Applicant v Respondent

1 This proceeding involves a claim for compensation pursuant to the provisions of the Land Acquisition and Compensation Act 1986 (the 'LAC Act') for the compulsory acquisition of land situated at 11-31 Montague Street, Southbank[1] (the 'Land'). On 19 December 2013 (the 'Relevant Date'), the Land was compulsorily acquired by the Secretary to the Department of Economic Development, Jobs, Transport and Resources (the 'Authority') for the purposes of the Melbourne Convention Centre Development.

2 The claimant, Caradi Pty Ltd (formerly known as Scared Bear Pty Ltd) (the 'Claimant'), was the registered proprietor of the Land, having held the Land since 1996 after purchasing it for around $4 million.[2] At that time, the Land was zoned General Industrial and was developed with a large factory building occupied by a tyre manufacturer. Shortly after taking occupation, the buildings on the site were demolished and, save for periods of occupation by Vic Roads_[3]_ and the Authority, the Land has generally been used for car parking.

3 The Claimant is one of two trustees of the Ballah Family Trust. The Land was purchased by the Claimant and held as a long-term real estate investment, or 'land bank', with the aim of obtaining a mixed-use residential and commercial rezoning to gain an uplift in value.[4]

4 The Land is a large irregularly-shaped parcel adjacent to the West Gate Freeway Montague Street interchange in South Melbourne.[5] It has frontages to Montague Street, Munro Street and Ford Street. At the time of acquisition, most of the Land was bitumen sealed and was used for at-grade car parking. The northern section of the Land was separately fenced and had a surface finishing of crushed rock. The Land is 15,900 m² in area, of which 2,796 m² is encumbered by easements, including three for electricity-related purposes. It is also subject to a freeway-related acquisition of a stratum of the Land (air rights) previously held in the title.[6]

5 The Land is located within the Montague Precinct of the Fishermans Bend Urban Renewal Area (the 'FBURA'). The FBURA is an area of approximately 250 hectares. On 5 July 2012, the FBURA was declared to be an area of State Significance by the Minister for Planning and was rezoned from Industrial 1 Zone to Capital City Zone - Schedule 1 ('CCZ1') under the Port Philip (the 'Council') Planning Scheme. This rezoning caused a significant uplift in value of real estate in the FBURA. At the Relevant Date, the Land was zoned CCZ1.

6 Despite the favourable development rezoning in mid-2012, there had been little development activity in the Montague Precinct as at the Relevant Date, and the locality was characterised by industrial land uses. The timeframe for development of the FBURA is expected to take place over the next 50 years.

7 At the request of the parties and accompanied by counsel, I undertook a view of the subject Land and key properties relied on as comparable properties including, in particular, 85-93 Lorimer Street, Docklands. The view followed an itinerary prepared by the parties and which is recorded as Exhibit C-10.

8 In summary, the key issues in dispute arising from the claim are:

(a) the market value of the Land at the Relevant Date, having regard to the comparable sales and the weight to be accorded to relevant transactions, in particular:

(i) the most appropriate comparative sales method in the circumstances (dollar per square metre of land ('$/m2'), dollar per apartment ('$/apartment'), or otherwise);

(ii) the relevance of transactions which were not completed, being the $24.5 million 'Hydrox Contract' and the $55.5 million[7] 60-82 Johnson Street transaction in May 2014;

(iii) the comparable sales relied upon by the respective valuers (including locational difference considerations, market maturity in the FBURA, and the 'low sale' theory);

(iv) the use of evidence of sales that occurred after the Relevant Date; and

(v) the impact of remediation costs (ie, the effect on the highest and best use of the Land and the appropriate treatment of the agreed figure for remediation);

(b) whether the Claimant is entitled to compensation for replacement land costs in circumstances where replacement land has not yet been purchased;

(c) whether the claimed financial loss, alleged to have been incurred as a result of the Claimant's inability to invest the initial sum of the initial offer into a higher return asset due to the inadequate amount of the Authority's offer, is a compensable disturbance loss under s 41(1)(d) of the LAC Act;

(d) whether the professional expenses incurred fall within the scope of s 41(1)(f) of the LAC Act; and

(e) whether compensation for the non-pecuniary disadvantages suffered by the Claimant as a consequence of the loss of the Land should be awarded by way of solatium.

9 The principal issue in this proceeding is the market value of the Land acquired. This is the issue on which the parties' positions significantly diverge.

10 At the commencement of the hearing, the parties' positions in relation to market value were that the amount claimed by the Claimant had been revised to $56 million, whilst the Authority's formal offer remained at $16.15 million. The Authority contended that the appropriate award should be in accordance with the later valuation assessments provided by its valuers, being Mr Brian Dudakov at $24.61 million, or Mr Les Brown at $25.3 million. Also in issue was the Claimant's entitlement to the following:

(b) legal, valuation, and other professional expenses;[9] and

11 There have been several iterations of the particulars of claim since 27 October 2014, with the most recent particulars dated 21 April 2016 (the 'Further Revised Particulars of Claim'). The respective positions of the parties at the commencement of the hearing (taking into account the parties' outline of submissions) are summarised in the following table:

In light of the amended valuations of Mr Murray and Mr Torr, this item of claim was revised to $56,000,000.

Submissions based on the Authority's valuers' latest assessments put amount between $24,610,000 and $25,300,000.

Loss of use of money caused by delay in payment of compensation.

Loss incurred as a result of the Claimant's inability to invest the initial offered sum into a higher return asset, due to the Authority's inadequate offer.

$1,546,700 (to 21 April 2016) and continuing to the date of judgment at 0.0126849315% per day.

This item of claim has been accepted by the Authority in its written submissions served 2 February 2018.

This item of claim has been accepted by the Authority in its written submissions served 2 February 2018.

Legal, valuation and other professional expenses pursuant to s 41(1)(f)

12 In early 2010, the Secretary to the Department of Innovation, Industry and Regional Development (as the Authority was then known) and Major Projects Victoria began investigating the potential future use of the Land.

13 On 29 January 2010, a Notice of Temporary Occupation was served on the Claimant by the Authority. The notice identified that access to the Land was required for the purposes of the Melbourne Convention Centre Development. The notice stated that the Authority intended to occupy the Land from 5 February 2010.

14 On 5 February 2010, the Authority entered into occupation of the Land and remained in occupation until 13 April 2011. During its occupation, the Authority compensated the Claimant at the market rental rate, by payment of approximately $470,000 per annum plus outgoings, taxes, and rates.

15 The Claimant says that it was given little detail as to why the Authority's occupation needed to continue over such an extended period. The Claimant said that, as a consequence of the uncertainty surrounding the acquisition, it had a reduced capacity to deal freely with the Land, including negotiating with potential purchasers.

16 In late 2009, the Claimant commenced negotiations with the Woolworths Group ('Woolworths') regarding purchase of the Land for a proposed 'Masters' branded hardware store. The negotiations with Woolworths continued during the period of temporary occupation by the Authority.

17 On 17 August 2011, the Claimant entered into a contract for the sale of the Land to Hydrox Nominees Pty Ltd (a Woolworths' nominee company) ('Hydrox') for $24.5 million (the 'Hydrox Contract'). Clause 24 of the Hydrox Contract provided that the purchase was subject to due diligence to be conducted within 90 days of the date of entering the Hydrox Contract.[12]

18 By letter dated 5 October 2011, the solicitors for Hydrox, Allens Arthur Robinson, advised that due to Major Projects Victoria's intention to acquire the Land, their client was not satisfied with the outcome of its due diligence and was terminating the Hydrox Contract.[13] The letter further stated that if Major Projects Victoria decided not to proceed with the acquisition, then Hydrox would be interested in reconsidering the purchase of the Land.

19 Following termination of the Hydrox Contract, the Claimant said that it continued to explore investment and development options for the Land.

20 On 20 April 2011, after the Authority had vacated the Land, the Claimant entered into a licence agreement with Care Park Australia Pty Ltd ('Care Park'), which allowed Care Park to operate a car parking facility on the Land pursuant to the licence.[14]

21 On 14 November 2011, the Claimant entered into an exclusive sale agreement with a commercial real estate agent, Fitzroys Pty Ltd ('Fitzroys'), for sale of the Land.[15]

22 In June 2012, a background paper for the Montague Precinct prepared by David Lock and Associates, and Charter Keck Cramer, for the City of Port Phillip identified that the Land was within a sub-precinct known as the 'Northern Neighbourhood'. The Northern Neighbourhood was identified as having significant opportunity for substantial scale development and was proposed to feature high-rise residential towers with heights of up to 28 storeys or 100 metres.[16]

23 On 5 July 2012, the Minister for Planning amended the Port Phillip Planning Scheme, rezoning the Land to CCZ1. The rezoning triggered a substantial uplift in the value of the Land by virtue of the significant opportunities for development as there were no built form controls imposed by the rezoning which would restrict the height and the density of permissible development.[17]

24 In the absence of a decision on acquisition by the Authority, the Claimant says that it continued to look at opportunities for the Land. It obtained advice on maximising the potential use of the Land following the FBURA rezoning. Mr Berryman of Fitzroys advised that a high-rise residential development would be the highest and best use of the Land. Mr Berryman's advice was that the Land was the most prominently positioned development site within the Northern Neighbourhood of the Montague Precinct, that it was most closely connected to the CBD, that it was of a substantial size so as to make it a highly attractive development proposition and that it was highly likely that potential purchasers/developers would have a very positive medium to long-term view of the Land. Mr Berryman recommended that the Claimant proceed with the planning and design of a development for the Land.[18]

25 The Claimant subsequently engaged architects, Rothe Lowman, to prepare concept drawings and designs for a high-rise residential development on the Land. It was intended that these drawings and plans would form the basis of a planning application to the relevant responsible authority for such applications.[19] Rothe Lowman provided the Claimant with concept drawings dated 18 June 2013, which depicted several options for a five-tower residential complex for the Land[20] (the 'Rothe Lowman Scheme').

26 The Rothe Lowman Scheme - and another similar, though more intensive, scheme for the land prepared by Hayball Architects (the 'Hayball Scheme') - were agreed by the parties to be reasonable responses to the planning regime for the development of the Land for the purposes of the compensation assessment.[21]

27 A Notice of Intention to Acquire the Land was issued by the Authority on 14 June 2013. The Land was subsequently acquired on 19 December 2013 when the Authority published a Notice of Acquisition in the Government Gazette.

28 The LAC Act requires the Authority to provide an offer of compensation within 14 days of the date of acquisition.[22] The Claimant's solicitor raised the Authority's failure to provide an offer of compensation within time on 9 January 2014.

29 Subsequently, on 24 January 2014, the Authority advised the Claimant that it hoped to provide an offer of compensation within two weeks and invited the Claimant to agree to an extension of time under the LAC Act for an offer to be made. The Claimant declined.[23]

30 On 28 March 2014, the Authority made an initial offer of compensation in the amount of $16.15 million. On 3 April 2014, the Claimant requested payment of the initial offer amount by way of advance of the compensation offered pursuant to s 51 of the LAC Act. This was paid on 3 May 2014.

31 On 22 May 2014, the Claimant rejected the initial offer of compensation and advised that it had engaged professional advisers to assist with the assessment of its compensation claim.

32 On 27 October 2014, the Claimant filed a response to the Authority's offer. It rejected the Authority's offer of $16.15 million and claimed the sum of $61.5 million plus expenses and interest to be confirmed.[24]

33 The major item claimed was for market value. This was based on a certificate of valuation by Mr Mark Murray at $60 million. A second certificate of valuation by Mr Christopher Torr was provided to the Authority with the Claimant's response to offer. Mr Torr's assessed the market value of the Land at $57 million.

34 On 28 May 2015, the Authority referred the disputed claim for compensation to the Court for determination.

35 Section 90(2) of the LAC Act provides that the Court must determine the compensation payable in the particular circumstances of the case having regard to the provisions of the LAC Act.

41 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.

(2) ...

37 Section 41(1)(a) of the LAC Act requires the Court to have regard to the 'market value' of the interest being acquired on the date of acquisition.[25]

market value, in relation to any interest in land on a particular date, means 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

39 No other assistance is provided as to the process for determining the market value of the Land under the LAC Act. Consequently, the Court must look to the Valuation of Land Act 1960 (the 'VL Act').

40 'Market value' is not defined in the VL Act, but s 5A provides:

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.

41 Section 5A of the VL Act applies as the LAC Act does not 'otherwise expressly provide' the matters or things which are to be taken into account when determining market value.

42 Section 5A(2) of the VL Act, and the definition of market value in the LAC Act, directs the Court's attention to the evidence of sales of other land, to factors such as the time at which sales took place,[26] the terms of such sales, the degree of comparability of the land in question, and other relevant circumstances.

43 In Spencer v The Commonwealth ('Spencer'), in discussing market value, Griffith CJ commented that:

[T]he test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was in fact on that day a willing buyer, but by inquiring 'What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?'[27]

To arrive at the value of the land at that date, we have ... 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 to the value of the property.[28]

45 Each of the factors set out above in s 5A of the VL Act must be considered collectively by a valuer when taking comparable sales into account. The method of deducing market value from the sales of comparable land involves making adjustments to allow for differences from the land to be valued or timing differences. The more adjustments that must be made, the less comparable the transactions relied upon.[29]

46 Where the adjustments are too extreme, the particular sale may no longer have any utility as a comparable sale. In RK Morgan Holdings Pty Ltd v Melbourne & Metropolitan Board of Works, the use of adjustments was cautioned:

It will be seen that that there are a large number of adjustments made in each case. Each adjustment is a matter of judgment with a potential for error. The figure arrived at is designed to relate to the sale parcel to the subject land so as to make the eventual rate reflect the various differences between the sale land and the subject land. The rate arrived at after such a process therefore has an illusory appearance of certainty and accuracy about it.[30]

47 To similar effect were the observations of Payne J in The Trust Company Ltd v Minister Administering the Crown Lands Act 1989:

If comparable sales are to be used these must be truly comparable ... Further a process of reasoning is required where sales differ in substantial ways from a subject site in order to apply these ... Adjustments made to comparable sales can be explicit and implicit to reflect adjustments for differences. Too much adjustment renders the use of comparables unsafe.[31]

48 In Challenger Property Asset Management Pty Ltd v Stonnington City Council, Croft J described both the role of the court in assessing valuation evidence and in making findings as to the value of land:

It is clear from the authorities that the role of the Court is not 'to bring a third set of opinions into the arena' or to 'piece together a valuation of [its] own'. Further, in circumstances where there is a disparity between valuers' valuations, the court must subject each valuer's evidence to critical evaluation. Additionally, it is clear that it is not permissible to average valuations because the result 'would be a figure not arrived at by the application by the court of the established principles of valuation'.

This does not mean, however, that the evidence of one valuer must be accepted on all issues. It is open to the court to accept the evidence of one valuer on one issue and the evidence of another valuer on another, separate, issue.[32]

49 In Electricity Commission of New South Wales (t/as Pacific Power) v Arrow, Kirby P (as he was then) observed:

Valuation is not a science. It is an imprecise, opinionative activity involving the consideration of many variables, sometimes with equally legitimate outcomes.[33]

50 The same point was made by Isaacs J, in Spencer, quoting the Privy Council in The Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co:[34]

It is quite true that in all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. In such an inquiry as the present, relating to subjects abounding with uncertainties and on which there is little experience, there is more than ordinary room for such guesswork; and it would be very unfair to require an exact exposition of reasons for the conclusions arrived at.[35]

51 Differences of opinion in the conclusions reached by valuers in their valuations require the Court to determine which matters on which the valuers agree and on which matters they differ. It may be a conflict of facts, of the relevance of facts, of inferences from facts or opinions or of law. The differences may lie in the assumptions that the valuers have made. It is not uncommon for valuations to widely differ. That does not mean that the valuations have not been carried out objectively.[36]

52 The task of the Court in respect of differences of opinion is to listen to the experts' opinions, and then select those which are deemed for one reason or another to be the most persuasive and credible. The Court's task is to scrutinise the differences of opinion given by the valuers, and to arrive at its own conclusion on the amount of compensation due, based on the evidence.

53 The evidence before the Court as to the market value of the Land consisted of the evidence of four individual valuers, their respective reports, and a joint report prepared by all four valuers (the 'Joint Valuers' Report').[37]

54 The Claimant relied on the evidence of two valuers, being Mr Torr and Mr Murray. The Authority relied on the valuation evidence of Mr Dudakov and Mr Brown.

55 Each of the valuers used the comparable sales method to ascertain the value of the acquired Land. Similarly, each of the valuers considered a basket of sales primarily in Southbank, Docklands, Port Melbourne, and South Melbourne. The earliest sale recorded was July 2010 and the latest was November 2017.

56 A table of the various properties considered by the valuers in their respective reports was produced in final submissions by counsel for the Authority. It provides a convenient summary. I have reproduced the table (with modification[38]) for convenience. I have added the sale price, land area and $/m2 analysis as additional columns to aid the task of comparison. The premises in bold are 'key sales' identified by the valuers as explained below.

2-4 Vaughan Tce and 101 Canning St, North Melbourne

880 Lorimer St, also referred to as Part 25 880 Lorimer St, Port Melbourne

38 Freshwater Pl, also referred to as 38 Freshwater Pl & 25 Power St, Southbank

85-93 Lorimer St, also referred to as 85 Lorimer St,

93-119 Kavanagh St, also referred to as 97-117 Kavanagh St,

15-87 Gladstone St, also referred to as 15-85 Gladstone St, South Melbourne

57 Mr Torr prepared two reports in the proceeding. The first, dated 30 March 2016, assessed market value at $52.4 million.[42] The second report, dated 22 January 2018, revised his market valuation to $53.5 million ('Mr Torr's Supplementary Report').[43]

(a) 85-93 Lorimer Street, Docklands[44] (February 2014);

(b) 60-82 Johnson Street, South Melbourne (Contract, May 2014);

(c) 6-78 Buckhurst Street, South Melbourne (September 2014); and

(d) 93-119 Kavanagh Street, Southbank (June 2014).[45]

59 Mr Torr considered 30 sales and resales of high-intensity development sites in the CBD, and surrounding precincts, between 2008 and 2017. The extended date range sought to emphasise the escalating prices for such sites over that period.[46]

60 Mr Murray also prepared two reports in the proceeding. The first was dated 31 March 2016 and assessed the market value of the Land at $55 million.[47] His second report, dated 24 January 2018, revised his estimate of market value to $56 million ('Mr Murray's Supplementary Report').[48]

(a) 85-93 Lorimer Street, Docklands (February 2014);[49]

(b) 60-82 Johnson Street, South Melbourne (Contract, May 2014);[50]

(c) 134-150 Buckhurst Street, South Melbourne (August 2012);[51]

(e) 6-78 Buckhurst Street, South Melbourne (September 2014);

(f) 15-87 Gladstone Street, South Melbourne (April 2015 and March 2016);

(g) 89-103 Gladstone Street, South Melbourne (December 2012); and

(h) 91-95 Montague Street, South Melbourne (May 2015).

62 Mr Dudakov was familiar with the Land as he had provided earlier valuation advice to the Authority prior to and at the acquisition. He prepared five reports overall, with three valuation reports filed in the proceeding.[52] Those filed in this proceeding are:

(a) Report dated 27 November 2013, just prior to the Relevant Date, which assesses the market value of the acquired Land at $16.5 million;[53]

(b) Report dated March 2014, which confirmed his assessment of the market value of the acquired Land at $16.15 million;[54] and

(c) Report dated February 2016, which reassessed the market value of the acquired Land at $21.71 million.[55]

63 As set out in the table above, Mr Dudakov considered a number of sales, but his key sales were:

(a) 60-82 Johnson Street, South Melbourne (December 2012), in his first two reports dated 27 November 2013 and March 2014; and

(b) 85-93 Lorimer Street, Docklands (February 2014), in his final report dated February 2016, after the sale came to his attention.

64 Mr Brown prepared two reports which were filed in the proceeding. The first, dated 17 December 2013, assessed the market value of the Land at $14.5 million.[56] This report was prepared very close to the Relevant Date. The second report, dated 30 March 2016, reassessed the market value at $21.4 million.[57]

65 Like Mr Dudakov, Mr Brown considered a range of sales, but ultimately his key sales were:

(a) 60-82 Johnson Street, South Melbourne (December 2012); and

(b) 85-93 Lorimer Street, Docklands (February 2014). As with Mr Dudakov, when he became aware of the 85-93 Lorimer Street sale, he took this sale into account.

66 Mr Torr, Mr Murray, Mr Dudakov, and Mr Brown participated in a joint valuers conference ordered by the Court which was held on 14 December 2016 (the 'Valuers Conference').[58] A joint report was prepared and formed part of the evidence before the Court (that is, the Joint Valuers' Report).[59]

67 The Joint Valuers' Report identified the two most comparable properties, and the key differences in approach between the valuers. Whilst counsel for the Claimant sought to make a distinction between the valuation reports filed and the Joint Valuers' Report - the former being a valuation report, the latter not being so - he correctly conceded that the Joint Valuers' Report was evidence upon which I could rely.

68 At the commencement of the Valuers Conference, each valuer tabled his adopted valuation as at the Relevant Date. I note that, at that point, each of the respective valuers had revised their assessment figure from that which was stated in their earlier valuation reports. This was done primarily because of variations in remediation cost advice over time. The implications of this are discussed in detail at paragraphs [244]-[305]. The respective assessments of market value are as follows:

69 The Joint Valuers' Report states that all valuers generally agreed that:

The highest and best use for the land was for high-rise residential development. Whilst there was some divergence as to the likely timing of development ultimately nothing in each of the valuers respective valuations turned on this point as all valuers relied on analysis of comparable sales in determining value. The exception to that statement is that the respective valuer's perception of the likely timeframe until development does influence the way in which they treat contamination remediation costs in the calculations: Murray/Torr applied a full impact, Dudakov/Brown applied a deferred/diluted impact.

The properties at 85-93 Lorimer Street and 60-82 Johnson Street were considered to be directly comparable in terms of location, size and development potential. However the valuers diverged in the respective interpretation as to the weight to be given to the various dealings and transactions relating to these properties.

The proportion of the subject property affected by the previous strata acquisition for the widening of Citylink had a significantly reduced value.

The planning experts of both parties agree that the development schemes proposed by Rothe Lowman and Hayball are reasonable responses to the planning regime at the relevant date.

The Joint Statement of the environmental consultants included the following, summarised, estimates of remediation costs (no basement scenario):

Mr Clark $2,432,000

Mr Parker $3,766,000

Mr Pump $3,606,000

Mr Scoffern $7,204,110[60]

70 Additionally, all valuers acknowledged that 2014 was a period characterised by a rapidly rising market.[61]

71 The Joint Valuers' Report identified the following matters which gave rise to substantial differences between their respective assessments:

(a) the impact of site contamination on value and the various environmental reports, and the subsequent return of the Joint Expert Report;[62]

(b) the relevance and application of the sale of 85-93 Lorimer Street in February 2014;

(c) the relevance and application of the conditional contract of sale of 60-82 Johnson Street, in May 2014, which ultimately did not proceed to transfer; and

(d) the relevance of the various development schemes postulated for the Land.

72 As a result of the Valuers Conference, having been able to consider the information provided in the joint statement of the environmental consultants and the agreed development scenario the respective valuers then reviewed their opinions and amended their market valuations. These figures are set out in the Joint Valuers' Report as follows:[63]

Mr Torr $53.9 million (an increase of $1.5 million)

Mr Murray $56 million (an increase of $1.0 million)

Mr Dudakov $24.61 million (an increase of $2.9 million)

Mr Brown $25.3 million (an increase of $3.9 million)

73 The issues which were focussed on at the trial concentrated on 85-93 Lorimer Street and 60-82 Johnson Street properties as comparable sales. Examination of other information at the trial about sales and the state of the market essentially revolved around the positions put by the parties which aimed to respectively demonstrate or undermine the Claimant's point of view based on the evidence of Mr Torr and Mr Murray that:

(a) the 85-93 Lorimer Street sale, in February 2014, for $18.5 million was a 'very low sale';[64]

(b) notwithstanding the sale of 60-82 Johnson Street in December 2012 (12 months prior to the Relevant Date) for $10.1 million, the re-sale on 18 May 2014 (6 months after the Relevant Date) subject to a conditional contract of sale which did not complete for $55.5 million was a reliable indication of market value.

74 After the Joint Valuers Conference, the parties agreed to a figure for the cost of remediation at $3,686,250.00. The figure was based on an average of the estimates of Mr Parker and Mr Pump, being the two middle estimates of those provided by the environmental consultants. The agreed remediation costs meant that no evidence was required to be called in relation to the quantum of the remediation costs at trial. The issue of how the cost of remediation factored into the respective valuations remained an issue, but more as a criticism by the Claimant of the Authority's valuers' respective approach.

75 It has long been established that, in normal circumstances, the best evidence of market value is that of comparable sales. Market value is measured by consideration of prices that have been obtained for land of similar quality and in similar position. The market value is determined by making adjustments to the amounts paid for properties in actual dealings that are comparable.[65]

76 It is a question of fact whether a certain property is comparable to the property being compulsory acquired. For the sale to be most relevant, the valuer needs to establish that the land is similar to the land acquired in all the many respects and that it was sold in the open market at a date close to the acquisition. A sale of the comparable land should be sufficiently close to the date of acquisition that the market price could not have changed to any significant extent.[66] The physical characteristics, amenity, and tenure need to be as closely alike as possible.

77 One comparable sale may have appreciably more weight than another. The sale of land made within one week of the acquisition may carry greater weight than the sale made six months earlier or later. The greater the difference, in time or other attributes, the greater the adjustment which needs to be made. Usually, the longer the distance of time to the relevant date, the lesser the weight that can be attached to the comparable sale.

78 There will also be a line of demarcation between evidence that is admissible, but entitled to little weight, and evidence which is not admissible at all. In a situation where there is an acknowledged rapidly-rising market, the comparable land sales closest in time will be the most useful and should be accorded the greatest weight.

79 There was no issue between the valuers that the direct comparison method was the method which should be used to determine market value in this case. All four valuers proceeded on the basis that analysis of comparable sales evidence may be undertaken, analysing vacant or near-vacant land sales by dividing the sale price by the number of square metres. This is the conventional method of comparable sales analysis. It was the primary method relied upon by Mr Torr and Mr Murray, and was the sole method relied upon by Mr Dudakov and Mr Brown.

80 The dispute lay in the respective valuers' approaches to the transactions, which ought to be taken into account as 'comparable sales' and, additionally, the analysis and adjustment to the comparable sales so as to compare like with like.

81 However, as there was considerable time spent in evidence, and submissions, on which other forms of comparison might be useful and appropriate in the circumstances of this assessment, I will briefly discuss the merits of these secondary methods of analysis below.

82 It was acknowledged by the valuers that there are a number of secondary methods of comparable sales analysis of property transactions. Common methods were analysing sales on a $/m2 basis, by $/apartment, by dollar per floor space yield ($/gross floor area) and, if the information is available, on a $/m2 of net saleable floor area. There are issues with each of the methods which require adjustment. Whilst each valuer used the $/m2 method, Mr Torr also particularly relied on a $/apartment comparison, as he considered the $/m2 approach problematic for a number of reasons, including the 'newness of the FBURA'.[67]

83 In his November 2013 and March 2014 reports Mr Dudakov reported that he researched and analysed the sample of sales considered capable of comparison on a $/m2 basis.[68] He made specific comments, including the following:

Given the speculative nature of the current planning permit applications within the Fishermans Bend precinct and the fact that most of the applications have not been approved, we are of the view that analysing sales and valuing sites on a rate per dwelling or per GFA should be treated with caution.

We are of the view that the primary approach to analysis and valuation ought to be on a rate per m2 of land area.[69]

84 Mr Dudakov adhered to this view throughout the various reports that he prepared, in his part of the Joint Valuers' Report, and in evidence at trial.[70] He gave consideration to the appropriateness, or otherwise, of both the $/apartment and $/gross floor area method at the time of his report. This is apparent from the sales evidence which, where available, was also analysed on that basis.[71] Whilst Mr Dudakov said that he commonly used both methods, his preference was to use the comparison of net saleable area,[72] acknowledging that there were sometimes information availability limitations with the use of that method.[73]

85 In his expert reports, Mr Brown did not refer to the alternative methods of analysis. However, when cross-examined, he said that he was familiar with those methods and that he preferred the $/gross floor area method to the $/apartment method, but considered it was not appropriate to use either method in this case. His reason was as follows:

In terms of the analysis, it seemed to me in this particular matter, as I have explained before about the Fishermans Bend area, there was not a lot of information specifically about what was being developed on various sites and at that point in time my recollection is there weren't many or any permitted sites in the Fishermans Bend area so given that degree of uncertainty, it was more speculation as to what could or couldn't be put on sites. As I discussed yesterday, in relation to Lorimer Street, there was 1,500 apartments sought at one point and Littles were talking about 7 to 800 apartments. So it seemed to be very fluid. Whereas if one goes to Southbank which is more stable area in terms of development, there is probably more consistency in terms of the manner in which buildings have been approved and the number of units to site areas. I just didn't think it was a useful measure at that point in time in Fishermans Bend.[74]

86 As was the evidence of Mr Dudakov and Mr Brown, no planning approvals had issued in the FBURA including, in particular, the Montague Precinct of that area at the Relevant Date. There was no established or known pattern of development.[75]

87 I accept that, given the 'embryonic' state of the market for this location,[76] the use of the $/apartment analysis is not appropriate in this case for the reasons articulated by Mr Dudakov and Mr Brown. The inherent difficulties with such an approach are clearly demonstrated in the case of the 85-93 Lorimer Street transaction where, according to which development scheme is assumed for the purposes of the analysis, the result varies from $11,672/apartment based on 1,585 apartments being the initial Elenberg Fraser 4-tower plan (the 'Elenberg Fraser Plan'), through to $20,556/apartment based on 900 apartments, being the actual approved plan as at 10 September 2014.[77]

88 This issue is also illustrated by the May 2014 60-82 Johnson Street example, where the vendor prepared a plan for 1,585 apartments, and the purchaser anticipated 700 to 800 apartments.[78] In circumstances where there is no permit in place at the time of sale, it will be difficult to reliably assume that the later permitted number of apartments accorded with the number of apartments which form the basis of the contract of sale.[79]

89 In Mr Torr's Supplementary Report, Mr Torr sought to undertake a comparative analysis based upon $/apartment between FBURA sales and non-FBURA sales which he listed.[80] When cross-examined he was unable to say of the analysis in his table which of the transactions were based upon actual permits issued and which were based upon other information.[81] If the $/apartment method is to be used, then consistency of input is essential for any meaningful comparison.

90 The Authority submitted that the two sales in Thistlethwaite Street demonstrate the perils of the application of the $/apartment method in an immature market. Mr Dudakov referred to both Thistlethwaite Street sales in his reports prepared at the time of acquisition.[82] Both sites sold in the same street in April 2013. Both were in the same zone and subject to the same overlays: 15-35 Thistlethwaite Street analysed at $3,685/m2, and 125-133 Thistlethwaite Street analysed at $3,406/m2. The first site was 1,194m2 in area and the second was 1,211m2 in area. The first site, 15-35 Thistlethwaite Street, applied for development of a 36-level tower comprising 280 apartments. The second site, 125-133 Thistlethwaite Street, applied for a more modest 20-level tower comprising 88 apartments. The simple fact of different heights of tower as the subject of development application meant that, if the sales were analysed on a per dwelling basis, the sale at 15-35 Thistlethwaite Street showed $15,714/apartment, whereas the sale at 125-133 Thistlethwaite Street showed $46,875/apartment.[83]

91 A simple comparison of these two sales shows that the method is not reliable when seeking to determine the value of the Land in this case.

92 The comparative analysis that Mr Torr sought to undertake in his Supplementary Report[84] suffered from the further problem identified by Mr Brown, namely, that Mr Torr was seeking to compare FBURA and non-FBURA sales in 2016 and 2017, which involved very different market conditions, very different considerations, and were sales which occurred three years after the Relevant Date.[85] The exercise in Mr Torr's Supplementary Report is unhelpful and I give it no weight.

93 Mr Murray also used the $/ apartment method as a 'check' when he prepared his March 2016 valuation. However, he only included a short reference to that method on the last page of his report. He included this statement:

I have adopted a rate of $30,000 per potential dwelling ... I note this calculates to a sum of $63,000,000.[86]

94 When he prepared his draft report in October 2014, Mr Murray attempted a regression analysis of the five sales upon which he relied for his opinion, using the number of apartments analysis approach.[87] He spread the sales into two groups; those prior to the Relevant Date and those after the Relevant Date. There were three in the latter category.[88] He discerned a close correlation using a regression analysis between the three sales after the Relevant Date but, essentially, found no relationship whatsoever if all five sales were taken into account. Using those three later sales, he arrived at a figure for the subject property of $73 million.[89] He did not include this analysis or discussion in his final report. The analysis that he undertook clearly showed the method was not reliable.

95 If one were to seek to apply the method, it would be necessary to have regard to the analysis of sales that occurred at or around the Relevant Date. I note that, in the sales listed in Mr Torr's Supplementary Report, 85-93 Lorimer Street showed $18,814/apartment and 134-150 Buckhurst Street showed $17,132/apartment.[90]

96 However, based on the analysis above, I do not rely upon this method for the assessment of market value in this case.

97 No valuer placed any reliance upon this method until belatedly. Following the Joint Valuers' Report, Mr Torr referred to this method in his Supplementary Report.[91]

98 The 15-35 and 125-133 Thistlethwaite Street sales, in April 2013, again provide a convenient demonstration of why this method was not appropriate to assist in arriving at the value of the Land at the Relevant Date. The property at 15-35 Thistlethwaite Street, with the 36-level tower, showed $166/m2 of gross floor area. The property at 125-133 Thistlethwaite Street, with the 20-level tower, showed $852/m2 of gross floor area.[92]

99 Another example of the unreliability of the method in an emerging area concerns the 85-93 Lorimer Street property. The various schemes for development on the 85-93 Lorimer Street site revealed a difference between the gross floor area of 123,677/m2 for the Elenberg Fraser Plan, and 76,678/m2 for the plan ultimately approved.[93]

100 I do not accept that the use of the dollars per gross floor area is appropriate in these circumstances.

101 Whilst comparative plot ratios between comparable sales and the property to be valued may be a relevant consideration, comparative plot ratios cannot be viewed in isolation from other information concerning otherwise comparable properties.

102 Again, by way of example as submitted by the Authority, 15-35 Thistlethwaite Street showed a ratio of four square metres of land area per apartment. The 20-level tower development at 125-133 Thistlethwaite Street showed a ratio of fourteen square metres per apartment.

103 All valuers were aware of the ability to compare based upon density or land area to number of dwellings.[94] None of the reports include this method of comparison as a material matter, when comparing the critical sale sites at 85-93 Lorimer Street and 6082 Johnson Street. Although considerable time was spent in cross-examination of Mr Dudakov and Mr Brown on this topic, it is not of significance in weighing the evidence of the respective witnesses.

104 In my view the $/m2 of land area comparison was the most robust method in the circumstances of the location, maturity of the market, and the availability of suitably comparable sales within a reasonable time frame around the Relevant Date.

105 The $/apartment method has too much variability due to variation in apartment size and quality of finish, as well as other amenity features of each particular development being compared. In my view, there was too much variation for a useful and compelling comparability to be drawn. I do not find it of sufficient consistency to be useful.

106 The other methods, for the reasons set out, are of no relevant probative or persuasive value.

Relevance of transactions which are not completed sales

107 I was not referred to any binding authority which would suggest that an uncompleted contract of sale must be taken into account as direct evidence of market value.

108 The Claimant seeks to rely upon two transactions which fall into this category, being the $24.5 million Hydrox Contract in 2011, and the $55.5 million 60-82 Johnson Street transaction in May 2014.

109 In McDonald v The Deputy Federal Commissioner of Land Tax for New South Wales[95] ('McDonald'), the High Court considered the admissibility of an offer that leads to a concluded contract and an offer that does not:

When the matter has reached the point of a concluded contract, there has been a definite concrete fact established, which not only evidences value, but to some extent helps to create or modify it. Where an owner has actually parted with his land for a fixed sum and a buyer has parted with his money for the land, a clear event has arisen, which, based on the ordinary instincts and pulses of human nature, indicates a consensus of opinion between two adverse parties in the community respecting the value of similar lands.

...

But if the negotiations do not end in a concluded bargain, the field is at once open to a multitude of other considerations before the same point of opinion is reached. Excursions into the realm of collateral circumstances would be endless. They would so add to the cost, delay and uncertainty of litigation as on the whole to render a great disservice to the cause of justice.

110 In Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd[96] ('Cordelia Holdings'), after referring to the above passage in McDonald, the full Federal Court said that whatever weight might be properly given to evidence of offers for limited or general purposes, it is clear that such evidence is not permissible as direct evidence of value.

111 In Warner v Ulysius International Trading Pty Ltd,[97] after referring to the proposition that an offer to buy is not admissible as direct evidence of the value of shares, the New South Wales Supreme Court noted that this was not a universal rule and, in some cases, an offer may be taken into account.[98]

112 In MMAL Rentals Pty Ltd v Bruning,[99] in relation to the fair market value of shares, the New South Wales Court of Appeal reviewed the authorities on offers as evidence of value.[100] The issue on appeal was the relevance of the appellant's offer to purchase the respondent's shares. In this context, Spigelman CJ considered that he was not bound by McDonald, as McDonald did not involve an offer of sale or purchase of a particular property being the subject of the valuation.[101] His Honour referred to the conclusion of the Full Court of the Federal Court in Cordelia Holdings and said, for present purposes, it was not necessary for him to qualify that conclusion.[102]

113 In Marroun v Roads and Maritimes Services,[103] the New South Wales Land and Environment Court considered that a genuine offer to purchase the subject property, which did not proceed to completion of contract due to compulsory acquisition, might be admitted as evidence as to the value of land.[104] This distinction is consistent with the earlier authorities set out above. However, there is a distinction between offers to purchase the subject property and offers, whether conditional or otherwise, to purchase allegedly comparable properties (which is what is being sought to be relied upon by the Claimant here) with reliance upon the 60-82 Johnson Street transaction in May 2014. Consistent with the above authorities, I am of the view that such evidence is not and should not be treated as direct evidence of value. In this case there is no evidence of any offer to purchase the Land at or near the Relevant Date.

114 It was argued by the Claimant that a number of matters arise in relation to the sequence of events surrounding entry into the Hydrox Contract and its termination. These are that:

(a) the reason for the termination of the Hydrox Contract was the likelihood of the acquisition of the Land by the Authority;

(b) there is no evidence that market conditions deteriorated subsequent to the termination of the Hydrox Contract; and

(c) the contracted price of $24.5 million should thus be viewed as informing the market value of the Land as at October 2011, providing a 'floor' to the value of the Land in December 2013, notwithstanding that the land at the earlier time was zoned for industrial purposes and not zoned for CCZ1 purposes.

115 The Authority argued that the evidence of Mr Dudakov and Mr Torr demonstrated that reliance on this contract to set the 'floor' to the value of the Land was not borne out by the objective facts.

116 Mr Dudakov's evidence was that he placed no weight on the Hydrox Contract because the ultimate use for the site had changed dramatically to residential as a result of the designation for urban renewal.[105] He also gave evidence that he considered the sale price of the Hydrox Contract to be above market for an industrial use, which was another reason to disregard the contract.[106] Mr Torr also regarded the contract as irrelevant, as he regarded it as a sale of land for industrial purposes, and that it took place three years prior to the Relevant Date in a different sector of the market.[107]

117 I have concluded that the transaction ought to be disregarded as a factor relevant in assessing the market value of the Land as at the Relevant Date based on the evidence of Mr Dudakov and Mr Torr as referred to above.

118 I note that the information provided to both Mr Dudakov and Mr Brown was that the contract had not proceeded, because satisfactory vehicle access for the proposed Masters store on the site was not achievable. A contrary reason relied upon by the Claimant - that the Hydrox Contract did not proceed because of the proposed acquisition - seemed dubious to me as the Hydrox Contract itself expressly referred to the potential acquisition and dealt with the topic of entitlement to compensation.[108]

119 It is difficult to give any weight to the letter dated 5 October 2011 from Allens Arthur Robinson purporting to terminate the Hydrox Contract. This is because the Hydrox Contract provided no right of termination for threatened compulsory acquisition, and also because the clause relied upon in the letter provided for the contract to lapse and come to an end, unless the purchaser positively gave notice that it wished to proceed to settlement.

120 In my opinion, the matters sought to be established by the Claimant in respect of the Hydrox Contract are not borne out by the weight of the evidence.

121 60-82 Johnson Street was the subject of a contract for $55.5 million in May 2014, which was conditional upon the issue of a permit 'generally in accordance' with plans lodged mid-2013. The site has an area of 9,776 m2, resulting in a rate of $5,677/m2. Mr Torr and Mr Dudakov agreed that the benefit of having a permit would have added approximately 10% to the sale price of this site.

122 Both Mr Torr and Mr Murray have placed weight on this sale as being a directly comparable sale, even though it was not completed.

123 The Authority argued that, by examination of the circumstances of this 'sale', no weight ought to be given to it. The Authority argued that the $55.5 million contract was unreliable as a comparable sale because it was not in fact a concluded contract of sale.

124 The history of this site was that MaxVic Holdings Pty Ltd ('MaxVic') purchased the property by contract, dated 3 December 2012, for the sum of $10.1 million.[109] This contract was completed in September 2013.[110]

125 On 18 May 2014, MaxVic entered into a contract with Shao Huang or nominee.[111] It was a term of the contract that it was subject to a 14-day due diligence, at the conclusion of which the purchaser could withdraw from the contract, and the 1% deposit would be refunded in full. It follows that the purchaser could walk away from the contract to purchase without penalty at the time up to and including 1 June 2014. In addition, the original terms and conditions of the 18 May 2014 contract permitted either the vendor or the purchaser to walk away if a permit did not issue before the specified date.[112]

126 On 30 May 2014, before the purchaser became bound to proceed,[113] special conditions were agreed to replace existing special conditions in the 18 May 2014 contract. The special conditions conferred an absolute discretion on the purchaser to 'walk away'. Neither of the Claimant's valuers, Mr Torr nor Mr Murray, were aware of the terms of the special condition that allowed this situation until they gave evidence or until shortly prior to them doing so.[114]

127 There were delays in obtaining the planning permit for the site. Despite the parties extending the contract three times, they eventually agreed to 'walk away' in April 2015. The permit was issued by the Minister for Planning in May 2015.

128 There was no contract of sale which was binding or enforceable upon both the vendor and the purchaser until December 2016, when a different contract was entered into for the sale and purchase of the property for $40.65 million.

129 When Mr Murray was confronted with the terms of the 60-82 Johnson Street transaction and the non-binding nature of clause 23.4, he recognised it to be a 'walk away' contract. Nevertheless, he continued to rely upon that transaction.

130 The Claimant submitted that a review of the history of the 60-82 Johnson Street property, after the May 2014 sale failed to be completed, suggested that there was continued interest in the market for the property at a price above $50 million. As to why the subsequent attempts at sale of the property remained unsuccessful (until December 2016), the Claimant suggested that it was possible that the remediation cost estimate of $7.06 million for a 'commercial' type development may have provided a significant disincentive to purchasers.

131 The Authority identified a number of unusual features of the transaction, including: the ability to 'walk away' from the contract absolutely without any reason or penalty; the deposit of 1% with a balance of 10% payable on acceptance of the contract at the conclusion of the due diligence period;[115] and the agreement was extended on three occasions in what was acknowledged by all valuers to be a rapidly-rising market, but without any change in price or fee being paid for the extension.[116]

132 Additionally, the comparison between the $55.5 million price and the actual price paid in December 2016, at $40.65 million, more than two and a half years later in what all valuers agree was a rising market is compelling evidence that, even if the $55.5 million transaction was a standard contract of sale, it was significantly out of line with the actual market value of 60-82 Johnson Street in May 2014.

133 Finally, I am asked to take into account the bona fides or reliability of the parties to the transaction under consideration. This is a consideration which was acknowledged by Mr Torr in his cross-examination that, 'if... you are looking into a sale and you are aware that one or both of the parties in it are dodgy, you will certainly treat that [sale] with some scepticism'.[117] I agree that such circumstances undermine the weight that could be given to this transaction as evidence of market value.

134 The 60-82 Johnson Street transaction in May 2014 was not a 'sale'. No actual transfer took place. The terms of the 5 May 2014 original contract did not bind the purchaser to proceed during the due diligence period.[118] After 30 May 2014, replacement special terms and conditions allowed the purchaser to 'walk away' in its absolute discretion, even after a permit was obtained which was generally in accordance with the application issued.[119] As accepted by Mr Torr, such an agreement was worthless to the vendor.[120]

135 A contract for sale of land requires the vendor and purchaser to be bound to the transaction, although there may be particular terms that make the obligation of the purchaser contingent. That was never the case, either in relation to the original contract, or in relation to the substituted special conditions of sale. In analysing the facts and circumstances of this transaction, it is clear that there was never a commitment to the contract.

136 I am of the view that, in principle, evidence of market transactions which fall short of a completed sale might be relevant depending on the circumstances. This view is supported by s 5A(1) of the VL Act, which provides that every matter or thing which a court considers relevant to determining the value of any land may be taken into account.

137 However, in this case, the facts do not bear out the robustness of such a price and I cannot give the $55.5 million Johnson Street May 2014 'transaction' any weight. This transaction did not complete and the eventual completed transaction in December 2016, at $40.65 million, more than two and a half years later, when all of the valuers have agreed that the 2014 period was one of a rapidly rising market,[121] demonstrates that the transaction was one of pure speculation rather than a transaction that demonstrated market value. The context and circumstances of the transaction are such that, in my view, it would be unsafe for the Court in these circumstances to rely on it.

138 Each of the valuers considered a basket of sales primarily in Southbank, South Melbourne, Docklands and Port Melbourne. These are discussed below.

139 In the Joint Valuers' Report, all the valuers generally agreed that the properties at 8593 Lorimer Street and 60-82 Johnson Street were considered to be directly comparable in terms of location, size, and development potential.[122] These two properties are considered below.

140 The sale closest in time to the Relevant Date is the 85-93 Lorimer Street sale on 19 February 2014 for $18.5 million with an area of 8,847m2. This equates to a rate of $2,091/m2.[123]

141 As stated, this property was accepted by all of the valuers as comparable. In the Joint Valuers' Report, Mr Dudakov and Mr Brown recorded their opinion that this is the most comparable sale, and considered it as the key sale in justifying their valuations at the lower end of the spectrum in this case. This sale was described by the Authority as a classic Spencer sale.[124] On the other hand, Mr Torr and Mr Murray described the sale in the Joint Valuers' Report as a 'very low sale'.

(a) the 85-93 Lorimer Street property was placed on the market in September 2012 following the announcement of the FBURA in July 2012. Placement of the property on the market was in response to advice from experienced managing agents, Lemon Baxter.[125] Aka Capital Pty Ltd ('Aka Capital') made an initial offer of $15 million followed by a further offer, on 17 December 2012, of $15.2 million. Ultimately, a contract of sale at $16.25 million was negotiated by February 2013.[126] Elenberg Fraser produced a feasibility report on 12 March 2013 incorporating a four-residential tower, 1,585 apartment development for the site;[127]

(b) the vendor company, Caponero Pty Ltd, was controlled by Ms Marina Darling, a former director of Mirvac Limited ('Mirvac'), the developer of the Yarra Edge Precinct residential development. At the January 2014 date of sale, a number of residential towers had been developed by Mirvac, including two towers directly opposite the sale site.[128] Additional residential development by Mirvac has continued further south along the river;

(c) by November 2013, there were three parties interested in purchasing the property.[129] On 13 January 2014, Lemon Baxter prepared an advertising schedule for expressions of interest closing mid-March 2014.[130] On 10 February 2014, Little Projects entered the competition as an additional prospective purchaser.[131] Little Projects was an experienced residential property developer active in the Melbourne market at that time;

(d) Mr Fox, who gave evidence in the hearing, had access to the feasibility for the property prepared by Elenberg Fraser.[132] He was aware of the need to provide for development contributions, payable in the Montague precinct, an impost not payable on other sites outside the FBURA. Feasibility assessments were prepared by Little Projects; and

(e) in the context of Little Projects' understanding that there were other players in the market interested in the same property, between 11 and 19 February 2014, the price was negotiated up from $16.25 million to $18.5 million.[133] On 19 February 2014, a binding contract for the sale of the property at $18.5 million was signed.

143 In April 2016, the 85-93 Lorimer Street property resold for $60 million. The second sale equates to a rate of $6,782/m2. At the time of resale, it had the benefit of a planning permit, which Mr Torr has estimated would have added in the order of $7 million to its value. Removing the permit value from the price achieved in April 2016 would result in a sale price of $53 million on a like-with-like comparison with the first sale.

144 The sale of 85-93 Lorimer Street in February 2014 is considered by both Mr Torr and Mr Murray as a 'low sale'. Mr Torr, in his original report, erroneously believed the price to have been agreed in 'late 2012' at a 'lower point' in the market.[134] When it became clear that he had the wrong date, he was 18 months out, he changed direction. In the Joint Valuers' Report, he reported the sale to be a 'very low sale'. He referred to two factors: the proposed tram route and the proposed public park taking up 41% of the site.

145 It was submitted on behalf of the Authority that Mr Fox's evidence in relation to Little Projects' purchase of 85-93 Lorimer Street in February 2014 was important in two respects. It was his evidence, confirmed by the Urbis' email dated 11 August 2014,[135] that, as purchaser, Little Projects knew nothing of the proposal for a public park which led to 40% of the site being given over to that use. In fact, there was no proposal for a park at February 2014.[136] It was also his evidence that Little Projects knew nothing about the proposal for an elevated tram route along the eastern boundary of the site.[137] As to that proposal, it was Mr Fox's opinion that the presence of the tram would add a benefit, as the tram interfaced with the site and would likely enable a second commercial frontage for development, in addition to the commercial frontage to 8593 Lorimer Street.

146 As the evidence of Mr Fox reveals, the reasons given by Mr Torr as to why the sale of 85-93 Lorimer Street in February 2014 was a 'low sale', were incorrect.

147 There was nothing in the evidence of Mr Fox which supports the contention advanced by Mr Torr and Mr Murray that the 85-93 Lorimer Street contract price was a 'very low sale'.

148 This sale was an actual sale. The contract was unconditional, and it settled resulting in a transfer of land. There is nothing about the terms of the contract of sale which put it outside the usual terms and conditions of sale.

149 The sale took place between fully informed sophisticated parties, both of whom were fully acquainted with the land, its planning circumstances, its potential for development of multi-storey residential towers, and its locational attributes. It was a sale that took place two months after the Relevant Date in the context of a number of parties interested to secure it.[138]

150 The following factors support the contention that it was not a 'very low sale':

(a) the 'cracking deal' (as described in Little Projects' internal correspondence) potentially available to Little Projects at $16.25 million, subject to an environmental due diligence, was not achieved. Whilst Mr Fox sought to downplay the extra $2.25 million paid for the site, the price that he offered went up by $2.25 million in the 9 days between the first offer and the contract;

(b) as Mr Dudakov identified, if the price was a low price, it would have been an option for Aka Capital to 'flip' or on-sell its contract at $16.25 million (which they did not do); and

(c) the price agreed was arrived at in the context of Little Projects' belief that there were other active participants in the market seeking to purchase the property.

151 The Estate Master feasibility assessment, which adopted $16.25 million, contained a variety of assumptions and was not able to be tested by the valuers. However, as it appears that there were a number of feasibilities undertaken by Little Projects over this period, this document is of limited assistance, and is of no assistance to me in supporting the proposition that the sale in 2014 reflected a low price.

152 Following the Joint Valuers' Report, Mr Torr sought to bolster his opinion as to value and 85-93 Lorimer Street by looking at the resale of that property and expressing a view as to market movement in his supplementary report. He referred to an 'extraordinary rate of increase'. He did not set out his workings, and his method of adjustment for development contributions was somewhat opaque. As was the case with section five of the report, struck out for failure to set out the underlying materials relied upon, Mr Torr was obliged to disclose his process of reasoning in his report. He sought to do so in re-examination, which was most unsatisfactory. Having had the opportunity to read the transcript, Mr Dudakov expressed disagreement with the method adopted.

153 In my view, the discounting of the sale of 85-93 Lorimer Street in February 2014 by Mr Torr and Mr Murray, and their view that it was a 'low sale', ignores a number of key characteristics about the property and the circumstances of the sale. These factors include the developer competition for the site, the date of the sale, the unconditional nature of the contract, its terms and conditions, the identity and characteristics of the parties to the transaction, and the fact that the contract proceeded to completion.

154 I do not accept that there was a proper basis for treating the 85-93 Lorimer Street sale as a low sale. In my view, this sale for $18.5 million or $2,091/m2 is the most useful and compelling evidence of the market at or about the Relevant Date.

155 As previously noted, the 60-82 Johnson Street property was one of two properties considered to be directly comparable in terms of location, size, and development potential.

156 The 60-82 Johnson Street property sold in December 2012 for $10.1 million or $1,033m2 which settled in September 2013. Prior to this, it had sold in April 2011 for $5.54 million or $545/m2.

157 In the Joint Valuers' Report, Mr Torr and Mr Murray placed no reliance on this 2012 sale.[139] Mr Torr considered the sale of 60-82 Johnson Street in December 2012 as 'extraordinarily low'. Mr Dudakov, in his report dated 31 March 2016, considered this as the most comparable sale to have occurred prior to the Relevant Date (although not the best evidence of value, which he considered to be the sale of 85-93 Lorimer Street in February 2014).[140] Mr Brown considered the sale of 60-82 Johnson Street, in December 2012, as one of the two most comparable sales (the other being 85-93 Lorimer Street in February 2014).[141]

158 The 60-82 Johnson Street sale in December 2012 was both a real sale, in that it was a completed transaction, and a sale that a hypothetical purchaser would have been aware of as at the Relevant Date. The parties to the hypothetical sale of the Land at the Relevant Date would have also been aware of the earlier sale in April 2011. They would have been aware of the dramatic increase in value of 60-82 Johnson Street by December 2012 following the FBURA announcement and rezoning.

159 The 60-82 Johnson Street sale in December 2012 satisfies all the criteria in s 5A(2) of the VL Act, only requiring adjustment for the passage of time (as it occurred 12 months prior to the Relevant Date).

160 I accept that both actual sales of 60-82 Johnson Street (April 2011 and December 2012) would have informed the amount that the hypothetical parties would have been prepared to pay and accept for the Land.

161 As discussed, 60-82 Johnson Street was the subject of a conditional contract for $55.5 million in May 2014, which did not complete.

162 For the reasons set out above at paragraphs [121]-[137], I am of the view that no weight should be placed on this transaction.

163 The Claimant's position was that the later sale of 60-82 Johnson Street in December 2016 for $40.65 million, three years after the Relevant Date, was also a low sale.

164 I find that the evidence does not justify a conclusion that the December 2016 sale of 60-82 Johnson Street was a 'low sale'. As stated by Mr Torr, in relation to the $40.65 million sale of 60-82 Johnson Street in December 2016:

I don't know any reason why its low but its low.[142]

165 In my view, support for the sale of 60-82 Johnson Street in December 2016 being 'low' can only be found if the sale of 60-82 Johnson Street in May 2014 is to be given any weight, which as I have found it should not.

(e) Conclusion on sales of directly comparable properties

166 The primary reason for the difference in the respective positions between the Claimant's and the Authority's valuers is the comparable sales' commencement point. Mr Brown and Mr Dudakov have appropriately placed the greatest weight on the 85-93 Lorimer Street sale, in February 2014, and Mr Torr and Mr Murray have unsustainably relied on the $55.5 million 60-82 Johnson Street transaction and their 'low sale' theory.

167 As reported in the Joint Valuers' Report, Mr Murray regarded the 85-93 Lorimer Street transaction as a 'very low sale'. He viewed the 60-82 Johnson Street May 2014 transaction as 'in line with sales evidence' and as a transaction which 'further confirms that the 85-93 Lorimer Street sale can be considered to be out of line with market levels'.

168 Mr Torr maintained his reliance upon the 60-82 Johnson Street May 2014 transaction at the time of the Joint Valuers' Report, and again sought to distinguish the 2012 sale of the same property as not reliable due to the 'extraordinary change in value' to the 'second sale'. Those observations are not sustainable in light of what is now known as to the circumstances of the sales.

169 Mr Dudakov did not place reliance upon the 60-82 Johnson Street transaction in May 2014. He provided reasons in support of his opinion in the Joint Valuers' Report.[143] As Mr Dudakov said, in cross-examination, there was only one transaction that was 'out of line'; the purported May 2014 sale of 60-82 Johnson Street.

170 Unless I accept the proposition upon which both Mr Torr and Mr Murray rely, that both the 85-93 Lorimer Street sale in February 2014 for $18.5 million, and the sale of the 60-82 Johnson Street property in December 2012 for $10.1 million and then again, in December 2016 for $40.65 million are low sales, the $50 million plus valuation figures for the Land which the Claimant contends cannot be supported.

171 In effect, the 'low sales' proposition only gains any support from one 'sale' - the sale that never completed being the 60-82 Johnson Street transaction in May 2014. The position advanced by Mr Torr and Mr Murray that the sales are 'low', and 'very low', depends upon adopting the 60-82 Johnson Street May 2014 transaction as defining evidence of market value as at May 2014.

172 I agree with Mr Dudakov that no weight should be placed upon the 60-82 Johnson Street transaction, and that the only transaction that was 'out of line' was the 60-82 Johnson Street transaction in May 2014.

173 The Land was variously described in terms of its postal address, or postcode, as South Melbourne or Southbank. Its correct designated postcode address is Southbank. Counsel for the Claimant sought to highlight this issue as an attribute of the Land.

174 There was no issue that the Land is within the FBURA. Notwithstanding its Southbank address, the barrier of the West Gate Freeway infrastructure disconnects this nominal 'Southbank' location from the established Southbank and Docklands areas to the north-west of the West Gate Freeway.

175 An address within a designated suburb may well have impact on value. For example, a Toorak address will have greater cachet (and price) than that of a property across the road, but which has a different designated suburban address. On the facts in this case, the locational attributes of being within the FBURA, including being disconnected from the Southbank or Docklands established areas by the substantial freeway infrastructure, the lack of connectedness with established retail, commercial, and community infrastructure, the obvious industrial appearance of the land, and the type of surrounding development, leads me to the conclusion that viewed objectively its nomination with a Southbank postcode has no measurable impact on the land value. Whilst the Land has a nominated Southbank address, it clearly read and was understood to be squarely in the newly minted FBURA.

176 The Authority's evidence, specifically the reports of Mr Biasci and Mr Dawson, sought to distinguish the development status of Fishermans Bend relative to other development precincts such as Southbank and Docklands.

177 Mr Dawson's report provides a statistical analysis (between 2012 and 2015, being the period surrounding the Relevant Date) of development applications, development approvals, sales volumes, and median price trends in the Montague Precinct, and seeks to draw comparisons with adjacent suburbs such as South Melbourne, Port Melbourne, Docklands, Melbourne, and the established Southbank area.

178 The Authority's planning and development evidence sought to highlight the 'embryonic' state of development within the Fishermans Bend Precinct at the Relevant Date.

179 The purpose of this evidence was challenged by the Claimant as it contended that neither of the Authority's valuers relied upon these reports as evidence in their assessments. This is correct. However, the Authority and its witnesses contended that the state of the market in the FBURA was rudimentary and immature at the Relevant Date, and that this was a matter which distinguished the other sales in the inner Melbourne area from those which were located in the established areas of Southbank and Docklands.

180 It was argued by the Claimant that the historically low volume of apartment sales and apartment approvals in South Melbourne and the Montague Precinct were not a reliable indicator of the strength or weakness of that market around the Relevant Date. Rather, it was argued that they are a product of the history of the location, the long-standing planning controls, and the fact that the rezoning/redevelopment was still in its infancy.

181 At the Relevant Date, the Minister for Planning had declared the FBURA to be an area of State Significance.[144] The Land was zoned CCZ1 on 5 July 2012. A Development Contributions Plan Overlay - Schedule 2 applied to the Land.[145] At the Relevant Date, a development contributions plan had not been prepared. Development contributions were being negotiated on a case-by-case basis, thus providing a level of uncertainty as to the quantum of the contribution required by the Minister.[146] The Minister for Planning was the responsible authority for applications over a certain threshold, including a high-rise residential development.[147]

182 Notwithstanding the strategic planning process for the FBURA had translated into a rezoning of the area to CCZ1, and the controls sought a transition to a high density, mixed-use precinct with a residential and commercial focus[148] little actual development had taken place by the Relevant Date. At the Relevant Date, the state of development in the FBURA reflected a declining manufacturing and industrial area ripe for urban renewal,[149] rather than an emerging high density mixed-use area to which the planning controls and polices aspired in the longer term.

183 The FBURA covers approximately 250 ha of land[150] and has a 50-year development horizon.

184 I agree with the Authority that all of this demonstrates the development uncertainty at this time, as well as the embryonic development status and immaturity of the market at the Relevant Date. This is particularly so when a comparison with the more established areas of Southbank and Docklands is undertaken. Southbank and Docklands are urban renewal projects that have been in train for several decades.[151]

At the Relevant Date, the Southbank and Docklands Precincts incorporate numerous facilities including supermarkets, restaurants, retail and professional services. Fishermans Bend, due to its history, continues to be used predominantly for industrial and business purposes and is lacking in the provision of facilities such as café/restaurant, retail and professional services ...[152]

186 Both Mr Biasci and Mr Milner acknowledged that, at the Relevant Date, there was still land available for redevelopment in both Southbank and Docklands, and that there was no formal requirement for the payment of development contributions in either of those areas at that time.[153]

187 Mr Milner's evidence was that, in time, Fishermans Bend and the Montague Precinct will provide substantial potential for growth in high-rise apartment development in the same manner as the established Southbank area and Docklands. However, at 2013, this location was not recognised as a residential address and was least endowed with established physical and community infrastructure. In his report, it was stated:

These attributes in conjunction with a stronger attraction presented by Southbank and Docklands suggest that apartment development in Fishermans Bend would have been slower to be developed in the short to medium term.[154]

188 The Dawson report provided an analysis of dwelling applications in the Montague Precinct, and in Southbank and Docklands, which provides a useful comparison of the maturity of the areas from a development perspective. In the 2012/2013 financial year, there were 3,449 dwelling applications in the Montague Precinct.[155] In the previous year, there were no applications. As at the Relevant Date, none of those applications had progressed to approval.

189 In 2013/2014, there were 551 dwellings approved in the Montague Precinct.[156] Whilst there was a wave of applications immediately following rezoning changes in the 2012/2013 financial year, no actual apartment construction occurred until 2014/2015, when the Gravity Towers[157] were actively selling. Eighty transactions were recorded in that year, compared with five or fewer in the Montague Precinct recorded in the previous two years.[158]

190 In 2013/2014, 1,241 building approvals occurred in Southbank and 657 in Docklands. In 2014/2015, 348 approvals occurred in Southbank and 1,703 in Docklands.[159]

191 I note that, whilst planning permits were being granted for sites within the FBURA following the Relevant Date, there has been limited development in the area, even up to the date of trial.

192 From a valuation perspective, neither Mr Dudakov nor Mr Brown consider that Southbank or Docklands is comparable to Fishermans Bend.[160] Mr Murray agrees that Fishermans Bend was in its infancy or at an embryonic stage of development.[161]

193 I find it difficult to conclude that meaningful comparisons can be made between the more developed and settled areas of Southbank and Docklands and the Montague Precinct within the FBURA at the Relevant Date. I am of the view that the utility of sales in Southbank and Docklands in assisting with the assessing of market value of the Land at the Relevant Date is questionable. The use of sales in the more mature high-rise residential market locations of the established Southbank, Docklands, and other inner-city locations are not of sufficient probative value in light of the closest sale in all respects, being the 85-93 Lorimer Street sale.

194 The Claimant argued that sales after the Relevant Date were equally relevant and should be taken into account.

195 Mr Murray and Mr Torr both relied upon the following as key sales, post the Relevant Date, in support of their values:

(a) the sale of 93-119 Kavanagh Street, Southbank, which is outside the FBURA for $145 million (a rate of $7,380/m2) in June 2014; and

(b) the sale of 6-78 Buckhurst Street, South Melbourne, which is located within the Montague Precinct of the FBURA for $42 million (a rate of $4,375/m2) in September 2014.

196 Mr Murray also relied upon a number of sales, post the Relevant Date, as supporting values achieved in the FBURA, including:

(a) the first sale at 15-87 Gladstone Street, South Melbourne, which is also within the Montague Precinct, in April 2015, for $37 million (a rate of $6,183 per square metre). It was resold in March 2016 for $52 million (a rate of $8,690/m2);

(b) the adjoining property at 91-95 Montague Street, South Melbourne, in May 2015, for $6.08 million (a value rate of $9,635/m2). It was proposed to provide a 30-storey building comprising 126 apartments (at the date of trial no permit had been issued).

197 All of the valuers have agreed that 2014 was a period of rapid escalation of the market.

198 The relevance of sales and events after the relevant date was discussed in Challenger Property Asset Management Pty Ltd v Stonnington City Council, where Croft J held:

In my opinion, the legal propositions arising from the Falconer case and the other authorities to which reference has been made may, as Challenger submitted, be distilled as follows:

(a) All circumstances occurring after the date of valuation (which is, in the present case, 1 January 2008) cannot be taken into account in valuing the site;

(b) Evidence of subsequent circumstances may only be used if it relates to a foresight, but may not be used if it merely constitutes a hindsight;

(c) The amount to be assessed is what the hypothetical prudent purchaser would entertain if perfectly acquainted with the land as at the relevant date.[162]

199 Whilst that decision concerned a rating valuation, the Court was bound to and applied s 5A of the VL Act.[163]

200 In Commonwealth of Australia v Arklay, Dixon CJ, Williams and Kitto JJ held that the 'best evidence of this [market] value is that of comparable sales of other land either before or after the date of acquisition'.[164] The critical question is, how far after, in circumstances where it is agreed that there is a rapidly-rising market.

201 The usual enquiry is the value of the property at the date of acquisition and not a subsequent date.[165] However, the principle does not preclude evidence of subsequent sales in order to determine the value of the acquired property at the relevant date. In other words, the circumstances of a sale 'being before or after a particular date cannot nullify the relevance of subsequent sales while the general market conditions remain the same'.[166] However, the prices paid for comparable land during a period of rapidly escalating prices are not as useful an index of value as sales in more stable conditions.[167]

202 In Brisbane City Council v Mio Art Pty Ltd, Fryberg J drew a distinction between the admissibility and utility of taking into account subsequent events, and the use of sales subsequent to the relevant date, in assessing market value at the earlier date:

I see no inconsistency between this approach and that which enables subsequent sales to be taken into account in assessing market price. Those sales are not taken into account as matters which would be present in the minds of the hypothetical parties. They are simply evidence of an event from which an inference can be drawn about the position at an earlier (but not very much earlier) time. The implicit assumption is that nothing material has changed in the meantime or that if it has, allowance can be made for the change. Consequently they are probative of the earlier position. There will probably be other cases in which inferences about the position on the date of acquisition might logically be drawn from subsequent events. For example, suppose in circumstances similar to those in this case an acquiring authority denied that a change in building heights was under consideration at the date of acquisition. Publication of a document which would have taken six months to prepare on that topic only three months after the date of acquisition might tend to prove the falsity of the denial; it might support an inference that the topic was under consideration. But it would still be necessary to prove what would have been known by the hypothetical vendors and purchaser.[168]

203 In Brisbane City Council v Bortoli, it was said:[169]

It is convenient to commence with the appellant's challenge to the use of evidence of sales subsequent to the resumption. Melwood Units demonstrates that it is not an error of law to determine the value of land at a particular date, by reference to subsequent sales. Nevertheless, account must be taken of changes affecting the market between the resumption date, and the date of the sale. This is recognised in the passage from Leichhardt, relied upon by the respondent. It is as follows:

... 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 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.

204 In Brady King Pty Ltd v Federal Commissioner of Taxation (No 2), Middleton J said:

The Commissioner contended that it appeared to be Mr Nicodimou's view that the relevant valuation principles positively forbade him from considering any information that post-dated 1 July 2000 in order to ascertain the market value of the strata units as at 1 July 2000. I agree that, if Mr Nicodimou held this view, it would be a fundamentally incorrect view.[170]

205 The task before the Court is to determine the market value at the Relevant Date. I accept as a matter of law that sales which are comparable in all or most other relevant respects, which occur in, or around, or after the Relevant Date, ought to be considered relevant and taken into account in some way. The question then arises as to how much adjustment can be safely made. If the adjustment is significant, a mere mathematical adjustment may not reflect the market at the relevant point in time. This is particularly so where the market is rapidly changing, is lumpy, or non-linear. Rather, such an approach may just be a mathematical exercise in and of itself and be a distortion rather than a good reflection of the market. What is necessary is to judge to what extent the sales reflect the consistency with general market conditions at the relevant date.

206 I acknowledge that, in accordance with s 5A of the VL Act and the Spencer principles, the parties are imputed with full knowledge of all of the relevant matters which would affect price as at the Relevant Date. This is not a situation where there is a question of hindsight confirming a foresight.[171] It is a question of what are the comparable sales, whether it is possible to safely make adjustments, and what are the adjustments to be made.

207 I do not accept that the correct approach is to look at the escalation of the market several years after the Relevant Date to assist a finding as to the market price at the Relevant Date. It is difficult to apply the Spencer approach at a date well after the Relevant Date in what is acknowledged to be a rapid and non-linear escalating market. In such a market, the closest in time will be the best evidence of value.

208 A number of other comparable sales were addressed in the valuation evidence. These are considered below.

209 93-119 Kavanagh Street, Southbank, is in a quite different and far superior locale. It is on the edge of established high-rise development. It was sold in June 2014 for $145 million ($7,380/m2). It has excellent visibility and connectivity to the established Southbank facilities, road access, and the established urban form. It is a site with significant opportunity for commercial and office development in addition to residential development. It requires adjustment as a non-FBURA site, for DCP contributions, time, and for proximity to amenities. The sale is in a different band of value to that which occurred in early 2014, such as 85-93 Lorimer Street. In my view, it is not sufficiently comparable to be given significant weight.

210 I also consider that the sale of 6-78 Buckhurst Street for $42 million, in September 2014, 9 months after the Relevant Date, is of no real assistance given the period of time since the Relevant Date in the rapidly escalating market. Additionally, it requires adjustment for its size as it is approximately half the size of the subject Land at 9600 m2. It, like Kavanagh Street, is in a different band of value.

211 The sale at 134-150 Buckhurst Street, in August 2012, for $11 million was relied upon by Mr Torr and Mr Murray (who incorrectly, in both his Original Report and Supplementary Report, refers to the sale as having taken place in April 2013).

212 Mr Dudakov gave evidence about this sale and said the following:

I would add another sale that I would rank as number 3 in my consideration would be the sale of 134 to 150 Buckhurst Street which sold in August 2012. My information at that time was that it was immediately prior to the announcement - the actual sale took place immediately prior to the announcement of the rezoning to capital city by Minister Guy. I think there is some conflicting evidence about whether it was actually prior to or immediately after the announcement because the sales recorded is August 2012. I don't think much plays on that because that property was significantly improved by a 6,000 metre office development so it was capable of being let in the short to medium term for an alternate use and get quite a substantial return for it whilst it was ultimately viewed as a redevelopment site in the future ...[172]

213 Mr Torr does not appear to have taken the improvements and ability to earn an income into account when considering the sale. There is no reference to it in his Supplementary Report and he did not mention it in his evidence-in-chief.

214 I consider that, due to the income producing improvements, the sale at 134-150 Buckhurst Street in August 2012 is not sufficiently comparable to accord it any significant weight.

215 Mr Murray relied upon a smaller site at 89-103 Gladstone Street, South Melbourne, with frontage to Montague Street in the Montague Precinct, which sold in December 2012 for a consideration of $3.42 million at a value rate of $4,207/m2.

216 A planning application was submitted in mid-2013, and approved in late-2014, for a 29-storey building providing 144 apartments and one retail premises. The development was marketed in late-2014 and sold out within 12 weeks. This transaction, which reveals a high rate for a development site in the Montague Precinct, occurred a year prior to the Relevant Date.

217 Smaller sites are generally accepted to have a higher rate per metre than larger sites, such as the subject Land. Mr Torr and all witnesses agreed that small sites were sales in a different market to the market for the Land. This sale was not relied upon as comparable other than by Mr Murray. In my view, the sale of much smaller sites, including 89-103 Gladstone Street, has little relevance to the market value assessment for the Land.

(e) 15-87 Gladstone Street, April 2015 and March 2016

218 I consider that the sale of 15-87 Gladstone Street, South Melbourne in April 2015 for $37 million, and in March 2016 for $52 million, 16 months and 27 months respectively after the Relevant Date, is of no real assistance given the period of time since the Relevant Date in the rapidly escalating market. Additionally, this is a significantly smaller site at 5984 m2.

219 Mr Murray also placed heavy reliance upon the 91-95 Montague Street sale for $6.08 million or $9,635/m2 in May 2015. This was a very small site, being 631m2. Due to its size and the date of sale, this sale should not be given any weight. I do not consider it of useful assistance in forming an opinion of the market value of the subject Land.

220 In view of the foregoing, I have concluded that the most reliable evidence of market value as at the Relevant Date was the sale of 85-93 Lorimer Street in February 2014. Each of the sales otherwise referred to is either significantly smaller in area, has locational differences, and/or has a sale date which is significantly remote in a rapidly-rising market. I have concluded that they do not provide better evidence of market value than the 85-93 Lorimer Street sale.

Date of acquisition and the rear-view perspective

221 I observe that Mr Dudakov and Mr Brown undertook valuations very close to the Relevant Date, whereas Mr Torr and Mr Murray[173] first undertook their valuations, and first inspected the Land at a later time.[174] Mr Dudakov valued the Land on 27 November 2013,[175] and again in March 2014,[176] and had valued the property on earlier occasions.[177] Mr Brown valued the Land in December 2013.[178] When Mr Dudakov and Mr Brown became aware of the 85-93 Lorimer Street sale, which took place on 19 February 2014, they appropriately referred to and relied upon that sale. In my view, the timing of their valuations provides a more accurate assessment of the market at the Relevant Date.

222 Mr Dudakov was particularly criticised for expressing a view that, 'strictly speaking', sales after the Relevant Date should not be taken into account. This may have had some resonance if, in fact, Mr Dudakov had ignored all sales after the Relevant Date. However, Mr Dudakov also took into account sales after the Relevant Date, specifically relying upon the 85-93 Lorimer Street sale on 19 February 2014, which was very close in time after the Relevant Date.

223 So far as later sales are concerned, Mr Dudakov was clear and unambiguous when it was put to him that, if you have the benefit of after sales, you would have both perspectives. Mr Dudakov responded:

[I]f you have got directly comparable sales at or around the relevant date, you don't need to go outside the realm to try and prove upper point because it is not necessary. If you don't have those directly comparable sales, yes, you would have to use whatever tool you can to try and arrive at a figure but I don't see the need when you have the directly comparable sales at or around the relevant date.[179]

224 Like Mr Dudakov, Mr Brown saw no need or justification to have regard to sales that took place more than one to two months after the Relevant Date, when there was the 85-93 Lorimer Street sale which provided a clear and reliable indicator of value.[180]

225 I agree with the response given by Mr Dudakov as noted above. It accords with the authorities discussed above at paragraphs [198]-[204]. I do not accept the submission by the Claimant that the evidence given by the Authority's valuers was a task approached '[181]h blinkers on'.181

226 If there is evidence of a sale or sales at or near the date of acquisition of land, which is otherwise comparable, then such a sale will properly fit into the basket of sales and, with the appropriate adjustments, is properly a 'comparable sale'. However, a rapidly-rising market is a factor which distorts the picture. The further out from the relevant date, the less confidence the Court can have on such sales, and the weight given to such adjusted valuations based on the length of time will be reduced.

227 I agree with the submission made by the Authority that, where the market is rapidly rising, and the increase is non-linear, the difficulty of seeking to use sales many months after the Relevant Date in an attempt to establish the prevailing value at the Relevant Date is fraught.

228 Both Mr Torr and Mr Murray commenced their work with a hindsight approach. That was inevitable because of the dates on which they were retained.

229 In Mr Torr's initial report, his discussion made common reference to 'hindsight'. In my view, the effect of this 'hindsight' starting point has led him unreasonably to rely upon the May 2014 60-82 Johnson Street transaction as 'the most comparable' key sale, and to treat the February 2012 85-93 Lorimer Street sale - a sale which, in his original report, he erroneously believed to have been at a price agreed in 'late 2012' at a 'lower point' in the market - as a 'low sale'.

230 Mr Torr referred to the June 2014 sale of 93-119 Kavanagh Street at $7,380/m2,[182] and to the sale of 6-78 Buckhurst Street in September 2014 showing $4,375 per square metre.[183] Mr Murray also identified those two sales, and described development sites reflecting general sales rates between $2,000-$7,150 per square metre.[184]

231 At the Relevant Date, there was no relevant sales evidence available at more than $2,000/m2.[185] Mr Torr's adopted level of value is double that rate. His initial report relied upon 60-82 Johnson Street, in May 2014, and 85-93 Lorimer Street, as an 18month-old transaction in February 2014, to justify that rate. The first transaction is not a sale and the 85-93 Lorimer Street date was wrong.

232 That is the context in which, when he gave evidence-in-chief, Mr Torr sought to refer to and expanded upon other sales; sales not mentioned by him in the Joint Valuers' Report. None of those sales are of properties 'directly comparable' to the subject Land. They are sales well after the Relevant Date, in a rapidly-rising market, which require too many adjustments to provide reliable evidence. They provide no support for the $4,000/m2 valuation and cannot be relied upon in preference to the 85-93 Lorimer Street sale, and the actual 2012 sale of 60-82 Johnson Street.

233 Mr Torr's evidence was that the value of high intensity development sites in and around the Melbourne CBD escalated rapidly over the period of 2011 to 2016.

234 In the course of his assessment, Mr Torr undertook a detailed analysis of 30 sales - and resales - of high intensity development sites in the CBD and the immediately surrounding precincts/suburbs, in the period between 2008 and 2017. Mr Torr's analysis shows a clear trend of strongly increasing land values over that period.

235 Each resale was further analysed to calculate the monthly (compounding) percentage increase in value with the monthly increases varying between 0.4% and 10.19%, and the average increase across the 30 resales being 2.38% per month (compounding), representing an average increase rate of 32.58% per annum. It is noted that some of the resales obtained a planning permit between the first sale and the resale, and that fact would have amplified the value increase in those cases. The average monthly increase of 2.38% per month was stated to be marginally above the 'core' change in underlying land values.

236 Whilst interesting in an historical context, I do not find the almost ten-year period analysed by Mr Torr of utility in determining the question of value when there is a solid direct comparator available, which was a sale at or near the Relevant Date being the 85-93 Lorimer Street sale on 19 February 2014 (two months after the Relevant Date).

237 Obtaining a precise measurement on the extent and timing of the increase in value is difficult, because development sites have wide variations in key valuation factors including: development density, height limits, site configuration, location, design constraints, and permit status. These factors make direct comparisons, to isolate just the value increase factor, particularly subjective. Given the location of the Land at the Relevant Date, the attempt to use wider geographic market data and such a wide time frame is unhelpful. It is a distortion of the market value exercise.

238 In addition, in my view, the Supplementary Report by Mr Murray was an attempt to prop up his level of value for the subject property at greater than $50 million. He increased his list from five sales nominated in his March 2016 report which he reported as being 'pertinent' and 'relevant' and which he examined in detail to include 16 additional sales, the majority of which were neither used nor referred to by any other valuer in the case.

239 In forming his opinion as to value, Mr Murray considered transactions from mid-2013 to late 2014 within the established Southbank precinct, as well as South Melbourne and Docklands, to give an overview of the apartment market, particularly in relation to value rates per potential apartment, as well as value rates per square metre.

240 He relied on this data to further confirm his view that the sale of 85-93 Lorimer Street, Docklands, in January 2014, and reflecting a value rate of $2,061/m2, is out of line with market levels and expectations at the time of sale. The fact that this site was later sold in April 2016 for $60 million (albeit with a permit), on a 90-day settlement, at a rate of $6,774/m2 was relied upon by Mr Murray to confirm his view that the February 2014 sale was low.

241 I am of that view, as Mr Torr and Mr Murray's evidence commences from a rear-view mirror starting point and relies upon a 'low sales' case theory. These are fundamentally unsound foundations.

242 Prior to the Relevant Date, and prior to March 2014, there was no sale of land comparable in size to the subject levels in excess of $2,000/m2. The sales after this time are in a very different band of value. The 85-93 Lorimer Street sale, which took place two months after the Relevant Date, is critical and highlights the difficult task that both Mr Torr and Mr Murray had, to ensure that they excluded hindsight in their thought processes.[186] In my view, taking hindsight as their starting point is a key factor in explaining why their valuations are significantly higher than those undertaken contemporaneously with the Relevant Date for the Authority, by Mr Dudakov and Mr Brown. It also explains why they formed the view that the 8593 Lorimer Street sale was a 'low sale', rather than seeing it as reflecting the state of the market at that time.

243 I do not accept the evidence and arguments which seek to reach a conclusion that the market value of the Land ought to be in excess of $50 million. To form this conclusion, I would need to be persuaded that the evidence of Mr Torr and Mr Murray should be preferred, which I am not.

244 There are two issues here. Firstly, the impact of the higher estimated remediation costs on highest and best use. Secondly, where there was an agreed remediation cost, what was the correct method of accounting for that cost.

245 These issues were raised as criticisms of the Authority's valuers and, as such, I have focused on the valuations of Mr Dudakov and Mr Brown.

(a) Evidence in relation to remediation costs

246 In April 2011, Mr Dudakov had regard to the advice that the likely cost of remediation for a development without basement excavation was $904,000.[187] This advice was provided in the context of planning advice that, whilst the site was zoned 'Industrial 1', the Council's Port Phillip Industrial and Business Strategy (2003) recognised the potential for a site-specific rezoning which would facilitate commercial, industrial, and/or retail uses. Mr Dudakov based in valuation assessment on the assumption that a likely rezoning to 'Business 3' would be supported by the Council.[188] Mr Dudakov valued the Land at that time at $1500/m2 and adjusted his valuation by $904,000 for contamination and remediation. His report included the warning that updated advice be provided to confirm the likely remediation costs associated with an alternative development scheme.

247 Mr Dudakov's report of June 2011 referred to remediation advice on three different scenarios. He adopted a market value assessment based on the existing Industrial 1 Zone, but on the assumption that rezoning would be supported by the Council. Further, that a structure plan review was underway, and the likely result was one which would allow office and residential uses and, prospectively, a more intensive built form.[189] The highest and best use for the Land was identified as commercial, industrial, retail, and/or possible residential use and car parking, noting that this would require a rezoning.[190]

248 The third Dudakov report, dated 4 August 2011, proceeded on the basis of a partial acquisition. The same methodology, making a direct deduction for contamination, was adopted. After adjusting for remediation, a value of $20 million was adopted for the 'before' valuation.[191]

249 The fourth Dudakov report, dated 10 July 2013, proceeded on the same remediation information as above. The Hayball Scheme was taken into consideration. Mr Dudakov cautioned that updated advice should be sought to confirm the likely remediation costs associated with the Hayball Scheme.[192]

250 At this time, the Land had been rezoned to CCZI. Mr Dudakov had received planning advice that the Hayball Scheme represented an interpretation of what might be achievable, rather than an optimistic outcome. The highest and best use was identified, having regard to the remediation costs of $904,000, as a high density residential. Mr Dudakov valued the Land at $22.25 million.

251 In November 2013, very different information regarding remediation costs was made available to Mr Dudakov. His report makes reference to environmental advice that he had received, where the 'over and above' costs, compared with other localised sites, were in the order of $11,756,400[193] for high density residential use with no basement. Based on this information, Mr Dudakov's opinion was that these remediation estimates are significant enough to reconsider the highest and best use for the site 'despite its advantageous planning'.[194] As a consequence, taking into account these remediation costs, as then advised, Mr Dudakov expressed the opinion that the highest and best use involved commercial or industrial purposes with the possibility of some prospect of residential development, subject to satisfying environmental issues.[195] He did not make a specific deduction in the valuation for the costs of clean-up. As he explained in his evidence before the Court, he adopted an allowance approach because there was insufficient evidence regarding what the clean-up costs would be.[196]

252 In Mr Brown's report of June 2011, he made an arithmetic deduction of $1 million for contamination based on the same information that Mr Dudakov had relied upon as to remediation and town planning.[197] Mr Brown concluded that the highest and best use for the site was high-rise residential with a mix of commercial and retail, subject to a rezoning of the Land, and recognised that there were risks associated with the timing of any such rezoning.[198] Mr Brown valued the Land at $20 million.[199]

253 Mr Brown's report of 17 December 2013[200] had regard to the then available environmental evidence, which was a cost estimate of $11,756,400, being costs over and above what would be considered normal circumstances.[201] He identified the Land as part of the FBURA, located within the Montague precinct, which under the Draft Vision supported high-rise residential. He also had regard to the Hayball Scheme.

254 Mr Brown noted that the cost estimates for remediation were prohibitive in the current environment, and therefore that residential in the short term would not be the most probable use. He did not identify a single highest and best use, but rather two uses over time. He observed that the ability to undertake residential development was reduced because of the risks of remediating the site, and the costs associated with it. As a consequence, until the area developed and the return on residential use became more attractive, he formed the view that an interim use akin to industrial, car showroom, car parking, or bulky goods would be more suitable.[202]

255 The final reports of Mr Dudakov and Mr Brown both seem to rely upon the estimates by Compass Environmental dated January 2016. Those remediation estimates were between $11 million and $46 million, depending upon whether a basement would be included in the development. The estimate of remediation costs for high density residential (no basement scenario) was estimated at $12,603,423.

256 In his final report, dated February 2016, Mr Dudakov considered that the highest and best use for the Land would most likely be a 'land bank' proposition, which may include the continued operation of the car park until the commencement of residential development is deemed appropriate.[203]

257 He considered that the sale of 85-93 Lorimer Street in February 2014 provided the best guide to value, even though the sale occurred a short time after the Relevant Date. He noted that 8593 Lorimer Street is smaller in size, thereby commanding a higher $/m2 rate, is in a superior location, and is unlikely to be as heavily contaminated. Taking all of these factors into account, Mr Dudakov resolved to adopt a land value of $1,550/m2 (for unencumbered land), which represented a 25% reduction from the 85-93 Lorimer Street sale price of $2,063/m2.[204] His valuation was $21.710 million.

258 In his final report, dated 30 March 2016, Mr Brown considered that, at the current time, the highest and best use was not residential. He considered an interim use akin to industrial, car showroom, car parking, or bulky goods would be more appropriate.[205] His valuation was $21.4 million.

259 Like Mr Dudakov, having regard to the costs of remediation, Mr Brown did not make a specific allowance for contamination remediation costs, but adopted a reduced land value.[206]

260 He considered the most comparable sales to be 60-82 Johnson Street in December 2012 and 85-93 Lorimer Street in February 2014 and, taking into account 'purchasers' risks', adopted a land value of $1,500/m2 (for unencumbered land).[207]

261 Both Mr Brown and Mr Dudakov had conflicting information as to the cost of remediation when they prepared their expert reports. The higher clean-up cost estimates remained unchanged, but as the expert reports prepared by Mr Torr and Mr Murray became available to Mr Brown and Mr Dudakov, they were aware of the very different cost estimates contained in those reports. Mr Brown determined, in view of the uncertainty and unresolved conflict in the cost estimates, that an allowance approach was appropriate.[208]

262 In relation to remediation costs, Mr Torr's first report adopted the ERM Option B estimate of $4,764,701, and deducted that amount from the assessed land value to result in a (rounded) valuation of $52.4 million.

263 Mr Murray relied upon the advice from Mr Pump in relation to the cost of environmental clean-up. The cost range was between $4,666,309 and $4,764,701. Mr Murray elected to apply a rounded allowance of $5 million deducted from the land value component.

264 At the Valuers Conference, the contamination issue was discussed with the benefit of a Joint Expert Report from the environmental consultants. This includes the following estimates of remediation costs (no basement scenario):

265 In the Joint Valuers' Report, Mr Dudakov acknowledged that the Joint Experts' Report significantly reduced the likely cost impact for the site clean-up and, as such, justified a review of his downward adjustment to 15%, from the key sale he relied on, namely 85-93 Lorimer Street. He adopted a land value of $1,750/m2 (for unencumbered land) and a revised valuation of $24.61 million.

266 Mr Dudakov acknowledged, when cross-examined, that his 15% from the 85-93 Lorimer Street sale, if an arithmetic approach was adopted, equated to $4.3 million.[209]

267 In the Joint Valuers' Report, Mr Brown did not make a specific deduction for the cost of contamination clean-up, stating:

In order to make such a deduction, such information in respect of sales evidence needs to be obtained in order to gross the sales up i.e. the sale price plus the clean-up costs to obtain a clean site value.

Unfortunately in the market is not the sophisticated where clean-up costs were either not obtained or estimated with significant ranges. In light of the agreement between the experts and the costs provided for the purpose of valuation, an adjustment to the value assessed is considered to be warranted given the consensus of the experts ...[210]

268 Mr Brown considered an adjustment to the value assessed was warranted and revised his valuation to $25.3 million with an unencumbered land value at $1,800m2.

269 Mr Brown and Mr Dudakov both referred to the Compass Environmental report which indicated remediation cost of $12.6 million in their final valuation reports. Following the revised remediation costs in the Joint Statement of environmental consultants, Mr Brown's valuation increased by $3.9 million whilst Mr Dudakov's increased by only $2.9 million.

270 In the course of the Valuers Conference Mr Torr concluded that the appropriate cost estimate was $3.268 million which he deducted from the assessed land value to arrive at a (rounded) valuation of $53.9 million.

271 In the Joint Valuers Report, Mr Murray acknowledged that Mr Pump and Mr Parker's opinions are closely aligned being $3,606,000 and $3,766,000. He reduced his clean-up allowance by $1 million to $4 million to reflect the updated clean-up assessment and revised his valuation to $56 million.

272 After the Valuers Conference, and prior to the Trial, the parties agreed that the cost of contamination clean-up on the subject Land would be $3,686,250, based on a 'no basement' residential development scenario.

273 Mr Dudakov's evidence was that he had regard to the four cost figures of the environmental consultants in making his deduction, not just that of Mr Scoffern.[211] His evidence was that, when presented with four remediation report costs, ranging from $2.4 million to $7.2 million, he considered it appropriate to amend his figure by reducing his deduction from 25% to 15%.[212]

274 Notwithstanding the agreement that has occurred since the Valuers Conference, Mr Dudakov did not adjust his valuation.[213]

275 Mr Brown explained in evidence-in-chief that, at the time of the Joint Valuers' Report, he had proceeded on the basis that it was likely that the clean-up costs would be between $3.6 million and $3.8 million.[214] He made no further adjustment to his valuation following the agreed remediation costs.

276 In reviewing his valuation based on the agreed remediation cost estimate of $3,686,250, Mr Torr applied the same methodology as previously, and revised his valuation to $53.5 million with all other components of the valuation remaining unchanged.

277 Section 5A(3)(a) of the VL Act requires, where relevant, that the highest and best use to which the land might reasonably be expected to be put at the relevant date, and to any potential use, be taken into account. The section requires that both the highest and best use at the relevant time, and also thereafter to any potential use, be considered.

278 In ISPT Pty Ltd v Melbourne City Council,[215] the Court of Appeal considered the interpretation of the phrase, 'highest and best use', and the phrase, 'and potential use'. The Court of Appeal stated that whether the highest and best use is in fact proven to be a single use, or a package of alternative uses, will depend on the evidence. It will be a question of fact, and it will also be a question of fact as to what degree of precision can be achieved in the description.[216]

279 In relation to Mr Dudakov's and Mr Brown's valuation reports, the level of remediation costs of which they were advised impacted on the highest and best use, both as to identification and as to timing. Quite clearly, where the evidence provided to the Authority's valuers was that the remediation costs were very significant, the approach that the highest and best use was not high-rise residential within a reasonable timeframe is understandable.

280 In the context of clean-up costs, Mr Dudakov and Mr Brown not only appropriately identify the highest and best use in their respective reports, but I consider that they did so in a manner consistent with the observations of the Court of Appeal.

281 Further, in the Joint Valuers' Report, all the valuers generally agreed that the highest and best use for the land was for high-rise residential development.

282 They also agreed that, whilst there was some divergence as to the likely timing of development, ultimately nothing in each of the valuers' respective valuations turned on this point, as all valuers relied upon an analysis of comparable sales in determining value.

283 The exception to that statement is the treatment of contamination remediation costs, which I discuss further below.

284 The comparable sales method requires the valuer to adjust comparable sales to bring them in line with the circumstances and attributes of the subject land. Adjustments and allowances must be made for contamination.

285 Each of the valuers agreed that such an adjustment or allowance needed to be made. Each of the valuers acted on the expert advice available to them, at given points in time, as to clean up costs. I accept that to rely upon such expert advice was not only reasonable, it was their obligation to have regard to such independent expert opinion.

286 I accept is that there were two different approaches to valuation methodology adopted by the valuers when dealing with contamination in the context of comparable sales analysis being an arithmetic adjustment approach or an allowance approach. Where the remediation costs estimate was moderate, and likely to be the same as other sites with no specific extra costs, an arithmetic approach was adopted.

287 The methodology adopted by Mr Torr and Mr Murray in addressing the expected remediation cost is to deduct the estimate of the cost, as if it were an 'upfront cost', directly from the assessed value of the Land. This was argued by the Claimant to be a conservative approach because, in reality, the remediation cost will not be incurred by the purchaser until commencement of construction which would represent a deferred cost. I acknowledge this is a conservative approach.

288 The Claimant criticised Mr Dudakov's approach to contamination.[217] This mainly related to a reduction in contamination costs not having a correlating increase in valuation. However, Mr Dudakov's December 2016 valuation report is not based on the absolute cost of remediation.[218] If an arithmetic approach were adopted instead of the 25% allow reduction the reduction would equate to $7.25 million. This is only 57.5% of the $12.6 million indicated by Compass Environment. As the report is not based on the absolute cost of remediation, a reduction in remediation costs should not have an equal increase in valuation.

289 The reports of Mr Dudakov and Mr Brown, which were made relying upon the significantly higher remediation costs provided by the Authorities' experts, affected their valuation approach. Where the remediation costs were high, both Mr Dudakov and Mr Brown independently took the view that there should not be a direct arithmetic adjustment made. Such high costs would make any redevelopment almost an uneconomic proposition at that point in time.[219]

290 I am of the opinion that such an approach was a reasonable one for them to adopt. That is not to say that the approach of Mr Torr and Mr Murray to make an arithmetic deduction was incorrect. The remediation costs evidence provided to Mr Torr and Mr Murray at an earlier stage was more modest. Their approach, in my view, was conservative but in the end I do not think that it is of such consequence to be preferred and ultimately is not of material consequence in the overall assessment of market value.

291 The agreed remediation costs are $3,686,250. This is (approximately) the average of the estimates of Mr Parker and Mr Pump, but less than the average of all four environmental consultants, which is $4,252,028.

292 The issue is whether it is still appropriate for Mr Dudakov and Mr Brown to adopt an allowance approach or whether I should accept the adjustments that they have made for remediation costs in light of the agreed remediation costs.

293 Mr Dudakov and Mr Brown's valuations are very close, with Mr Brown's valuation only 2.8% more than Mr Dudakov's valuation. This is largely due to Mr Dudakov adopting a rate per square metre for unencumbered land at $50/m2 less than Mr Brown.

294 The following table sets out the comparison between Mr Brown and Mr Dudakov's final assessments.

Taking a suite of factors into account, resolved to adopt a land value of $1,550/m2 (unencumbered) which represents a 25% reduction from the 85-93 Lorimer Street.

No direct allowance for remediating site or specified percentage reduction but having regard to purchasers' risk, adopted a rate of $1500/m2 (unencumbered).

Joint Experts' Report justifies adjustment to 15% reduction.

295 In the Joint Valuers' Report, Mr Dudakov applied a 15% downward adjustment for contamination, from the key sale relied upon by him, being 85-93 Lorimer Street. It is important to note that this downward adjustment takes into account a suite of factors, other than contamination, including time, size of the sites, and location.

296 Mr Dudakov's allowance of 15%, if an arithmetic approach were adopted, equates to $4.3 million. This is 60% of $7.2 million (Mr Scoffern), 114% of $3.76 million (Mr Parker), 119% of $3.6 million (Mr Pump), 177% of $2.43 million (Mr Clarke), 101% of the average of the four environmental consultants ($4.25 million), and 117% of the agreed remediation cost ($3.67 million).

297 To reduce the downward adjustment so that it is effectively capped at the agreed remediation costs, Mr Dudakov would need to adopt a rate for unencumbered land of $1801.95/m2. This would increase the (adopted) valuation to $25.3 million, an increase of $690,000. This is the same value as Mr Brown's assessment.

298 I accept that there are a 'suite of reasons' which justified the 15% downward adjustment, and that these are not specifically quantified by Mr Dudakov. But this analysis shows that there is support for an unencumbered land rate of $1800/m2 as opposed to $1750/m2. Mr Dudakov also gave evidence at trial that he understood the actual sale price for 85-93 Lorimer Street in February 2014 to be $18.5 million, not $18.25 million.[220] Effectively, this is a rate of $2091/m2 as opposed to $2063/m2 in his report. Considering this was Mr Dudakov's key sale, this also supports a marginally higher land rate for unencumbered land.

299 As previously noted, Mr Brown assumed at the time of the Joint Valuers' Report that clean-up costs would be between $3.6 million and $3.8 million.

300 In the Joint Valuers' Report, Mr Brown does not specify the percentage reduction but, based on his $/m2 adopted for unencumbered land, this can be calculated at 13.9%, if compared with 85-93 Lorimer Street only. This equates to a $3.8 million reduction if an arithmetic approach were adopted. This is consistent with the evidence given by Mr Brown.

301 To reduce the allowance for remediation costs, so that it is effectively capped at the agreed remediation costs, Mr Brown would need to adopt a rate for unencumbered land of $1808.95/m2. However, as Mr Brown's reduction, like Mr Dudakov's, includes other factors, I do not consider it is necessary for Mr Brown to depart from the $1800/m2 for unencumbered land that he has adopted.

302 Mr Brown's and Mr Dudakov's approach to the encumbered land, approximately 18% of the Land, is different but their valuations for this part of the Land are very close.

303 Mr Dudakov valued the encumbered land at $1,668,080. Mr Dudakov's encumbered land rate of $600/m2 is impacted by contamination, as it is based on a percentage (33.33%) of the unencumbered land value. However, as this encumbered land rate has been rounded up, it would remain unchanged even if an $1800/m2 unencumbered land rate was adopted as a result of reduced contamination remediation costs.

304 Mr Brown valued the encumbered land at $1,709,985. Mr Brown, in considering the value of the encumbered land, considered the ground rent that may be achieved. He did not attribute a rental value to the portion of the Land (592 m2) restricted by strata acquisition. The balance of the unencumbered land (2,204.4 m2) was attributed with a rate of $776/m2, based on a ground rental rate of $40/m2 and a capitalisation rate of 5.00%. Based on these figures, the weighted average for unencumbered land is $611.50/m2 (although this is not specified in his report). This is slightly higher than the $600/m2 adopted by Mr Dudakov.

305 I accept Mr Brown's higher valuation of the encumbered land at $1,709,985.

306 Having considered all of the evidence and submissions, I have formed the following conclusions in relation to the market value issues raised in this case.

307 The most appropriate comparative sales method in the circumstances of this case is a $/m2 analysis.

308 I do not accept that the Hydrox Contract is evidence which can be relied upon to put a 'floor' in the market value of the Land. The market for industrial land at an earlier time is not useful in assisting to make an assessment of CCZ1 zoned land several years later. Nor do I accept that the reason for the Hydrox Contract not proceeding was the acquisition of the Land.

309 The key comparable properties are 60-82 Johnson Street and 85-93 Lorimer Street. Properly examined, the real sales of these properties provide the most reliable assistance in making the assessment of market value.

310 In the circumstances disclosed by the evidence before me, I have formed the conclusion that the May 2014 60-82 Johnson Street transaction for $55.5 million should not be given any weight. As the 60-82 Johnson Street property is one of two most comparable properties, the earlier sale in 2012 is of greater relevance, requiring an adjustment for time, and is a sale which would be a known fact at the Relevant Date. In cross-examination, Mr Torr refused to 'give up' on the May 2014 60-82 Johnson Street transaction. In the face of the clear terms of the documents, he ought to have accepted that no reliance could be placed upon it. Consequently, one of the foundations for his opinion falls away.

311 The state of the market for the relatively newly identified FBURA land was embryonic at the Relevant Date. The use of sales in the more mature high-rise residential market locations of the established Southbank, Docklands, and other inner-city locations are not of sufficient probative value in light of the closest sale in all respects which is the 85-93 Lorimer Street sale in February 2014.

312 The use of sales evidence after the Relevant Date may be admissible, but in a rapidly rising market extreme caution needs to be taken when taking later sales into account. In this case, it is clear that, after mid-2014, the sales take a significantly higher turn in a different band of value to that which occurred at or around the Relevant Date.

313 Mr Torr's initial report is more than 27 months after the Relevant Date.[221] Whilst Mr Torr is an experienced valuer, I have formed the view that his opinion as to value in this case should not be preferred. In essence, I have formed the view that he, like Mr Murray, has been influenced by the rear-view window starting point from whence he commenced his analysis.

314 His view, also held by Mr Murray, that the 85-93 Lorimer Street sale in February 2014 was a 'low sale' cannot be upheld as it relies upon acceptance that the $55.5 million 60-82 Johnson Street transaction represented market value. It is this 60-82 Johnson Street transaction in May 2014 which is out of kilter with the trajectory of sales in and around the Relevant Date. This is clearly demonstrated by the terms and circumstances of the 8593 Lorimer Street sale and supported by the later $40.65 million sale for the same 60-82 Johnson Street property in December 2016.

315 Mr Torr sought to use $/apartment as a check in his original valuation. He maintained reliance on that method in his Supplementary Report. For the reasons already set out, I have concluded that it was an unreliable method in this case. In addition, in his Supplementary Report, Mr Torr sought to rely, for the first time, upon a $/gross floor area analysis. Again, for reasons discussed earlier, that method was unreliable in this case.

316 Finally, I accept that the treatment by the valuers of a reduction to account for contamination costs, either by making a direct dollar deduction, or by a percentage are both acceptable approaches. I accept that the cost of remediation, when high, affected the Authority's valuers' acceptance of a high-rise residential highest and best use, but both Mr Dudakov and Mr Brown accepted that the highest and best use was high rise residential with some time delay in their assessment before the Court. I also accept that there is validity in the time lag to development at the Relevant Date, given the state of development and the physical attributes and infrastructure available to the Land at that date. The Land was, and still is, at the date of trial in an industrial precinct in appearance and operation. This inevitably reduces its attractiveness for immediate high-rise residential development.

317 As set out above, the assessments of Mr Brown and Mr Dudakov are very similar, notwithstanding the route to the final figure is not identical. What the analysis in relation to the agreed contamination costs shows is that there is support for the $1800/m2 rate for unencumbered land, which is the figure currently adopted by Mr Brown.

318 For the reasons set out above, I am of the view that the evidence and opinions of Mr Dudakov and Mr Brown should be preferred. Mr Brown and Mr Dudakov have approached the exercise in a very similar manner in contrast to that of the Claimant's valuers. In accordance with established principles, I will resolve the amount properly payable in favour of a more liberal estimate, by giving the benefit of the doubt to the Claimant in awarding the slightly higher figure as assessed by Mr Brown.[222]

319 I find that the market value of the Land at the Relevant Date is $25.3 million based on Mr Brown's slightly higher valuation.

320 The Claimant seeks compensation for disturbance for the following items pursuant to s 41(1)(d) of the LAC Act:

(b) lost opportunity to invest in a higher yield property due to an allegedly inadequate offer.

321 Loss attributable to disturbance is defined in s 40 of the LAC Act as any 'pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of ... the fact that an interest of the claimant in [the relevant] land has been divested or diminished, being a pecuniary loss for which provision is not otherwise made in [Part 4 of the Act]'.[223]

322 In this case, the Claimant has the onus to prove that the loss:

(a) is an actual pecuniary loss;[224] and

(b) meets the causal requirement of being 'the natural, direct and reasonable consequence' of the acquisition. This test is one which requires a close causal connection[225] between the event giving rise to the right to compensation and the financial loss suffered.[226] The test is a narrower one than the common law test of causation based on reasonable foreseeability.[227]

323 The Claimant sought $3.35 million for replacement land costs. This includes $3.3 million with respect to stamp duty and $50,000 in relation to legal costs. The Authority denies that the Claimant is entitled to any compensation under this head of claim.

324 As at the date of trial, no replacement land has been purchased. The fact is not conclusive of the issue and it does not necessarily mean that replacement land costs are not recoverable. It does mean that it is necessary to look closely at the evidence in support of this claim.

325 The Claimant argued that it intended to use the compensation received for the acquisition of the Land to purchase a replacement property. It was argued that, due to the significant disparity in the value of the Land as assessed by the experts for the Claimant and the Authority's offer, the Claimant was unable to determine how much money it had available to spend on property to replace the Land until the proceeding has been resolved. Due to this uncertainty, it was argued that it has been premature for the Claimant to undertake a detailed investigation of potential replacement properties to date, although members of the board regularly received material regarding available properties. The Claimant's board considered that there was little point in looking at properties in and around the $15-20 million dollar range, if the amount of compensation awarded by the Court (as is the position contended by the Claimant) is significantly higher.

326 To ensure that the Claimant has preserved its ability to invest in a replacement property without paying significant capital gains tax on the compensation sum awarded, it sought and obtained a private ruling from the Australian Taxation Office ('ATO') on 7 July 2015 which provides the Claimant with a period until 30 June 2019 to acquire a replacement asset without triggering a capital gains tax liability (the 'CGT Private Ruling').[228] The CGT Private Ruling outlines the relevant facts and circumstances justifying the request for rollover relief, including the difficulty in obtaining a replacement asset where the discrepancy between the compensation sum offered and that claimed by the Claimant is substantial and unresolved.

327 The Claimant seeks the cost of securing a replacement asset namely, stamp duty and legal expenses, which have been calculated by reference to the purchase of an asset valued at $60 million as an item of claim. It was submitted that:

(a) the Land was the major investment vehicle of the Claimant and therefore it is a natural, direct, and reasonable consequence of the acquisition that it be replaced;

(b) the consequence of the low offer made by the Authority is that it has not been possible for the Claimant to initiate the process of securing a comparable replacement asset until the issue of compensation is resolved;

(c) the evidence of Mr Hubay, director of the Claimant, was that the Claimant intends to secure a replacement asset as soon as the issue of compensation is resolved. This is a position which has been forced upon the Claimant because of the compulsory acquisition of its key asset;

(d) the Claimant's intention to secure a replacement asset is evidenced by the steps taken to preserve its eligibility for CGT rollover relief in obtaining a CGT Private Ruling from the ATO; and

(e) the Claimant should be entitled to replace its investment and to delay doing so until such time as the issue of compensation has been resolved.

328 In Secretary to the Department of Economic Development, Jobs, Transport and Resources v Manor Lakes (Werribee) Pty Ltd ('Manor Lakes'),[229] the Court of Appeal upheld the finding of the Court below that it was plainly open to conclude that the purchase of replacement land, which was the stock in trade of a developer, was a direct consequence of the compulsory acquisition, and thus compensable as a disturbance loss. In that case, Mr Marshall Dennis gave evidence that he had been and was continuing to actively look for replacement land of the same type as, and suitable to replace, the land that had been acquired. He had kept a dedicated file of replacement properties that he had considered.[230]

329 The Claimants have had the benefit of the advance payment by the Authority since May 2014. The fact that it is more than four years between the Relevant Date and the trial is not helpful to this claim, notwithstanding the arguments put as to delay. This timeframe, in association with the scant evidence of action in pursuit of replacement property, does not assist in convincing me that this aspect of the claim can be properly held to be a claim which meets the LAC Act causal connection test.

330 I do not give significant weight to the CGT Private Ruling which gives the Claimant CGT relief until 30 June 2019 as being determinative of the Claimant's intention to purchase a replacement property. In my opinion, this step was a prudent one to protect the Claimant from CGT taxation implications, but does not prove an active intention to purchase replacement land. Rather, it is consistent with keeping that option open to it, nothing more. This is particularly so given that I have determined that the compensation for market value was not significantly higher than the market value conceded by the Authority, and not in the realm of the $60 million claimed by the Claimant in their initial claim, nor the amount of the amended claim.

331 There was no oral evidence given in support of an active effort to search for replacement property at all, let alone that which would be in the range of the offer form the Authority, or that within the aspirations of the Claimant's claim.

332 The evidence in terms of the search for replacement land is scant and superficial; it falls well short of the evidence as to intention to replace relied upon in Manor Lakes. I am of the opinion that the Claimant sat on its hands and effectively punted that the claim for market value would be significantly more than the Authority's offer. I do not accept on the evidence that the Claimant has taken sufficient steps to convince me that replacement land will be purchased.

333 As a consequence, I do not find that this claim is made out.

Lost opportunity to invest in a higher yield asset

334 As a further item of disturbance loss, the Claimant seeks compensation for the alleged loss incurred as a result of the inability to invest the initial offered sum into a higher return asset due to the Authority's inadequate offer. The sum claimed is $1,546,700.00 to 21 April 2016, and continuing to the date of judgment at 0.0126849315% per day.

335 It is claimed that there is a material difference in the investment potential associated with properties within different price brackets. To invest the compensation advanced in a property with a lower yield would result in the Claimant ultimately foregoing higher yields on a higher priced property, assuming significantly higher compensation is awarded.

336 The Claimant's evidence is that the financial return associated with the purchase of property at prices ranging from the $15-20 million dollar range is less than those in the $50-60 million range.[231] It also argued that a higher yield (that is, a better investment return) would apply to properties in the higher price bracket. The claimed differentiation in yields is between 0.25% and 0.5%.

337 The explanation for this difference was that within the lower price category of $1520 million the market would be much deeper and there would be many more buyers actively competing in that price category including high net worth individuals looking to add to their superannuation fund. In contrast, a well-located, well-tenanted investment property used for a similar purpose in a similar location but in a price bracket at or around $60 million is likely to attract interest from fewer potential purchasers who are more likely to be 'institutional investors' who may be driven by different and potentially more sophisticated investment criteria. It was argued that the depth of potential purchasers in the market can play a significant role in influencing the yield of investments. All else being equal, it was said that the resultant impact is that there is a slightly higher yield for higher priced properties, particularly when comparing price categories of $16 million and $50-60 million.

338 In circumstances where the Claimant has had to effectively 'park' the compensation sum advanced in a term deposit account, it was argued that this has had the direct consequence that the Claimant has been denied the opportunity to invest in a higher value, higher yield replacement asset valued in the order of $60 million. It is argued that this has resulted in a loss of $1,546,700.00 to 21 April 2016, and continuing to the date of judgment at 0.0126849315% per day.

339 This claim is creative. There was no cogent evidence given to justify this claim. At best, it was explained in submissions both oral and written by counsel for the Claimant. Mr Hubay's evidence did not assist in supporting this claim either.

340 In order to prove a further item of disturbance loss, it is necessary not only for there to be sufficient evidence to support the pecuniary loss, but that the loss must also be one which is the natural, direct, and reasonable consequence of the acquisition. I find that the loss is at best, theoretical and speculative. An alleged loss in these circumstances cannot be one which is a natural, direct, and reasonable consequence of the acquisition.

341 I agree with the Authority that this claim assumes that there was an obligation on the Authority to assess the claim at the then claimed amount of $53.5 million, when it acquired the Land in 2013 and that, having done so, the Claimant would have invested that amount immediately in an investment property which would have given it the assumed return. In essence, a failure to assess the market value at $53.5 million, at the date of acquisition, has caused the loss and that such loss is a natural, direct, and reasonable consequence of the acquisition. This scenario demonstrates the speculative nature and the creativity inherent in the claim.

342 Further, the Authority argued that in effect what the Claimant wants is interest on interest. The obligation on the Authority under the LAC Act is to make an initial offer of compensation accompanied by a certificate evaluation, to which the Authority has had regard. The LAC Act does not create a right of action recoverable as a disturbance loss for failure to comply with those obligations. It imposes no duty giving rise to a private right of action.

343 The Claimant has an entitlement to interest for the difference between the last offer made by the Authority and the amount awarded by the Court. This is specifically provided for by the LAC Act and, as it is provided for at the rate prescribed in the Penalty Interest Rate Act 1983. It has a compensatory element to it.

344 The Court has assessed market value at $25.3 million which is less than half the amount sought. It is a figure nowhere near the amount sought by the Claimant for market value which was well in excess of $50 million and was argued to put the Claimants into another sphere of the investment market.

346 In the Further Revised Particulars of Claim, an agent's commission was claimed in the amount of $177,650. However, this claim was not pursued at trial.[232]

347 Under s 41(1)(f) of the LAC Act, in assessing the amount of compensation payable to a claimant, regard must be had to 'any legal, valuation and other professional expenses necessarily incurred by the claimant by reason of the acquisition ...'.

348 The Claimant claims to have incurred substantial costs in relation to preparing a detailed response to the offer, obtaining advice on the appropriate level of compensation for the Land, and preparing its claim for compensation. All of the costs itemised were argued to be necessarily (that is, reasonably) incurred by the Claimant by reason of the acquisition of the Land.

349 The amount claimed was $290,378.12, which was revised to $284,754.94 at trial. Some invoices were ambiguous as to whether they related to the acquisition of the Land and the Claimant did not pursue them. Of this, $242,689.49 constituted invoices addressed to the Claimant, and $42,065.45 constituted invoices addressed to Ballah Nominees Pty Ltd ('Ballah Nominees').

350 The Claimant prepared and submitted spreadsheets identifying the work undertaken by the various professionals including valuers, planners, architects, accountants, and lawyers. Copies of supporting documents, including invoices relevant to the work, were filed with the Court on 31 March 2016[233] and on 8 December 2017.[234] The affidavit dated 21 February 2018 of Mr Mark Kornhauser, a director of the Claimant, on this issue was filed on 22 February 2018.

351 The Authority accepted that the Claimant necessarily incurred legal, valuation, and other expenses by reason of the acquisition of the Land. However, the Authority submitted that the Claimant has not demonstrated that expenses claimed by it under s 41(1)(f) of the LAC Act are costs 'incurred by the claimant' as required under s 41(1)(f). That is, the Authority submitted that the Claimant has failed to demonstrate that the expenses claimed were incurred by the Claimant, in its own right, or as trustee for the Ballah Trust.[235]

352 In oral submissions, the Authority argued that the Claimant held the Land in its capacity as trustee of the Ballah Trust and that it is therefore necessary to show that the Ballah Trust has incurred these expenses[236] and that there was no evidence that the Ballah Trust itself incurred or paid those expenses.[237]

353 The evidence to support the Claimant's claim for these costs was unclear.

354 Mr Kornhauser's evidence was that:[238]

(a) the Claimant does not operate its own bank account;

(b) invoices issued to the Claimant, or to Ballah Nominees for services provided to the Claimant, are paid by Ballah Nominees;

(c) expenses are recorded in the special purpose accounts of the Claimant;

(d) the Claimant is owed in excess of $11 million by Ballah Nominees (the 'Ballah Nominees Liability'); and

(e) the Claimant offsets the payment made by Ballah Nominees on its behalf against the Ballah Nominee Liability.

355 Mr Hubay swore in his affidavit dated 8 December 2017 that the Claimant held the Land on trust in its capacity as the trustee of the Ballah Trust.[239] This was supported by a Deed of Appointment dated 12 June 2015, which appointed the Claimant as an additional trustee of the Ballah Trust and confirmed that event as having taken place on or around 17 May 1996.[240] The other trustee was Ballah Nominees. In addition, the relevant background facts to the CGT Private Ruling also provide that, '[the Claimant] is a trustee of the Ballah trust';[241] and Mr Kornhauser gave evidence, although somewhat hesitantly, that the Claimant was the trustee of the Ballah Trust.[242]

356 However, Mr Kornhauser also gave evidence that the Claimant was a nominee of Ballah Nominees and that a number of special purpose financial statements, which were either exhibits to Mr Kornhauser's affidavit[243] or filed in court[244] described the Claimant as the nominee for the Ballah Trust, and only Ballah Nominees as the trustee for the Ballah Trust.

(a) the unaudited special purpose financial statement of the Ballah Trust for the year ended 30 June 2015, with expenses in FY2015 of $440,375 and in FY2014 $338,038, although these expenses predominately related to 'Salaries and wages';

(b) the unaudited special purpose financial statement for the Claimant as nominee for the Ballah Trust for the year ended 30 June 2015, with expenses in FY2015 of $223,999 referable to the compulsory acquisition; and

(c) a spreadsheet prepared by Pitcher Partners which records the reduction in the loan balance for Ballah Nominees between 2014 and 2015.

358 The spreadsheet identifies the specific expenses referable to the payment by Ballah Nominees and the corresponding reduction in the amount of the Ballah Nominees Liability for the financial year ending 30 June 2015. The amount (disregarding BAS payments and refunds) is $223,576. The evidence of Mr Kornhauser was that the discrepancy between the $223,576 figure, and the $223,999 shown in the expenses in the profit and loss statement for FY2015, is referrable to a miscalculation of GST.

359 While there appears to be some similarity between invoices addressed to the Claimant, being $242,689.49, and the expenses shown in the FY2015 special purpose financial statement referable to the compulsory acquisition, being $223,999, these figures are irreconcilable. The invoices addressed to the Claimant span a period of 20 January 2014 to 4 December 2017 (as opposed to only FY15), while the expenses relate predominately to Fitzroys' commission for which there is no invoice.

360 However, I accept the submission of the Claimant that to make good this claim it is not necessary to demonstrate payment.[245] The word 'incurred', as it appears in s 41(1)(f) of the LAC Act, is to be distinguished from 'paid' or 'made'.[246] Payment of an incurred expense is relevant in terms of calculating any interest payable under s 56 of the LAC.[247] Further, in an income tax context, where payment is not made, a presently existing pecuniary liability is a necessary prerequisite to an expense being 'incurred'.[248]

361 Under s 3 of the LAC, 'claimant' means a person who makes or is entitled to make a claim for compensation under the LAC. There has not been any suggestion that the Claimant is not entitled to make the claim for compensation, the subject of this proceedings. Nor is there any suggestion that the invoices addressed to the Claimant were not genuine.

362 On the foregoing analysis, I find that the amount of $242,689.49, being the amount of the invoices addressed to the Claimant, is 'incurred' by the Claimant and within the scope of s 41(1)(f). I accept the invoices as evidence of an existing liability.

363 In relation to the invoices addressed to Ballah Nominees, I am not satisfied that these expenses are incurred by the Claimant. I do not accept that an 'inference' should be drawn that expenses were incurred by the Claimant, because the invoices were addressed to Ballah Nominees.

364 Counsel for the Authority submitted that it is not necessary, indeed, that it is inappropriate, for the Court to look into the trust relationships that sit behind the Claimant.[249] However, the Claimant does have the onus of demonstrating that the expenses were incurred by it, and it may have been necessary to clarify this relationship in order to properly establish that the Claimant had incurred these expenses.

365 The unaudited special purpose financial statements were prepared exclusively for the purpose of preparing income tax returns. A mere record in a financial statement does not change the liabilities between the parties. In the absence of evidence of a liability owed by the Claimant to Ballah Nominees, or any agreement to offset mutual liabilities, I do not accept that the expenses relating to the invoices addressed to the Ballah Nominees were incurred by the Claimant.

366 Consequently, I find that the amount of compensation payable pursuant to s 41(1)(f) of the LAC Act is $242,689.49.

367 An award of compensation under the LAC Act includes the potential for an award under s 44(1).

(1) The amount of compensation may be increased by such amount, not exceeding 10% of the market value of the land, by way of solatium as is reasonable to compensate the claimant for intangible and non-pecuniary disadvantages resulting from the acquisition.

(2) In assessing the amount payable under subsection (1), there must be taken into account all relevant circumstances applicable to the claimant including, without limiting the generality of the foregoing -

(a) the interest of the claimant in the acquired land; and

(b) the length of time during which the claimant had occupied the land; and

(c) the inconvenience likely to be suffered by the claimant by reason of removal from the land; and

(d) the period of time after the acquisition of the land during which the claimant has been, or will be, allowed to remain in possession of the land; and

(e) the period of time during which, but for the acquisition of the land, the claimant would have been likely to continue to occupy the land; and

(f) the age of the claimant; and

(g) where the claimant at the date of acquisition is occupying the land as the claimant's principal place of residence, the number, age and circumstances of other people (if any) living with the claimant.

(3) If no solatium is paid to a claimant, a person other than a claimant who, at the date of acquisition, had occupied the acquired land for a continuous period of not less than 12 months before that date as the person's principal place of residence may claim from the Authority such amount, not exceeding 10% of the market value of the land, by way of solatium as is reasonable to compensate the person for intangible and non-pecuniary disadvantages resulting from the acquisition.

(4) In determining the amount payable under subsection (3), there must be taken into account all relevant circumstances applicable to the person, including the matters referred to in subsection (2)(b), (c), (d), (e), (f) and (g).

(5) If the Authority rejects a claim for solatium made by a person under subsection (3), that person is to be taken to be a claimant and the claim to be a disputed claim for the purposes of this Act.

369 In an award for solatium all relevant circumstances applicable to the Claimant, including those factors enumerated at s 44(2), must be taken into account. In my view, a number of the s 44(2) factors are either inapplicable or have little bearing on my assessment by reason of the Claimant's circumstances including being a corporate entity holding the Land with the intended purpose of on-selling the Land in due course for its development potential.

370 The Claimant says that the acquisition of the Land, including the process leading up to it, warrants a significant award for non-pecuniary loss. The Claimant argued that the compulsory acquisition and compensation process has been disruptive and inconvenient to it, and the nature and magnitude of the Claimant's loss is referrable to the following:

(b) the Claimant's desire to maximise the value of the Land to realise maximum return on the long-held investment;

(c) the impact that the acquisition, including the protracted process leading to the acquisition and the unsatisfactory responses from the Authority prior to any formal steps being taken to acquire the Land, created commercial uncertainty and effectively left the Claimant in a state of 'limbo'. The lengthy period of investigation by the Authority about the prospects of acquisition have been regular and frustrating topics of discussion by the Claimant's board in relation to the future use of the Land;

(d) the threat of acquisition caused the loss of the sale of the Land to Hydrox, which was also a considerable waste of the time spent by the Claimant (over a period of more than 18 months) in negotiating terms of the sale;

(e) the acquisition has resulted in disappointment for the Claimant as it destroyed its long-standing re-sale and/or development expectations for the Land. The consequence of the acquisition was not only to sever the connection with the Land, but to end their efforts to use the Land to plan for the future of the Claimant; and

(f) the radically altered statutory and strategic planning context of the Land opened up many possibilities for the Claimant, and would have allowed it to either develop the Land with a high density residential development, or to choose the right price at the right time. Those opportunities were denied to the Claimant with the acquisition of the Land.

371 The Claimant argued that the determination of an appropriate figure for solatium can be difficult, as what is being compensated is 'non-pecuniary loss' expressed in pecuniary terms. The sum of $1.5 million, which represents approximately 2.67% of the market value of the Land (on an assumed award of $56 million for market value based on Mr Murray's assessment) was argued by the Claimant to be the appropriate award in the circumstances.

372 The Authority submitted that the amount in respect of solatium, based on the factors in s 44(2), should be a significantly more modest sum, if any award at all were to be made. The Authority argued the following factors were relevant to my assessment:

(a) the subject Land was purchased by the Claimant on 23 September 1996 for a purchase price of $4.035 million;[250]

(b) the Land was purchased in order to make a profit either by selling it on or redeveloping it, taking into account all options;[251]

(c) the Claimant is a sophisticated commercial entity involved in property development;[252]

(e) the Claimant received rental from the Authority for the period that the Authority was conducting its investigations on the subject Land (1 February 2010 to 13 April 2011); initially at $430,000 per annum, which was subsequently increased on 31 July 2010 to $470,000 per annum,[253] and which provided a rental return of 10.7% and 11.6% respectively. Beyond this time, the Claimant had a license agreement with Care Park Pty Ltd, which provided an excellent return on the Land; and

(f) in his oral evidence, Mr Hubay observed that an award of any amount above $22 million was a bonus to the family.[254]

373 The Authority submitted that it is questionable whether any solatium payment at all should be made and, if an award for solatium were made in these circumstances, then considering the range of solatium awarded in other cases, an allowance of $50,000 would be generous.[255]

374 Solatium is an award for intangible and non-pecuniary loss disadvantage. In the circumstances here, it is difficult to identify separate intangible or non-pecuniary loss which is not already bound up in compensation encompassed by the pecuniary amounts represented by the market value at highest and best use, and by the various claims made out, or agreed, for disturbance.

375 I am of the opinion that the extent of delay and frustration, which the Claimant argues supports its claim for solatium, is not of such impact to support a claim for solatium other than a nominal award of compensation. The period of time between when the Land was identified as a prospect for acquisition in January 2010 and its ultimate acquisition in December 2013 was not in the circumstances extensive, nor was the period of temporary occupation excessive. As noted, the Claimant was fully compensated for that temporary occupation. In respect of the delay in making an offer within the time permitted by the legislation, the Claimant has already been compensated for this financial loss.

376 As previously noted, I am not convinced that the Hydrox Contract's failure to proceed was related to the acquisition, so I do not consider that a factor which aids a claim for solatium.

377 The Claimant continued to earn a very significant rental from the Land over the period between its nomination as a potential acquisition and its eventual acquisition.

378 Further, the Claimant held the Land for investment purposes with the ultimate intention to sell the Land at an enhanced value after rezoning. There is no evidence of particular attachment to the Land. The steps taken by the Claimant to engage expertise to prepare the Land for sale, including the preparation of a scheme for development of the Land (such as the Rothe Lowman Scheme), are actions consistent with its ambition to seek to enhance the value of the Land to achieve its best price at its intended sale. The rezoning of the land (including the subject Land) within the FBURA, in July 2012, significantly increased the value of the Land, and this is taken into account in the assessment of market value for which the Claimants are to be fully compensated. On the evidence before me, the uncertainty the Claimant alleges leading to an inability to sell the land has allowed it to benefit by reason of the increase in land values in the 2013-2014 period, including by reason of the rezoning of the land to CCZ1. The delay in the sale of the land (ultimately to the State by way of acquisition) given the movement in the market which followed only enhanced the Claimant's position.

379 The Claimant is entitled to be compensated fairly and fully for its loss, and with all of the generality that the statutory words permit, but the Claimant is not entitled to receive more than fair compensation.[256]

380 Whilst there is no bar to a corporation receiving an award of solatium, in my opinion, in the circumstances of this case, an award beyond a nominal amount is not appropriate. It is not a correct approach to start the assessment of the amount to be awarded by looking at what percentage of the market value the award represents. The correct approach is to determine an amount which is reasonable in the circumstances. The task then is to consider whether the amount falls within the cap set in s 44(1) of the LAC.

381 Whilst acknowledging that the acquisition would have caused some frustration and annoyance, the circumstances here are such that the claim for $1.5 million is manifestly excessive. Such a claim is no doubt based on the inflated expectation of the market value of the Land. In any event, I do not find that the factors identified above are factors that would support a claim for an award other than for a nominal amount.

382 In my opinion, there ought to be an award of solatium but, in my view, the award should be a modest one. In the exercise of my discretion to award an amount of compensation in respect of solatium based on all the relevant factors in this case I assess the amount payable under sub-s 44(1) of the LAC Act to be $50,000.

383 There were two items of claim that were agreed between the parties:

384 Of what remained in dispute, I make the following assessment:

Loss incurred as a result of inability to invest initial

Legal, valuation and other professional expenses

385 I will hear the parties further on the question of costs and the final form of order.

[1] Crown Allotment 104B, City of South Melbourne, Parish of Melbourne South and otherwise known as the land described in Certificate of Title Volume 10294 Folio 632.

[2] Transcript of Proceedings, Secretary, Department of Economic Development, Jobs, Transport and Resources v Caradi (Supreme Court of Victoria, S CI 2015 02923, Justice Quigley, 12-16, 19-23 February 2018) 124-5 (Hubay) ('T').

[3] VicRoads occupied the Land between 2007-2010, during construction of the freeway, and paid rental of approximately $430,000 per annum together with rates, tax, and outgoings.

[5] The Land has a Southbank address, but land to the south of the Westgate Freeway is generally recognised as being in the South Melbourne locality.

[6] Compensation of $1 million was paid by VicRoads for the air rights or strata acquisition. 592m2 of the Land was restricted by the strata acquisition, and 2,204m2 by other easements.

[7] Mr Torr stated in his valuation report dated 30 March 2016 that the sale price for this transaction was $55 million.

[8] Land Acquisition and Compensation Act 1986 (Vic) s 41(1)(d).

[9] Ibid s 41(1)(f).

[10] Ibid s 44.

[11] Court Book, Secretary, Department of Economic Development, Jobs, Transport and Resources v Caradi (Supreme Court of Victoria, S CI 2015 02923, Justice Quigley, 12-16, 19-23 February 2018) 49-152, 613-639 'GEH-21'-'GEH-22' ('CB'), being the evidence in support of the claim filed 31 March 2016, spreadsheets of expenses, and copies of invoices relating to these expenses.

[17] Noting also that the then Minister for Planning, Matthew Guy, became the relevant responsible authority for this type of development in Fishermans Bend.

[18] CB 552 'GEH-13'. Mr Berryman did not give evidence at the trial.

[19] In these circumstances, the relevant responsible authority was the Minister for Planning.

[21] Mr Biasci for the Authority and Mr Milner for the Claimant; see also CB 1663.

[22] Land Acquisition and Compensation Act 1986 s 31 provides that the initial offer of compensation 'must be made within [14] days after the date of acquisition'.

1. [23] CB 582 'GEH-16', being copies of the correspondence between the parties dated 9 January 2014, 24 January 2014, and 12 February 2014.

[25] Here, being 19 December 2013 (the 'Relevant Date').

[26] The Court will have regard to comparable sales taking place at or around the relevant date: see Brisbane City Council v Mio Art Pty Ltd [2011] QCA 234; [2012] 2 Qd R 1, 26-7 [79].

[27] [1907] HCA 82; (1907) 5 CLR 418, 432.

[29] Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156, 177.

[30] (1992) 77 LGRA 102, 108; see also discussion in Mario Piraino Pty Ltd v Roads Corporation (No 2) [1993] VicRp 9; [1993] 1 VR 130.

[31] [2012] NSWLEC 73; (2012) 211 LGERA 158, 182-3 [99] (citations omitted).

[32] [2011] VSC 184; (2011) 34 VR 445, 453 [17]-[18] (footnotes omitted).

[33] (1994) 85 LGERA 418, 419 (citation omitted).

[34] [1901] AC 373, 391.

[35] Quoted in Spencer [1907] HCA 82; (1907) 5 CLR 418, 442-3.

[36] Duffy v Minister for Planning [2003] WASCA 294; (2003) 129 LGERA 271.

[38] The content of the address and date columns have been modified to note discrepancies between the valuers' reports. The price, area and $/m2 columns have also been added. Any comments contained in the table were removed for simplicity. Where there were discrepancies between the valuers reports in addresses, dates, prices, areas and rate $ / m2, these are noted.

[39] $31,795,854 not having regard to the additional open space contribution payment.

[40] While this sale was recorded in the Authority's Table, this sale was not recorded in Mr Torr's report.

[41] While this sale was recorded in the Authority's Table, this sale was not recorded in Mr Murray's report.

[44] Whilst this property has a Docklands address it is quite close to the Subject Land but on the north west side of the Westgate Freeway.

[45] Mr Torr's report stated the address of this premises as 97-117 Kavanagh Street, Southbank.

[49] Mr Murray's report stated that this sale occurred in January 2014.

[50] Mr Murray's report stated June 2014.

[51] Mr Murray's report incorrectly stated that this sale occurred in April 2013.

[52] Mr Dudakov had prepared earlier reports which were before the Court, and which are referred to in relation to the remediation cost issue at paragraphs [246]-[276].

[58] The participants were Mr Dudakov and Mr Brown for the Authority, and Mr Torr and Mr Murray for the Claimant.

[62] Referring to the Joint Expert Report of the environmental consultants dated 16 November 2016: CB 864.

[65] River Bank Pty Ltd v Commonwealth (1974) 4 ALR 651, 653.

[66] See Douglas Brown, Land Acquisition: An Examination of the Principles of Law Governing the Compulsory Acquisition or Resumption of Land in Australia (LexisNexis Butterworths, 6th ed, 2009) 227-8.

[67] Ibid 1667. Other reasons given were differing development yield, sales locations, and fast changing market.

1. [69]Ibid.
2. [70]T 448.3-13 (Dudakov).
3. [71]CB 1009-11.
4. [72]T 513.15-17 (Dudakov).
5. [73]Ibid 521.5-10 (Dudakov).
6. [74]Ibid 660.1-17 (Brown).
7. [75] Cf Southbank proper: Ibid.

[76] Discussed at paragraphs [173]-[ 193].

1. [77]Exhibit 'A31'; T 290.6-22 (Torr).
2. [78]CB 308.
3. [79]T 223.15-224.3, 226.21-227.12 (Torr), 406.11-18 (Murray); see also CB 1667.
4. [80]Supplementary Court Book_, Secretary, Department of Economic Development, Jobs, Transport and Resources v Caradi_ (Supreme Court of Victoria, S CI 2015 02923, Justice Quigley, 12-16, 19-23 February 2018) 2865-6 ('SCB').
5. [81]T 282.1-5 (Torr).
6. [82]See CB 1009.
7. [83]Ibid 1047; see also T 237.9-24 (Torr), 355.11-357.8 (Murray).
8. [84]SCB 2865-6.
9. [85]T 597.7-22 (Brown).
10. [86]CB 1417.
11. [87]Exhibit 'A40'; T 404 (Murray).
12. [88]Exhibit 'A40', 28-30.
13. [89]Ibid 30.
14. [90]CB 2867.
15. [91]Ibid.
16. [92]Ibid 904.
17. [93]Exhibit 'A31'; T 289-290 (Torr).
18. [94]See, for example, CB 1048.

[95] [1915] HCA 54; (1915) 20 CLR 231, 239-40.

[96] [2004] FCAFC 48 (5 March 2004) [128]-[129].

[97] (2011) 6 BFRA 24.

[99] [2004] NSWCA 451; (2004) 63 NSWLR 167.

[103] [2012] NSWLEC 199 (30 August 2012).

1. [109] See sale agreement for the purchase by MaxVic Holdings Pty Ltd of the property located at 60-82 Johnson Street, South Melbourne, dated 3 December 2012: SCB 2937-83.

[112] Ibid 3060, 3068; T 256-8 (Torr).

[114] T 391.6-9 (Murray); T 257.31-258.2 (Torr); T 397.13-16 (Morris).

1. [116] 19 August 2014, 26 September 2014 and 19 March 2015: SCB 3091-2.

[123] Mr Dudakov in his February 2016 valuation report stated that the sale price for this transaction was $18.25 million, a rate of $2,063/m2. At trial, he gave evidence that he understood that the actual sale price was $18.5 million: T 425.28-426.2 (Dudakov).

[124] See Spencer [1907] HCA 82; (1907) 5 CLR 418 and paras [42]-[43] above.

[125] Court Book Subpoena Materials_, Secretary, Department of Economic Development, Jobs, Transport and Resources v Caradi_ (Supreme Court of Victoria, S CI 2015 02923, Justice Quigley, 12-16, 19-23 February 2018) 3320 ('CBSM').

[132] This document was produced by Little Projects on subpoena: see CBSM 3510-65.

[136] First contained in the Fishermans Bend Strategic Framework Plan of July 2014.

1. [144] Pursuant to the Planning and Environment Act 1987 (Vic) s 201F. The notice was published in the Victorian Government Gazette on 5 July 2012. See CB 2712.

[151] As at the Relevant Date, Southbank for approximately 30 years, and Docklands for 18 years.

[160] T 504-5 (Dudakov), 602.4-24 (Brown).

[162] [2011] VSC 184; (2011) 34 VR 445, 464 [41] (footnote omitted).

[164] [1952] HCA 76; (1952) 87 CLR 159, 170.

[165] Spencer [1907] HCA 82; (1907) 5 CLR 418, 440.

[166] Roberts and Bagwell v The Queen [1957] SCR 28, 36-7.

[167] Nissen v The Queen (1976) 11 LCR 115 (Fed Crt Canada, Trial Division).

[168] [2011] QCA 234; [2012] 2 Qd R 1, 26-7 [79].

[169] [2012] QLAC 8 (5 December 2012); [2012] QLAC 8; (2012) 33 QLCR 418, [21] (footnotes omitted).

[170] (2008) 220 FCR 284, 292 [38]; see, eg, McCathie v Federal Commissioner of Taxation [1944] HCA 9; (1944) 69 CLR 1, 16-17; Melwood Units Pty Ltd v Commissioner of Main Roads [1979] AC 426 (PC) 436; Closer Settlement Ltd v Minister (1942) 17 LGR (NSW) 62.

[171] Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547.

[173] Mr Murray's valuation report is dated 31 March 2016. He inspected the Land on 21 September 2014.

[174] Mr Torr's valuation report is dated March 2016. He inspected the Land in September 2014.

[177] Mr Dudakov's earlier valuation reports were dated 12 April 2011, 30 June 2011, 4 August 2011. Mr Brown's valuation report is dated 30 March 2016. He inspected the Land on 25 November and 8 December 2013.

[181] Caradi Pty Ltd, 'Closing Submissions on behalf of the Respondent', Submission in Secretary to the Department of Economic Development, Jobs, Transport and Resources v Caradi, S CI 2015 02923, Undated, 32 [99] ('Claimant's Closing Submissions').

[185] I do not consider 89-103 Gladstone Street in December 2012 a comparable sale, thus it is not relevant sale.

1. [197] Exhibit 'R48' (tab 3, 11, 26).

[198] Exhibit 'R48' (tab 3, 16); T 610 (Brown).

[215] [2008] VSCA 180; (2008) 20 VR 447.

[217] Claimant's Closing Submissions 27-28 [82]-[85].

[222] Commissioner of Succession Duties (SA) v Executor Trustee & Agency Co of SA Ltd [1947] HCA 10; (1947) 74 CLR 358, 774 (Dixon J).

[223] Land Acquisition and Compensation Act 1986 s 40.

[224] Love v Roads Corporation [2011] VSCA 434 (16 December 2011), [96].

[225] Roads Corporation v Schembri (2009) 28 VR 229, 234 [25].

[226] Secretary to the Department of Economic Development, Jobs, Transport and Resources v Manor Lakes (Werribee) Pty Ltd [2016] VSC 358 (24 June 2016), [44] (Emerton J), citing Halwood Corporation Ltd v Roads Corporation (1995) 89 LGERA 280, 303-4 (Batt J).

[227] Secretary, Department of Economic Development, Jobs, Transport and Resources v Stella (2016) 215 LGERA 314, 324 [39].

[229] (2017) 224 LGERA 195 (Warren CJ, Osborn JA and Ferguson JA).

[235] Authority's Closing Submissions 73 [248].

[246] See W Nevill & Company Ltd v Commissioner of Taxation [1937] HCA 9; (1937) 56 CLR 290, 302, where it was said that: 'The word used is "incurred" and not "made" or "paid." The language lends colour to the suggestion that, if a liability to pay money as an outgoing comes into existence, [the section is satisfied] even though the liability has not been actually discharged at the relevant time. ... It is only the incurring of the outgoing that must be actual; the section does not say in terms that there must be an actual outgoing - a payment out'.

[247] The inference in s 56(c)(iii) of the LAC is that expenses under s 41(1)(f) do not need to be paid for those expenses to be incurred.

[248] Coles Myer Finance Ltd v Commissioner of Taxation [1993] HCA 29; (1993) 176 CLR 640; Nilsen Development Laboratories Pty Ltd v Federal Commissioner of Taxation [1981] HCA 6; (1981) 144 CLR 616.

[255] Authority's Closing Submissions 77 [258]-[259].

[256] McCann v Roads Corporation [2011] VSC 96, [18] (Osborn J).