Ashfield Municipal Council v RTA of NSW

Land and Environment Court (NSW)|2000-06-15|Before: Sheahan J, Mr J

The applicant Council relied upon the evidence of Terence Michael Dundas , a Director of Egan National Valuers (NSW). No CV of Mr Dundas is in evidence, but his credentials were admitted by the respondent. Mr Dundas is the author of Exhibits A7-A10 . Exhibit A8 and A10 are reports in reply to the valuations of the respondent's expert Anthony William Finlay , Regional Director (Metropolitan) of the Valuer General's office. He qualified in 1965 and has occupied a number of senior positions in that office.

Because of the fragmented character of the subject lands, both valuers operated on a " piecemeal ", rather than a " before and after ", basis in preparing their valuations.

The value assessed and compensation offered in respect of lots 15-17, pursuant to s 42(2) of the JTC Act, amounted to $77,000 (market value $72,000, plus disturbance of $5,000), and that in respect of the easement to $1,801 (market value $1, plus disturbance of $1,800).

Mr Dundas relied on ten sales, and he also referred to other sales considered by the court on other occasions (see Exhibit A8 p12) and to the values arrived at by the Judges in those cases. In a postscript to his schedule of ten sales he referred specifically to the value of $600 arrived at by Pearlman J in the Prince Alfred Park case (see par 50 below).

Mr Finlay relied on eight completely different sales, having looked for "market evidence where land has been purchased for the purpose of public recreation on a basis that it did not reflect a potential for a higher and better use " ( Exhibit R2, p2).

The values per square metre of the 18 properties considered by the valuers ranged from $115.27 to $11,894 for Mr Dundas's nominees, and from $24 to $134 for Mr Finlay's. Mr Dundas settled on a unit value of $450 per square metre, and Mr Finlay on $63 per square metre.

On its comprehensive " view ", the court visited, with both parties, five of Mr Dundas's nominees, seven of Mr Finlay's, and the subject site itself. Both valuers asserted that their respective sales were " comparable ", and both were subjected to searching cross-examination on their statements of evidence to that effect.

None of the 18 properties reviewed in this case, and none of the others referred to by Mr Dundas, appears to the court to be " truly comparable " with the subject site, and I think that position was fairly conceded in the oral testimony of both experts.

Several of the sales were not market-place transactions, and, as such, had their own history and special features (e.g. the Brighton, Dover Heights, Vaucluse, Gladesville and Randwick lands relied on by Finlay, and the North Ryde lands relied upon by Dundas, were unusual intra-governmental or inter-governmental deals).

In several instances the relevant lands had genuine residential potential and their prices reflected that.

Several sales resulted from the establishment of open or recreational space in areas where such space had a " higher " value and purpose (e.g. the Kirribilli land relied upon by Dundas was acquired for a harbour-side walk).

In other cases there was an actual community need, such as shortage of parkland (e.g. the Erskineville and Chippendale lands relied upon by Dundas), or a valuable opportunity presented for the augmentation of existing open space (e.g. the Penshurst and St Peters lands relied upon by Dundas).

Several of the parcels had little alternative use, due to the proximity of another use, such as the road in the case of the subject land (e.g. the Cammeray and Sans Souci lands, and possibly also the Penshurst lands, relied upon by Dundas, and the La Perouse and Fraser Park lands relied upon by Finlay).

The subject land is alongside the waters of Iron Cove, and the end of Hawthorne Canal, and also alongside what has been and remains a major arterial urban road, and a significant bridge (now duplicated).

It is comprised of small irregular lots which the court cannot envisage being developed beyond their use as road reserve, or for fairly passive recreational uses and some recreation-related carparking.

The acquired lands certainly could and would not be used as, nor could they be sold as, residential land.

Accordingly, the subject land should not be valued as if it could be so used. It should be valued on the basis of what it actually is, namely open space.

I have, therefore, concluded that the most relevant, if not genuinely " comparable " of the 18 sales before the court, would be the local open space component of the Cammeray sale ($146 per m2), and the Sans Souci ($156 per m2), La Perouse ($63), Randwick ($111), and Belmore ($286.60) sales.

Mr Finlay's $63 figure is equal to the lowest of those per square metre sale prices, and Mr Dundas's $450 is 1.5 times the highest of them.

I have arrived at a market value of the acquired lands on a fee simple basis, of $152.50 per square metre, i.e. approximately the average of the per square metre sale prices of the five " most " comparable parcels of land.

I should note for the record that of the five parcels of land I have chosen for the calculation of the relevant valuation the court viewed only three. However, the court is familiar with the Cammeray land (and said so as time ran short on the tour of inspection), and is satisfied from the written and oral evidence that the Belmore land, although substantially higher priced that the others, is sufficiently comparable to be included in the calculation.

The court must now proceed to determine how to apply that valuation to the acquired lands and interests. ( Hurstville City Council v RTA of NSW [1999] NSWLEC 100). The questions to be addressed in that determination are: (i) Does the Council have an interest as valuable as the fee simple? (ii) Does the classification of public lands have any impact on compensation? (iii) Does the existing encroachment of the road have any impact on compensation?

Section 92 of the Crown Lands Act 1989 (" the CLA ") provides that the Minister may dissolve a trust or alter its corporate name. Sections 102-103 require the Minister's consent to any alienation of the trust lands, and s 106 requires any proceeds to go to the State. However, only the trustee can sell, lease or mortgage trust lands.

The expert valuers in this case have - I think, correctly - assumed that the positions of trustee and trust manager entail similar rights, powers and interests.

Section 100(1) states that, for the purposes of Part 5 (ss 78-128) of the CLA and any by-law made under that part, " a reserve trust that, but for this section, would not have an estate in fee simple in the reserve has such an estate ".

I accept Mr Ayling's contention that this means that the Crown holds the fee simple of the trust lands, but vests in the Council, for the purposes of the Council's exercise of its functions as trustee or trust manager under the CLA, those incidents of the fee simple which the Council needs in order to achieve those purposes.

Council's interest is, therefore, " limited ", but it is regarded as an estate in fee simple for the purposes of only the CLA. Such limited interest is, however, an interest for which the Council is entitled to be paid compensation . (Prince Alfred Park Reserve Trust v SRA (1997) 96 LGERA 75).

The question before the court in this context is whether, and if so to what extent, the fee simple value should be discounted for the effects of the obstructions/restrictions encountered by Council in " dealing with " the reserve lands.

The applicant discounts its valuation by only $100,000 out of a gross value of $2.5M (i.e. 4%) for these restrictions, and then only in respect of the situation on the land of gas pipelines and associated equipment, and perhaps the effect of an electricity easement.

The respondent relies on cases where discounts of up to two-thirds, or even 75%, were applied for these restrictions. Those cases involved " community land ", under the Local Government Act 1993 (" the LGA "), (as to which see the next section of this judgment), but Mr Ayling submitted that, even if the constraints imposed on Council by the CLA regime are not quite as comprehensive as those affecting " community land ", they are, in general terms, quite significant, and, in the context of these particular lands, quite overwhelming.

I have concluded that Council, or a public body like the RTA, is the only potential " buyer " or " user " of these lands, but Council made " use " of them only to provide recreation space, water views, some " public " parking, and water-side access for the general public.

In those circumstances of public use and enjoyment, it would seem to the court that the Crown would be unlikely to consent to any alienation proposed to it by Council, except perhaps for such public purposes as the making or improvement of public roads. In addition to the withholding of consent, the CLA empowers the Crown to extinguish Council's interest, dismiss the trustee, and control the proceeds of any disposal.

In view of those matters, I believe I should follow the principles laid down and applied in cases such as the NSW Court of Appeal decision in Hornsby Shire Council v RTA of NSW (1998) 100 LGERA 105, and so have regard to Mr Finlay's opinion that the value should be reduced by as much as 75%. To resolve any ambiguity in favour of the claimant, I intend to apply the discount applied by Bannon J in Hornsby , namely two-thirds, despite Stein JA's comment, on appeal (at 108), that such may be considered " generous".

Sections 98(1) and (1A) of the CLA provide that if a Council is the manager of a reserve trust and the reserve is a public reserve, the trust has " all the functions " of a Council under the LGA, but no power to classify the reserve as " operational land " under that Act.

Hence, Council cannot " unfetter " its right to deal with trust lands by purporting to reclassify the land as " operational " under the LGA.

Chapter 6 Part 2 of the LGA, according to its " note " (which s 6 provides does " not form part " of the Act but is there to " assist understanding "), requires that all lands vested in a council (except a road, or, relevantly here, land to which the CLA applies) must be classified as either " community " or " operational " land.

" Community land " must be kept for use by the general public and, generally speaking, must not be sold, or otherwise alienated. Exceptions and conditions appear in ss 45-47. Plans of Management must be prepared to govern the use of " community land ". Such restrictions do not apply to " operational " land.

The " note " in the LGA comments that classification or reclassification of land under the LGA does not affect Council's estate or interest in the land.

In this case, due to the significance of the acquired lands as public recreation land, which also provides pedestrian access along the foreshore, a lease or licence of the land would seem unlikely to be achieved. Nonetheless, it is feasible that some of the area could be leased, e.g. for carparking at the Rowing Club. " The possibility of the Council being dispossessed of the land, other than for the purpose of a public works project would seem remote " (Mr Finlay's report in Exhibit R1, p16).

Section 53 of the LGA requires Council to keep a register of all land " vested in it or under its control ", setting out in the register, inter alia, " whether or not the land is Crown land ", and any " classification " given the land under Chapter 6 Part 2.

The Council's land register ( Exhibit A16 ) records all the relevant resumed lands as " Crown Land ", and as neither " community " nor " operational " land. I regard this as correct, but I note that the effect of cl 6(2) of Schedule 7 of the LGA would seem to require Council to classify all " land subject to a trust for a public purpose" automatically as "community land ".

However, as the land here is land to which, in my view, the CLA relevantly " applies ", it comes within the exceptions. (See Bannon J in Hornsby Shire Council v RTA of NSW [1994] NSWLEC 144). As Linda Pearson says in her text " Local Government Law in New South Wales " (1994) (p 268): The extent of the power of the council to manage and deal with public land therefore depends on the origins of the land. If the land falls within part 5 of the Crown Lands Act 1989, that is, Crown land dedicated or reserved from sale for a public purpose, and either the council or another person have been appointed as trustee, the land continues to be land to which the Crown Lands Act applies and is therefore not 'public land' for the purposes of Chapter 6 of the Local Government Act. The power to grant leases in respect of such land is conferred by ss 102-106 of the Crown Lands Act and the consent of the Minister for Lands is required; if no trustee has been appointed, and the land is reserved rather than dedicated, the only leasing power is that of a special lease granted by the Minister for Lands under s 34 of the Crown Lands Act 1989.

I accept Mr Webster's submission on this point and can see no basis on which I should reduce the value of the acquired lands to take account of the provisions of the LGA. c.f. Hornsby Shire Council v RTA of NSW (1998) 100 LGERA 105.

Sections 204 and 206 of the Roads Act 1993 provide as follows:

204 Council entitled to compensation if Crown compulsorily acquires public road (1) A council is entitled to compensation under this Division for a public road owned by the council that is acquired by the Crown by compulsory process. (2) The provisions of this Division apply in substitution for the provisions of the Land Acquisition (Just Terms Compensation) Act 1991 with respect to compensation.

206 Compensation where council does not have to construct new road (1) This section applies except where it is necessary for the council to construct a new public road to replace an existing public road that has been acquired by the Crown by compulsory process. (2) The amount of the compensation to which a council is entitled under this section is the sum of: (a) the money (if any) that the council paid for the acquisition of the land, and (b) the money that the council has spent on the construction of the road, and (c) the money that the council has spent in erecting or constructing, in, on or over the road, any conduits, poles or structures for use in connection with any water, sewerage or drainage work of, or any trading undertaking carried on by, the council, which, at the time of the acquisition by the Crown, were owned and used by that council in connection with any such work or trading undertaking, but does not include any money spent on the maintenance, replacement or repair of the road or any such conduits, poles or structures. (3) Compensation is not payable under subsection (2)(c) to the extent to which any such conduits, poles or structures can reasonably continue to be used by the council in connection with any such work or trading undertaking.

The applicant submits that as Council is not the " owner " for the purposes of s 204, the Roads Act is not enlivened in this case to oust the operation of the JTC Act. Council is only the manager and/or trustee under the CLA and would have needed the Minister's consent to alienate the land for road purposes. The land encroached by the roadway cannot become dedicated as a road under the Roads Act 1993, by virtue only of some default, and in the absence of some dedication process.

On the other hand, the respondent relies on the bundle of maps and Gazette notices in Exhibit R11 , and on the aerial photograph in Exhibit R13 (see par 10 above) to submit to the court that, as the road in the vicinity of the reserved lands appears to date back well beyond 1993, it is taken to be a public road within the terms of the Roads Act 1993, which acts as a code. (See discussion of the law on roads in Xerual Pty Ltd v Auburn Council [1999] NSWLEC 64).

I accept Mr Ayling's submissions on this point. As the relevant road was declared as MR 650 in 1993, all the pre-conditions required by s 206 are present. (See Commissioner for Main Roads v BP (Australia) Pty Limited & Anor (1964) 10 LGRA 423). There is no reason the relevant area of the subject land cannot at the same time lie within a Crown or public reserve for the purposes of the CLA.

As s 206 of the Roads Act applies, the question of any compensation payable in respect of 2349m2 of the 5590m2 of land acquired is not a matter for this court in these proceedings. However, compensation for the remaining 3241m2 of the lands is indeed the concern of these proceedings.

Accordingly, I conclude that the applicant is entitled to compensation in Matter 30020 on the following basis:

Market Value 3241m2 of land at $152.50 per m2 $494,252.50 Allow two-thirds for effect of CLA restrictions on Council's interest in the land One-third of $494,252.50 = $164,750.83 Plus Disturbance , as allowed by respondent in the Points of Defence, and not contested by the applicant in the Points of Reply $5,000.00 $169,750.83

The powers, rights and duties of the Australian Gaslight Company (" AGL "), as a statutory, but not Crown, gas undertaking, derive initially from very old legislation, the first AGL Act having been passed by the NSW Parliament in 1837, subject now to the Gas Industry Restructuring Act 1986.

The area of land under easement is 339m2, and AGL is able to put apparatus " in, through, under or across " the whole of that area of land (wording taken from AGL's 1858 amending legislation). The easement is a blot on title and sterilises the value and use of the land to some extent.

As Mr Ayling put it (in his written submissions par 7), the 1837 statute, as amended, does not limit AGL's authority to " do any act or thing necessary for or reasonably incidental to engaging in the reticulation of gas ", provided the 1986 Act allows it to do so.

He, therefore, submits that, as AGL is clearly authorised, by the joint operation of the 1837 and 1986 legislation, to lay pipes in streets and public places, it is exempt from the licensing requirements of the Pipelines Act 1967, and can utilise " as much or as little of the area of the reserve as it needs to accommodate its apparatus, without the need for any easement ". Accordingly, under the principles in Rogerson & Anor v The Minister (1968) 16 LGRA 400, " the easement must be valued as no more than the blot on title it creates ".

In Rogerson , Hardie J dealt with compensation for the acquisition of an easement over an existing sewer main several feet below the surface, and ruled that "a reasonable and fair apportionment of the depreciation in value would be two-thirds to the presence of the sewer main and the statutory rights available to the Board and one-third to the creation of the easement ".

Prior to the acquisition of the easement there were already certain improvements on the land which has been subject to it. They comprised several large metal covered manholes on a concrete slab, together with four 2m high metal pipes, and several smaller manholes, apparently constructed pursuant to the statutory right of easement.

Since the acquisition of the easement several large metal kiosks about 1.5m high have been constructed on a concrete slab pursuant to the rights of easement acquired.

The market value of the easement was twice assessed by Mr Dundas, on behalf of the applicant, by reference to the decrease in value of the land retained. This process threw up the following components of value: (a) the blot on title of the easement (b) the restrictions placed on the use of the retained land under the terms of that easement (c) the rights under the terms of the easement

In his first assessment Dundas allowed for a decrease in value of 25%, on the basis of 2.5% for blot on title, 10% for restrictions on use of retained land, and 12.5% for the rights granted to the owner.

The total decrease in value of the affected land, due to the presence of the acquired easement was, therefore, 25% of $150,000 (being 339m2 at $450 per m2, rounded down), namely $37,500.

The respondent rejected that methodology, and claimed that the applicant had sustained no loss , and was, therefore, entitled to no compensation in respect of market value. However, the respondent admitted that the applicant was entitled to compensation for disturbance in the amount of $1,800.

Mr Finlay considered Mr Dundas's allowances (totalling 25%) to be excessive. " The land had already been severely affected by the existence of the utility. The utility not only carried gas in pipes below the surface but also consisted of various unsightly manholes and kiosks at the surface. The acquisition of the easement, it is contended, merely formalise title to the dominant tenement and constitutes a blot on title effect. Whether described as a blot on title or not, the diminution in value would be generously estimated at 10% of the restricted value of the land held by the Council as trustee ". ( Exhibit R4 , p2).

Mr Dundas then in his " report in reply " ( Exhibit A10 , p3) accepted Counsel's advice that Rogerson did not apply. He, therefore, made a second assessment, opining that the value of the affected area decreased by 40% (not 25%), made up of 2.5% for blot on title, 17.5% for restrictions on the use of the land (7.5% existing and 10% potential future), and 20% for rights granted to the owner of the easement (7.5% for present rights and 12.5% for the " added rights " under the easement). Thus he amended his figure for the decrease in value of the affected land to be a total of 40% of $150,000 (being 339m2 at $450 per metre2, rounded down), namely $60,000.

On the other hand, Mr Finlay opined that the land was worth $5,500 (being 339m2 at $63 per metre2, reduced by 75%). The owner has " full and free right… " under its easement, but an obligation to restore the surface, and a right to be asked for consent to any " building, structure, roadway, pavement, pipeline, cable or other ' improvement '".

Finlay distinguished the present case from Rogerson because the Rogerson pipes were well below the surface and a boatshed was erected over part of the easement area. " The effect of the easement was to severely restrict further development by the owner within the easement area. However in this case the use of the land had already been severely sterilised by the existence of the works because the utility existed both above and below the surface making the land undesirable for public recreation ". ( Exhibit R4 , p3).

He concluded that the " blot on title " effect was no more than 10% of restricted value of the land, so the compensation should be only $550.

With respect, I consider that assessment to be unacceptably conservative.

Mr Webster submitted that as the easement allowed for full use of the surface, including for the erection thereon of buildings etc, a reduction of 90% was more " relevant and appropriate ".

I agree with Mr Webster's submission in this regard.

Accordingly, I conclude that the applicant is entitled to compensation in Matter 30021 on the following basis:

Market value 339m2 of land at $152.50 per m2 $51,697.50 Allow two-thirds for effect of CLA restrictions on Council's interest in the land One-third of $51,697.50 = $17,232.50 90% thereof = $15,509.25 Plus Disturbance , as allowed by respondent in the Points of Defence, and not contested by the applicant in the Points of Reply $1,800.00 $17,309.25

The court, therefore, makes the following orders:

(a) In Matter 30020 of 1998:

The amount of compensation payable by the Respondent to the Applicant is determined at $169,750 .
The question of costs is reserved.

(b) In Matter 30021 of 1998.

The amount of compensation payable by the Respondent to the Applicant is determined at $17,310 .
The question of costs is reserved.

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

CITATION : Ashfield Municipal Council v RTA of NSW [2000] NSWLEC 117 Applicant: PARTIES : Ashfield Municipal Council Respondent: The Roads &Traffic Authority of New South Wales FILE NUMBER(S) : 30020; 30021 of 1998 CORAM: Sheahan J KEY ISSUES: Compensation :- Market Value - Disturbance - Crown Land - Interest of Council as Trustee - Valuation Land Acquisition (Just Terms Compensation) Act 1991 ss 42, 55, 56, 66 LEGISLATION CITED: Crown Lands Act 1989 s 92-106 Local Government Act 1993 Chapter 6 and Schedule 2 Roads Act 1993 ss 204 and 206 Commissioner for Main Roads v BP (Australia) Pty Ltd (1964) 10 LGRA 423; Hornsby Shire Council v RTA of NSW (1998) 100 LGERA 105; CASES CITED: Hornsby Shire Council v RTA of NSW [1994] NSWLEC 144; Hurstville City Council v RTA of NSW [1999] NSWLEC 100; Prince Alfred Park Reserve Trust v SRA (1997) 96 LGERA 75; Rogerson v The Minister (1968) 16 LGRA 400 DATES OF HEARING: 6/12/99-10/12/99, written submissions 22/12/99 DATE OF JUDGMENT: 06/15/2000

(1998) 100 LGERA 105

At a glance

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Judgment (78 paragraphs)

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Cases Cited (6)

Cited By (5)