Australand Industrial No. 111 Pty Limited v Valuer General

Planning history of the Land 6The planning history of the Land is summarised in the town planning report prepared by Mr Robert Chambers and filed on behalf of the applicant (the planning report) (Exhibit A1, Tab 5 at [69]). 7It describes the Land as having been set aside as a conservation area as part of the development of the Eastern Creek Precinct for industrial purposes (Exhibit A1 at [72]-[73]). In short, it is the biodiversity conservation offset land to the impacts of development in the Eastern Creek Precinct (Exhibit A1 at [74]). 8The Land is subject to registered positive covenant no 10. The terms of the positive covenant are as follows: The owner(s) and successors shall manage the Conservation Area in accordance with the Bushland Management plan prepared by Conacher Travers dated July 2006 held at Enclosure 17A of Blacktown City Council's file No DA -09-2400. (Exhibit A1 at [123]). 9The imposition of the positive covenant, according to Mr Chambers, can be traced back in time to 27 May 2009, when the Blacktown City Council (the Council) granted development consent (DA 06-1992) to the applicant for the subdivision of land (being the parent parcel of the Land) and associated works (Exhibit A1 at [72]). 10In granting the May 2009 consent the Council imposed the following condition: 2.5.5 A total of 59.9 hectares of conservation/riparian land (being 54.3 and 5.6 hectares respectively) shall be set aside for conservation purposes as per the requirements of the Eastern Creek Precinct Plan. 11Subsequently, on 27 November 2009, the Council granted further development consent (DA 09-2400) for the subdivision of the parent parcel into 5 industrial residue lots and 2 lots for conservation area. This further November 2009 consent was also subject to a condition requiring the creation of a positive covenant namely: 3.2.6 A positive covenant over proposed Lot 1 and 5 is to be created to require the owner and successor in title to manage the Conservation Area in accordance with the Bushland Management plan prepared by Conacher Travers dated July 2006 held at Enclosure 17A of the Council's File No DA-09-2400. 12There has been no development consent issued in respect of the Land since the consent which created it. Relevantly, it exists today (as it did as at July 2011) as virgin bushland with some areas of limited clearing and perimeter fencing.

The Appeal 13The respondent determined the land value of the Land under the Valuation Act as at 1 July 2011 at $5 million representing $9.17 per m2. 14The applicant made objection to that land valuation on the basis that it was too high. 15This appeal, under s 37 of the Valuation Act, is in response to the respondent's disallowance of the applicant's objection (Exhibit A1, Tab 1 at [8]). 16The Court's powers on appeal are to (a) confirm or revoke the decision to which the appeal relates; (b) make a decision in place of the decision to which the appeal relates; or (c) remit the matter to the Valuer General for determination in accordance with the Court's finding or decision (s 40(1) of the Valuation Act). 17The applicant has the onus of proving its case (s 40(2) of the Valuation Act).

The Statutory framework for determining the land value 18Section 6A(1) of the Valuation Act identifies the meaning of 'land value' as follows: 6A Land value (1) The land value of land is the capital sum which the fee-simple of the land might be expected to realise if offered for sale on such reasonable terms and conditions as a bona-fide seller would require, assuming that the improvements, if any, thereon or appertaining thereto, other than land improvements, and made or acquired by the owner or the owner's predecessor in title had not been made. (2) Notwithstanding anything in subsection (1), in determining the land value of any land it shall be assumed that: (a) the land may be used, or may continue to be used, for any purpose for which it was being used, or for which it could be used, at the date to which the valuation relates, and (b) such improvements may be continued or made on the land as may be required in order to enable the land to continue to be so used, but nothing in this subsection prevents regard being had, in determining that value, to any other purpose for which the land may be used on the assumption that the improvements, if any, other than land improvements, referred to in subsection (1) had not been made. (3) Notwithstanding anything in subsection (1), in determining the land value of any land, being land in relation to which, at the date to which the valuation relates, there was a water right: (a) the land value shall include the value of the right, and (b) it shall be assumed that the right shall continue to apply in relation to the land. (4) For the purpose of determining the value of a water right, the value of any water secured by, or referable to, that right is to be ignored. 19The concept of "land improvements", referred to in s 6A(1), is defined in s 4(1) of the Valuation Act to mean: Land improvements means: (a) the clearing of land by the removal or thinning out of timber, scrub or other vegetable growths, (b) the picking up and removal of stone, (c)the improvement of soil fertility or the structure of soil, (d) the restoration or improvement of land surface by excavation, filling, grading or levelling, not being works of irrigation or conservation, (d1) without limiting paragraph (d), any excavation, filling, grading or levelling of land (otherwise than for the purpose of irrigation or conservation) that is associated with: (i) the erection of any building or structure, or (ii) the carrying out of any work, or (iii) the operations of any mine or extractive industry, (e)the reclamation of land by draining or filling together with any retaining walls or other works appurtenant to the reclamation, and (f) underground drains. 20Also relevant in this appeal is The Threatened Species Conservation (Biodiversity Banking) Regulation 2008 - Regulation 11 (Regulation 11) which provides: 11 Land excluded from being designated as biobank site (1) Land is not to be designated as a biobank site by a biobanking agreement if: (a) the Minister is of the opinion that any previous, current or proposed use of the land proposed to be designated as a biobank site is inconsistent with biodiversity conservation or will prevent management actions from being carried out on the land or prevent the purpose of those actions from being achieved, or (b) the Minister is of the opinion that any previous, current or proposed use of any land that is adjacent to or in the vicinity of the land proposed to be designated as a biobank site will prevent management actions from being carried out on the land proposed to be designated as a biobank site or prevent the purpose of those actions from being achieved, or (c) the land is the subject of an offset (within the meaning of the Native Vegetation Regulation 2005) under a property vegetation plan approved under the Native Vegetation Act 2003, or (d) the Minister is of the opinion that the land is already the subject of a requirement to carry out biodiversity conservation measures of an ongoing nature on the land under a condition of an approval or consent granted under Part 3A, 4 or 5 of the Environmental Planning and Assessment Act 1979 (this extends to any land that is the subject of a conservation agreement entered into under the National Parks and Wildlife Act 1974 for the purpose of compliance with such a condition), or (e) the Minister is of the opinion that biodiversity conservation measures are already being carried out, or are required to be carried out, on the land under an offset arrangement made for the purpose of complying with requirements imposed by or under any Act (including the requirements of any authority granted by a public authority under any Act), or (f) the land is reserved under Part 4 or Part 4A of the National Parks and Wildlife Act 1974, or (g) the land is a flora reserve or special management zone within the meaning of the Forestry Act 2012 . (2) Subclause (1) does not prevent other parts of a parcel of land (that do not fall within subclause (1) (a)-(g)) from being designated as a biobank site by a biobanking agreement. (3) This clause has effect in relation to land at the time that any biobanking agreement in relation to that land is first entered into or proposed to be entered into. Accordingly, the fact that land designated as a biobank site by a biobanking agreement becomes, after the biobanking agreement is entered into, land excluded from being designated as a biobank site under this clause does not affect the validity of the biobanking agreement (or any subsequent variation of the agreement).

Contentions 21With respect to land value under s 6A, the parties disagree about: (1)The effect of the requirements in s 6A that the object of the valuation exercise under s6A is the fee simple of the land - in particular, whether 'the existence of the covenant on the title of the subject land requiring its ongoing conservation in accordance with the regeneration plan can be taken into account for the purposes of determining whether the subject property would be eligible for inclusion under the Threatened Species Conservation Act 1995 (the TSC ACT). (2)The analysis of comparable sales to assist in resolving the value of the land.

Valuation Expert Evidence 22The parties have each engaged a valuer for the purpose of the proceedings, Mr Davis for the applicant and Mr Sorrenson for the respondent. 23They have each prepared a primary report and a joint report in which they have agreed on certain basic matters about the Land as at 1 July 2011(CB146) including: a. 54.5 hectares in area (545,000 m2); b. vacant but for perimeter fencing and is irregular but broadly triangula; shaped with a frontage to the M4 Motorway of 1.378m; c. zoned "E2 Environmental Conservation" under the State Environmental Planning Policy Western Sydney Employment Area 2009 (WSEA SEPP); d. located in the Eastern Creek Precinct under the WSEA SEPP. 24As it currently stands the applicant's assessed land value, on the evidence of Mr Davis, is that the respondent's assessed land value is too high and should be $40,000 representing $0.07/ m2 (Exhibit A1 Tab 4 at [41]). 25The respondent's position, based on the evidence of Mr Sorrenson, is not that the assessed value is too high but, rather that it should be $3,270,000 representing $6/ m2 (Exhibit A1 Tab 8 at [114]). 26Not surprisingly, the issues as framed by the parties and, in particular in the joint experts' report, guided the conduct of the hearing. Relevantly, the valuers did not assess the valuation of the Land based on any biobanking potential. In fact, Mr Davis considered the Land was not eligible for use in the NSW Biobanking scheme (Exhibit A1, Tab 9 147) and, Mr Sorrenson expressed the view that the highest and best use potential was as an "environmental facility" in accordance with the uses which are permissible under the E2 zoning. 27In fact the case proceeded on the basis that the parties were in agreement that the Land was not eligible for biobanking. That is, until the final day of the hearing when counsel for the respondent raised the biobanking potential of the Land as a reason for rejecting the applicant's valuation evidence (respondent's written submissions (RWS) at [15]-[16]). Not surprisingly, opposition was then taken by counsel for the applicant to the introduction of what it argued was a new issue. Ultimately, the applicant withdrew its objection to the submission because I allowed the applicant an opportunity to respond in writing. This happened on 24 October 2014.

Respondent's contentions 28The respondent contends, as a matter of law, for statutory land valuation purposes, the Land is not excluded from being designated as a bio bank site (RWS at [15] ad [16]). 29Therefore, Mr Davis has wrongly assumed that the Land had no potential to derive any form of income as a biobanking site and, for that reason his valuation evidence cannot be relied upon by the Court (RWS at [14]). It submits that Mr Davis' assumption is based on the opinions expressed by the town planner and ecologist and their views were based on the real world potential, not the s 6A potential. Regulation 11(1) (d) excludes land from being designated as a biobank site by a biobanking agreement if the Minister is of the opinion that the land is already the subject of a requirement to carry out biodiversity conservation measures of an ongoing nature on the land under a condition of an approval or consent. 30In the real world the Land is already the subject of such a requirement. 31However, the parties are not operating in the real world but in a hypothetical world where it must be assumed that no consent exists, that no covenant exists, and that no Bushland Management Plan exists, and have never existed. However, the threatened species on the land are assumed to be present and one assumes the existence of the Threatened Species legislation which is a law of general application. 32The written submission at [16] of the RWS is in the following terms: 16. Mr Davis has not valued the land with potential for use as a bio bank site. However, it is quite plain from his evidence (and obviously correct) that if the land did have such potential, it would have potential to derive income from its use as a bio bank site, and that would give the land an economic value far greater than $40,000. That is because biodiversity credits are valuable; can be sold on the open market each bio bank site may generate a number of different ecosystem or species credits; any of those credits may be sold separately or in groups; and credits can be acquired to be build a portfolio of credits to offset future development. For this reason alone, the Court would not accept that the appellant had discharged the onus and proved its case that the land value should be $40,000. 33The respondent's submission is based on the principle that the fee simple of the land to be valued under s 6A naturally means the fee simple as the highest estate unencumbered and subject to no conditions: Royal Sydney Golf Club v Federal Commissioner of Taxation (1955) 91 CLR 610 at 623; or "an absolute or pure estate in fee simple in the subject land, free of any private conditions, limitations, restrictive covenants, or other inherent restrictions affecting the estate or land, but subject, of course to any laws of general nature that affect the use or alienability of the land ": CSR v Valuer General (1977) 42 LGRA 52 at 55, per Wells J. 34It submits that the covenants and restrictions on title (including the positive covenant requiring the land to be managed in accordance with the Bushland Management Plan) must be assumed not to exist in the s 6A valuation assessment. In fact, it must be assumed that there is nothing on the land by way of improvements, and never has been as it is only the unimproved value of the land which is relevant: Toohey. This means that the development consents on the land cannot be included at all in assessing the unimproved land value: Holcim (Australia) Pty Ltd v Valuer General [2009] NSWLEC 225, at [21] per Biscoe J. Although, the respondent submits for obvious reasons that the consent that created the Land must be taken to exist. 35Therefore, if the positive covenant on title which refers to the Bushland Management Plan is left entirely out of view and assumed never to have existed, Mr Davis's assumption that the Land has no potential to derive any form of income as a biobanking site is based entirely on the real world potential, rather than the hypothetical exercise invited by s 6A (Spencer v Commonwealth (1907) 5 CLR 418; Commonwealth Custodial Services v Valuer General [2006]148 LGERA at [13], per Biscoe J.) 36In assessing the land value under s 6A the respondent submits that the hypothetical purchaser would have regard to the potential for the land to be used for biobanking purposes before seeking development consent. As Mr Davis has not valued the Land potential for use as a biobank site but instead formed a view that the Land has no economic value or at best a nominal Land value at $40,000(Joint report at [9]) his land assessment cannot be relied upon. 37In short, Mr Davis has not untaken the assessment required by s 6A of the Valuation Act and assessed the highest and best use of the land. That is the best and most profitable potential use having regard to the physical economic and legal constraints on the use of the land: Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410 at [415]. The respondent concedes that it is not necessary to identify a precise highest and best use; a range of uses may be sufficient: Commonwealth Custodial Services Ltd v Valuer-General (NSW) (2006) 148 LGERA 38 at [15]. In fact, it submits that the highest and best use may be to hold the Land for a potential future use. 38However, it does not accept as the applicant contends that Mr Davis can ignore the Land's biobanking potential because Regulation 11(1) (d) is not engaged for the purpose of s 6A valuation - the positive covenant is assumed not to exist.

Applicant's response to biobanking issue 39The applicant's written submissions dated 24 October address paragraphs [15] and [16] of the respondent's biobanking submissions together with the relevant parts of paragraphs [5] through to [14]. Insofar as the argument refers to the covenant on title and the Bushland Management Plan the applicant repeats its analysis set out at [21] and [29] of its written submissions dated 16 October 2014. 40The applicant's analysis of the biobanking potential of the site is based on the ecological and town planning evidence of its relevant experts. They are Mr Robert Chambers, for the purpose of providing a town planning perspective of the highest and best use of the Land as at 1 July 2011 (Exhibit A1, Tab 5 at [69]) and its consultant ecologist, Mr Phillip Conacher to prepare an ecological report for the Land (Exhibit A1 at Tab 6 at [94]). 41Their evidence was not contradicted by any other expert because the respondent did not adduce any independent expert evidence from an ecologist or town planner nor did it require Mr Chambers or Mr Conacher for cross-examination. (For completeness I note that the respondent's valuer Mr Sorrenson valued the property on the basis that its highest and best use was the E2 zoning (Exhibit A1 at [110/15.1] and 112/15.14]). He also did not value the subject land by reference to its potential for biobanking). 42Nevertheless, the respondent in its opening contended that the analysis and conclusions of Mr Chambers and Mr Conacher as to the eligibility of the Land for the TSC Act Biobanking Scheme should not be accepted in the proceedings because to do so would be contrary to the legal effect of the reference in s 6A of the Act the "fee simple of the land". 43This is because their evidence as to eligibility was predicated on: (i) the existence of the covenant on the title of the Land that required its ongoing management and conservation - which engaged Regulation 11 which excludes the Land from being eligible under the Scheme; (ii) and did not take into account the reference to the fee simple of the land in s 6A which requires all restrictions on title to be disregarded. 44The applicant's position in respect to the above is that the respondent overstates the legal effect of the requirement in s 6A to value the "fee simple of the land". 45While the applicant accepts that the language of s6A has been interpreted to mean a hypothetical fee simple title unencumbered and subject to no conditions restricting enjoyment or use (Valuer-General v New South Wales Golf Club [2012] NSWCA 355 at [34]-[36] referring to Royal Sydney Golf Club v Federal Commissioner of Taxation (1955 91 CLR 610 at 623) it draws a distinction between the express requirement in s 6A to assume no "improvements" on the Land and the necessity to disregard covenants on title and the like which arise directly as a result of judicial interpretations of the phrase "fee simple of the land". 46It submits that there is nothing it the text of s 6A that requires an assumption that this covenant had not been imposed at all or that its existence is to be ignored for all purposes. All that is required by s 6A is that the covenant is disregarded for the purpose of assessing the land value. This requirement would be infringed if Mr Davis had for example reduced the value of the Land to reflect the cost to the hypothetical purchaser of complying with the obligations under the positive covenant. As this would be valuing the actual and not the hypothetical fee simple. Mr Davis expressly disregarded the covenant and all other restrictions on title in that regard. (Exhibit A1 at [31/17]). 47The applicant submits that the TSC Act and the regulations are laws of general application affecting the Land. The fact that the fee simple to be valued is a hypothetical fee simple does not mean that public laws which affect the value of the land are not to be taken into account NSW Golf Club at [36]; Royal Sydney Golf Club at 624.The applicant submits that if those general laws (such as the TSC Act) happen to operate in accordance with their tenor in respect of the Land by reference to the obligations contained in the positive covenant then it does not infringe the "hypothetical fee simple" principle. Once engaged, that law may affect the value of the Land but, so long as it is the hypothetical title that is being valued, that is all that s 6A requires. 48Unlike the case of Holcim (Australia) Pty Ltd v Valuer General [2009] NSWLEC 225 at [21] in this case there has been no new development consent issued for the Land since the development consent that created it as a separate parcel - (being essentially an offset lot for the adjoining industrial parent lots). For that reason the applicant rejects the respondent's submission that the valuers must ignore the development consents on the Land in the s 6A valuation because to do so would remove the legal basis for the very existence of the Land as a separate lot. 49It also rejects the respondent's submission that you can accept the creation of the lot by the consent but not the conditions requiring, amongst other things, the positive covenant no 10. In short, the applicant argues that the respondent cannot "cherry pick" which condition(s) it seeks to accept from the consent. 50Ultimately, the applicant contends that there is nothing in s 6A that requires the historical town planning regulation of the parent parcel that formed the basis of the existence of the Land as a separate parcel to be ignored Randwick Municipal Council v Valuer - General (1960) 5 LGRA 387. The surrounding industrial development exits for the purpose of the valuation: Tetzner v Colonial Sugar Refining Co Ltd AC [1058] 50. The Land is subject to a covenant which means its biobanking potential has been spent because Regulation11 is engaged as discussed. That covenant was created in performance of an obligation imposed by the development consent creating the Land as a separate lot; not as a consequence of a consensus act.

Finding - The Land's Biobanking potential 51I have decided that the Land is not eligible for biobanking for the reasons articulated by the applicant. 52Mr Davis' assessment, in my view, is correct. The Land has no potential to derive any form of income as a biobanking site because that opportunity has been spent. The applicant submits that Regulation 11(1)(d) of the Threatened Species Conservation (Biodiversity) Regulation 2008 excludes land from being designated as a biobanking site by a biobanking agreement if the Minister is of the opinion that the land is already the subject of a requirement to carry out biodiversity conservation measures of an ongoing nature on the land under a conditions of an approval or consent. 53As the general law applies to the Land in the s 6A valuation assessment and the surrounding development exits, the requirements under those consents that the Land be set aside for conservation purposes as per the precinct plan and the imposition of the covenant on the Land requiring compliance with the Bushland Management Plan must exist. There is no new consent attaching to the Land the covenant was imposed in accordance with the obligation imposed under the consent that created the Land as a separate lot. 54I agree with the applicant that neither the improvements assumption in s 6A nor any other principle of law relating to s 6A requires the existence of these development consents to be ignored. 55I accept that the term "improvements" in s 6A means any human operation on the land that has the effect as at the date of valuation of enhancing the land's value compared with its natural state: Trust Company of Australia Ltd v Valuer General [2007] NSWCA 181. 56However, as the applicant submits, there are no such improvements on the land to which the assumption in s 6A attaches. In those circumstances it is difficult to accept the respondents' submission that the assumption in 6A operates to have the effect that the development consents attaching to the parent land which created the subject Land, as a separate land holding are to be ignored. 57If the Court accepts, as the respondent necessarily submits, that the consents that created the Land must be held to exist for the purpose of giving a legal basis to the creation of the Land it is difficult to agree that the Court must ignore the conditions attached to that consent in circumstances where the consent incorporates the conditions. The respondent cannot as the applicant submits "cherrypick" and seek to ignore only some conditions of the development consent and not others. 58Accepting, as the respondent does that any laws of a general nature that affect the use or alienability of the land are relevant in the s 6A assessment (CSR), it follows that Regulation 11(1)(d) precludes the opportunity for the Land to be used for biobanking in the current circumstances. 59The surrounding industrial subdivision exists because the Land was set aside for conservation purposes. Adopting the approach to valuation in Tetzner v Colonial Sugar Refining Co Ltd [1958] AC 50, the industrial land existing at the valuation date is relevant in the s 6A assessment but any physical improvements on the land must be assumed not to exist. 60As the improvement assumption in s 6A has not been interpreted to require the ignorance of historical town planning regulation of the Land (Randwick Municipal Council v Valuer General (1960) 5 LGRA 387) I must accept the submission of the applicant that the Eastern Creek precinct was developed for industrial warehouses and other areas of biodiversity and natural habitat was lost, in exchange for the Land being set aside for conservation purposes as per the requirements of the Eastern Creek Precinct Plan (see Development Consent no 06-1992 condition 2.5.5) (Exhibit A2 letter dated 17 September 2014 from Mr Conacher to King & Wood Mallesons). That circumstance cannot be interpreted as a physical improvement for the purposes of s 6A therefore it need not be ignored. 61For the reasons stated I find that the conclusion of the town planner and the ecologist that the Land was ineligible for the biobanking scheme under the TSC Act at the valuation date was correct. Therefore, the consequential approach of both valuers that the subject land had no biobanking potential was also correct. 62Having dealt with the biobanking issue, I am now in a position to consider the competing valuation evidence.

Permissible uses on the site 63The principal advice and conclusions of the applicant's planning and ecology evidence are set out by Mr Davis in the valuers' joint report under the general heading "Matters of Disagreement by the Valuers" at [147]. It states:

• The Land contains Cumberland Plain Woodlands which is designated as a Critically Endangered species under both state and federal legislation.
• The Land contains threatened plant species, being Grevillea junipernina, listed as Vulnerable under the TSC Act;
• The Land contains threatened fauna species, being Cumberland Plain Land Snail (Meridolum comeovirens), listed as Endangered under the TSA Act (1995).
• The current E2 Environmental Conservation zone is quite restrictive in the breath of uses that are permissible, and this is supported by the very high ecological value of the Land, and its critical size of over 50 hectares (enabling easier maintenance of its biodiversity values, subject to appropriate management ).These characteristics would be almost certain to preclude any future rezoning to a higher and better economic use than the present 'virgin bush' nature of the Land;
• None of the uses which are permissible on the Land under the SEPP E2 zoning are commercial in nature, and beyond these uses, all other uses are prohibited;
• With limited exceptions, no development consent can be granted under the SEPP on land zoned E2 unless a Development Control Plan (DCP) has been prepared, which is not the case in respect of the Land;
• An exception to the requirement for the preparation of a DCP occurs where the consent authority is satisfied that an existing precinct plan applies to the land within the SEPP. The Eastern Creek Precinct Plan was approved prior to 1 July 2011 (being the valuation date in contention in the matter);
• Development Consent 06-1992 was granted 27 May 2009 and required certain lands, including the Land to be set aside for conservation purposes. Development consent 09-2400 enabled the subdivision of the Land (including the Land) into 5 industrial lots and 2 conservation area lots, one of which is the Land;
• A condition of the later consent requires the creation of a Positive Covenant (which is registered on the Land Title ) over the Land for its future conservation in accordance with a Bushland Management Plan;
• The requirement for the management of the Land as part of a Conservation Area was effectively a condition for the development of the rest of the precinct and, as such precludes the Land being "traded off" for the conservation of land elsewhere;
• The Land is ineligible for use in the NSW Biobanking Scheme by virtue of the operation of Regulation 11(1) (d). 64Finding sales of land having a similar 'highest and best use' to the Land was difficult in this case because of the Land's restrictive zoning. In fact, Mr Davis' evidence is that he was unable to locate any truly comparable sale to the Land, and he is critical of the manner and extent of the necessary adjustments to Mr Sorrenson's comparable sales. 65Mr Davis's primary position is that the land has no economic value; yet, he gives it a nominal value of $40,000. After necessary adjustments he was able to find two sales to support his valuation. 66The applicant submits that the Land's very low or nominal value is also supported by the evidence that the applicant has been unable to transfer the Land to various public bodies (including the Council) for no consideration and with a trust sum of $700,000 in place (Exhibit B). I will deal with this matter in due course. 67Mr Sorrenson's evidence is that there are a range of permissible uses with consent for the Land within the constraints of the E2 zone. They include "artificial wetland" and "environmental facilities" and "roads". 68Mr Sorrenson's valuation was ultimately not affected or "coloured by the prospect of up zoning in the future". He gave oral evidence to the Court that he is not a planner and that any future 'up zoning' was not an important factor in his report on the Land. He was of the opinion that given the wide range of uses, the size of the Land and, its high ecological value, they offered the highest and best use of the Land. 69He was firmly of the view that there is no reason why such a use or a combination of uses could not have economic potential and value. Although, as will become apparent, Mr Sorrenson did not provide any evidence of the value of such uses. In short, none of his comparable sales involved land uses for "artificial wetland" or "environmental facilities" or "roads".

Comparable Sales evidence 70The comparable sales which Mr Davis relies upon to support his contended value are Gosling Street, Emu Heights, which is land of a similar zoning and, Swallow Drive, Erskine Park which is land having a higher zoning than the Land but whose physical characteristics constrain its commercial development potential so as to effectively make its highest and best use sufficiently similar to the Land. 71While Mr Sorrenson relies upon the two principal sales of Grange Road, Schofields and 2 Emu Heights. 72The comparable sales referred to in this case are summarised in the respondent's written submissions at [21]. While the submissions include a commentary which naturally lends support to the respondent's position it also provides basic facts about each sale. For that reason I have decided to include those paragraphs in this judgment. It states: 1 Grange Road, Schofields

• Sale price of $195,000 on 3 July 2010;
• Not acquired /sold by public authority;
• No evidence anything other than arm's length sale;
• E2 objectives and zoning for each of the sites similar;
• Criticisms made by Mr Davis in his report without any evidentiary foundation;
• Not obvious that allegedly 'more valuable' permitted uses could actually take place on the land in accordance with zoning objectives and requirements;
• Appropriate adjustments can be made to reflect a land value of the subject property;
• When those adjustments are made, derived land value of the Land is far in excess of $40,000. 2 Emu Heights
• Not all E2, part E3;
• Property sold in 1 line so not appropriate to strip out the residential land value and derive a residual value for the remaining E2 zone;
• Purchaser was acquiring a bush block with opportunity to build a house on it;
• Davis accepts that it is "useless land" with no economic potential;
• Sold July 2012 for $312,500; equates to just over $2 per m2;
• In contrast to the Land, no economic potential ;category 1 bushfire risk; heritage constraints (Joint report [28]); steep topography, creeks ;transmission line. Far inferior site.
• When appropriate adjustments are made, it supports a land value of the subject site of $6 per m2. Other sales used by Mr Sorrenson A Kellerman Drive, Helens Park
• Sale price of $180,000 for 2.76 hectares on 25 Feb 2011;
• Acquired by public authority, but consensually (no evidence that there was an actual threat of acquisition at the time, but clearly the acquiring authority did have such powers);
• Unsurprising that land was not sold when offered on open market because part of the land is the route for the Georges River Parkway (hardly an attractive proposition for a prospective purchaser);
• Independent valuation carried out which valued the land for open space uses at $250,000;
• Parties eventually agreed on a lower price, equivalent to $6.52 per m2;
• Relatively few/minor adjustments required. B Cranebrook
• $17,500,000 on 11 August 2009
• Consensual purchase by Minister acquiring the land for open space purposes;
• No evidence that threat of compulsion made. C Off Bergendal Road
• $885,471 at 15 December 2011
• Consensual sale to Council ;
• No suggestion sale is tainted;
• No comment by Mr Davis;
• More permissive zoning although heavily flood prone;
• Mr Sorrenson made greater adjustment for flooding. 73The respondent submits that while the "other sales" used by Mr Sorrenson require greater adjustments, often reflecting their greater economic potential, they all have restrictive zonings and the sales support the proposition that land with a highly restrictive zoning does have an economic (not nominal) value. 74Therefore, the respondent submits that these other sales provide a useful check which demonstrates that land value of $6 per m2 in this case is appropriate. In short Mr Sorrenson's sales are comparable and he has made appropriate and transparent, adjustments which give a reliable indicator of the land value of the Land The respondent's comments on Mr Davis' comparable sales A Swallow Drive
• Sold to adjoining owner, who used it for drainage purposes in connection with DA on adjoining land;
• Agreed that circumstances of sale "are not consistent with the notion of an open market transaction (Joint report at[19]); sale should be rejected on that basis alone, if not rejected ,treated with caution;
• Economic use potential of the site highly constrained by existence of transmission line/easement across whole site;
• Court has to value the subject property assuming no easements; Court would get very limited assistance from a sale which is entirely covered by an easement;
• To be contrasted with that of subject property which has use potential within E2 zone;
• The adjustments required to this sale are so significant that it is not a reliable indicator of the value;
• Sale price out of kilter with other sales of constrained land (not an open marker sale). B Wallgrave Road, Eastern Creek
• Sale between 2 government departments. Davis says it should be "put aside".

Emu Heights 75As stated, the applicant's primary position is that there are no identified comparable sales in this case. However, it finds support for its contended value by relying on the sale of Gosling St, Emu Heights (the respondent's sale described as 2 Emu Heights discussed above). It is a large portion of land with the same zoning of "E2 Environmental Conservation" as the Land and part "E3" land. 76Mr Sorrenson's value of the E3 part of the Emu Heights land is based on comparable sales and is $300,000 (Exhibit A1 at [151/28]). The applicant accepts this figure. The applicant submits that it is appropriate to disaggregate that price for this sale to derive a value for the E2 land by deducting the value of the smaller portion of the E2 zoned land on which the purchaser has built a house. Mr Sorrenson disagrees with that approach and suggests that rather than deduct the $300K from the total purchase price to derive an amount for the E2 land the sale should be viewed as a rural residential homestead with limited building area and assessed at an overall per m2 rate (Exhibit A1 at [151/28]). 77Having viewed the site in its context I must agree with the applicant's submission that there is no reason not to disaggregate the sale price for this comparable sale. The adjoining properties are not (as Mr Sorrenson states in his evidence) rural residential in nature and, the parties have agreed on the value to be attributed to the E3 land with the house on it. 78Mr Davis contends that the sale (after adjustment) is as good a comparable sale as can be found. It was an open market sale (not by acquiring authority) and none of the other sales relate to land with an E2 zoning the same as the Land. Relevantly, Mr Sorrenson does not in principal have a problem with disaggregation and, in fact attempted that exercise in his Orange Grove sale (Exhibit A1at [137]) so it is difficult to see why disaggregation is appropriate in other scenarios and not for this comparable sale. In fact without disaggregation it is difficult to accept that the land is comparable with a house on it. 79When the exercise is undertaken this sale shows a deduced value for the E2 land of $12, 5000 which more that supports the applicant's contended land value. Even comparison on an overall per m2 basis (42.08m2) as preferred by Mr Sorrenson derives an adjusted land value for the Land of $1,133,600 which is less than Mr Sorrenson's contended value. In any event for the reasons stated I prefer Mr Davis approach and accept his evidence about this sale. Swallow Drive, Eskine Park 80The sale at Swallow Drive, Eskine Park was land zoned 6(d) Regional open space at the time of sale. The zoning permitted various commercial uses such as child care centres, kiosks and restaurants (Exhibit A1 at [136]). Although the development potential was fully constrained by easements burdening it and it had no potential other than as a landscape buffer (Exhibit A1 at[136]) the land had been bought by the adjoining owner as drainage reserve after the owner Landcom had offered it to the Council at no cost (Exhibit A1 at [113/15.22]). Mr Davis was of the view that despite the higher zoning of the land it effectively had no commercial development potential and truly comparable to the Land in terms of highest and best use. 81Mr Davis did not need to further adjust the land on the basis of topography or size because he was of the opinion that adjustment is only necessary if a particular feature affected the realisation of the highest and best use potential between the two properties. In his expert assessment this was not the case because neither the Land nor the comparable sale had any commercial development potential. A large parcel of land with no development potential will have the same value as a small parcel of land with no development potential (Exhibit A1 at [149/14-16]). 82For this reason Mr Davis' position in this case was that comparison on a per m2 basis was inappropriate and the relevant metric was simply the quantum of the purchase price. 83Mr Sorrenson placed little reliance on this sale because it was purchased by the adjoining owner and not offered on the open market and the easement affected 100% of the land. However, when tested in crossexamination about this sale Mr Sorrenson agreed that he should have made a -35% negative adjustment for zoning (not 0%) in his adjustment table at (Exhibit A1 at [141]). He also agreed that the "free" offer to Landcom was good evidence that the land had low value; and as the adjoining owner purchaser was aware of the owner's offer to give the land free to the Council it is reasonable to assume that he would not have felt any strong economic pressure to acquire the land at an inflated value Barber v Valuer General (1969) LGRA 490 at [421]). 84The applicant submits that this sale to the adjoining owner is relevant as a comparable sale and, although these types of sales are generally treated with caution they are not automatically disregarded: West Australian Planning Commission v Arcus Shopfitters Pty Ltd [2003] WASCA 295 at [55]. 85I accept the applicant's submission that these two sales support the applicant's contended value. 86I accept Mr Davis' criticism of the respondent's most reliable sales of The Northern Road, Cranebrook and Kellerman Drive, St Helen's Park Sales. While it is contended by the respondent that in each sale the public authority "agreed to consensual business" (RWS at [20]) and, such sales can be admitted albeit cautiously (Chaudry v Liverpool City Council [2008] NSWLEC 251) I accept Mr Davis' evidence that those sales are not comparable to the Land. 87The Northern Road, Cranebrook sale of 2009 after adjustment by Mr Sorrenson derived a value of $7.34 m2 for the land. However, the history of the sale as explained by the evidence (Exhibit A1 at 152/29-30) demonstrates this sale by a Commonwealth agency to a developer in 2004 for $15 million was based on an expectation for rezoning to develop residential and related purposes. Ultimately, after three attempts at rezoning, the environmental values of the land (despite is zoning of 5(a) Special Uses Wireless) resulted in the land being sold to National Parks and Wildlife Services in 2009 for $17million. A sale price that covered the initial $15million plus wasted rezoning costs. Having regard to the circumstances outlined, I cannot accept Mr Sorrenson's assessment that this sale is evidence of the price a speculative purchaser was prepared to pay for the land with significant development ecological constraints and very limited long term development potential (Exhibit A1 at [152/30). 88The evidence supports a finding that at the time of purchase the developer was of the opinion that the Cranebrook land had significant development potential otherwise it would not have attempted to rezone the land 3 times before selling it. The Chairman's report for the year ended 30 June 2004 for the purchaser (Infracorp) contained a reference to the Directors being 'confident' of the development potential of the property as being 'a valuable asset'. (Exhibit C p2). While this evidence did not shake Mr Sorrenson's resolve in holding this sale as being comparable and supportive of his valuation, in my assessment it supports Mr Davis' evidence that the price paid reflects a view by the purchaser that the land had significant potential for residential development. 89Therefore, I must accept Mr Davis' evidence that the Cranebrook sale is an unreliable comparable sale to the Land which according to the planning evidence has no upzoning or residential development potential. 90With respect to the sale at Kellerman Drive, St Helens Park in February 2011 for $180,000 it showed a price of $6.52/m2 adjusted to $5.54/ m2 by Mr Sorrenson. This sale involved an acquisition by the Minister of Planning from Landcom of landlocked bushland zoned 6(a) Open Space and part 5(b) Special Uses - Arterial Roads under Campbelltown LEP. Under the zoning the land may be used for drainage, roads, and utility installations without consent. With consent, bushfire hazard reduction may be carried out as well as underground mining. It is understood that development in accord with the Open Space designation is not practical. Situated to the east of the land are established residential subdivisions. 91According to Mr Davis' evidence, prior to acquisition the St Helens Park land had been offered for sale on the open market before being sold 'under the shadow' of a potential acquisition by compulsory process (Exhibit A1 at [138]). Its sale price reflecting its part "Special Uses - Arterial Roads" zoning and having been earmarked for many years for future roads (Exhibit A1 at [138]). 92Mr Sorrenson has not investigated the circumstances of the sale to establish its reliability and for that reason I agree with the applicant that this sale needs to be approached with caution. Firstly, it is a sale to an acquiring authority (Chaudry) and although it is based on a valuation report prepared under s 55(a) of the Land Acquisition (Just Terms Compensation) Act 1991 which embodies the same test underlying s 6A (Spencer v Cth), a report by a valuer assessing market value is not the same as an actual transaction between a willing seller and willing buyer. 93For the reasons stated I am of the opinion that the principal sales relied upon by Mr Sorrenson are unreliable and not properly comparable. Having said that however, if I did accept that the sale at Kellerman Drive is reliable and the relevant amount for adjustment purposes would be the purchase price of $180,000 this sale is closer to Mr Davis' contended value of $40,000 than Mr Sorrenson's ($3,270,000). 94After analysis it is clear that Mr Sorrenson's sales (as adjusted by him) reveal a large range of values for the Land (Exhibit A1 at [141-2]). This disparity of outcomes supports the applicant's contention that Mr Sorrenson's selection and method of adjustment of these sales is inappropriate and unreliable. For example, his selection of Grange Road, Schofields as comparable because it is "Environment Conservation Zone" was ultimately undermined when he conceded that he had incorrectly described the permitted uses (Exhibit A1 at [111/15/10]) - omitting restaurant and entertainment facilitates - and agreed that the permitted uses were materially different to those applying to the Land. I agree based on the submissions of the applicant that this sale should be disregarded (AWS at [75]-[78]). 95The last common sale of the valuers is 30 Webster St Milperra. According to Mr Davis this waterfront land was acquired for the purpose of developing a function centre as the zoning permitted the operation of a registered club and recreation facility with consent (Exhibit A1 at [138]). For this reason I agree with the applicant that the sale is not reliably comparable. The other sales analysed by Mr Sorrenson are dealt with by the AWS at [82] to [89]. I accept the applicant's submission that these sales are of no assistance as they either relate to land which has a fundamentally different 'highest and best use' (such as Bergendal Drive, Edmondson Park); have materially different permitted uses (122 Georges River Road, Kentlyn); involve acquisition by the Minister (536 Richmond Rd Glendenning or are a related party sale (Butu Wargun Drive, Pemulwuy), or have commercial development potential for clubs and sporting facilities (63 Orange Grove Road Liverpool) .In short, they are sales which cannot be transparently adjusted to be truly reliably and ultimately comparable with the Land. For those reasons I do not accept that evidence.

Lack of demand for the Land 96The respondent submits that the offer by the applicant to transfer the Land to the Council free of charge and with a Trust fund of $700, 000 is irrelevant. It was offered subject to onerous burdens and obligations conferred by the restrictions on title, covenant, development consent and requirement of the Bushland Management Plan that must be assumed to not exist. It submits that the evidence supports a finding that land of this nature with restrictive zoning and use potential commands a value in the market. 97The applicant contends that the applicant's efforts to transfer the Land free of charge and with a Trust fund of $700,000 demonstrates a lack of demand in the market place for the Land. It submits that this is relevant in the assessment of the s 6A valuation. 98I must agree with the respondent in respect of this issue. The hypothetical valuation required by s 6A assumes no improvements and a disregard for restrictions on use, and covenants etc. Therefore, an unsuccessful attempt to sell land (with its improvements and restrictions in place) is of no assistance in the hypothetical valuation world of s 6A. This is the antithesis of the assumption required by s 6A. Therefore, I do not intend to give this submission any weight in my assessment of the value under s 6A.

Conclusion 99I accept that the use of comparable sales is the conventional (if not preferred) method of land valuation under s 6A: Marroun v RMS [2012] NSWLEC 199. 100Furthermore, given the restrictive zoning of the Land, I agree that the most reliable sales are those with the same or similar zoning because such sales are likely to have the equivalent highest and best uses to those on the Land. 101I also accept that sales which have the advantage of being an arm's length transaction between private parties, with no government involvement or purchase by adjoining owners are more reliable comparable sales for the purposes of the valuation required under s 6A. 102The applicant's criticism of the respondent's two principal sales extends to all of its comparable sales evidence. The criticism, quite fairly in my assessment, is that when properly analysed, the prices paid in these sales reflect a substantially different and more valuable highest and best use than the Land. Therefore, they are not truly comparable: Commonwealth Custodian Services Ltd v Valuer-General (2006) 148 LGERA 38 at [13] - [15]). 103The respondent criticises Mr Davis' opinion that the land has no economic value on 3 grounds;

• he wrongly assumes that the Land has no potential to derive any form of income as a biobanking site;
• he wrongly assumes that none of the use permissible with consent on the Land have any potential commercial value;
• A proper analysis of sales of comparable lands indicates that sites with highly restrictive zonings and use potential do have an underlying market value, significantly in excess of the nominal value attributed by Mr Davis. 104I have dealt with the biobanking issue at the outset and for the reasons stated I have decided the Land is not eligible as a biobanking site. 105I accept Mr Davis' evidence (based on the uncontradicted evidence of the applicant's planner and ecologist) that the highest and best use of the Land is very restrictive uses under the E2 zoning - uses that make the Land bereft of any commercial development potential based on the evidence before me. 106Furthermore, I accept Mr Davis' evidence that it is highly unlikely that this zoning will be varied in the future to permit commercial development beyond its current uses; or could become eligible for inclusion under the biobanking scheme (Exhibit A1 at [73]-[74] and [95]-[98]).The respondent did not adduce any town planning or ecological expert evidence on these matters and Mr Sorrenson valued the Land on the basis that its highest and best use was the existing E2 zoning (Exhibit A1 at [110/15.1,112/15.4]). He did not value it by reference to its biobanking potential or the likelihood of its zoning altering in the future. 107The applicant's primary position is that there are no identified comparable sales in this case. However, it finds support for its contended value by relying on the adjusted sales of Gosling St, Emu Heights which is a large portion of land with the same zoning of "E2 Environmental Conservation" as the Land and some "E3" land and Swallow Drive. 108For the reasons discussed I accept Mr Davis' approach to derive a land value for the E2 portion of the land at $12,000 (the purchase price $312,000 less the agreed value of the residential block of $300,000) and his evidence in respect of the sale at Swallow Drive. 109Having said that, Mr Davis is of the opinion that the figure of $40,000 is the land value for the Land (joint report at [9]) which is more than his accepted comparable sales. For the reasons outlined I accept his expert assessment of the valuation under s6A in place of the respondent. 110I do not accept Mr Sorrenson's sales as comparable or that he has made appropriate or transparent adjustments which give a reliable indicator of the land value of the Land. Consistent with the test of market value laid down by Griffith CJ in Spencer which remains the law today Commonwealth Custodial Services Ltd v VG at [13] the land must be valued in accordance with its highest and best use. That is as stated at the outset of the judgment as being "the best and most profitable potential use having regard to the physical, economic and legal constraints on the use of the land Adelaide Clinic Holdings Pty Ltd at [415]. After a consideration of all of the evidence, including that taken at the view of the Land and the comparable sales sites, I find that the Land, with its peculiar characteristics, had a land value of $40,000 for the purposes of s6A of the Valuation Act at the relevant date, being 1 July 2011. 111The orders of the Court are: (1)The appeal is upheld. (2)Revoke the decision of the Respondent determining the land value of the land at 16 Wallgrove Road Eastern Creek (the Land) at 1 July 2011 as being $5,000,000. (3)The value of the Land at 1 July 2011 is determined as $40,000 in accordance with s6A of the Valuation of Land Act 1916. (4)The Exhibits are returned. Susan Dixon Commissioner 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. Decision last updated: 10 December 2014