then in existence demonstrated that a new landfill was not at that time needed for the disposal of the community's waste.

233 Appendix 3 to the BPEM summarised the requirement outcomes of the screening process as follows:

To identify and rank those sites that require the fewest engineering and management controls to meet the objectives of all State Environment Protection Policies.

• Use regional waste management planning to identify the sites within or adjacent to the region which are best suited for future landfilling.
• Develop landfill sites in the sequence specified in the regional waste management plan.
• Ensure that sufficient buffer is available for the life of the landfill.
• Consider the most appropriate landfill type to meet the requirements imposed by local conditions.
• Ensure that the landfill is sited to protect surface waters, groundwater and flora & fauna.

234 The third criterion for the screening of potential landfill sites related to buffer distances. There is no dispute that Mr Love's site met the recommended buffer distances which envisaged a buffer of 100 metres from surface waters, and 500 metres from a dwelling. Nevertheless, the notion of buffers to landfills raises a planning issue identified by Mr Milner. This is that the need for buffer zones around landfills discourages the approval of multiple landfill sites within urban and future urban areas. The need for buffers in respect of a land use which may last for many years (in the present case Mr Love's landfill was put forward as having an estimated life in the order of 20 years) has the capacity to materially constrain land use planning for adjacent land. This is a secondary reason to that of the potential for direct environmental impacts, for limiting the approval of landfills to those for which there is a community need.

235 It can be seen that the status of Mr Love's land under the regional plan was a matter of critical importance to the likelihood of the obtaining of land use approval. I turn now to examine that status in greater detail.

236 First it must be recognised that at the date of acquisition, there was an approved RWMP which made no reference to Mr Love's land at all. This plan had been prepared in 1997 and approved conditionally in 1998.

237 The plan set out a 25 year strategy and incorporated a schedule listing landfills expected to close, together with a proposed sequence for filling of available landfill sites within the region for at least the next 10 years (as envisaged by the EP Act). It provided for only a limited number of landfills but envisaged ongoing review. The initial overview stated in part:

While this Regional Waste Management Plan will establish the Northern Region's resource recovery and waste disposal strategy for the next 25 years and beyond it must be reviewed annually, as must each Member's performance in our collective effort to reduce total waste. The annual reviews must be made in the light of up to date and accurate waste management data, so that fine tuning can be carried out.

238 The RWMP identified a series of goals including an overall waste management goal.

To provide for the current and future management of waste in an effective and efficient manner using best practice for environmental improvement.

239 It listed municipal and other operating and potential waste disposal sites.

240 It further among other things analysed the regional waste stream which comprised construction and demolition waste 30 per cent, domestic waste 29 per cent, commercial and industrial waste 24 per cent and other waste 17 per cent. In discussing the issue of waste management it stated:

The overall supply of landfill capacity in Melbourne is sufficient for the medium term and the Northern Region is well catered for in the longer term also. Competition in the industry is such as to limit the opportunity to increase prices as a deterrent to waste generation and make waste reduction programs in areas other than residential difficult to implement.

241 It stated the following waste disposal strategy by way of overview:

Whilst committed to greatly improving the management of its wastes, through waste reduction, recycling and composting programs, this Region recognises that it must also provide for the disposal of a range of unavoidable waste products.

The Waste Disposal Strategy developed in this Plan is to cater for the next 25 years and is the culmination of an extensive program of disposal site identification and evaluation. While this regional area can boast of large numbers of holes in the ground, all of which have been identified in various parts of this document, the actual number of sites that have either ceased as an active quarry operation or would be available at a time to suit the needs of Member Councils and other waste generators is limited.

Based on the data and studies detailed in this Plan, disposal of wastes to landfill within this Region for the predicted future will rely on the utilisation of the existing airspace in both municipal and private existing operations and then at a limited number of new sites yet to be licensed but all of these site (sic) are to be included in the Regional Plan.

To achieve by the year 2000, the 50% reduction in the wastes now going to landfill, this Region will, through its Member Councils, develop a wider range of waste reduction programs. These will include public education, kerbside collection of recyclables and garden wastes, on-call hard waste collections, tree branch mulching services and the possible key to the whole program, volume (variable-bin-size) or weight based user-pays domestic garbage collections or other waste reduction incentive schemes. The Region and/or Members will also consider developing Green and Food Organic Composting Facilities and Materials Recovery Facilities to handle organics, recyclables and other separated wastes.

Only non-recyclables, non-reclaimable mixed wastes will be disposed of in landfills within this Region or at sites approved by the Region.

Landfill will be retained, rather than developing waste-to-energy plants or other technologies, both because of the economics involved and the desire of residents in the Region to show how much waste can be reduced and recycled. Another factor inhibiting the development of waste-to-energy plants is the uncertainty about future ash disposal, flue gas emission regulations and other environmental considerations.

With recycling increases and at-source reductions, the volume of garbage for disposal is expected to decrease. This will prolong landfill life and give Member Councils and the Region added flexibility for the Regional Waste Management Plan.

The proposed mode of operation is that only the larger volumes of garbage and separated wastes be direct hauled to landfills with the smaller self hauled loads of residential wastes and small loads of municipal wastes being handled through the network of Resource Recovery and Waste Transfer Stations in the Region.

The Strategy requires that all landfills will reflect the Region's Waste Management Policies. These will require that wastes be separated into recyclables, compostables/garden organics and disposables as normal procedure. Landfills should be able to process or store on site materials which can be converted to useable products such as compost, low grade aggregate and fuel.

Landfills will, through the structure of their management and operation, play a key part in educating people about the importance of waste reduction and recycling, as well as the proper separation of waste materials.

The NORWASTE Plan also requires that people will only send for disposal those wastes that cannot be reused or recycled.

The Region will ensure that non-recyclable wastes are disposed of in an environmentally safe manner and in accord with State and local regulations and codes of practice.

New disposal technology will be evaluated from time to time and be incorporated into the solid waste management system as appropriate.

As a major step towards this Vision the Region has developed a comprehensive waste disposal strategy that provides each of its Member Councils and other disposal site users, adequate and cost competitive waste disposal facilities for the next 10 years, and beyond. The Strategy involves the orderly and economic filling and closure of existing operations leading to a situation in about 2003, where only a small number of efficiently operated sites will be utilised.[68]

242 The last paragraph of the strategy makes clear that its fundamental thrust was to consolidate and reduce the number of landfill sites within the region. That strategy was directed not just to the member councils of the management group but also to other disposal site users.

243 The RWMP then referred to the statutory regime governing the policy framework in which regional waste management planning was required.

244 It then identified the following disposal plan outcomes:

• long term planning for the number, location and timing of landfills at the regional level;

• consolidation of landfilling into a reduced number of sites, providing optimal scales of operation, and leading to better utilisation of space as the quantities of waste decline under the waste minimisation programs;

• substantial reductions in adverse environmental and social impacts of landfills;

• improved public perception of landfills and the waste industry generally and reduced exposure of public and private enterprise owners and operators to liability risk;

• better targeting of relevant technology in areas of research;

• improved health and safety outcomes for personnel employed in the waste management industry;

• reduced litter and related health, safety and public amenity issues.

245 Once again the first two outcomes identified are significant framework elements of the plan. There were express commitments to long term scheduling of landfills and consolidation of landfilling into a reduced number of sites. They were directly adverse to the prospects of approval of a landfill upon Mr Love's land for at least the next 10 years.

246 The RWMP went on to elaborate the need for the application of a best practice approach. It then reviewed existing landfilling operations within the region and identified the type of waste permitted to be deposited at them. The putrescible waste landfills comprised two sites within the City of Hume (Sunbury and Bolinda Road), two sites within Nillumbik (accepting putrescible 'non-public' waste), and two sites within Whittlesea (Cooper Street No. 2 and Epping Waste Disposals, a site located towards the eastern end of Cooper Street).

247 It recorded that the only non-operating but potential site then holding an EPA works approval for operation as a landfill was the Pioneer Wollert site.

248 The RWMP also set out a strategy for waste disposal by member councils which recorded the intention to direct municipal waste to the Pioneer Wollert site.

Given the long-term [disposal] facilities offered through the Pioneer/Wollert proposal the planning became a process of determining the manner in which existing sites could be most effectively and efficiently filled and closed. This process was adopted in the light of waste reduction principles as well as the conditions imposed in the Contracts. The predominant factor being the need to aggregate a threshold of 120,000 tonne of municipal waste before the Wollert Site would commence operation.

249 The RWMP then set out a proposed sequence of municipal tipping arrangements. It noted however that the proposed schedule would of course require regular review and adjustment as circumstances and waste streams fluctuate.

250 In summary the approved RWMP at the date of acquisition contained a series of framework elements which did not encourage the view that there was a present need for a future landfill on the WA149 land.

(a) It explicitly endorsed a strategy of the orderly filling and closure of existing operations leading to a situation in about 2003, where only a small number of efficiently operated sites would be utilised.

(b) It set out a long term plan for the provision of landfill space which did not include the WA149 land.

(c) It made clear that it embraced the provision of adequate landfill capacity within the region for both the public and private sectors.

(d) It supported the consolidation of landfill operations at the Pioneer Wollert site.

251 On 20 May 1998, Mr Love wrote to the executive officer of the NRWMG foreshadowing a formal application to have the WA149 land designated as a potential future landfill.

252 In June 1998 this letter was acknowledged and Mr Love was advised that after his letter was presented to the regional group at its July meeting there would be consultation with him in relation to his proposal.

253 On 28 July 1998 he was advised that the management committee of the NRWMG had considered his letter.

The outcome of the Committee's consideration on this matter was that any... consideration of the inclusion of the Conundrum Holdings Quarry hole as a possible future landfill be considered in the annual review of the Region's Waste Management Plan.

Timing of the review of the Plan will be dependent on the date on which the EPA gives final approval to the draft Plan now before it.

It will be necessary to contact you, prior to that time in order to undertake an audit of the site and to obtain greater details related to the sites (sic) suitability as a landfill.

254 Subsequently in September 2000, Mr Love formally applied to the NRWMG to have the WA149 site designated as a future putrescible waste landfill. On 4 June 2001 he received a letter from the NRWMG which stated in part:

Further to your submission of an expression of interest to have your site/s included in the Region's revised Regional Waste Management Plan, I now enclose a draft Prospective Landfill Site Schedule for your consideration and comment.

Each of the sites submitted for consideration have been assessed using a standard set of criteria and ranked accordingly. This preliminary assessment and schedule has been submitted to the EPA for preliminary comment. The comments received have been incorporated in the attached documents.

At this stage, it has been decided by the Regional Group that rather than delay the adoption of this prospective site schedule by incorporating it in a fully revised Regional Plan, it has been decided that the EPA be requested to accept the schedule as an amendment to the existing and approved plan ...

It would be hoped that any comments you have could be received prior to 30 June next. This timing would then facilitate the adoption of the Schedule (with any amendments) at the Group Meeting scheduled for July 26, 2001.

255 On or about 26 July 2001 the NRWMG adopted the schedule including the WA149 land as a proposed amendment to the RWMP. It did not however at this point in time have EPA approval and the WA149 land has not since been included in an approved RWMP.

256 As at the date of acquisition the hypothetical purchaser was therefore confronted with a position where Mr Love's land was not contained within an approved RWMP but was referred to in documentation which had been adopted by the NRWMG and submitted to the EPA. I turn then to the terms of that documentation.

257 As I have said, on 4 June 2001 the NRWMG forwarded to Mr Love a draft Prospective Landfill Site Schedule for inclusion in the RWMP. The draft document commenced with the heading 'Future Waste Disposal Strategy'. It stated that the relevant section of the RWMP dealt with the development of future waste disposal strategy and the preparation of a 'prospective landfill schedule' as required by the EP Act. It recorded that in August 2000 the region had invited the submission of expressions of interest for the use of sites for waste disposal purposes. In response eight sites had been offered for landfill purposes. These included the WA149 land which was identified as a proposed landfill for 'municipal wastes'. It then stated that the sites had been assessed against criteria based on the key elements of the Landfills SEPP.

258 Based on the latest EPA data it estimated that a total of 785,000 tonne of leviable waste was deposited within the region in the 1998/99 year and estimated the current annual rate as 790,000 tonnes. It recorded that in the 1999/2000 year 151,540 tonnes of municipally derived waste was deposited at landfills. It then went on to deal with airspace consumption in operating landfills during 1999/2000.

Airspace Consumption in Operating Landfills during 1999/2000

Based on the 790,000 tonne estimate of landfill disposal, it can be calculated, using the maximum allowance of 15% for landfill cover and an average insitu density of 1m3/tonne, the airspace consumed can be assumed to be approximately 930,000 m3/year.

While the above airspace consumption rate can be established on a region wide agreement basis the confidential nature of the data collected by EPA from individual landfill operators is not available to Regions. The unavailability of such important information seriously restricts a Region's ability to accurately plan for and prepare "a schedule showing a proposed sequence for the filling of available landfill sites for at least the next 10 years" and the preparation of "a program for replacing existing landfill sites", as required by 50R (3) (g) & (h) of the Act.

The Region has at this stage no powers to require owners/operators of existing sites, other than those operated by member Councils, to provide such information.

Through discussions with the operators of existing and the analysis of aerial surveys conducted at sites currently receiving municipally derived wastes, the remaining airspace in the Region and its estimated rate of consumption is as set out in the following Table.

Volume Remaining as at December 2000

M3

Based on the results of the above, it is apparent that if the Daameell Site is used only for LLC and AS Soils[69] the airspace capacity available in existing landfills is sufficient for at least the next ten years and likely to be 25 years.

259 This last conclusion is one of fundamental difficulty for Mr Love's case. On its face it made clear there was no need in capacity terms for a new landfill for at least the next 10 years. This schedule was directly responsive to the requirements of s 50R of the EP Act in specifying the proposed sequence of tipping for the next 10 years. That requirement was also repeated in clause 14 of the Landfills SEPP.

260 The table also demonstrates there was no need in Whittlesea (as distinct from the region). The two landfills referred to in the approved RWMP which accepted putrescible waste within the municipality, had been replaced by the Pioneer Wollert landfill with a capacity then estimated at 10 million cubic metres.

261 The document went on to deal with the landfill site rating system. Each of the potential sites was assessed against the following criteria:

• potential of site to incorporate Waste Diversion Infrastructure.

262 The document was prepared prior to the release of the BPEM and the criteria were directed to characteristics of the respective landfills but not to the question of community need.

263 The sites were then given different rankings. The WA149 land was given a rating score higher than the other potential new municipal waste sites. It incidentally scored well on accessibility by virtue of its access via a main road. Mr Hince, the executive officer of the NRWMG, had inspected existing access arrangements as part of the assessment process.

264 Further a proposed potential extension to the Bolinda Road landfill was noted to have the following problems:

There are concerns that this site is listed for Municipal Wastes due to the location of neighbouring residential area and the lack of buffer distance. There is a current shopping centre development also occurring close by on the southern side of the site. EPA's draft landfill guidelines will specify a buffer of 500 metres for putrescible wastes. This site would appear to be more suited to inert Fill.

265 The ranking process included a description of relevant characteristics of the potential landfill sites. It described the WA149 land amongst other things as proposed to become available in six to seven years.

266 It can be seen that the systematic evaluation of potential landfill sites within the region, ranked Mr Love's site first as against other new potential municipal waste sites and noted that a potential alternative site was confronted with problems. It did so however expressly in the context of a finding that there was sufficient airspace capacity in existing landfills for at least 10 years and probably 25 years.

267 In my view the hypothetical purchaser confronted with this information in a draft schedule to the RWMP not yet approved by the EPA, would have regarded as extremely problematic the prospect of demonstrating community need as contemplated by the BPEM. First the site was not yet recognised on an approved RWMP. Secondly, the draft plan did not demonstrate a need for at least 10 years and thirdly, the draft plan did not designate a sequence as contemplated by the BPEM, which endorsed commencement of filling of the WA149 land within any specified time frame.

268 For completeness, it is appropriate to refer to the subsequent 2004 final draft of a RWMP prepared by the NRWMG. This identified three prospective landfills with possible commencement dates as stated by the owners - Wollert (Boral), Thomastown Clay Hole (Boral) and Northern Quarries (the WA149 land). It stated in bold in part:

Ranking - All three sites have a very Low Ranking based on Regional Planning needs.

These three sites have been proposed as future potential landfill. Based on projections of Non-Municipal airspace consumption it could be likely that at least one of these sites would need to come into operation by about 2009 in order to provide continuity of disposal capacity after the expected closure of the GB landfill.[70]

The Region does not require these sites for municipal purposes however, there may be a future requirement under the Solid Industrial Waste Strategy being developed by EcoRecycle Victoria.

270 It may be debatable whether any real regard can be had to this document for the purpose of assessing the situation as it was at the date of acquisition in 2001 but insofar as it reflects the continuum of NRWMG thinking, it does not assist Mr Love. It tends to confirm that his land was seen by the region at the relevant date as having a very low ranking as a potential receptor of putrescible waste based on regional needs as at the date of acquisition.[71]

271 Mr Borelli expressly conceded that the issue of need would have to be addressed if application were made for planning approval. He said he was not the best person to address the issue. He agreed that the issue could be a 'significant hurdle' for Mr Love. He said that there was an issue about what was the tipping capacity available and the volume per year required.

'In other words how many holes are we going to need and what's the airspace requirements for tipping.'

272 Mr Borelli said the estimates in the RWMP were not 'inviolate' but could be the subject of expert challenge. I accept this is so but this evidence was given by him on 12 May 2009 and no evidence was led thereafter supporting the view that either the approved RWMP or the 2001 draft schedule were wrong in terms of the lack of need for an additional landfill upon Mr Love's land in the foreseeable future. Other evidence was led on behalf of Mr Love concerning waste stream issues after the resumption of the hearing in this matter in August. The evidence relating to the RWMP before the Court however, compels the conclusion that there was no need whatsoever for an additional landfill upon Mr Love's land in terms of regional planning.

273 I regard Mr Borelli's evidence in relation to the issue of need as corroborating Mr Milner's opinion in important respects. Mr Borelli did not address this issue in his written report, but when he did so in his oral evidence, it can be seen he accepted:

• need was a relevant issue pursuant to the applicable planning controls;

• need was potentially a significant hurdle for Mr Love's proposal;

• the issue was one of tipping capacity as against projected demand; and

• the RWMP documentation does not show a need for Mr Love's landfill.

274 The documentation tendered on behalf of Mr Love with respect to the Bolinda Road landfill records that on 4 October 2001 an officer of the EPA advised the consultants, Golders:

The development of the site must have the support from the Regional Waste Group, with agreement that it is necessary and that the timeframe for the development fits into the overall plan. The general opinion of [the] EPA is that there is presently an oversupply of landfills in Melbourne.

I am satisfied that the hypothetical purchaser of Mr Love's land would have received like advice from the EPA as at the acquisition date and that it accurately reflected the view of the EPA.

275 On 14 June 2002 the EPA responded to a draft works approval application lodged with respect to the Bolinda Road proposal and stated in part:

• The site is not currently listed on the Northern Region Waste Management Plan as a prospective landfill site. The NRWMG has applied for Authority approval for an amendment to the NRWMP relating to the prospective landfill schedule. The proposed amendment includes Lot 7 Bolinda Road and needs to be approved by the Authority before the works approval application is submitted. The Authority will be considering the amendment shortly and you will be advised of the outcome.
• A review by NRWMG of currently operating landfills within the region concluded that the airspace capacity available in existing landfills is sufficient for at least 10 years and likely to be 25 years. Consequently a strong case is needed to demonstrate why the region needs this additional landfill now.

276 Although the content of the first paragraph quoted was probably influenced by the impending amendment to the EP Act,[72] I am satisfied any application made on behalf of Mr Love's land as at the relevant date would have met with a similar response to that contained in the second paragraph quoted above. What was required was 'a strong case' to demonstrate why the region needed an additional landfill.

277 Mr Milner's evidence was that to overcome the obstacle of the RWMP Mr Love would need to show something extraordinary had happened since it was formulated, which justified putting it aside and completely changed the contemplated sequence of provision of landfills.

278 There is of course no evidence of any supervening circumstance since the formulation of the RWMP, or the proposed amendment in 2001, which supports the view there was a foreseeable need for a landfill on the WA149 land during the window of opportunity.

279 In my view, Mr Milner's opinion is correct and as at the date of acquisition the hypothetical purchaser would have apprehended that there was no real prospect of demonstrating need by reference to a RWMP in the short to medium term. In turn having regard to the Landfills SEPP, the BPEM and the terms of the SPPF the prospects of approval for landfill either by way of works approval or planning permit were very low.

280 In so concluding I am not of course to be taken be holding that the RWMP was a mandatory document. The SPPF, the BPEM and the RWMP were policy documents. As such they bore directly on but were not necessarily determinative of the exercise of the relevant discretion to grant respectively a planning permit and a works approval. Nevertheless the relevant policy imperative was plain.

281 Dr Bellair gave evidence that the desire to limit landfill numbers was a driving force behind the change to the EP Act which came into force on 1 July 2002.

Well I've been involved in many landfills and I'm aware that EPA was concerned in the Clayton South area where there are multiplicity of landfills operating simultaneously and a lot of them - I think they were competing with each other for price and the environmental performance of some of them was less than desirable, causing offsite impacts and also the - the duration of landfilling in individual sites was extended because there were multiple sites. So in discussion with the EPA officers I understood that one of the reasons for introducing this was to reduce the number of landfills to a manageable number within each region, so they'd be filled more quickly so that adjoining residents would suffer pain, if you like - always some offsite impact, for a shorter period before the landfill became a park and then they could enjoy the park.[73]

... it was commonsense really that there were too many landfills and they weren't being properly managed, many of them.

283 It follows from his evidence that during the window of opportunity with which I am concerned, the EPA regarded the issue of need, highlighted in the BPEM, as sufficiently significant to lead to the introduction of the 2002 amendments to the EP Act, into Parliament in May 2002. Further the EPA approach should be regarded as a 'commonsense one'. This contextual circumstance further favours Mr Milner's view.

284 Mr Parker's evidence was that if a landfill site was not listed on an approved RWMP, the prospects of approval of the landfill were low, but the context in which this opinion was initially expressed, was one of experience of difficulty with the Bolinda Road proposal after the amendment of the EP Act in 2002.

285 Mr Currie's evidence was that even in the era of the acquisition, the government was making it quite clear that they did not want too many more large putrescible landfills established and they were trying to keep the numbers down.

286 The final written submissions made on behalf of Mr Love expressly acknowledge 'the environment of increasingly restrictive EPA approvals allowing for a significant reduction for a number of landfills', as at the date of acquisition. This is relied on by Mr Love as supporting the conclusion that landfill potential was of high value. The context however carries with it the fundamental threshold difficulty I have identified.

287 Submissions made on behalf of Mr Love place significant weight upon the decision of VCAT in Western Recycle Pty Ltd v Brimbank City Council & Ors.[74] In that case the applicant sought both a permit and works approval for a putrescible waste landfill at a site which was already operating as a landfill accepting non-putrescible waste.

288 VCAT discussed the nature of policy documents which do not have the statutory force of a State Environment Protection Policy or planning scheme provisions. Following a ruling of Deputy President McNamara, it held the RWMP affecting the site was in effect a strategy or policy which was intended to guide the exercise of a discretion found elsewhere. It stated:

Therefore we are of the opinion that the waste management plan is intended to guide the decision of the EPA and on review this Tribunal. We are concerned however that the EPA has not been able to show how the proposal is in fact a substantial departure from the plan and how, to the extent that it is a departure, it has any significant environmental, planning, or economic effects.[75]

289 It went on to summarise the facts in that case:

The situation as we understand it is this:

* the proposal is to divert relatively small quantities of putrescible wastes[76] to an existing engineered tip which already accepts solid waste, low level contaminated wastes, and asbestos wastes;

* the tip is located within a region where the space available for the disposal of wastes is growing at a rate far greater than the production of wastes itself;

* the subject land is ideally located in relation to central Melbourne and the likely sources of wastes, and is in a locality extensively used for waste disposal and waste recycling purposes;

* the existing tip is identified in the WRWMP as a tip available for putrescible waste "sometime later than the year 2000". The sole issue arising from the Plan is the issue of timing; [77]

* it was not submitted that the existing tip could not be operated for the disposal of putrescible wastes in a way consistent with current environmental standards;

* it was not submitted that the extension of the operation of this existing tip to include putrescible wastes would delay the filling of an existing putrescible facility where the speedy completion of filling is regarded as important because of the amenity or environmental impacts of the existing operation.

These factors lead us to the conclusion that there is no sound basis for the decision to refuse to grant a permit, or a Works Approval, for the extension of the operation of this existing tip to encompass the disposal of putrescible wastes.[78]

290 I accept that this decision demonstrates that at the date of acquisition the RWMP was to be regarded as stating relevant policy but not as necessarily determinative of the discretion to grant either a works approval or planning permit.

291 I further accept that the case demonstrates that each application for works approval and planning permit would fall to be decided on its particular facts.

292 I do not accept however that the decision would indicate to a hypothetical purchaser that there were real prospects of overcoming the problem that the RWMP (both in approved and draft form) made clear, namely that, there was no present need for a putrescible landfill upon Mr Love's land. First, the Western Recycle case was decided prior to the release of the BPEM and the BPEM made clear that community needs should as a matter of policy be regarded as the first basis of selecting appropriate landfill sites. Secondly, the WA149 land proposal (as hypothesised by Mr Love) was one to divert a relatively large quantity of putrescible waste to an as yet non-existent landfill.[79] In both these respects it was fundamentally different from the Western Recycle case. Thirdly, the WA149 land was not identified in an approved RWMP whereas the Western Recycle site was. As VCAT said the sole issue before it, was one of timing with respect to a site identified as potentially appropriate for putrescible waste. Fourthly, the RWMP applicable to the WA149 land expressly endorsed the consolidation and limitation of the number of landfills within the region whereas the RWMP applicable to the Western Recycle site did not.

293 Reference was also made in the course of the hearing to the decisions of VCAT relating to landfills proposed in the City of Kingston. These decisions of 18 December 2000[80] and 1 May 2002[81] demonstrate that the issue of need was resolved by reference to the provisions of the relevant RWMP (see [28] of the first decision and [10] and [25] of the second decision).

294 Mr Love further submits that the draft plan is to be understood in the light of the evidence of Mr Hince. Mr Hince was at the date of acquisition the executive officer of the NRWMG. Mr Hince gave evidence that the proposed availability of the site described in the draft plan, reflected Mr Love's instructions. If at the date of acquisition Mr Love or a hypothetical purchaser had advised Mr Hince that the site would be available within two years, then he would have altered the draft schedule to reflect this. Mr Hince said the NRWMG believed it could not control whether a site was in or out. That would be the final decision of other authorities. I accept that if such a request had been made Mr Hince would have put such an alteration to the regional group, but in fact no such request had been made as at the date of acquisition. I also accept that the scheme of the document which was proposed to be amended was to state the landowner's intentions.

295 Mr Hince also gave evidence that a landfill on the WA149 land could be supported on the basis that it met community needs for the supply of a more convenient waste disposal venue to individual members of the public than would be provided by the Pioneer Wollert site. This would be particularly so as the approved RWMP envisaged the creation of a hub of recycling land uses on the adjacent site of the former Cooper Street No. 1 landfill. I accept that after the closure of the Bolinda Road landfill (then expected to occur in five years time) and in the event of no provision of a waste transfer station at that or another nearby location, this would be so for a sector of the community. Nevertheless it is common ground that a landfill on Mr Love's land would have needed principally to cater for commercial contractors in order to succeed. The potential convenience postulated would not easily justify a need for such a facility. Further the approved RWMP quoted above expressly stated:

The proposed mode of operation is that only the larger volumes of garbage and separated wastes be direct hauled to landfills with the smaller self hauled loads of residential wastes and small loads of municipal wastes being handled through the network of Resource Recovery and Waste Transfer Stations in the Region.

296 Mr Love also submitted that a landfill on the WA149 land would meet community needs by providing economic competition with other landfills. I do not accept this is the sense in which the BPEM contemplates meeting community need. It is directed to environmental and not economic considerations. A series of witnesses made clear that at the date of acquisition the EPA was supporting an overall reduction in the number of landfills for reasons of environmental policy. Further the framework elements of the existing RWMP made it clear that it was express regional policy to consolidate landfills into a limited number of sites. The approved RWMP also spoke of increasing landfill prices as desirable in order to deter waste generation.

Competition in the industry is such as to limit the opportunity to increase prices as a deterrent to waste generation and make waste reduction programs in areas other than residential difficult to implement.[82]

297 The RWMP process itself involved looking at other available landfill sites and their pluses and minuses. Neither the approved RWMP at the date of acquisition nor the proposed amended RWMP demonstrate any acknowledgment of a need for increased economic competition within the region.

298 It was further submitted on behalf of Mr Love that need could be demonstrated by reference to the transport advantage the WA149 land had over the Pioneer Wollert site in terms of closeness to metropolitan Melbourne and consequential savings in greenhouse gas emissions. I accept this is a factor that could be advanced as relevant to the exercise of discretion both under the EP Act and the P and E Act.

299 Nevertheless it was never satisfactorily demonstrated where the probable sources of waste for a landfill on the WA149 land would be concentrated. As will appear from my discussion of waste stream issues relating to the hypothetical development analyses put forward on behalf of Mr Love for valuation purposes, the most probable potential source was a commercial waste collector or collectors, serving the central metropolitan area. Mr Love's site had no necessary transport advantage over sites in the western region in respect of such a collector.

300 Further, the SPPF, the EP Act, the Landfills SEPP and the BPEM direct attention to the RWMP. The relevant RWMP identifies need by reference to capacity within the region. It further adopts an express policy of consolidation of the number of landfills. I do not accept that the hypothetical purchaser would or could regard the RWMP documentation as realistically being capable of being bypassed by arguments based on hypothetical advantages relating to greenhouse gas emissions.

301 In my view Mr Milner's evidence should be accepted and the hypothetical purchaser would not have regarded as more than minimal, the prospects of meeting the intent of the BPEM, ie demonstrating need for the landfill by reference to a RWMP, despite the identification of the WA149 land by the NRWMG as a potential landfill site in the long term.

302 In turn the prospects of obtaining approval within the first 10 year period of demonstrated capacity identified in the draft schedule to the RWMP were very low. When the 2001 draft schedule is read in the context of the approved RWMP and the BPEM, Mr Milner's opinion should be accepted.

(a) The EP Act granted a discretion to refuse the works approval because the site was not included in an approved RWMP.

(b) The EP Act, the Landfills SEPP, and the BPEM established the RWMP process to co-ordinate the approvals of landfills on a regional basis by sequential scheduling.

(c) The SPPF expressly refers to the Landfills SEPP and the RWMP as policies that 'must' be complied with.

(d) The SPPF is itself a consideration that must be taken into account in making decisions with respect to planning permits and is expressed in terms which make clear that it is intended to provide a fundamental framework for net community benefit and sustainable development in Victoria.

(e) At the relevant date the approved RWMP did not identify the WA149 site as a potential landfill, did not show a need for a new landfill and expressly adopted a policy of consolidation and reduction of landfill site numbers within the region.

(f) The proposed draft schedule to the RWMP identified the site as one for a potential landfill, but made it clear there was no need for additional landfills in the next 10 years and probably in the next 25 years.

(g) There is no evidence to suggest this analysis was or could be shown to be incorrect.

(h) Shortly prior to the relevant date (but after the preparation of the draft schedule) the BPEM made clear that in the EPA's view community needs were the first factor governing the ranking of prospective sites.

(i) There is no substantial basis on which to conclude a hypothetical purchaser would have believed he or she could evade the plain terms of the RWMP documentation in respect of the issue of need and scheduling of new landfills within the region.

(j) The probability therefore was that applications for land use approvals in the foreseeable short term would fail.

(k) Nevertheless the appropriateness of such approvals was ultimately a matter governed by the discretion of VCAT.

2.3 The Cooper Street Precinct Strategy ('CSPS')

304 Mr Milner also expressed the opinion that the provisions of a precinct plan prepared on behalf of the cities of Whittlesea and Hume with respect to the areas adjoining Cooper Street, led to the conclusion that in strategic planning terms a landfill should not be permitted on the WA149 land.

305 At the date of acquisition the WPS contained a municipal strategic statement ('MSS') in accordance with the Victoria Planning Provisions. The MSS was followed by local planning policies. The MSS specifically addressed employment and economic development at clause 21.06-4. The strategy had the objective of creating better jobs/housing balance and achieving greater diversity in employment opportunities within the municipality. The clause stated that the city must focus on strategies which:

• maximise retention of as much of the local resident and industrial owner occupier market as possible in the short term;
• attract the maximum number of local industries to service the growing local population;
• substantially increase the range and quality of sites; and
• differentiate future large scale industrial estates based on local conditions and other comparative advantages.

306 Councils' strategies included progressively increasing the supply of land zoned for employment purposes and pursuing a greater diversity in economic investment in the municipality. They further included:

• Protect future industrial activity within the Cooper Street Precinct by ensuring that nonindustrial land uses that would adversely affect industry viability are discouraged from encroaching on the area.
• Provide adequate separation and buffer areas between sensitive land uses and offensive or dangerous industries and extractive industry to ensure that adverse environmental effects, nuisance or exposure to hazards does not affect existing and future residents.
• Maintain and improve the aesthetic appearance of existing employment areas at Bundoora, Thomastown and Epping.
• Ensure that all new employment areas have regard to high quality urban and landscape design and appearance.

• Focus on planning for the concept of integrated business parks in Cooper Street and Mernda/Doreen.

307 In turn the first specific action which is listed for implementation is:

• Implement the Cooper Street Precinct Strategy pending the finalisation of the alignment of the Hume Freeway.
• Following definition of the Hume Freeway alignment review the Cooper Street Precinct Strategy as required and pursue rezoning of land in accordance with the strategy.

• Oppose the establishment of unsightly industries and storage yards which are a disincentive to investment in key employment corridors such as Cooper Street, High Street and McDonalds Road.

309 In turn the Cooper Street Precinct Strategy is listed as a reference document in the planning scheme.

310 The CSPS originated from an 'issues paper' prepared for the cities of Whittlesea and Hume by independent planning economic and traffic consultants in June 1996. Public submissions were received in relation to this paper and a reformulated CSPS was adopted by WCC in October 1996.

311 Mr Love participated in the process and made submissions seeking to protect the extractive industry potential of the WA658 land contained in the central portion of his property. Those submissions were reflected in part in the ultimate form of the CSPS.

312 The CSPS presented a vision for Cooper Street which runs east-west between the Hume Highway and Epping. It envisaged a significant upgrade in the amenity of Cooper Street coupled with a significantly increased level of urban land use adjacent to it.

To create a vibrant living and working community, which integrates good urban design, effective use of physical services and the significant natural environment of the Merri Creek and nearby Grasslands, to promote the precinct as a gateway to the Northern Metropolitan growth areas.

314 A key feature of the plan was summarised as being:

Limit extractive industry/ tipping activity in the area to currently active sites.

315 I accept Mr Milner's opinion that the CSPS reflected a strategic desire on the part of WCC to transform Cooper Street in both urban design and land use terms. I also accept that as part of this transformation the CSPS sought the cessation of uses that had historically adversely affected the amenity of the area.

316 Nevertheless Mr Love submits that there is significant doubt as to the weight that should be given to this policy and as to its intent insofar as it affected his land as at the date of acquisition. I accept this submission for a number of related reasons.

317 First, it is apparent from the terms of the MSS that the CSPS was intended to be the subject of review once the alignment of the Craigieburn Bypass was known. This alignment had become known by the acquisition date and accordingly as at that date the document was one which was subject to review as the MSS indicated.

318 Secondly, the CSPS was prepared at a time when the Bypass was anticipated to be located along the Merri Creek valley. In fact it was located a substantial distance to the east and passed over the eastern part of the central portion of Mr Love's land instead of to the west of that land. It follows that a fundamental physical parameter affecting Mr Love's land had changed since the CSPS was formulated.

319 Thirdly, the WA149 land was not within the gateway precincts at each end of Cooper Street, the upgrade of which was a particular focus of the CSPS.

320 Fourthly, the CSPS referred to the area east of the Merri Creek (which includes the WA149 land) in the following terms which both contemplated further review and recognised the retention of extractive industry:

The area generally to the west of the Merri Creek provides a major long term employment focus for the region. The potential for development east of Merri Creek requires further review when resolution is reached about issues regarding the freeway alignment, adjacent rock extraction and tipping works, and conservation areas are addressed.

Details of land uses with[in] the study area have been examined by precincts. These are detailed in Section 5 of this report. In summary, the proposed zoning of land for urban purposes (subject to servicing infrastructure) will encourage a broad spectrum of employment based uses to be facilitated in the region.

The Section 5 overview of each precinct includes discussion of potential land uses for the precincts. Land uses are expected to vary according to location, with more intensive commercial uses being encouraged around the Epping Plaza node. A variety of light industrial, mixed use and general industrial uses are proposed for the majority of the area. Extractive industries are retained in areas directly east of the Merri Creek, where there is potential for combined economic benefit from extractive uses whilst limiting conflict with adjoining land uses. It is acknowledged that extractive industry provides benefits to the local area in terms of associated businesses and employment opportunities.

321 Fifthly, there is some fundamental ambiguity in the statement 'limit extractive industry/tipping activity in the area to current active sites.' The WA149 land was a currently active extractive industry site. The plan itself does not make clear whether the intention was to allow tipping on such sites or to preclude it.

322 Sixthly, Mr Love's land was contained in two precincts. The WA149 land was substantially within area B Precinct 4 and partially within area B Precinct 5. The CSPS stated with respect to these precincts:

5.2.4 Area B: Precinct 4 - Existing Farming to Refuse Site and Quarry Site

This area currently includes an existing waste disposal site and quarrying activities with similar topography and existing land form as in Area A5. Waste disposal and quarrying activities will remain in the medium to long term for the site, i.e. 20-30 years. New areas of extraction are appropriate provided that it can be demonstrated that:

• the use will not impact on the visual amenity of Cooper St, both during extraction and from landforms resulting from extraction;
• the use can be commenced in the short term and completed within 20-30 years when it is anticipated other uses will surround the site; and
• extractive operations are well managed.

This assumes that quarrying and tipping on this site will remain viable and that filling on the A2 precinct will finish in the short term.

The zoning of this land should continue to facilitate extractive and filling uses acknowledging that these uses provide employment and economic opportunities for the local area. Opportunities exist to use final unfilled quarry floor levels for long term industrial activity in preference to tipping usage should be considered.

The Landscape Design Guidelines presented as part of this strategy should be used to ensure development in this precinct complements the design principles established for the Cooper Street area. Given the low amenity nature of these medium to long term uses, landscaping and screening to Cooper Street is imperative. This continued use needs to be carefully managed to protect both the Wetlands and Grasslands to the west from degradation. Potentially conflicting uses need to be addressed carefully. Reclamation and reuse options for the quarry site needs to be progressively addressed to ensure new technologies and alternatives can be adopted. The long term development of this precinct should be based on the same principles as Area A5.

5.2.5 Area B: Precinct 5 - Refuse Site to Freeway reserve.

This precinct includes areas of wetland and grassland significance as well as areas within the operating quarries in precinct B4.

Potential realignment of the Freeway should be considered to protect the nationally significant grasslands further to the north of the precinct. This and other long term options for development of open space and recreation areas will require detailed investigation of the area. An alternative alignment would cross the Merri Creek further south and divert east or through parts of the Refuse Site to protect areas of nationally significant grasslands.

In either event development in this precinct should be limited to existing filling and waste management operations and in the longer term recreation and open space based activities.

Urban development of any sort in this precinct must be considered as long term and inconclusive given the potential realignment of the freeway, the areas of environmental significance within the precinct and the existing filling operations on the land.

323 It can be seen that these recommendations envisage continuing waste disposal activity in Precinct 4 (which then contained the Cooper Street No. 2 landfill), although it is envisaged new opportunities for industrial use should be considered in preference to tipping use. Further the vision for Precinct 5 is a limited one.

324 Seventhly, (although I place less weight on this) the strategy for area B Precinct 5 was subsequently rejected by a planning panel which considered amendment C75 to the WPS, and recommended the facilitation of a dog pound within it. In February 2006 that panel stated:

The Cooper Street strategy is now an old document. It has in part been superseded by a new strategy (for land east of the Craigieburn Bypass), and on land including the subject site, whilst notionally still in force has clearly now been thoroughly overtaken by events. The panel places little weight on it;

325 When the above matters are taken together it seems to me that the hypothetical purchaser as at the acquisition date would not regard the CSPS as either necessarily precluding or endorsing the potential of the land for a putrescible landfill. Its terms would however alert the hypothetical purchaser to the probability that the WCC may take the view that a new putrescible landfill was inappropriate if the precinct were to be upgraded in accordance with its overall preferred vision of it. The witnesses generally, and the planning witnesses in particular, agreed that the WCC would not have supported the grant of a permit for a putrescible landfill and any planning permit application would necessarily have gone on appeal.

326 Further, the terms of the MSS and the CSPS itself presented the hypothetical purchaser with the risk that the refinement of planning policy for the precinct would result in further planning controls which prevented or impeded the obtaining of a planning permit. This risk would further tend to confirm the hypothetical purchaser in the view that the risk of failure to obtain land use approvals for a putrescible landfill was high. The critical risk however was as I have said the risk with respect to the inability to demonstrate community need and in particular community need by reference to the provisions of the RWMP.

327 Mr Love submits that no regard should be had to the CSPS because the acquisition gave effect to the scheme of the CSPS. I do not accept this. The road widening scheme predated the CSPS and influenced that strategy. The strategy was also materially and relevantly concerned with matters other than the road widening. In terms of s 43(1)(a) of the LAC Act the purpose for which the interest was acquired was not the same purpose as that of the CSPS. Further, any increase or decrease in value which occurred as a result of the CSPS was not one 'arising from the carrying out, or the proposal to carry out, the purpose for which the interest was acquired'.[83]

328 It follows from the above conclusions however, that as at the acquisition date and generally during the window of opportunity identified by Mr Love, the prospects of obtaining land use approval for a landfill on the WA149 land were very low.

329 In my view even accepting that VCAT ultimately retained a discretion with respect to the approvals in issue and accepting it is possible, the case on community need might have been floated with respect to issues such as greenhouse gas emissions, the prospects of obtaining approval were no greater than 10 per cent at best. The hypothetical purchaser who was properly advised at the date of acquisition, would have reached a like conclusion.

330 The most complex evidentiary issue in this case is the assessment of Mr Love's claim that if it be accepted the WA149 land had potential for use as a landfill within two years of the date of acquisition, such potential had substantial market value exceeding the value of the land as future industrial land.

331 Mr Brown and Mr Dudakov, the valuers called to give evidence on behalf of the Corporation, adopted a comparable sales approach when seeking to determine the 'before' and 'after' value of Mr Love's land.

332 They identified the highest and best use of the land as future industrial use or, as Mr Dudakov sometimes put it, urban use for industrial or business purposes. Their valuations were as follows:

333 Mr Brown assesses the compensation at $310,000, Mr Dudakov at $246,000.

334 The Corporation submits that the claimant should be given the benefit of the doubt and the Court should award Mr Brown's figure.

335 The rates per hectare adopted by Mr Brown and Mr Dudakov do not reflect the value of land with present potential for industrial development, but rather land with potential for such development in the future.

336 The rates set out above are average rates although Mr Brown and Mr Dudakov arrive at their values by accepting a differential between the value of different portions of land and in particular between the land to the east and to the west although on different bases.

337 Mr Brown also adopts a higher value for the land having a direct frontage to Cooper Street than for the balance of the land more remote from it. In so doing he is on one view generous to Mr Love, in that the land retained direct frontage to Cooper Street in the 'after' situation.

338 Mr Dudakov adopted a lower value for the urban floodway zone land than the balance of the land. He also allowed for the severance of the westernmost portion of the land by this zone. Mr Brown did not, on the basis that the urban floodway land could be incorporated in a future subdivision as open space.

339 It seems to me Mr Dudakov's is the better view.

340 Neither Mr Brown nor Mr Dudakov made an allowance for enhancement insofar as the duplication ultimately resulted in improved access to Mr Love's land.

341 In summary in my view Mr Dudakov's approach to the question of market value is to be preferred to Mr Brown's but, as I have stated, the Corporation concedes that Mr Love should get the benefit of Mr Brown's somewhat higher figure if the land is to be valued on the basis of future industrial values.

342 The levels of value ascribed to the land described by Mr Brown and Mr Dudakov are generally consistent with those advised to Mr Love by the valuer first retained by him to act in respect of the acquisition. On 17 May 2004 Mr Hocking advised Mr Love in writing in the following terms:

I have had further discussions with the VicRoads Valuers in relation to comparable land sales along Cooper Street and I am hoping we will shortly have a response with an increase from their original basis of $52,000 per hectare. If they go to $70,000 per hectare this will equate to approximately $240,000.

The difficulty in obtaining sales evidence is the relevant date of 15th November, 2001. Time is starting to run by and consequently, current sales are relevant. If VicRoads come within the vicinity of $240,000 I will be pleased to recommend that you consider accepting ...

I have not been able to discuss the potential of the loss on the sale of the property for a landfill site. VicRoads is not interested in pursuing that argument and again, that would be a matter for an appeal. Again, I do not recommend that you proceed down that path because there has been no attempt made to sell the property for a landfill, or even approaches to potential purchasers.

If a sale of the property had been rejected by several purchasers on the grounds that access was not available then the matter would be different, but in reality any sale under those conditions would have become conditional on satisfactory access being granted, and history will suggest that access will or would have been arranged by VicRoads.

343 Mr Hocking had acted both on behalf of Mr Love and Conundrum in respect of the acquisition. He had been retained by Mr Love in respect of valuation issues in 2002. He prepared a valuation report dated 20 October 2003 which assessed compensation for the acquired land in the sum of $300,560 based on $90,000 per hectare. He participated in a valuers conference with Mr Brown in 2003. Mr Hocking also had a prior history of dealing with the land and in particular involvement in dealings between Mr Love and Conundrum.

344 The fact that he was not called to give evidence and indeed no valuer was called on behalf of Mr Love to give direct evidence as to the question of future industrial land values, encourages acceptance of Mr Brown and Mr Dudakov's level of value.

345 For the purpose of his 'after' valuation Mr Herdman (the primary valuer relied on by Mr Love) adopted a value of $50,000 per hectare for nine hectares of future industrial land at the front of the WA149 land. This figure was derived from advice from a further valuer, Mr Kerr, who was not called to give evidence. Once again the failure to call Mr Kerr encourages the adoption of the views of Mr Brown and Mr Dudakov as to the relevant levels of value of the land for future industrial purposes.

346 In cross-examination Mr Herdman agreed that if one accepted Mr Brown and Mr Dudakov's opinion as to highest and best use, he did not take issue with their levels of value.

347 Nevertheless a sustained and extended attack was mounted in cross-examination upon Mr Brown's evidence.

348 Mr Brown was initially instructed by the Valuer-General to prepare a valuation for the purposes of informing the statutory offer process brought into play upon compulsory acquisition by the LAC Act.

349 I accept that his initial valuation was undertaken as one of a group of valuations in a relatively limited period of time and made with the assistance of another valuer who was not called to give evidence. It did not accurately state the zoning of the westernmost portion of Mr Love's land and in particular did not acknowledge the Special Use zone (which encouraged interim use of the land for extractive industry), nor the Urban Floodway zone.

350 Mr Brown took the view that it was not necessary to include the land used for quarrying in his 'before' or 'after' assessment, as the value would remain constant.

351 Hence, although his report referred to 'special use work authority 149', he did not address the value of this aspect of the land.

352 He also did not acknowledge any potential for landfill use (although I accept Mr Doyle of Mr Brown's office was advised of Mr Love's intention in this respect). Nor did he deal with all the background factual issues raised by the Corporation at the time.

353 Mr Brown valued the land on the assumption that access would be reinstated to similar effect to that which existed before acquisition and that current activities would not be adversely affected. He did not turn his mind to landfill use nor to the question of access to a future landfill. His firm did, however, give advice on compensation implications of three different forms of reinstated quarry access. Thereafter, at a valuation conference with Mr Hocking on 28 April 2004, the issue of reinstatement of access to the quarry was raised on behalf of Mr Love, together with a claim for delay in obtaining approval for a landfill.

354 Mr Love had himself made clear in October 2003 in his written response to the Corporation's initial offer that he asserted uncertainty concerning reinstatement of the access to 460 Cooper Street, had rendered him unable to progress business negotiations with any party regarding future development of a landfill.

355 Mr Brown was subsequently advised of this but also advised that the parties affected had agreed that new access arrangements be created. It seems Mr Brown proceeded on the basis that if access to the quarry were reinstated the landfill access issue was also resolved.

356 Some cross-examination was also directed to Mr Brown by reference to evidence given by him in a case concerned with assessing compensation for land acquired at Craigieburn for the purposes of the Craigieburn Bypass.[84]

357 I am satisfied that the case was not comparable for the reasons stated by Mr Brown.[85]

358 Cross-examination was also directed to Mr Brown with respect to the revision by him of the figure he adopted at the time of the acquisition giving the land a future industrial value of $50,000 per hectare.

359 He gave evidence that he adjusted his values first, to reflect the value fixed by this Court[86] for the nearby Murdesk land as at February 2002. Secondly, he adjusted to recognise Mr Love's land was held in a series of existing lots, enabling it to be sold by way of parcels without further subdivision (an advantage to land held for future industrial use). Thirdly, he adjusted to reflect the potential of the land as enhanced by the Craigieburn Bypass proposal.

360 Mr Dudakov was also subjected to criticism. He stated in his written report of February 2009 that he reached his view as to highest and best use first, on the basis of an 'economic analysis of the returns derived from extraction' and secondly, from the fact 'there is no sales evidence of higher values being paid for land suitable for extractive purposes simply because quarry operators have alternative cheaper land sources available to them in close proximity'. In evidence it became apparent that he had not in fact analysed returns from the Conundrum quarry nor from a potential landfill, but he elaborated his evidence as to the second factor:

What I'm saying is that this is a basalt reserve, it's not - it's quite a common reserve that is found throughout the northern, western areas of Melbourne and quarry operators have got ample opportunities to buy land outside the urban fringes and therefore not have to pay or compete with urban developers for that land and they [can] buy cheap - effectively rural land at cheaper prices, so they don't have to compete and nor should they because it's not a scarce resource.

361 Mr Dudakov was also cross-examined as to the accuracy of the background facts stated in his reports and conceded that he had in part misstated the existing zoning and the relevant title particulars.

362 He was questioned as to the works necessary to convert the WA149 land to industrial use. He said the costs of fill and other development costs for further industrial subdivision were taken account of in the comparable sales evidence on which he relied.

363 Ultimately, however, both Mr Brown and Mr Dudakov are the only valuers who gave direct evidence of future industrial value to be inferred from comparable sales and I am satisfied their opinions should be accepted, particularly in circumstances where Mr Love had available to him the evidence of Mr Kerr, but chose not to adduce it. The rate adopted by Mr Brown and Mr Dudakov also fits with a level of which Mr Love was independently advised by Mr Hocking was appropriate and Mr Love did not call Mr Hocking.

364 I accept Mr Brown and Mr Dudakov's levels of value in the context described by Mr Dudakov:

I consider the above sales demonstrate that there has been a substantial increase in value for this type of property over the past two to three years. I consider the sales at the adjoining 'Northpoint Enterprise Park', at 360 Cooper Street compared to the earlier sale on the corner of the Hume Highway and Somerton Road, provides a good indication of this value shift. The first sale, in March 1998, was for around $124,527 per hectare, whereas the average price for the adjoining two lots sold into the Northpoint Enterprise Park joint venture, was $224,000 per hectare in early to mid 2001. In my opinion this increase in value for zoned land would equally apply in respect of unzoned land earmarked for future rezoning.

I also note that this increase in value reflects the strong development phase that has occurred in and around Epping, with high levels of residential, commercial and industrial development. In addition, I note that the land on the opposite side of O'Herns Road, to the south of the subject property, has been designated by the City of Whittlesea for the development of the 'Epping North' township (formerly known as the 'Epping Bulge'). A number of land parcels within this area were purchased by residential land developers, with the Urban Land Authority having secured a number of parcels.

I also consider that the proposed construction of the Craigieburn By-pass also added to the attractiveness of the subject property as a site for a future staged industrial/business park.

The thinking that would be in my mind if I were the owner of that land is that I know that the Scanlan land sells for $220,000 a hectare as zoned. If my land is currently worth $80,000 I've got an uplift there of virtually three times if I can get the land rezoned and I would agitate towards rezoning of that land.

... The fact of the matter is that these two parcels of land are fronting onto Cooper Street where the major new interchange was known to be going and this was an area that would have been ideal for future industrial use, way ahead of anything in O'Herns Road.

367 Acceptance of the levels of value put forward by Mr Brown and Mr Dudakov of the land on the basis of its potential for future industrial use, does not of course necessarily establish the relevant levels of value for compensation purposes, if in fact the highest and best use of the land in the 'before' situation was for future landfill.

368 As I have said Mr Brown was cross-examined in part on the basis that his initial valuation did not adequately reflect the special use zoning affecting the WA149 land, nor ascribe value to the extractive industry being undertaken on the land.

369 Insofar as his valuations plainly proceeded on the basis that neither the existing zoning, nor the existing use constitute the highest and best use of the land, I do not accept these criticisms bear on his ultimate opinion. The real question is whether potential for landfill can be said to have generated a higher potential than the potential for future industrial use.

370 The problem from Mr Love's point of view is reflected by Mr Herdman's calculation of 'after' value. Mr Herdman values Mr Love's interest in the nine hectares at the front of the WA149 land at $50,000 per hectare giving a value of $460,000 and the balance of the land at only $410,000 based on a capitalisation of expected quarry royalty income.[87] If a figure of $75,000 per hectare is adopted for future industrial land then at least 30 hectares of the western land was available for such use, unaffected by the northern pit at the date of acquisition. Even if this figure is applied only to this area this gives a 'before' and 'after' value significantly greater than that adopted by Mr Herdman.

371 Mr Herdman accepted in cross-examination that if the level of value for future landfill and existing quarry for the WA149 land came in at below Mr Brown and Mr Dudakov's levels of value, then logically the highest and best use of the land was for future industrial.

372 There is no evidence of sales of land for quarry purposes with potential for landfill use at or about the relevant date for anything like $75,000 per hectare.

373 Mr Herdman referred to the sale of the Cooper Street No. 2 landfill site to WCC in July 1989 for $2.7 million reflecting a value adjusted as at the date of the acquisition of $2.60 per cubic metre of potential tipping space.

Well I looked at the realisation price, $2.7m and I understand that at the date of acquisition there was approximately 1.2 million cubic metres of available airspace. So that arrived at sort of a capital multiple of in the order of $2 per metre cubed. I then looked at indexing that on the All Groups Melbourne index up to December 01 and that revised the multiple to $2.83 a metre cubed void take up. Now, I made some further adjustments to that, principally because the site that we were valuing in this particular instance had a greater void available of just slightly over four million. My view is, based on experienced (sic), that the prospective purchaser would generally reduce his overall value in situ capital figure to reflect that fact.

374 Reference to this sale raises the question of the 'degree of comparability' of the lands in question.[88]

375 In Leichhardt Municipal Council v Seatainer Terminals Pty Ltd, Hope JA said:

Whether the differences between land a sale of which is to be relied upon and the land to be valued are so great that the land the subject of the sale cannot be regarded as comparable is a question of fact and degree. The difference may be so great that a court may be constrained to hold that the land is in no sense comparable, and that the adjustments which have to be made are so great that the sale can provide no evidence of the value to be determined, and no basis upon which that value can be assessed. [89]

376 The question whether a sale of land is sufficiently comparable to provide a satisfactory basis for the determination of value, is primarily a question of fact to be assessed by an expert valuer.[90]

377 In Brewarrana v Commissioner of Highways (No 2) Wells J stated:

It is general valuation practice for sales characterized as comparable sales to be used as bases for the valuation of lands said to be similar. But allowances must always be made before such sales can be so used. No two parcels of land are identical in all respects: the sale price of any given piece of land is not necessarily the price at which it ought to have been sold, or the same thing as its true value. Before using any allegedly comparable sale, therefore, the valuer must consider whether, having regard to the circumstances (using that word in its broadest sense) appertaining to the parcel of land in question, and to the transaction of sale, there are sufficient similarities to the circumstances appertaining to the subject land and to the notional sale presupposed by the test formulated in Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418 and in later cases to warrant a court's reasoning from the sale price paid under the allegedly comparable sale, with or without other evidence, to a value for the subject land. Adjustments must, of course, be made every time reasoning of that kind is undertaken. For example, in relation to the land itself and the circumstances appertaining to it, it may be necessary to consider such matters as topography, location, size, shape, slope, view, land use (actual and potential), scope for, and difficulties of, development, services and amenities; and in relation to the transaction of sale, the valuer must weigh such things as the character, business and relationships of the parties, their motives, the terms and conditions in their contract of sale, and any other special considerations that induced or may have induced them to conclude the contract at the selling price agreed, as well as the dates when the contract of sale and the transfer were concluded or effected. I do not for a moment pretend that I have been exhaustive. What I am concerned to emphasize is that, as I understand the evidence, and according to the inferences that I feel I can safely draw from it, there is no hard and fast rule by the application of which a valuer may, whatever the circumstances, draw the line that clearly separates the sales that are comparable from those that are not. It is, in my view, all a matter of degree: some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning process in the comparable sales method. Just where the line is to be drawn is, it seems to me, the very sort of question that is fit for the expert valuer to determine; the assessment of the risks of adjustment is peculiarly within his sphere of skill. The valuer must use his skill to winnow out the element of comparability if it is there, and use it with discretion. It is perhaps worthwhile adding that just because a sale is excluded from use in the comparable sales process of reasoning, it does not necessarily follow that it must be discarded from all consideration. The evidence in this case suggests strongly to my mind that, at the initial stages, a valuer will almost certainly look at all known sales in potentially relevant areas, if for no other reason than to discern patterns of prices and changes in price levels over important periods. He will, while doing so, also be culling possibly comparable sales for further consideration. The process, seen as a whole, is not unlike that of using items of circumstantial evidence that possess varying degrees of cogency and weight. [91]

378 In the Leichhardt case referred to above, Hope JA also said:

Theoretically a comparable sale may be of the very land to be valued, as where, for example, a contract for its sale was entered into on the very day upon which it was to be valued. This would be a most unusual situation, but often evidence is available of sales of very similar land close in point of time to the date of valuation. However, probably more often, the lands the subject of the sales relied upon are in some way different from the land to be valued, giving the latter land a higher or lower value than that to be deduced from the sales. The times of the sales in relation to the date of valuation may also have to be considered in the light of general movements in land prices. The need to make adjustments to values deduced from sales in order to arrive at the true valuation of the land to be valued does not preclude the court which has the task of valuing the land from relying upon the sales as comparable in the relevant sense, nor from the making by the court or by valuers of adjustments which may be nothing more than the best guess that can be made.[92]

379 In ISPT Pty Ltd v City of Melbourne (Land Valuation),[93] the President of VCAT stated:

The strength of the comparison between a sale and the land to be valued will depend on a comparison of the different circumstances. Suppose the land to be valued was sold, in the same condition, one year before the date of valuation. The sale may or may not be directly useful in the valuation: whether it is will depend on evidence of general market movements over the period between the sale and the date of valuation. However, even if there is evidence of substantial market movements over that period, the sale may still be relevant provided adjustments are made for that general market movement. As a matter of logic, a sale after the valuation date is just as relevant as a sale before that date. However it will still be necessary to consider market movements or trends in deciding what weight to give such a sale or whether to make adjustments to it before comparing it with the subject land.[94]

380 Mr Herdman did not adduce evidence of other comparable sales to measure probable alteration of price over the 12 year period in issue between the sale of the No. 2 landfill and the acquisition date. Reference to such sales is itself potentially attended by difficulty. In Verebes Investments Pty Ltd v Commissioner for Main Roads, Else-Mitchell J stated:

I suppose, precise quantification is not possible because unless the market is plentifully supplied with land for sale and sales take place regularly there will not be a uniform upward trend but merely a series of spasmodic movements at intervals which may be as long as three months or more and, indeed, it may only be when closely situated and similar properties are sold for substantially different figures or when the same property is resold at a later date that some general notion of the increment is disclosed. [95]

381 I accept the opinions of Mr Brown and Mr Dudakov that the sale of the Cooper Street No. 2 landfill was too remote in time to constitute a comparable sale upon which meaningful reliance could be placed. I do not accept proper adjustment could take place in the circumstances of this case by reference to the All Groups Melbourne CPI as Mr Herdman sought to do.

382 Further the No. 2 landfill was purchased by WCC which had control of a municipal waste stream. No such stream was assured for Mr Love's land, a matter to which I shall shortly return.

383 In addition the extent of the existing voids and the relationship of existing void to potential tipping space were not directly comparable.

384 I do not accept this sale can be treated as comparable or, as was submitted, a 'benchmark'.

385 Mr Dudakov gave evidence of the Barro purchase of 174 hectares at Werribee in June 2002 for quarrying purposes at $10,000 per hectare. The land was estimated to have 4 million tonnes of good quality basalt and 4 million tonnes of low quality basalt. It was expected to generate a proportionate void. His evidence was that because rural land was available for the purposes of quarrying basalt on the fringe of the metropolitan area purchasers would not pay more than rural prices for land for this purpose.

386 The quarrying income received by Mr Love and reflected in Mr Herdman's 'after' valuation was minimal in proportion to a value of $70,000 per hectare for industrial land.

387 I accept Mr Dudakov's evidence as to the general market situation. It would require compelling evidence of the special potential of Mr Love's land to displace it. In my view no such evidence was adduced.

388 I also accept the evidence of Mr Brown and Mr Dudakov that if WA149 were extracted to its full extent and filled with putrescible waste above natural ground level, then its capacity for future industrial development would be regarded in the market as seriously diminished because of limitations on the form of development possible.

389 Mr Brown and Mr Dudakov were criticised in final address on behalf of Mr Love for not having properly assessed the 'marriage value' of the WA149 land, taking into account its value to Conundrum. No valuer however purported to assess this value, and there is no satisfactory basis in this criticism for rejecting their values.

390 Mr Love's case is ultimately founded not on a credible alternative view of the comparable sales relating to future industrial land (differing from that of Brown and Dudakov) but on the adoption of a different methodology. In effect he seeks to value the landfill enterprise which he claims was destroyed by the acquisition. The claim is formulated by reference to the valuation of Mr Herdman, who described the methodology as follows:

In accordance with the above instructions, we have adopted the "hypothetical development methodology". This approach assumes that a landfilling business, as a profitable going concern, experiences "loss of profits, earnings" as a result of the compulsory acquisition, which in essence, has sterilised realisable voidspace reserves for subsequent putrescible landfilling.

However, in line with accepted waste management industry practice, we have adopted "Capitalisation of Future Profits" as well as "Discounted Cash Flow" methodologies. These approaches assumes that a landfilling business, as a profitable going concern, produce margins that are either capitalised or discounted over the life of the operations at an appropriate capitalisation or discount risk rate. In this instance we have adopted a risk rate of 13%. The earnings or EBIT figures adopted are fixed throughout the calculated term of each operation. In accordance with historical market evidence, a purchaser of a landfilling business is unlikely to pay the full margin per tonne of voidspace being sold, we have therefore utilised 70% of the net margin for both the capitalisation and discounted cash flow models.

This is a common method of valuation for trading businesses and involves estimating the likely level of future maintainable profits and then capitalising and or discounting that level of profit at a rate commensurate with the return an investor would expect to earn from investing in such a business. The likely future maintainable profits are generally based on actual profits earned per tonne of voidspace consumed in the period immediately preceding the valuation.

However, for the "before scheme" valuation exercise in this instance, we are valuing a hypothetical development and have not been provided with audited accounts. We have therefore adopted an industry and experienced thought process, which is based on market evidence, to arrive at an appropriate surplus trading profit that can be capitalised/discounted inline with the above methodology. It is important to note that this is the valuation methodology adopted by all of the industry majors including Veolia, Sita, Transpacific Industries, WSN Environmental Solutions when valuing landfill assets or businesses for acquisition purposes.

Experience shows that a major or intermediate landfill operator looking to purchase a Type 2 void of this nature, as a going concern of a reasonable size and operating in a stable and growing market place, will look at discounting at 13% before tax. As a general rule, a hurdle rate of 13% will be deemed a sufficient return on a landfilling investment by a major or intermediate operator. We have therefore adopted a 13% discount rate before tax when valuing the proposed Cooper Street No 3 landfill.

We are of the opinion that this is a reasonable market rate for this type of investment reflecting adjustments for non-recurring or abnormal items and any material changes in factors likely to affect the business in the future, such as the cost of borrowing, the nature of the reserve, methods of operation and risks associated in achieving the margins to be capitalised or discounted.

391 In Mr Herdman's opinion the hypothetical development he modelled, reflected the total market value of the realisable putrescible waste landfill airspace as at the relevant date.

392 There are three initial difficulties with respect to this methodology. First, Mr Herdman's methodology was put forward as that which would in fact have been utilised in the marketplace at the date of acquisition. Such an approach conforms to the underlying principle that a valuer's opinion is to be regarded as informing but not determining the Court's conclusion as to appropriate compensation for market value as at a particular case.[96]

393 In the present case however I am not satisfied the methodology was adopted in the marketplace at the relevant date, with respect to proposed but not operational landfills. Mr Herdman himself did not come to this country until 2005 and he was unable to cite any specific example of the application of his methodology to a proposed landfill as distinct from a going concern.[97]

394 Secondly, the very description of the methodology highlights the fact that it assumes a going concern, when in the present case there was no such going concern. Mr Brown and Mr Dudakov both accept that a methodology of the type utilised by Mr Herdman can be applied to existing landfills, but dispute that it can be employed with respect to a non-existent enterprise. I do not exclude entirely the possibility that in some circumstances the necessary assumptions could be made with sufficient confidence to enable the exercise to be undertaken, but in the present case for reasons to which I shall shortly come, I accept that such confidence does not exist.

395 Thirdly, Mr Herdman not only selects a discount rate apparently reflective of profit and risk, but applies an initial 30 per cent adjustment, as he said in cross-examination, to enable the hypothetical purchaser to make a 'quid' out of the transaction. He did this, he said, to reflect market practice, and in particular his experience of the sale of a landfill opportunity in west Sydney.

396 This step was criticised by each of the other valuers and accountants called to give evidence, as inconsistent with the usual application of the methodology employed. It is not reflected in a Technical Briefing Paper written by Mr Herdman in 2006 concerning the relevant methodology. It is a discount Mr Herdman says was applied in practice by the market to existing businesses. To my mind it highlights the significance of identifying the proper approach to risk, in applying the relevant methodology.

397 As Mr Herdman freely acknowledge his methodology is highly susceptible to variation in inputs.

398 His calculation utilises assumptions as to the following matters:

(a) the creation of tipping space of 4,077,900 cubic metres (the existing pit at the date of acquisition was 924,000 cubic metres);

(b) an annual waste stream of 200,000 cubic metres;

(c) the release of a void tipping space on a continuing and uninterrupted basis sufficient to accommodate such a waste stream;

(d) a gate fee of $35 per cubic metre (exclusive of GST and EPA levy costs);

(e) establishment costs in the order of $13.45 per cubic metre;

(f) operating costs in the order of $7.40 per cubic metre (resulting in total costs in the order of $20.85 per cubic metre);

(g) a compaction rate of one tonne per cubic metre;

(h) a 30 per cent adjustment of the average margin of $14 per cubic metre to provide a profit to the potential purchaser;

(i) a notional royalty per tonne or per cubic metre of $9.80;

399 For reasons I shall explain I do not accept that a number of these assumptions should be made nor do I accept that the calculation adequately allows for cumulative risk with respect to the assumptions.

400 Mr Herdman calculates the value of the landfill enterprise as follows:

401 In the course of preparation for the proceeding Mr Herdman at one point provisionally proposed a revised valuation which reflected advice from employees of Collex, that $25 per cubic metre was the appropriate gate price, and also reflected the adoption of a discount rate of 15 per cent as against 13 per cent.

402 The re-worked calculation resulted in a value of $6.1M replicated in the following table:

403 In his final affidavit Mr Herdman affirmed a calculation based on a gate price of $35 per cubic metre and a discount rate of 13 per cent. The discount rate was said to be within the range of 9 per cent to 18 per cent.

405 At the relevant date municipal waste within the northern region was contracted to go to the landfill operated by the Pioneer Hanson Group at Wollert until at least 2010 ('Pioneer Wollert'). In addition the terms of the 1986 and 2002 contracts between the WCC and the Pioneer Hanson Group provided a strong incentive to WCC to continue to deposit municipal waste at Wollert beyond 2010 because of royalty arrangements.

406 Mr Aylward,[98] who was called by Mr Love to give evidence concerning waste stream issues, stated that in 2003/2004 the entire waste stream which was the subject of EPA levy when deposited to landfill in the northern region (including municipal, commercial and industrial waste streams) was 550,000 tonnes inclusive of putrescible, solid inert and construction and demolition waste. On the closure of the Bolinda Road landfill (in or about 2005) municipal waste previously deposited there was directed to Wollert. The commercial and industrial stream comprising 64,600 tonnes per annum consisted of putrescible and solid inert waste and was available to the general market.

407 Mr Love's case is that a landfill upon his land would have expected to have received a portion of the 550,000 tonnes of waste in 2003/04, and an increased portion of this waste after the closure of the Bolinda Road landfill in or about 2005 (as from that date only one major alternative existed in the region, namely Pioneer Wollert).

408 Mr Aylward's evidence was that Mr Love's site had a transport advantage over the Pioneer Wollert site of some $50 per average 10 tonne truck trip, by reason of its greater proximity to the developed metropolitan area. As a result Mr Love's land should be able to compete aggressively with Pioneer Wollert. As against this however Mr Aylward conceded in cross-examination that Pioneer Wollert had a significant cost advantage by reason of its level of throughput, underpinned by ongoing contracts for municipal waste. Further, the cost advantage for larger 25 tonne trucks of the sort used to transport compacted waste from transfer stations would be significantly less.

409 Mr Aylward also conceded that until the existing Bolinda Road landfill closed it would have had a cost advantage over Mr Love's site.

410 A further factor affecting the potential waste stream was the 'leakage' of waste from the northern region to more competitive landfills in the western region. The relevant dynamics of this leakage were never satisfactorily established in evidence. More particularly it was not shown that Mr Love would have satisfactorily competed against these landfills if the pricing structure put forward on his behalf were adopted.

411 Mr Aylward did not provide an estimate of the volume of putrescible waste available within the northern region in November 2001. It seems that the total volume is not known.

412 In 2006/07 (the first year for which data is available as to the composition in terms of volumes of putrescible waste of municipal and non-municipal origin within the northern region) approximately 339,000 tonnes of putrescible waste went to landfill in the northern region. About half of this (comprising the municipal waste stream) went to Wollert under the regional contract. This left about 170,000 tonnes of putrescible waste from the commercial and industrial stream within the northern region.

413 Mr Aylward estimated the putrescible waste available in the northern region in 2006/07 as taking 28 per cent of the regional estimated air space consumption tabulated in the Metropolitan Waste and Resource Recovery Strategic Plan of 2007. Mr Aylward acknowledged there was some prospect the available putrescible waste consumed was less than this in 2006/07 and hence in the northern region may have been less than 170,000 tonnes.[99]

414 Mr Aylward also gave evidence that the 2007 Metropolitan Waste and Resource Recovery Strategic Plan demonstrates that there was a partial shift in landfill disposal from the northern region to the western region commencing in 2003/04. This shift was attributed to a greater availability of air space (landfill capacity) and the number of landfills providing greater competition in that region than in other regions. He did not assess supply and demand outside the northern region.

415 Mr Love's affidavits make clear that in putting forward his claim he placed some significant reliance in respect of waste stream matters upon the affidavit sworn in this proceeding by Mr De La Rue. In the event Mr De La Rue was not called to give evidence.

• There is no satisfactory evidence of the amount of putrescible waste being deposited in the northern region as at 2001 (nor was such evidence available to a hypothetical purchaser as at the acquisition date).

• If the total amount deposited in 2006/07 (other than municipal waste) was only 170,000 tonnes or less, then the 200,000 tonne estimate adopted by Mr Herdman as an operational waste stream for a hypothetical landfill upon Mr Love's land, appears unduly optimistic. The limited data available does not support the estimate adopted.

• There is a real issue as to the volume of non-municipal putrescible waste stream which would have been available to a hypothetical landfill upon Mr Love's land commencing in or about 2003-04.

• It is probable that after the closure of the Bolinda Road landfill, a landfill on Mr Love's land could have captured some part of the putrescible waste stream included in the commercial and industrial waste stream of 64,600 tonnes formerly deposited there. It was the next most proximate site.

• It is possible that Mr Love's landfill could have captured waste subsequently deposited in the western region but it was not shown that it was probable this would have occurred.

417 Mr Love's intention was to enter into contractual arrangements with a commercial collector of putrescible waste. He described pursuing the 'normal process':

...go out and contract with one or two operators, put in place what are called "bankable contracts" and put them, plus the assets, plus the permits and all the rest of it you've got, to your financier, and then grab your finance and away you go.

418 No such waste stream source had been identified at the date of acquisition or prior to July 2002. Mr Love's evidence was that of the major waste collectors, Collex was not bound by arrangements tying them to other sites at the relevant date.

419 Mr Love's evidence was that as at 2005 the big operators otherwise had their own landfills tied up. There was no point talking to operators other than Collex, '...because the other collectors of waste had their own landfills or had connections which I knew about ...'.

420 Large private waste companies such as Collex were generally party to medium to long term contracts. To secure a waste stream from such a company would require very competitive pricing.

421 There is evidence of inquiries by Mr Herdman indicating Collex had a potential waste stream of 100,000 to 130,000 cubic metres per annum.

422 No evidence was called from Collex on behalf of Mr Love as to the truth of the matter, although it is apparent Mr Herdman obtained information from and had relatively extensive discussions with the employees of Collex.

423 No smaller waste collection operators were specifically identified in evidence as potential customers. No level of potential waste stream for such operators was established.

424 It is probable that some additional putrescible waste might have been obtained from private householders, to whom Mr Love's site was more convenient than either the Pioneer Wollert landfill or facilities provided at Bolinda Road either by way of landfill in the short term or waste transfer station in the longer term. This volume cannot however be regarded as likely to be particularly substantial, nor as a proper basis for a capitalisation of earnings calculation. Within the City of Whittlesea household tipping was substantially governed by a tip ticket voucher system administered with rate notices.

425 Looked at as a whole the evidence supports the position adopted by the Corporation, namely that there was a reasonable prospect of obtaining a waste stream in the order of 100,000 to 130,000 cubic metres per annum but no more. Further there was a real risk that this figure would not be achieved.

426 At an assumed 150,000 tonnes per annum or an assumed 100,000 tonnes per annum, and adopting a gate price of $35 together with Mr Herdman's other costings and inputs, the capital value would respectively be $7 million or $2,700,000.

427 If the waste stream assumed by Mr Herdman were not achieved however this would also have direct consequences for operating costs.

428 Mr Currie's evidence was that at 200,000 tonnes per annum operating expenses would be $7.40 per tonne; at 78,000 tonnes per annum operating expenses would be $15.90 per tonne.

429 I accept the Corporation's submission that on the evidence the prudent hypothetical purchaser would expect a maximum of 100,000 to 130,000 tonnes per annum as a waste stream for the purposes of a reasonable hypothetical development calculation. This would result in a significant increase in operating cost from $7.40 per tonne. I accept as substantially correct the logic of the final written submission made on behalf of the Corporation to the effect that:

Adopting Mr Herdman's capex, initial Mr Alsop leachate cost of $7.95 (later increased) and Herdman's leachate cost of $2 (noting Messrs Meredith and Lonergan were at $3), for a total of $20.85 [capex and] opex based on 200,000 tonnes per annum, the margin, at $25, is only $4.15. If opex increases by more than $4.15 per tonne, as it inevitably will, based on Mr Currie's evidence and as accepted by Mr Herdman, the site is unviable. At an assumed 150,000 tonnes per annum, Mr Herdman adopted $10 per tonne opex and at an assumed 100,000 tonnes per annum, he adopted $15 per tonne opex, the site is not viable.[100]

430 Exhibit AC shows the published (undiscounted) gate prices for putrescible waste at landfills in the broader area were between $26 and $30 per tonne, excluding EPA levy and GST at the date of acquisition.

431 The gate price at the Boral western landfill (Truganina) for putrescible waste was $27 per tonne. At Wyndham City Council landfill it was $26.59 per tonne. At Pioneer Wollert the charge for commercial waste was $30.36 and for municipal waste a range between $24.11 (for 140,000 tonnes per annum) up to $34 (for less than 66,000 tonnes per annum).

432 Mr Currie's evidence was that a landfill facility on Mr Love's land might expect to charge a gate price between $25 to $35 per tonne. He would however expect that it would be able to charge at the higher end of this range because of its location and transport cost advantage.

433 It is clear that significant discounts were offered to municipal councils and large private operators in order to secure substantial waste streams. This is reflected by the Pioneer Wollert pricing structure for municipal waste. Mr Currie's evidence was most relevantly:

Your Honour, the putrescible waste industry is very competitive and very market driven. There's a lot of discounting goes on and I have specified a range from $25 to $35 per tonne and it was suggested that was too wide a range and I refused point blank to narrow it because I believed that a $10 spectrum is quite reasonable in these large landfills. You get large contractors come in with perhaps up to they can be a million dollar a year customer quite easily, the front loading type trucks from four or five of the big companies around Melbourne and if you can win one of those over and by discount they do, and they will play you off against the opposition and quite a bit of discounting goes on. So I believe that that $10 spectrum is correct.[101]

434 Mr Currie had extensive operational experience during the relevant period with the Twigg Group of which for a time he was General Manager. The Twigg Group both operated landfills itself and tendered and contracted for the provision of operational services to landfill owners.

435 The Twigg Group operated the Pioneer Wollert site for the first three or four years of its operation commencing in or about 2000.

436 Mr Currie based his estimates on charges at three landfills to the north and west of metropolitan Melbourne, each being putrescible landfills taking in excess of 200,000 tonnes per annum.

... a lot of the big customers had rounds around the - sort of the north west area, so around Broadmeadows sort of type area, that they could go to the - in those days go to the council's Broadmeadows site at Bolinda, or go to Wollert or go to Brooklyn Twiggs, or Boral. There was a, you know, just the pure geographics of Melbourne there's a - probably a quarter of that whole metropolitan Melbourne that could sensibly go to three or four sites in 2001.

438 Although Mr Herdman's inquiries of Collex disclosed evidence of discounts below Mr Currie's range, the Corporation did not call evidence of such discounting. This encourages adoption of Mr Currie's range. The question is how it should be approached.

439 Because the municipal waste in the region was contracted to Pioneer Wollert, there was, as I have already said, a need to secure a substantial base waste stream for a facility on Mr Love's land if it were to succeed. The hypothetical development calculations put forward on behalf of Mr Love are advanced on the basis of relatively short term commencement and profitability. They do not proceed on the basis of potential securement of municipal waste in 2010. I interpolate that it is difficult to see how a hypothetical purchaser could have placed much reliance on the possibility of attracting such waste in any event.

440 In order for a landfill upon Mr Love's land to succeed in the short term it would be necessary to obtain contract waste from a large private operator or operators. The probability is that this would have required discounts to be given. Mr Currie's evidence was the power to obtain a discount was in broad terms proportionate to the capacity to bring in waste.

441 The discounts historically offered to major operators at about the time of the acquisition, were not properly quantified in evidence. Nevertheless the evidence demonstrates that the hypothetical purchaser would have expected to discount below the publicly listed price range in order to obtain such custom.

442 I do not accept Mr Currie's evidence that the transport advantage enjoyed by Mr Love's site would enable the hypothetical purchaser to have confidence that prices towards the upper end of his range would be achieved.

443 First, as Mr Currie agreed, the existing Pioneer Wollert landfill had a significant competitive operational cost advantage. Mr Currie accepted that the unit cost of processing 200,000 tonnes of putrescible waste per year was less than half of the cost of processing 78,000 tonnes per year. The two scenarios were said by him to reflect 'sensible limits'. As I have said, the relative figures were $7.40 per tonne as against $15.90. The advantage would continue progressively if volumes increased to 250,000 tonnes per annum, but would then progress in steps having regard to additional equipment costs. Some larger landfills may have had additional advantages by reason of being able to offer 24 hour service.

444 The range referred to by Mr Currie demonstrates a relatively massive differential in costs. The evidence supports the conclusion that a new operation upon Mr Love's land would necessarily be vulnerable to competition with Pioneer Wollert (which was at the relevant time anticipated to receive in excess of 250,000 tonnes per annum during the initial operations of landfill on Mr Love's land). The potential cost differential would also more than offset the fact that Pioneer Wollert was obliged to pay a $2 royalty per tonne to WCC in respect of putrescible waste pursuant to arrangements that had been entered into to establish and secure the Pioneer Wollert operation.

445 It follows from the cost differential referred to that discounting was directly facilitated by additional volume. It also follows that in a situation where no waste stream was secure at the date of acquisition, a prudent hypothetical purchaser would be relatively conservative as to the gate price adopted for any hypothetical development calculations.

446 This view gains substantial additional force from the statement by Mr Currie in evidence that all these figures are 'pretty rubbery'. In my view the prudent hypothetical purchaser would have taken a like view and so should the Court.

447 For these reasons I accept that the figure of $25 per tonne was the appropriate one for adoption for any hypothetical development calculation in this case.

448 For completeness I add that Mr Herdman placed some weight upon investigations as to what was charged for non-contract waste (including that deposited by the general public) at the Bolinda Road and Pioneer Wollert landfills at about the date of acquisition. There was no evidence to suggest that the probable volume of waste from such sources was likely to be significant. To the contrary the weight of the evidence strongly favoured the view that it would be necessary to attract a substantial stream of contracted waste if a landfill were to succeed on Mr Love's land. Accordingly this factor does not alter my conclusions.

449 The probable achievable compaction ratio, bears on the tonnage of putrescible waste that could be accommodated in the proposed tipping space. In turn it affects the potential life of the landfill, filling rates, timing of costs and taxation consequences.

450 Putrescible waste is received at landfills with a likely ratio of weight per volume of between half a tonne per cubic metre to three quarters of a tonne per cubic metre.

451 Evidence as to compaction ratios was given by a series of witnesses. In addition Mr Love relies on the standard by reference to which the EPA imposed levies upon landfill operations.

452 Mr J P Piper gave evidence that normally the density of waste under compaction was about one tonne per cubic metre. The actual compaction rate achieved was influenced in particular circumstances by factors such as the depth of the landfill.

453 Mr Hince gave evidence that for the purpose of regional planning the NRWMG adopted a compaction ratio of about one to one for general municipal waste.

454 Mr Herdman adopted a compaction ratio of one to one, essentially on the basis of an understanding of hearsay evidence as to what was achieved elsewhere.

455 Mr Lonergan in his first written valuation report said that the actual compaction rate achievable in 2001 at this particular site would be a matter for expert engineering evidence. In oral evidence however he sought to support a compaction ratio of one to one, based on his understanding of what was achieved at sites in New South Wales.

456 Mr Parker gave evidence for the Corporation that the compaction ratio for putrescible waste, where you had good compaction and people really working at it, would be 0.75 to 0.80 tonnes per cubic metre. He said this would require an operator who was very organised in what they were doing and well planned compaction. In cross-examination Mr Parker stated that a ratio of one tonne per cubic metre would be achievable with very heavy compaction and a lot of cost and effort.

457 Coincidentally Mr Love gave evidence he was advised by a Mr Steven Murray, the operations manager for Logan City Council in Queensland, an engineer with landfill management experience, (on whom he relied generally for advice relating to landfill matters), that compaction of one tonne per cubic metre should be achieved, but in reality 0.7 tonne per cubic metre was likely.

458 I accept the Corporation's submissions that Mr Parker was the witness best qualified by experience to address this issue. Mr Parker has over 30 years experience in geo-technical and environmental engineering. He has been involved in the landfill industry for over 20 years. He has been an environmental auditor under the EP Act since 1991. He has audited groundwater conditions at landfill sites, cell construction and methane emissions. His report sets out an extensive list of the sites at which he has had experience relating to landfill investigations, design and operation, and a further list of landfills he has audited.

459 Mr J P Piper has experience in the design of landfill liners and capping but not in the construction of and operation of landfills comparable to that of Mr Parker.

460 Mr Love did not call Mr De La Rue, an affidavit by whom was filed in the proceeding, who also had extensive operational experience, and upon whose figures Mr Meredith initially relied. Nor did he call Mr Murray.

461 Mr Hince has experience in municipal and regional waste management. He did not purport to give evidence as to what might be expected to be achieved at this site operationally.

462 Neither Mr Herdman nor Mr Lonergan should be preferred to the engineering witnesses. They have an understanding based on hearsay information relating to other sites, but evidence of that understanding could not be preferred to direct engineering evidence.

463 I do not accept that the EPA default standard by reference to which landfill levies were imposed, in the absence of evidence as to actual compaction rates, should be treated as evidence of probable compaction rates at the proposed landfill. The default standard of one to one compaction, is one which might well be expected to proceed by reference to potential degree of compaction, rather than the most probable. In any event it could not be preferred against direct evidence from an appropriately qualified engineer of what might be anticipated.

464 It follows that I accept that in the present case there was at the very least a real risk the compaction ratios which Mr Herdman adopted would not be achieved.

465 A hypothetical purchaser would either have adopted the less optimistic figure supported by the best evidence available (being that of Mr Parker) or have taken into account the real risk that a compaction of one to one might not be achieved in practice when assessing cumulatively the risk associated with the reliability of the hypothetical analysis.

466 Conversely I accept the submission made on behalf of Mr Love, that if the actual compaction rate achieved at landfills within the region in respect of putrescible waste was less than the rate planned for general municipal waste (1:1), then air space would be taken up more speedily than planned for in the draft regional plan, provided of course that the waste stream anticipated was otherwise achieved.

467 Evidence was called from quantity surveyors on behalf of Mr Love (Mr Alsop) and the Corporation (Mr Robinson). They gave evidence of the cost of constructing the landfill liner and permanent cap. They proceeded by reference to a design prepared on behalf of Mr Love by Mr J P Piper, and endorsed as appropriate by Mr Lane. It included elements of fill to create edge embankments, a compacted clay liner, geo-textile and geo-membrane layers, drainage layers (utilising crushed rock) and a cap comprising a soil sub-base, topsoil and mulch.

468 The dimensions and volume of the void space which it was assumed the landfill would occupy, were calculated on behalf of Mr Love by Mr Natoli.

469 Because both Mr Alsop and Mr Robinson assumed the quarry pit in which the landfill would be constructed would have regular dimensions and a regular floor above the groundwater table, the Corporation contends that there is a threshold risk that the assumptions adopted by them would not reflect the reality.

470 Mr Alsop conceded in cross-examination that if the pit were not square, the floor level and the walls regular, then additional costs would be incurred. He also agreed that at the date of acquisition the pit was not square or regularly shaped, and that photographic and contour plan evidence of the progressive development of the quarry pit between 2001 and 2009 did not show a regular or square pit.

471 As against this he stated that it was appropriate to adopt average costs for an estimate of the type in issue and accordingly to make the assumptions which he had.

472 The evidence of both quantity surveyors was the combination of a process of iteration through a series of sequential reports. The process generated a range of estimates reflected in exhibit AK.

473 It can be seen first that there is some significant variation in the cost per cubic metre of landfill space. Secondly, as the headings to columns indicate, the differences in opinion ultimately turned on two categories of factor, namely the cost of fill and the appropriate allowance for 'preliminaries' or as they were more accurately characterised 'on costs'. The cost is stated as at 2001 and as at 2012.[102] The lowest figure reflects first the free supply of fill coupled with an incidental cost for the compaction and formation of the fill. In addition the figure inclusive of preliminary on costs is calculated at 20.1 per cent. The highest figure does not assume the free supply of fill, assumes a higher figure for the cost of compaction and formation of fill and adjusts for on costs by 41.4 per cent.

474 The elements of each individual calculation for the total void space in issue are illustrated by Mr Alsop's calculation of 17 August 2009.

475 The highest figure is that of Mr Robinson as formulated in his report of 20 July 2009. Although exhibit AK (quoted above) did not make it clear, this opinion proceeded on the basis that fill would not be supplied free and that in total it would cost $12.81 per cubic metre (2001) and $15.67 (2012). In addition the relevant column states a total cost figure calculated on the basis that on costs were 41.4 per cent of the cost per cubic metre of tipping space.

476 The intermediate figures reflect a combination of different approaches to the cost of fill coupled with different percentage allowances for preliminaries or on costs. I shall deal firstly with the issues relating to on costs and then come back to the question of fill.

477 Mr Alsop made an allowance of 10 per cent for 'preliminaries' in his first report. The elements of this allowance were not differentiated. In response Mr Robinson particularised an allowance for preliminaries constituted by the following on costs:

478 Agreement was then reached that builder's preliminaries should be allowed at 10 per cent, reflecting a contingency for site supervision, management, insurance and other costs associated with the overseeing of works during the construction of the landfill liner and cap. Mr Alsop did not however accept that any provision should be made for design development or builder's overheads and margins. He agreed that provision should be made but at a lesser rate for design consultant fees and project contingencies.

479 Mr Robinson took the view that a design development contingency was appropriate because the design itself was preliminary. Mr Alsop responded that the basic design was dictated by the BPEM published by the EPA. Mr Robinson persisted in his position on the basis that the design was preliminary only and that it was likely the dimensions of the pit would not be square or regular and this would require refinement of the design.

480 Mr Alsop took the position that because the dimensions were 'average' they provided an appropriate order of cost.

481 In my view Mr Robinson's position is to be preferred. The design is a preliminary one only and the evidence as to the form of the pit demonstrates discrepancy between its form at the acquisition date and the form of the landfill proposed to be created within it. In cross-examination Mr Alsop said:

You'd accept that the nature of site data being an estimate, at least in this case involves potentially different figures than the actual site data that will be necessary for a design of the landfill, isn't that so?---(Indistinct) yes.

Insofar as those figures are different there will be - it will be necessary to design for those differences, isn't that so?---Yes.

Where that design occurs a contingency should be made for it, isn't that so?---That's correct.

A good example of that Mr Alsop is that as you've already given evidence, the assumption is that this landfill would be square pit, and ground level, and vertical walls?---That's right.

And that if indeed as it emerges at least from the photos that's not the case, there will be an additional design in relation to that?---It would, that's true.

482 In my view the allowance of 5 per cent by Mr Robinson is appropriate.

483 Turning to the question of builder's overheads and margins, Mr Robinson assumed that the works would involve a separate independent contractor undertaking the works on behalf of the owner. Mr Alsop took the position the works would be relatively straightforward and could be undertaken in effect by a sub-contractor on behalf of the owner. An appropriate sub-contractor would be one such as Cornfoots. Whilst I accept Mr Robinson's methodology is conventional, and that the works would require independent supervision in the sense of an overriding environmental audit, in cross-examination Mr Robinson conceded that if such a contractor was involved he would accept the margin in issue should not be allowed. Such a contractor would be available, the question is who would be procuring the works. I am not satisfied Mr Robinson's allowance should be made. I have formed this view in part by reason of the allowance made with respect to builder's preliminaries.

484 Turning next to the question of design consultant fees, Mr Alsop accepted Mr Robinson's view that the retention of an independent and appropriately qualified designer would be necessary in order to obtain EPA approval. In his view however the appropriate allowance was 3 per cent rather than 6 per cent having regard to the nature of the project. I accept Mr Robinson's figure. As he stated, the design required input from a civil engineer, geo-technical engineer, environmental engineer and site supervisor. Mr Alsop's opinion does not gain credibility from the fact that he initially made no allowance with respect to the item in contention. Further I do not accept the size and complexity of the project was such as to justify a lower figure. It involved works concurrently with a quarry and a relatively substantial landfill, with a total cost of construction of approximately $33 million.

485 Insofar as the project contingencies allowance is concerned, Mr Robinson's view was that an allowance should be made for unforeseen difficulties during construction such as latent site conditions, weather delays and contractors' claims. Mr Alsop accepted that such an allowance should be made but he concluded that 6 per cent not 10 per cent was appropriate.

486 I accept Mr Robinson's view. The works proposed involved the sequential construction of cells, and final capping. They utilised compacted clay in part and were proposed in a configuration and sequence susceptible to weather conditions. They would be required to meet the satisfaction of an independent environmental auditor. The possibility of weather conditions affecting civil engineering works at the site was illustrated by the evidence of Mr Kerr as to the difficulties he had experienced with quarry operations at the site during periods of heavy rainfall. It also seems to me that, although less significant perhaps, the fact that the landfill void that was to be utilised had only partly been extracted, gave rise to some uncertainties as to potential future difficulties. Likewise I accept there were potential difficulties with contractors' claims.

487 I return then to the question of fill. The quantity surveyors were proceeding on an agreed basis until shortly before Mr Alsop's evidence in chief on 24 August 2009. The cost of the fill necessary to construct edge embankments was calculated assuming that the construction would utilise fill purchased at commercial rates. These were sequentially estimated as follows:

The last mentioned figure reflected an indexation factor which was ultimately accepted by Mr Alsop.

488 The claim now abandoned by Mr Love for drainage impacts upon his land resulting from alteration to a culvert upon Cooper Street, had however included a claim for cost of fill necessary to raise land above alleged increased flood levels. That claim was made by Mr Love on the basis of a cost of $30 per cubic metre for fill (to which a 50 per cent allowance was added for contingencies).

489 In response to that claim Mr Robinson took the position that appropriate fill would potentially be available free and that the relevant cost would then be that of laying and compacting appropriately. He envisaged some availability of 'free issue of clean fill delivered to the site by contractors with surplus material looking to offset tip charges.' It would be a potentially attractive dump site for 'contractors looking to circumvent the tipping charges applicable to surplus extracted material'. It is also possible over-burden would be generated on site which could be used as fill.

490 On 24 August 2009 Mr Love's counsel took the position that reflecting the approach of Mr Robinson in respect of the culvert claim, fill costs for the landfill construction claim should be estimated on the basis that free fill would be available. Assuming the supply of free fill Mr Alsop allowed $0.50 per cubic metre reflecting deposition by third parties of the fill at the appropriate location on site and the cost of appropriate compaction and formation thereafter.

491 The acceptance of fill for construction purposes on the basis envisaged by Mr Robinson would involve a loss of tip charges so it would not in that sense be free.

492 The evidence as to the availability of fill is somewhat unsatisfactory. Approximately 120,000 cubic metres of fill was required for filling purposes, as at November 2001. A total of approximately 225,000 cubic metres was required for the full construction.

493 The probable supply of fill at the date of acquisition and thereafter was attended by uncertainty. Mr Currie said of both the demand and supply of fill, that it was volatile. He further said of the availability of free fill:

...look, it's very difficult; we've just been saying that it's a day by day basis, it comes and goes. Sometimes there's a surplus, probably most times it's perhaps the other way.

494 In 2001 the hypothetical purchaser could not be assured he or she was going to get large supplies of fill for free.

495 At the date of the acquisition it was known that the bypass would be constructed which would traverse Mr Love's land some distance to the east of the WA149 land. Subsequently Mr Kerr sold all available overburden on the quarry site in 2002/03 for the construction of embankments as part of the bypass project.

496 Mr Currie's evidence was that at the time of the acquisition the cost of fill was up to $5 per loose truck cubic metre although this would be the high end of the spectrum.

497 I prefer Mr Robinson's cost estimate of $3.20 per cubic metre for the cost of compaction and handling on site in 2001. There was on the evidence no certainty of appropriate sequential supply of free fill, nor do I accept that it could be expected to be simply directed to be placed where required as required. It seems to me that Mr Robinson's scenario of stockpiling fill and then utilising it in the construction process is inherently more probable.

498 On the other hand I do not accept that it is appropriate to cost the supply of fill at wholly commercial rates. It is appropriate to proceed on the basis that fill would in all probability in part be able to be obtained free of charge and in part require purchase. It seems to me that a fall back submission made on behalf of the Corporation as to the appropriate approach should be accepted. Assuming 50 per cent of the fill cost $8.20 per cubic metre ($5 plus $3.20 for the cost of compaction and handling) and the remaining 50 per cent was supplied free but required handling costs of $3.20 per cubic metre, this would result in an average cost of $5.70 per cubic metre of fill.

499 This approach favours Mr Love insofar as the 'free' fill also would involve the cost of foregone tipping fees unless over-burden could be utilised.

500 The evidence does not permit a more precise calculation and the hypothetical purchaser would approach this issue reasonably but prudently.

501 This approach generates a figure for overall engineering costs per cubic metre for the existing void of 924,000 cubic metres as at the date of acquisition, significantly greater than that adopted by Mr Herdman of $7.95 (based on Mr Alsop's report of 6 March 2009). If the on costs rates I have accepted and fill costs I have accepted are adopted then the total cost per cubic metre for engineering costs is $9.06 per cubic metre as the date of acquisition.

502 If the on costs rates I have accepted are adopted but the handling figure of $3.20 per cubic metre of fill only is applied, the total cost per cubic metre for engineering costs would still be $8.62.

503 If the on costs rates I have accepted are adopted, but the fill is allowed at $0.50 only per cubic metre (in accordance with Mr Alsop's view) then the total cost per cubic metre would still be $8.15.

504 Mr Lonergan's evidence as to the general order of costs is not to be preferred against that of the quantity surveyors.

505 Mr Herdman discounted twice in his primary calculation for profit and risk. He first discounted by 30 per cent to reflect what he said was commercial practice and then discounted his final figure a further 13 per cent for profit and risk.

506 None of the other valuers agreed that this was an appropriate methodology.

507 Insofar as it was incorrect however, it increased a factor which favoured the Corporation and not Mr Love.

508 The other valuers also disagreed with the proposition that the appropriate discount rate was to be equated in any way with the notion of internal rate of return as Mr Herdman appeared to assert in his reports.

509 In cross-examination Mr Herdman referred back to the 1989 sale of the Cooper Street No. 2 landfill site as supporting a yield rate of 13 per cent. For reasons I have stated elsewhere I do not regard this sale as sufficiently comparable to be relied on.

510 Both Mr Brown and Mr Dudakov gave evidence that the 13 per cent discount rate was too low.

511 Mr Herdman also did some simple DCF calculations, but he did not rely on these to derive an appropriate rate of yield. Nor did he put them forward as properly particularised and detailed DCF calculations.

512 In Turner v Minister of Public Instruction,[103] Dixon CJ said of a hypothetical subdivision analysis:

This is perhaps a convenient point to make an observation about the basis of the deduction of a percentage for "risk of realisation". To no small extent the "risk" is of the estimate of the net proceeds of sub-divisional sale proving too low. The reason may be found in the estimate of the prices for blocks being too high, the sale of the blocks being too slow, the estimated costs attending sub-division and sale proving too low or in any or all of such causes. It is therefore evident that the degree of faith felt in the estimates, whether by the court or the hypothetical purchaser, must bear upon the fixing or allowance of the percentage. In coming to a reliable determination there is no reason why it should not be done by fixing provisional figures and then reducing them, but it would seem that there is equally no reason why it should not be done by making definitive estimates in the first place. It must be borne in mind, of course, that while the estimate of the expenditure may prove too high and estimate of the return may prove too low, the contrary is equally possible. At some point fixed reliance must be placed on the figures produced by the use of the hypotheses which the use of the formula requires.[104]

513 In Minister for the Environment v Florence, Wells J observed:

Probably the most important step in assembling a calculation based on a hypothetical subdivision is the introduction of the profit and risk factor. And yet, though, for convenience, one may refer to the addition of a profit and risk factor, it is to foster error and misunderstanding to speak of adding such a factor. For to construct a calculation of this kind is not to bring together a number of independent figures and add them, and subtract from them, much as one might compile statistics whose constituent figures are drawn from several sources. The profit and risk factor is related to the other items in a calculation much as a key is related to the mechanism of a high security vault; all parts of the relevant mechanism must be completely co-ordinated. Judging as best I may from the evidence in this case, and from the authorities to which I have been referred, it seems to me that it is entirely contrary to principle to marshal your figures without the profit and risk factor, and then, drawing on materials whose origins place them beyond the reach and influence of the subject land and the hypothetical subdivision, to introduce a figure to make good the missing item. True it is that the factor may be affected by actual profits made in similar developments, that regard may be had, in a general way, to the percentage given to this factor by other developers when assessing other prospective developments. Such influences can only, however, be comparatively remote. What is far more important is the valuer's appraisal, as a whole, of the hypothetical subdivision under consideration, one of whose principal characteristics is the interdependence of its several parts. There seems to be a suggestion in some writings that a valuer is at liberty to take from valuations based on the hypothetical subdivision that have been examined or approved in decided cases the figure there stated, and use it in the valuation then being prepared. With all respect to those holding or advancing that view, that cannot be right. The actual obstacles to subdivision at the relevant time; the actual price set upon the lots; the actual period decided upon for selling the subject land in its hypothetical form; and the type of land and the state of the market with respect to it, must all be looked at as a united whole in the particular circumstances of the case, and a percentage fixed accordingly. [105]

514 These observations concerning the conceptual basis of risk rates are apposite to the hypothetical development calculations advanced in this case.

515 The principal risk confronting a hypothetical purchaser which I have identified with respect to the landfill potential of Mr Love's land, related to the second threshold difficulty, ie the likelihood of obtaining land use approvals for such use in the short term. Mr Herdman's calculation assumed the grant of approvals.

516 Mr Herdman's calculation does not allow adequately for this risk.

517 Further, in my view (and putting aside entirely the second threshold difficulty) Mr Herdman's valuation assumed an operational landfill business and did not allow adequately for other risks and most significantly risks with respect to:

(a) the volume of waste anticipated and associated risks with respect to operating expenses;

518 It is unnecessary to dwell on the other risks which were asserted in submission on behalf of the Corporation, including risks associated with the provision and smooth release of void space by sequential quarrying,[106] and risks associated with potential conflict with concurrent quarry operations. It is also unnecessary to address the additional risks which it is submitted were associated with the value of the land to Mr Love personally as a potential operator, namely his lack of experience as a landfill operator, lack of a business plan and lack of financial arrangements.

519 For present purposes it is sufficient to say that Mr Herdman's 'before' valuation should be rejected because:

(a) it does not adequately reflect the approvals risk constituting the second threshold difficulty;

(b) I do not accept critical assumptions as to waste stream, gate price, compaction rates and engineering costs; and

(c) I do not accept the cumulative risk associated with each of these factors can be satisfactorily assimilated into his methodology in a manner which gives rise to either a sufficiently positive or reliable outcome.

520 The second and third considerations would warrant rejection of his evidence even if I am wrong as to the second threshold difficulty.

521 I am of this view even if Mr Lonergan's views are accepted that Mr Herdman has been unduly conservative in his approach to the treatment of capital costs, capping assumptions, and other matters.

522 I also do not accept Mr Herdman's 'after' valuation. First, it does not adequately reflect the future industrial levels of value established by Mr Brown and Mr Dudakov. Secondly, it does not sit comfortably with the offer of $3.2 million made by Conundrum in November 2004 for the WA149 land (equivalent to approximately $55,255 per hectare). Although I accept this offer reflected an element of special value arising from the presence of Conundrum's existing crushing plant on the land.

523 Thirdly, Conundrum and the Pioneer Hanson Group had access to the land other than over the quarry road, even if Mr Love's case as to difficulties with that access were accepted. It follows that there was a potential market for the land even if access were regarded as a material problem by other hypothetical purchasers.

524 Mr Meredith is an experienced forensic accountant who was retained by the Corporation to assess Mr Herdman's valuation and to prepare his own. For the latter purposes he adopted a DCF methodology. He summarised the underlying concept in his report of 9 April 2009 as follows:

Discounting of Future Cash Flows

This method is most commonly used for the valuation of projects and businesses with cyclical results where earnings can fluctuate significantly or that involve significant start up costs or limited lives.

The methodology considers economic cash flows by recognising the time value of money. Estimated future cash flows are assessed for each year and discounted back to a current value (net present value).

This methodology exclusively allows both the business risk (the nature of the industry in which business operates) and the financial risk of the business to be incorporated in the methodology via an estimate of the discount rate.

Typically, the net present value is very sensitive to relatively small changes in the discount rate applied. Accordingly, considerable judgement is required to set an appropriate discount rate.

DCF is considered as the theoretically superior valuation methodology on the basis that the value of any asset is the sum of its future cashflows discounted by an appropriate discount rate.

525 In his view such a methodology was preferable to other approaches:

In my opinion only a properly constructed DCF methodology is suitable for assessing the value of the proposed landfill.

The DCF methodology considers economic cash flows by recognising the time value of money. Estimated future cash flows generated by the business or asset each year are discounted back to a current value (Net Present Value or NPV). These amounts will differ from year to year in a landfill operation.

This methodology exclusively allows both the business risk (the nature of the industry in which the business operates) and the financial risk of the business to be incorporated in the methodology via an estimate of the discount rate.

Additionally, the DCF methodology has the following advantages over the other valuation methods:

(a) specifically provides for the differential timing specific to the various inflows and outflows over the life of the landfill operation;

(b) is transparent in the inputs from which a value is derived for the proposed landfill; and

(c) best deals with operations which have a finite life.

526 Mr Lonergan takes a similar view. He elaborated the underlying concept as follows:

A DCF valuation is based on the generally accepted theory that the value of a business depends on the future net cash flow of the business discounted back to present value at an appropriate discount rate. Future cash flows are comprised of two elements:

(a) the cash amounts expected to be generated each year after paying all cash costs (including the proprietor's remuneration in the case of a business) and cash outgoings (such as capital expenditure and working capital requirements)

(b) the net cash amount expected to be received upon the ultimate sale of the business.

For these reasons the DCF approach is the most theoretically sound valuation methodology. However, it may be difficult to apply in practise because of a lack of reliable financial information about future events. Where information is available and reliable this is the appropriate method to use.

The concept of discounting is based upon the principle that the value of a sum of money received in the future is less than the value of the same sum of money if it were to be received today. This difference in value between money receivable today and receivable in the future arises for a number of reasons which include:

(a) inflation

(b) interest,

(c) risk, and

(d) any tax liability that may be associated with receiving the money.

The effect of inflation has been at various times a major contributor to the need for discounting. However, given the economic circumstances over recent years, inflation is not presently such a major issue as it has been in the past. Despite this, inflation must still be taken account of when considering the value of future cash flows and must be included within the discount rate for nominal cash flows. Real discount rates should be applied to real cash flows. The deciding factor to take into account when considering whether inflation should be included within a discount rate, is whether inflation has been included within the cash flows.

The second factor is the effect of interest. The value of $1,000 received today is greater than the value of $1,000 in one year's time, because the $1,000 received today can be invested so that in one year it is worth more. The equivalent value today of $1,000 to be received in one year would therefore be $1,000 discounted by the interest rate that could be earned if the money was received today and invested at prevailing interest rates. Therefore, in considering the value of future cash flows, account must be taken of the inability to invest the cash and receive a return in the meantime.

The third factor to take into account is the need to discount future cash flows for the impact of risk. If there were no interest or inflation, then it could be argued that $1,000 today would have exactly the same value as $1,000 in one year. However, given the choice between the two alternatives any rational person would choose the $1,000 today. The reason for this choice is essentially risk. That is, there is no risk involved in receiving the $1,000 today but there is always some risk that during the intervening period, some factor or event will occur either to prevent receipt or reduce the amount received. Therefore, $1,000 today is inherently more valuable than $1,000 in the future because of risk, and therefore future cash flows must be discounted to take account of it. I consider this aspect in more detail below.

The DCF methodology is used extensively in the mining and extractive industries. This is generally because of the finite life of the company or project, together with the known or estimated quantities of resources in the ground to which cost and revenue estimates can be applied with reasonable accuracy.

527 Mr Lonergan was initially retained to critique all the valuation reports produced by other witnesses. Ultimately he was also requested to prepare his own report. He utilised essentially the same methodology as Mr Meredith save in two respects to which I shall turn.

528 Mr Lonergan is an accountant with very extensive experience in valuing mining and other business enterprises. He is also a published textbook writer and commentator with respect to DCF methodology.

529 Mr Meredith and Mr Lonergan both assumed inputs relating to relevant parameters save for the risk of not obtaining planning approval and works approval. Both take the view that the figure derived from a calculation of the type in issue can be further discounted by adopting a matrix approach which applies a percentage reduction reflective of the risk such approvals would not be obtained.

530 Mr Meredith derives a value of $2.6 million from his primary calculation. Mr Lonergan derives a value of $17 million.

531 Mr Lonergan's valuation was put forward on behalf of Mr Love in final submission on the basis that he:

... accepts, given the probability approach (which is accepted by both Dr Meredith and Dr Lonergan), that this valuation, as a differential in the before and after, is probably subject to some discount. Mr Love does not, at that late stage of the proceeding, seek to amend his claim from the $10.8 million claimed in respect of lost landfill potential.

532 It may be observed that the discount of Mr Lonergan's figure which is accepted is $6.2 million.

533 If the 10 per cent probability of approval which I have found a hypothetical purchaser would adopt, is utilised, Mr Lonergan's figure would reduce to $1.7 million and the highest and best use of the land would be future industrial.

534 Nevertheless it is necessary to further address Mr Lonergan's evidence in fairness to the detailed cases put by the parties.

535 The use of DCF methodology for the purpose of the valuation of land in court proceedings has not been free from controversy.

536 In Albany v Commonwealth,[107] Jacobs J rejected its application to the valuation of vacant land suitable for subdivision in the case then before him.

537 On the other hand Jacobs J accepted the valuation of part of the land used as a quarry on the basis of a capitalisation of the minimum annual royalty payable to the owner by the quarry operator pursuant to licence.[108]

538 In Adelaide City Corporation v City of Port Adelaide Enfield,[109] the Full Court of the Supreme Court of South Australia considered the assessment of the capital value of the Wingfield Waste Management Centre for rating purposes. Debelle J (with whom the other members of the Court agreed) discussed the DCF method:

1. The discounted cash flow method values the land by valuing the business conducted on the land. It is, in truth, the value of the land and the profits derived from conducting a business on the land. That is demonstrated by Mr Smithson's evidence as to the manner in which he made his valuation. He calculated the revenue and expenditure over the known life of the Wingfield dump based on the revenue and expenditure of the WWMC. He then discounted those calculations back to a present value, the discount rate reflecting the risks inherent in the cash flows, in particular, revenue. His assessment allowed for the cost of the land itself and for the costs of closing the site, rehabilitation costs and other costs to be incurred after the site had closed. That realised what he believed to be the price an owner-operator would pay for the land. Significantly, the valuation assumes, as Mr Smithson acknowledged, that the purchaser would obtain a licence for the land. In that sense, it is a valuation of the price which would be paid for the land and the business with a licence to carry on that business. It is not, therefore, an assessment only of the price to be paid for the land.
2. The discounted cash flow method is useful for valuing shares and other assets.[110] It is also useful when valuing land to be used either as a quarry or as land to be used for waste disposal and, in particular, the latter. As already mentioned, land used for waste disposal usually has little intrinsic value, particularly if already used for that purpose. As the value of the land lies in the ability to earn income from the land, the price of the land is essentially determined not by any intrinsic value of the land but by the use to which the land can be put and the income derived by the owner of the land from that use, be that income royalties or, in the case of the owner-operator, profit.
3. As mentioned earlier, the income to be derived from the land is, of course, often a factor affecting value. It has a particular significance in a case such as this where little capital expenditure is required to operate the business. In this case, both valuers ignored the relatively insignificant improvements on the land. In addition, the evidence shows that the necessary equipment can be hired. In other words, land used for this purpose is able to generate revenue without significant costs in addition to the purchase price. If purchased by the owner-operator, the discounted cash flow method has a particular utility. It is, however, generally recognised that care should be taken when using the discounted cash flow method and the resulting valuation should be checked against other methods of land valuation.[111] A judgment must be made as to value and the result checked against other available evidence of value. In this case, notwithstanding that he primarily relied on the discounted cash flow method, Mr Smithson used the sales of comparable land in Victoria as a check. Ms Carolan also used those Victorian sales as a check.
4. The discounted cash flow method is useful in cases such as this where there is a finite life of the business and the income and expenditure are known. It is also useful when valuing a business such as this which is a going concern. It is less useful when other assets or capital expenditure are involved. But the evidence is that little, if any, capital expenditure is required to operate the business. The method is also useful because the quantity of fill which can be dumped on the site is known. The purchaser is not simply buying the land. He is buying the land with the capacity, subject to obtaining a licence, to run a like business earning like profits. The utility of the discounted cash flow method is emphasised by the fact that the land has a relatively low value of itself. [112]

539 It may be observed that the facts before the South Australian Court were fundamentally different from those before me;

(a) the finite life of the operation, the income and expenditure of an existing operation are not known;

(b) the quantity of fill which can be dumped on the site can be estimated, but is not known and depends on the extent of future extraction, the terms of relevant approvals, and operational compaction rates;

540 In the article by S J Brown to which Debelle J refers, the learned author observes:

It is important for expert witnesses to rely on verifiable evidence in projecting cash flows. Discounted cash flow analysis makes explicit items which conventional capitalisation methods subsume as being taken account of in the discount rate. While having the advantage of ensuring that all relevant considerations are analysed, discounted cash flow analysis requires that such considerations which are extrapolated and projected are based upon evidence available to the expert witness as at the date the valuation is made.[113]

541 The Adelaide City case was concerned with the valuation of land which had been used for the purpose of dumping rubbish since 1974 firstly by private contractors and then between 1987 and 1999 (the date of valuation) by the Adelaide City Council. Conversely, the landfill business hypothesised in Mr Love's claim did not exist.

542 Debelle J further concluded in the Adelaide City case:

1. Other factors which point to the utility of the discounted cash flow method in the particular circumstances of this case are:

(1) the hypothetical purchaser would be buying land already used for waste disposal;

(2) as the use was an existing lawful use of land, the purchaser would not have to obtain planning approval;

(3) the purchaser could himself conduct the business subject to obtaining a licence;

(4) the purchaser would be aware that the site is the largest landfill site in the Adelaide metropolitan area taking about 55 per cent of metropolitan Adelaide domestic waste and 50 per cent of commercial and industrial waste from the Adelaide metropolitan area;

(5) there are a diminishing number of operational landfill sites in the Adelaide metropolitan area;

(6) the site is close to the Adelaide central business district and therefore has a local, as distinct from personal, goodwill which attaches to the land and enhances its value;[114]

(7) the site has a finite life;

(8) the purchaser would have been able to gain access to the accounting records of the vendor; and

(9) the operation of the dump required little capital expenditure because it was not necessary to incur substantial costs to establish the business such as the cost of buildings in that plant and equipment would be hired.

By reason of the factors listed in pars (1)-(9) above, there were few risks attached to the operation of the business. The only risk would be in obtaining a licence and, before purchasing the land, a prudent purchaser would have made inquiries to determine the likelihood of obtaining a licence. But it must be acknowledged that the discounted cash flow is a valuation of the business including the licence.[115]

543 It can be seen that factors (1), (2), (4) and (8) fundamentally differentiate the Adelaide City case from that before me. This is not an existing landfill site. It had no approvals at the date of acquisition. It had no current waste stream, let alone established market share. There were no accounting records available to evidence the operating costs and profitability of the business. It cannot be said there were 'few risks' attached to the operation of the business. Rather there was very considerable uncertainty as to the obtaining of approvals, waste stream, gate price, compaction rates, and costs.

544 In Collex Pty Ltd v Roads and Traffic Authority,[116] Talbot J was concerned to value loss of air space from part of an existing landfill site following a compulsory acquisition. The authority acquired an area of some 4.5 hectares from a 35 hectare site. At the date of acquisition the landfill had planning approval to accept 430,000 tonnes of solid waste per annum. His Honour surveyed relevant authority and concluded:

Although Courts have clearly experienced difficulty from time to time in accepting the DCF method due to the unreliability of the assumptions made for the purpose of the analysis, it is nonetheless a method which can be accepted where the special facts and circumstances pertaining to the subject land make it appropriate to do so.[117]

545 In the Collex case, the DCF analyses put forward on behalf of the plaintiff were founded on the evidence of Mr Reed, a qualified geologist with 31 years in the quarry industry and 16 years in the landfill industry. On the basis of the evidence available to him, Mr Reed formulated appropriate assumptions in relation to:

• development approval for quarrying and landfill operations;
• extraction and landfill scheduling;
• handover of quarried airspace to Collex;
• landfill compaction and landfill densities;
• types of fill able to be placed in the Horsley Park landfill;
• landfill forecasts (tonnes per annum);
• tip fees for landfill, before and after EPA levy;
• landfill revenue;
• operational costs - labour, operating, maintenance and fuel;
• administration costs -royalties, provisions, other, premises and general overheads;
• fixed costs - depreciation, insurance, rates and taxes etc;
• capital expenditure - pre-payment, establishment etc;
• discounted cash flows - discount rates;
• risk and sensitivity analyses.[118]

546 In assessing the net present value of the projected operational cash flow of the landfill operation assuming that no land had been resumed, Mr Reed adopted a before tax discount factor of 12 per cent on the basis of experience with similar valuations over the previous five years. In projecting the net present value of the projected operational cash flow in the 'after' situation he relied on the opinion of Mr Lonergan (who also gave evidence in that case). Mr Lonergan adopted a weighted average cost of capital in the range of 8.41 per cent to 8.74 per cent after tax. Mr Reed adopted a midpoint of 8.6 per cent. Talbot J recorded:

In a written joint statement Mr Lonergan and Mr Holt express the opinion that the methodology adopted by Mr Reed is a widely used and accepted valuation methodology and is the appropriate methodology to use in assessing the loss caused by the resumption. Furthermore the DCF approach is the most theoretically sound valuation methodology where reliable financial information about future events is available.[119]

547 The fundamental difficulty confronting the use of the DCF in the present case is the question of whether reliable financial information is available.

548 In the Collex case Talbot J ultimately concluded with respect to the special facts and circumstances before him:

After giving due consideration to the various criticisms raised by [the valuer for the respondent] and appreciating the reluctance demonstrated by courts to accept the DCF methodology I nonetheless propose to adopt the overall joint opinions and advice given by the applicant's witnesses in the circumstances of this case where there is a significant degree of consistency about the operation of what is essentially a low risk business. I adopt the DCF method as the primary method of valuation. That approach carries with it the advantage of eliminating the relevance of a number of possible variables and adjustments such as a betterment factor or possible deferral of the price of the airspace as these matters are taken into account by the DCF calculation. The comparable sales analysis provides considerable assistance as a check method to show a result relevantly consistent with the DCF outcome. [120]

549 It can be seen that his Honour applied the DCF methodology in circumstances where there was a significant degree of consistency in the evidence about the existing operation of what he found to be 'essentially a low risk business'. Further, he did so in circumstances where comparable sales analysis provided considerable assistance as a check method.

550 His Honour's decision at first instance was upheld on appeal. The appellant did not challenge the adoption of the DCF methodology as such.[121]

551 The observations of Hodgson JA in dissent under the heading 'How did this conflict with commonsense occur', however point up the sensitivity of DCF analysis to potential error in critical inputs. [122]

552 Mr Meredith's valuation of $2.6 million in the present case was presented to the Court as a spreadsheet. The analysis deals with some 30 separate input variables such as waste inflow, operating costs per inflow tonne and gate charges. The spreadsheet indicated the following assumptions and variables were applied in deriving the $2.6 million valuation:

(a) the waste inflow is assumed to ramp up from 60,000 tonnes per annum in 2003/04 to 200,000 tonnes per annum in 2005/06;

(b) assumptions are made about the release of space by the quarry operation for the landfill commencing with the initial void of 924,000 cubic metres;

(c) the gate price is based on discounting back from the December 2008 gate charge at Pioneer Wollert adopting a starting price of $32.09;

(d) operating expenditure reflects Mr Herdman's figures;

(e) capital expenditure involves a series of detailed assumptions regarding landfill lining capping and infrastructure derived from Mr Herdman's valuation and Mr Alsop's figures and Mr Robinson's figure as to preliminaries;

(f) initial leachate collection and management costs are based on Mr Herdman's figures. Further leachate costs are based on Mr Parker's estimates;

(g) taxation is included at the corporate tax rate of 30 per cent and modelled on the basis capital expenditure is depreciated over the life of landfill;

(h) post-closure costs are based on Mr Parker's estimates;

(i) the 'after' tax discount rate adopted is 13.5 per cent.

553 Mr Meredith prepared a sheet demonstrating the impact of change to individual variables.

554 This illustrates the sensitivity of the calculation to different variables:

(a) if the compaction ratio is changed from 0.75 to 0.925 it increases Mr Meredith's value from approximately $2.6 million to $3.72 million;

(b) if the timing of the waste flow (which was assumed by Mr Meredith to commence in two years, in accordance with Mr Herdman's approach) is deferred this may reduce the valuation. If there is a deferral for a further year as assumed by Mr Lonergan, this reduces Mr Meredith's $2.6 million to $780,000;

(c) Mr Meredith's gate charges are higher than those adopted by Mr Lonergan. If Mr Lonergan's gate charges are adopted this reduces Mr Meredith's $2.6 million to $750,000;

(d) capital expenditure was assumed by Mr Meredith to be spread over years one to three and by Mr Lonergan to be a lump sum at year three. The difference increases Mr Meredith's valuation by $244,000;

(e) the cap and liner elements of capital expenditure addressed by Mr Robinson and Mr Alsop also impact materially on the calculation. Mr Meredith adopted $10.83 in his valuation (on instructions) whereas Mr Lonergan adopted $7.28. This accounts for a difference of $5.8 million. If Mr Meredith adopts costs at the lower end of the range as does Mr Lonergan, his value increases from $2.6 million to $8.4 million;

(f) Mr Meredith treated capital expenditure in a conventional manner, depreciating capital assets over the life of the asset. Mr Lonergan treated capital expenditure as the equivalent of operational expenditure, expensing it at 100 per cent for tax purposes in the year in which it was incurred. The difference in approach results in a $2 million difference in value in this calculation;

(g) there is a difference in relation to post-closure costs. Mr Lonergan does not allow for any. This accounts for $140,000;

(h) there is a significant difference in discount rate, 13.5 per cent after tax adopted by Mr Meredith compared to 8.6 per cent after tax adopted by Mr Lonergan. The different rate makes a $6.5 million difference to Mr Meredith's calculation raising it to $9.1 million if Mr Lonergan's rate is adopted.

555 It follows from my previous conclusions in respect of Mr Herdman's calculation that I do not accept a number of Mr Meredith's assumptions which are favourable to Mr Love, including those relating to waste stream, gate price and a number of costs.

556 I do not propose to resolve all the issues between the parties, including that as to the appropriate taxation assumption. For reasons which will become apparent I do not find it necessary to do so.

557 Mr Meredith also recalculated his $2.6 million calculation adopting a figure of $25 as the gate price as at November 2001.

558 This produces a negative value of minus $3,654,535.

559 If the $2.6 million calculation is adjusted for Mr Lonergan's gate price, waste volume, timing and capital expenditure timing, the result is minus $1,772,647.

560 Mr Lonergan's base calculation is attached as Appendix A to this judgment.

561 Mr Meredith has also tabulated incremental changes illustrative of the gap between the two valuations of Mr Lonergan and himself.

562 I accept that as Mr Love submits, the sequence of adjustment will affect the mathematical result of partial permutations of this type of calculation.

563 This said Mr Meredith's calculation usefully illustrates parameters of difference between the two figures.

564 The principal controversy between Mr Meredith and Mr Lonergan as to matters directly within their expertise, related to the assessment of the appropriate discount rate reflecting risk (other than the risk with respect to approvals, which was agreed could be the subject of separate adjustment).

565 Factors affecting the required return on equity include:

(a) operational risk of the industry and the financial asset being valued;

566 There are different methods adopted by accountants to assess an appropriate required return on equity. In the present case both Mr Meredith and Mr Lonergan adopted the capital asset pricing model ('CAPM'), to assess the appropriate rate of return.

567 When utilising the CAPM the risk associated with the profitability of any asset is measured by the beta of the asset.

The expected return of an asset can be written as a function of the risk free rate and the beta of that asset. Hence, the CAPM is expressed by the following formula:

Ri = Rf + βi (Rmrp)

Where:

Ri = Cost of equity capital or required return on investment i.

Rf = Risk free rate of return

βi = Beta of investment i.

Rmrp = Market Risk Premium

568 In the present case Mr Meredith calculates the cost of capital under the CAPM as follows:

569 Both Mr Meredith and Mr Lonergan agree as to the risk free rate. Mr Meredith states:

The risk-free rate is the starting point for all expected return models including the CAPM. For an asset to be risk free, it has to be free of both default and re-investment risk. In practice, it is accepted that the best indicator of the risk-free rate of return is the rate for Commonwealth Government bonds with a maturity equivalent to the time frame over which the returns from the asset are expected to be received. It is also important that the risk-free rate is consistent with the cash flows being discounted.

I have adopted a risk free rate of 5.43%, which approximates the 10 year Commonwealth bond yield on 15 November 2001.

570 Mr Meredith and Mr Lonergan also agree as to the market risk premium. Mr Meredith states:

The market or equity risk premium is the additional reward that investors require to accept the uncertain outcomes associated with owning securities. The equity risk premium is measured as the extra return that equity holders expect to achieve over risk-free assets on average.

The equity risk premium as it is used in discount rates is a forward looking concept. It should reflect what investors think the risk premium will be going forward. As expected premia are not directly observable phenomena, it is common to use historical risk premia to assess future risk premium. It is important to note that this assumes what has happened in the past is representative of what might be expected in the future.

According to a 2008 report prepared by Bob Officer and Dr Stephen Bishop, Australian studies indicate that the most commonly accepted rates to apply based on historical observations are in the order of 6%-7%. A copy of this report is included at Annexure G.

For the purposes of this report, I have adopted a Market Risk Premium of 6%, as per Officer and Bishop's report, this was the most commonly used rate at the relevant date.

571 There is however disagreement as to the calculation of the appropriate beta and as to the applicability of the small company premium.

572 The beta is a measurement of the risk of the enterprise. Although the risk in issue is a prospective one it is common to derive the beta from historical data. Both Mr Meredith and Mr Lonergan proceed by reference to information for listed companies, although each adopts a different approach to the appropriate basket of companies. They also differ as to the appropriate mode of calculation utilising the data.[123]

573 Nevertheless as Mr Lonergan observed, although he differs in his approach to the calculation of the appropriate beta, the ultimate difference from Mr Meredith in the effect of the calculations flows principally from the application or non-application of a small company discount.

574 Mr Meredith's approach is firstly to derive a beta from information published by Bloomberg with respect to listed companies operating landfills. The beta is calculated based on observations of returns by companies to the market over the previous 24 months.[124] From the data he derives first a levered (equity) beta and second an ungeared beta. He adopts an average ungeared beta from the four companies sampled. He then makes an adjustment by way of a small company premium because he says research indicates the CAPM does not fully explain the returns of small company stocks. The beta for small companies tend to be greater than those for large companies but do not account for all the risks faced by those who invest in small companies.[125] He adds a premium to CAPM to account for this issue using a premium derived from research by Ibbotson Associates.

575 As he explained in oral evidence, Mr Meredith makes this adjustment in the present case essentially as a proxy for the greater risk attaching to a single landfill site, than attaching to a site comprising part of the diversified assets of companies of the type on which he relies to calculate the beta in the first instance.

576 Mr Lonergan asserted that the small company risk premium should not be applied because to do so would be the equivalent of valuing a house offered for sale only by reference to the value of the owner's equity rather than the market price. The purpose of the premium is however to determine the discount rate which an investor would require to be applied to the discounting of future cash flows to bring them back to a present day value.

577 The second major difference in methodology between Mr Meredith and Mr Lonergan is the question of whether a geared or ungeared beta should be adopted for the calculation. Mr Meredith states in his report:

The risk of debt to equity holders is reflected in the Company's beta.

As there is no debt funding in the information provided about the proposed land fill, this component must be removed from the comparable companies' betas, to ensure the betas correctly reflect the cost of equity for the purposes of the DCF.

This is applying the capital asset pricing model and beta is used within that model as a measure of risk and the way it's generally derived is by regression analysis of a particular stock's relative volatility against the market's volatility as a whole, and again in the way that it's normally applied is that you identify comparative companies, companies which look and feel close to the company particularly that you're valuing and you look at the betas, the equity betas of those comparatives and then you estimate a suitable equity beta for use in the model. Of course what we have here is we're valuing an asset and the way to get from an equity beta which includes the financial leverage of the company to an asset beta is to do what's called de-lever the beta ...

580 Mr Lonergan adopts a beta of 1.1 based on a different basket of companies from those utilised by Mr Meredith. He criticises Mr Meredith for using non-Australian companies.

581 Mr Lonergan contends that degearing is not appropriate in the present case. In his view the conceptual problems involved in degearing and regearing adjustments are such that the exercise is not warranted in this case. He further contends Mr Meredith has not properly calculated through the effect of the degeared beta which he adopts.

Mr Meredith's error in essence is this. Firstly the sample that he chose was an inappropriate sample because it was non Australian companies. Secondly he de-geared the beta which was unnecessary because unless the amount [of] debt in a company is hugely distorted from normal, it's not mathematically accurate or reliable to attempt a de-gearing and re-gearing exercise. And last but not least, notwithstanding that he de-geared the beta and his own concession that there would be at least some debt level involved, he didn't re-gear it back again.

Mr Meredith has got two almost compensating errors, Mr O'Brien. But to get it technically correct, one has to deal with them. In simple terms, he doesn't allow the sort of level of debt that an operator of a landfill can easily obtain and service. And secondly, as I've said before, his calculation of a beta being based on an overseas sample of companies is (a) not applicable in Australia because they live in a different environment with different tax rates and different reporting rules, and secondly even his own sample should have indicated to him that his beta calculation was wrong because one of the companies that he had in his sample had no debt. And therefore even if his calculation was theoretically valid, it should have alerted him to the fact that his mathematical answer was wrong because he had what is technically called a pure play sample to refer to, and which he ignored.

584 Conversely Mr Meredith contends Mr Lonergan has discounted by reference to a calculation of weighted average cost of capital (WACC) but failed to make an appropriate deduction for outstanding debts. He contends that if debt were removed from Mr Lonergan's calculation this would result in a discount rate of around 12 per cent.

585 Mr Meredith maintains in answer to Mr Lonergan that it is necessary to degear the beta to remove the impact of debt on stock volatility when what is sought to be assessed is risk. The discount rate requires an estimate of the required return on equity or cost of equity.

586 Mr Meredith also maintains he has in fact used the correct formula. In this respect I accept his evidence.

587 I do not however find it necessary to fully resolve this debate having regard to the following considerations:

(a) Mr Lonergan proceeds on the fundamental basis that the operational risk of the hypothetical landfill business should be regarded as low.

In assessing the appropriate beta, it is relevant to compare the business risks of landfill operations with the inherent risks of business operations in general. Taken overall I consider such differences as may arise to be marginal. I further consider the operational risks of landfill businesses to be fundamentally low in the light of the nature of such businesses and related cash flows, and have adopted a beta to reflect this.

I do not accept that the operational risks associated with the hypothetical landfill business which Mr Lonergan seeks to value, can be regarded as low when regard is had to the uncertainties to which I have already referred (see my conclusions as to waste stream, compaction, gate price and costs above).

(b) The adoption of an ungeared beta in itself (assuming other parameters remain equal) reduces rather than increases the discount rate.

(c) If Mr Lonergan is correct he remains separated from Mr Meredith effectively by the small company premium discount, in terms of his calculation of the appropriate discount. I do not accept his position with respect to this discount.

I prefer Mr Meredith's conclusion in respect of the small company premium. It seems to me that the risks associated with this particular site on a stand alone basis must be recognised in the methodology if it is to be translated to the value of Mr Love's land.[126] Those risks parallel those affecting an embryonic company including information risks, management risks, liquidity risks and asset backing risks.

The data relied on by Mr Meredith relates to small companies but this does not mean that the adjustment does not reflect a factor logically applicable to the value of an embryonic enterprise on a single site.

588 Mr Lonergan adopted the same discount rate in the present case as he did in the Collex case in New South Wales. I cannot accept that a hypothetical landfill on Mr Love's land could properly be regarded as carrying the same risk as the continuation of the existing Collex landfill upon part of its site.

589 It should firstly be noted that the Collex site was not a putrescible waste landfill but one which accommodated solid inert waste. Putting to one side the question of land use approvals, none of the following matters were informed by historical data in the current case but each was so informed in the Collex case:

590 In the Collex case Mr Lonergan's report stated:

• it was assumed that maximum sales volumes would be consistent with the annual quota under the development approval;

• current average landfill prices per tonne of waste were adopted;

• operational costs were benchmarked against actual cost incurred at the site in the 18 months prior to the date of resumption.

591 Further Mr Reed had prepared a risk analysis matrix taking into account a range of factors including land ownership, availability of air space, development approvals and conditions, landfill compaction/density, land volumes and selling prices, capital and operational costs and management. The matrix identified all of these risks as minimal to marginal with the exception of selling prices which were assessed as marginal to moderate risks.

592 Mr Lonergan concluded in his report for that case:

Most of the risks for the landfill operations at Horsley Park are low, with the exception of sales prices which pose a higher risk. On balance, we consider the operational risk to equal the market average. A beta of 1.0 to 1.1 has been adopted as appropriate in the circumstances.

593 I do not accept that the information available in relation to Mr Love's site could justify the adoption of the same beta as was adopted for the Collex site when regard is had to the differences in the evidence available to inform the selection of the relevant beta. I do not accept the operational risk could be regarded as equal to the market average of existing businesses. In turn, I prefer Mr Meredith's opinion with respect to the application of the small company premium to arrive at the appropriate discount.

594 I also accept Mr Meredith's view that it is not possible to predict capital and operational expenditure or other operational parameters with the same confidence for a proposed or embryonic business as it is for a mature existing business.

595 I do not accept (as Mr Lonergan maintained, and was put to Mr Meredith in cross-examination) that risks in respect of these matters can be adequately reflected in the adoption of appropriate rates.

596 Mr Lonergan maintained that landfills are low risk businesses. Mr Brown gave evidence that the profit and risk which an investor would require from a landfill were greater than those for commercial property or securely leased land. I am not satisfied the evidence justifies Mr Lonergan's generalisation. Self-evidently risk will be affected by factors such as the availability or absence of contracts for municipal waste and the other factors analysed in detail in the evidence in this case.

597 Mr Lonergan also maintained that his calculation was conservative because it did not allow for real growth in gate prices over the life of the landfill. It is difficult to assess what weight should be given to this factor, if the calculation is hypothesised as one done at the date of acquisition. Among other things it is plain that the market became more strictly regulated from July 2002 onwards. Moreover the market would not in fact necessarily have been as it has been, if there were an additional player within it. If the calculation is to be assessed retrospectively then other countervailing parameters and in particular costs, would also need to be re-evaluated. I am not persuaded that the asserted conservatism means the calculation should be accepted.

(a) It is one thing to apply a DCF methodology to the value of the landfill potential of land where landfill is a going concern, but quite another to apply it to the valuation of a hypothetical business.

(b) If the DCF method is to be relied on the assumptions must be satisfactorily grounded in evidence.

(c) The present case is not comparable to either the Adelaide City or the Collex case.

(d) I do not accept capital or operating expenditure, waste flow or gate prices can be predicted with the confidence with which they could be for an established business.

(e) I do not accept Mr Lonergan's assessment of the appropriate discount rate. I prefer that of Mr Meredith.

(f) I do not accept critical assumptions which favour Mr Love made by both Mr Lonergan and Mr Meredith with respect to waste stream, compaction, gate price and costs.

(g) The results of the DCF method fall to be discounted further to reflect the probability of obtaining land use approvals which I have assessed as low (no more than 10 per cent).

(h) I am satisfied the DCF analysis is not sufficiently reliable in respect of critical parameters to demonstrate a positive value for the proposed landfill (even if it is assumed Mr Meredith erred as to post-closure costs and taxation).

(i) Such conservatism as may be involved in Mr Lonergan's assumptions do not alter my opinion.

599 Putting aside my conclusion with respect to the first threshold difficulty, the consequence of each of my conclusions concerning the second threshold difficulty and market value, is that I reject the contention made on behalf of Mr Love and summarised at 3(b)(iii) of the statement of issues with respect to value to the hypothetical purchaser, namely that were it not for the acquisition or the carrying out of the duplication works, the value of the site to the hypothetical purchaser would have reflected a price for the site's landfill potential.

600 The second threshold difficulty leads to the inevitable conclusion that future landfill use was not the highest and best use of the WA149 land, even if Mr Love's valuers' evidence were otherwise accepted.

601 Further, my conclusions as to the valuation evidence independently support the conclusion that the highest and best use of the land both in the 'before' and 'after' situations was future industrial, even if I am incorrect in my conclusions with respect to both the first and second threshold difficulties.

602 It is unnecessary to further elaborate the conclusions stated with respect to these heads of claim in the introduction to this judgment, insofar as they are premised upon the potential of the WA149 land for landfill use. There is no evidence justifying the conclusion that any landfill potential of the land was of greater value to Mr Love than its market value. Accordingly I reject the contention made on behalf of Mr Love and summarised in 3(b)(iii) of the statement of issues that were it not for the acquisition or the carrying out of the works, the special value of the site would have reflected a price for the sale of the landfill potential.

603 Nevertheless I accept that at the date of acquisition Mr Love operated his property as an integrated unit used for interrelated and sequential land uses. He had for a number of years used it for the purposes of grazing beef cattle and progressively given it sequentially over to use for quarrying basalt, and a series of landfills. In turn he ultimately contemplated that it would go over to urban land use of some industrial nature.

604 The conclusion that the highest and best use of the land at the acquisition date was constituted by its value as future industrial land does not preclude it from having further special value to Mr Love. This is because the notion of future industrial use is itself consistent with interim alternative use not destructive of its future value. In the present case that interim use was most obviously the continuation of the residential and agricultural use of the land by Mr Love potentially for some 20 years or so before subdivision for industrial purposes.

605 It is more difficult to regard quarry use as potentially contributing to special value, first because that use was on the evidence destructive of the ultimate developmental potential of the land, and secondly because the duplication of Cooper Street was not shown to have adversely affected the WA149 quarry operation or a future quarry operation within the WA658 land. There is no evidence quarry use of the land was adversely affected in any material way by the acquisition.

606 The potential use of the land for residential and agricultural purposes after the acquisition date may however have given rise to special value in respect of pecuniary advantages that would not (in the terms of s 41(2) of the LAC Act) 'necessarily have been foregone in realizing that potential' of the land for future industrial use.

607 The actual use of the land for industrial use remained at the date of acquisition a long term proposal, perhaps in the order of 20 years ahead. In the interim period the land was of value to Mr Love as a source of income from a profitable farming operation and as his family home.

608 There are a series of further elements of the claim that are properly characterisable as claims for loss of special value:

(c) loss of residential amenity during and after construction works.

609 Prior to the acquisition there were a series of tree plantations along the southern boundary of Mr Love's property. The aerial photographs show these plantations were not continuous but they were substantial. The trees were planted either in the 1950s by Mr Love's parents, or by Mr Love himself in 1983 and 1984. They principally comprised Monterey and golden cypress which had matured to a substantial size by the date of acquisition.

610 In the vicinity of Mr Love's house the plantations along the boundary of the property were complemented by other plantations extending up the driveways towards the house and sheds respectively. These principally comprised golden and Bhutan cypress.

611 As a result of the acquisition the plantations along the Cooper Street frontage were substantially removed and the plantations in the vicinity of the house were materially diminished.

612 Landscape planting has occurred within the widened road reserve of Cooper Street, but plantations of the pre-existing type have not been re-established.

613 Mr Love claims $279,550 compensation for the loss of trees. He does so on the basis of the valuation of Mr Stone who utilises what is called the Modified Burnley method of tree valuation to in effect calculate the replacement value of equivalent specimens to the 87 trees lost as a result of the acquisition. Mr Stone's ultimate figure in evidence was $271,650.

614 The Modified Burnley method calculates the value of the volume of a sample comparable nursery tree and factors its value up to arrive at the value of the tree being valued, having regard to a series of parameters.

615 Ordinarily the value of trees is taken into account in the value of the land to which they are affixed.

616 There is no evidence that the future industrial value of the land was adversely affected by the loss of the trees in issue. It is possible that some trees might have been incorporated into a future industrial subdivision, but it is equally likely that they would not have been so incorporated, and that a future industrial subdivider would simply cut them down.

617 Likewise it is possible that a future quarry approval might be subject to landscape screening conditions, which took advantage in part of pre-existing boundary plantations. It is equally possible however that the bunding and screen planting required for any future quarry operation upon Mr Love's land, would be similar to that required for the southern extension of WA149. In these circumstances the existing farm plantations would not be materially relevant.

618 I accept however that the pre-existing plantations did contribute first to the agricultural capacity of the land by providing wind-breaks for stock, and secondly contributed to the residential amenity of the land.

619 The land as a whole had been the subject of sequential plantation tree planting, involving the planting of very substantial plantations for agricultural purposes and in conjunction with the quarry operations conducted on the WA149 land, and earlier quarry operations.

620 In these circumstances it is reasonable to allow as special value the actual estimated replacement cost of the plantations which Mr Galbraith has assessed on behalf of the Corporation at $35,655 (if the cost of new stock fencing were excluded the replacement cost would be $16,461). Mr Galbraith's recommendation is that replacement plantations should utilise native plants such as Lightwood and Blackwood and I accept that this is a reasonable recommendation having regard to the screen planting previously adopted and now proposed with respect to the WA149 land.

621 However, the question remains whether Mr Love should obtain the further value attributed to the trees lost as a result of the duplication of Cooper Street, which Mr Stone arrives at by application of the Modified Burnley method.

(a) Whilst I accept this method may be appropriate for the valuation of specimen trees in parks, gardens and other like settings, that is not their present context. In such contexts the trees themselves are a primary component of the value of the land to the owner. In the present context they are at best ancillary. The present context is one of a farm property undergoing on-going change in land use accompanied by sequential plantings of substantial plantations in conjunction with quarry use. It is simply not comparable to the valuation of specimen trees in a park or garden. Mr Stone's method does not draw a distinction in value by reference to location. A tree located in an extractive industrial zone has the same value as one located in a prime location within an urban setting.

(b) It is not appropriate to value individual trees within composite plantations on an individual basis. There are some five kilometres of plantation trees on Mr Love's land including cypress, eucalyptus trees, melaleucas, wattles and hakeas. The land also benefits from one kilometre of plantations along the boundary of the former Cooper Street No. 1 landfill. Such trees have been planted and grown on a broad scale basis. I accept Mr Galbraith's views they do not lend themselves to valuation by method premised on the nursery value of a sample tree. Further, as I apprehend it if the method of valuation adopted by Mr Stone were applied to these plantations, then at the date of acquisition the trees within them would have a value of millions of dollars, indeed the value would potentially approach the market value of the whole of the land itself. Mr Galbraith estimated the application of the Modified Burnley method to the existing plantations on Mr Love's property as a whole could yield a value in the order of more than $20 million. I do not accept Mr Stone's method is a proper basis for valuation of part of the total plantation component of the land in issue. The value of the trees cannot sensibly be regarded as a sum disproportionate to the value of the associated land in the context with which I am concerned, namely one in which they constitute a limited part of very extensive plantations on a property used for rural and extractive industry purposes.

(c) Insofar as the trees contributed to Mr Love's residential amenity, they fall to be considered in the context of a farmhouse which Mr Love intended to occupy for only a limited period of time[128] and which was located on an agricultural property with a long history of being given over to sequential quarrying and landfill use. I do not accept that in this context the trees can sensibly be accorded the value claimed for them.

(d) When one stands back and looks at the figure derived from Mr Stone's calculations, I do not accept Mr Stone's view that as a matter of common sense they seem fair.

623 Mr Stone's evidence was also challenged on the basis that he did not personally observe the trees which he purported to value (although he did view remnant trees). Rather he relied on instructions from Mr Love as to their age, health, form and vigour. These instructions were complemented by photographs. A consequence of this process was that he revised his initial value of $146,405 upwards to $279,550 after supplementary information was received from Mr Love as to the number and condition of trees in issue. It is further submitted Mr Love's instructions to Mr Stone were not properly verified by him in evidence.

624 I accept that the hearsay basis of Mr Stone's evidence is a consideration affecting its credibility and calling at the least for some qualification of his figures.

625 Ultimately however I reject his valuation as a proper basis for the calculation of special value in the present case for the more fundamental methodological reasons I have identified. Accordingly, Mr Galbraith's figure of $35,655 should be allowed.

626 It was put on behalf of Mr Love in written final submissions that the trees in issue were not 'plantation' trees. I do not accept this. They were part of extensive boundary and other plantation planting upon a property used for agricultural and extractive industry purposes. Mr Brown said and I accept they were not unusual farm plantings. Indeed the presentation of Mr Love's case in part asserted a special value of the trees in question, precisely because they had existing agricultural value and the potential to screen future extractive industry.

4.2 Loss of access facilities (claim 2(c), (d) and (e))

627 Mr Love also claims for the cost of construction of a new farm track and for the reconstruction of two driveways.

628 None of these costs have actually been incurred. If however they represent the value of pre-existing access facilities used in conjunction with the house and farm, I would be prepared to allow compensation in respect of their special value to Mr Love on a like basis to the claim for loss of trees.

629 A claim for $2,000 is made for the construction of an internal farm track. Mr Love's evidence is that the track is needed to replace truck access from Cooper Street to his land between the gas pipeline running north-south to the east of his home and his home at 410 Cooper Street. He says the truck access was lost when a gate to Cooper Street previously on the gas line easement was not replaced in the course of the duplication works. He exhibits a quotation from a contractor for necessary earth works in the sum of $990. In addition Mr Love's evidence was that it would be necessary to spread crushed salamander on the track. The quotation has attached to it a crude sketch of the track location which is less than helpful in explaining the works proposed. Nevertheless I am prepared to accept this claim. The underlying basis asserted was not displaced in cross-examination. I would allow it in the sum claimed of $2,000. The quotation is a 2004 quotation and to this extent the allowance is generous to Mr Love, but the evidence does not permit refinement of the figure.

630 Mr Love also claims $5,000 for the reconstruction of the heavy vehicle driveway to his yards and a further $5,000 for the reconstruction of the driveway to his house. He says these were not properly reconstructed following the duplication works and that the contractors retained by the Corporation simply spread some crushed concrete over the ground. He said in evidence:

I have put additional crushed rock on that entrance, but that was only an interim solution and certainly not a final solution. When we have wet weather, we are working in mud when we turn in, particularly coming in - well, in fact, the thing gets muddy, the crushed rock is sort of pushed down into the mud.

631 It is now more than five years since the works in issue were carried out by the Corporation. Mr Love says that prior to the duplication of Cooper Street these all weather entrances were properly formed and constructed with rock and brick bases, over which were constructed layers of crushed rock laid with incorporated culverts for drainage.

632 He further says the costs estimates of reinstating the access crossovers were made by him as a professional engineer and are based on the following assumptions:

• The crossovers would be made of 25mpa reinforced concrete to meet the standards required of entrances to the upgraded Cooper Street;

• Preparatory site works would include the excavation of the site to a depth approximately 100mm below the final concrete depth and the backfilling of the site with crushed rock;

• Prior to concreting the site would require the erection of boxes, the laying of black plastic over the crushed rock and the positioning and restraint of F72 reinforcing mesh, one layer for the car entrance and two layers for the heavy vehicle entrance within the boxing.

633 I accept the Corporation submission that the basis of the cost estimates reflects a higher standard of construction to that which is described as existing prior to the duplication of Cooper Street (despite Mr Love's assertion that higher construction costs would be offset by lesser excavation costs). Nevertheless I accept Mr Love's evidence the current situation is inferior to that pre-existing. I assess the loss of special value at a total of $5,000 for the two entrances.

634 Mr Love claims $60,000 for loss of amenity to his dwelling and farming facilities including disturbance during construction.

635 This claim is not premised on actual pecuniary loss but for the reasons I have set out above I accept that the residential amenity of his home may be regarded as having some special value to Mr Love. Continued residence in that home for a period of time was consistent with future industrial use of the land. The claim is in effect a rolled up claim principally relating to matters which occurred during the construction of the duplication road works but also relating to some continuing effects of those works.

636 Mr Love's evidence is that prior to the acquisition he intended to reside at 410 Cooper Street until a saleyard was constructed on his land and thereafter he would have used 410 Cooper Street to manage the business activities carried out on the property. It was not his intention to continue living in the house indefinitely. I accept however that it had residential value to him for potentially at least another 10 to 20 years.

637 Mr Love's case is also that he would have continued the existing agricultural land use for as long as he could so as to 'maintain land tax exemptions'. I accept this evidence.

638 I also accept the evidence of Mr and Mrs Love that during the construction works (which were completed in March 2004) there were occurrences which materially affected their residential amenity.

639 The most significant of these were noise events associated with the operation of heavy machinery and in particular a crusher. There was also some interference with access and services to the property.

640 Subsequent to the works Mr Love has been left with a situation in which his house is closer to the carriageway of Cooper Street. As a result noise levels are somewhat increased as is exposure to vehicle emissions to air. The aspect from the front of his house is less attractive, and the area surrounding the house is less private.

641 In addition, there has been light spill towards the house from one of the central lights installed within the roadway as part of the duplication works. Mr J S Piper gave evidence this could readily be screened and I was advised in final address that this had occurred.

642 There is also some increase in headlight glare affecting the house. Further it is said the house gateway is less protected from southerly winds.

643 The Corporation submitted that if compensation were awarded in respect of loss of amenity it should reflect and be limited to the estimated cost of double glazing to Mr Love's house namely $10,000. In 2004 Mr Brown agreed that an allowance of $10,000 should be made for reduced residential amenity, after the issue was raised by Mr Hocking on behalf of Mr Love at a valuers' conference. The Corporation admits an allowance should be made in this amount.

644 Nevertheless having regard to the detailed evidence of Mr and Mrs Love concerning these matters I assess compensation (including compensation for a further consideration to which I shall shortly turn) in respect of this aspect of the claim at $30,000.

645 In so finding I accept that the amenity of the house must be assessed in the context of a property which had historically been affected by ongoing quarry operations and landfill operations. Further Cooper Street already carried a substantial and increasing volume of heavy vehicle traffic prior to the duplication. In addition as I have said Mr Love's intention was not to make the house his permanent home but to develop other operations upon his land. Most relevantly it was intended to develop a saleyards operation. It was also intended to develop a quarry operation immediately to the north of the house.

646 I have also had regard to the fact that no evidence was led of costs having been incurred in respect of amelioration of amenity impacts.

4.4 Loss of direct access to dwelling - the travel cost claim (claim 2(b))

647 As a result of the duplication of Cooper Street and the construction of the Craigieburn by-pass in a form directly connected to the duplicated Cooper Street by a diamond interchange, longer vehicle trips (utilising the by-pass and ring road) to and from Mr Love's property have been facilitated, but local trips are complicated by the need to turn only through breaks in the median strip and not directly at the point of the driveways into Mr Love's property.