Barkat v Roads and Maritime Services

SOLICITORS: Shaw Reynolds Lawyers (Applicants) Ashurst (Respondent) File Number(s): 2016/158064

TABLE OF CONTENTS Applicants object to offer of compensation for compulsory acquisition of land in Homebush The Underwood Land The evidence Mr Ellis' valuation approach Mr Lunney's valuation approach The relevant statutory provisions Land Acquisition (Just Terms Compensation) Act 1991 Strathfield Local Environmental Plan 2012 Environmental Planning and Assessment Act 1979 Preliminary Note Planning proposals and Ministerial Directions The final positions of the parties on compensation The agreed valuation principles Highest and best use - the Applicants' submissions Hydrological evidence Easement evidence Town planning evidence Summary of evidence regarding the highest and best use Highest and best use - RMS' submissions The constraints of the Underwood Land Town planning constraints Flooding constraints Easement constraints Potential for rezoning The Draft PRUTS The potential for rezoning - the evidence Timing for potential rezoning Development potential and development consent Summary of evidence regarding the highest and best use Direct comparison analysis - the Applicants' submissions The "top-down" approach The "bottom-up" approach Comparable sales approach - RMS' submissions Disturbance - the Applicants' submissions Disturbance - RMS' submissions Stamp duty Development application Costs - the parties' positions Consideration and Determination The public purpose and the status of the Draft PRUTS Relevant case law on public purpose and the statutory disregard The highest and best use Land banking - a legitimate use Hydrological issues - implications Floodway issues - implications of climate change Market value - determination The disturbance claim Disturbance claim - agreed items under s 59(1)(a), (b) and (f) Rocco Fraietta v Roads and Maritime Services - useful guidance Disturbance claim - the new dwelling DA application costs and stamp duty Costs Orders Annexure A - References to Particular Evidence on Public Purpose Annexure B - Consolidated R3 Comparable Sales Annexure C - Court's Adjustments to Relevant Comparable Sales

Applicants object to offer of compensation for compulsory acquisition of land in Homebush

1. On 18 December 2015, the Respondent, Roads and Maritime Services (RMS) compulsorily acquired land comprising Lot 101 in Deposited Plan 874681, Lot X in Deposited Plan 359920 and Lot 3 in Deposited Plan 13612, collectively known at the time as 90-92 Underwood Road, Homebush (the Underwood Land). RMS acquired the Underwood Land under the Roads Act 1993 (the Roads Act) for the purpose of the WestConnex M4 East Project (the WestConnex Project).
2. Immediately prior to the compulsory acquisition, Mr Mark Barkat and Mrs Rubina Barkat (the Applicants) were the registered proprietors of the Underwood Land.
3. On 7 January 2016, the Valuer-General determined the amount of compensation for the compulsory acquisition of the Underwood Land in the sum of $3,095,590 (comprising $2,900,000 for market value and $195,590 for disturbance). Accordingly, RMS offered compensation to the Applicants in the sum of $3,095,590.
4. On 5 April 2016, the Applicants commenced these Class 3 proceedings by way of a Class 3 Application objecting - pursuant to s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) - to the amount of compensation offered by RMS for the acquisition of the Underwood Land.
5. Initially, in their Class 3 Application, the Applicants sought an order from the Court that the compensation payable to the Applicants by RMS for the acquisition of the Underwood Land be determined in the sum of $45,007,262. However, the Applicants have since revised their claim and seek an order from the Court that the compensation payable be determined in the sum of $23,213,219.04 (comprising $21,900,000 for market value and $1,313,219.04 for disturbance).
6. In sharp contrast, RMS contends that the Court should determine the compensation payable to the Applicants in the sum of $3,267,110.27 (comprising $3,200,000 for market value and $67,110.27 for disturbance).
7. It falls to the Court to resolve this significant dispute between the parties as to the amount of compensation which RMS must pay the Applicants for the compulsory acquisition of the Underwood Land: Just Terms Act, Div 5 of Pt 3 and Land and Environment Court Act 1979, s 24.
8. In order so to do it is necessary to first: identify some of the fundamental characteristics of the Underwood Land; set out the most relevant statutory provisions; provide an overview of the significant body of evidence in the proceedings; delineate the final positions of the parties on the appropriate amount of compensation; and summarise the submissions of the parties on the highest and best use of the Underwood Land, the appropriate valuation method, and disturbance.

The Underwood Land

1. The lots comprising the Underwood Land are identified in the following survey plan [Ex A, C01, p 5]. The neighbourhood of the Underwood Land is illustrated by the "Nearmap" photograph that also follows, extracted from the statement of evidence of the Applicants' planner, Mr Murray Donaldson [Ex A, C01, p 6]. To be noted from the photograph is the abuttal of the Underwood Land to Underwood Road, its proximity to the M4 Western Motorway and the location of Ismay Avenue to the rear.
2. The drainage channel, which figures largely in this case, is shown on the survey plan diagonally traversing the Underwood Land between the two dwellings. Taking care to note that the photograph is swivelled 45 degrees clockwise to the survey plan, the drainage channel is not visible in the photograph due to the obscuring effect of the trees that were extant on the property prior to acquisition.
3. The Underwood Land is the land encompassed by the red border in the survey plan (with a site area of 1,705.3 m2). At the relevant date, the Underwood Land was improved by two freestanding dwellings, each used for the purpose of a boarding house. In particular, there was an extant brick dwelling on 90 Underwood Road used for the purpose of a boarding house and an extant weatherboard dwelling on 92 Underwood Road also used for the purpose of a boarding house.
4. The Court was advised by the Applicants' senior counsel that the boarding house use in both dwellings was unlawful because consent had never been sought for such a use. For present purposes, the Court simply notes the submission of Mr Tomasetti SC, when he said: "I think that nothing turns on it, but the use wasn't lawful because consent hadn't been sought for the use. It doesn't matter, I don't need to explain it, but if I do I think I'm instructed that there was just no understanding the consent was required. It doesn't matter. Two dwelling houses, they were occupied, they were earning an income …" (T43.17-21). In the circumstances, if there had been an increase in the value of the Underwood Land by reason of the use of both dwellings for the purposes of boarding houses without the necessary consents, the statutory disregard provided by s 56(1)(c) of the Just Terms Act would have required any such increase in value to be disregarded.
5. Importantly, there is no dispute that the Underwood Land was flood liable and burdened by the following three easements in favour of Sydney Water: 1. Easement A - A 10.06 m wide drainage easement which had a 225 mm sewer pipe running along it and a dwelling constructed over part of it. 2. Easement B - A 3.66 m wide (variable) open stormwater drainage channel easement (with a driveway crossing and footbridge across it). 3. Easement C - A 3.66 m wide drainage easement which had a 300 mm sewer pipe running along it and a dwelling constructed over part of it.
6. It must also be noted that the Underwood Land was zoned as R3 ‑ Medium Density Residential land (R3 Zone land) under the Strathfield Local Environmental Plan 2012 (SLEP 2012).

The evidence

1. The evidence in these proceedings included both expert and lay evidence. The lay evidence was in the form of an affidavit from the First Applicant, Mark Barkat, sworn 19 May 2016 (the Barkat affidavit) (Ex A.B01). To the Barkat affidavit there were annexed the copies of 33 documents (Ex A, B01.1‑B01.33) which were addressed in the course of the deponent's evidence set out in the affidavit. Although Mr Barkat had been scheduled to be called to speak to his affidavit and be available for cross-examination, by arrangement between the parties' counsel he was not in the end called, rather his affidavit was formally read into evidence without overall objection from RMS. RMS only objected to par 10 and to one sentence in par 16, which objections the Court addresses later in this judgment at [271] and [280]. As Mr Barkat was not required for cross-examination, the Applicants submitted that his evidence should be accepted (Applicants' outline of closing submissions at par 119).
2. As for the expert evidence, it was produced by 12 professionally qualified persons and pertained to the following areas of expertise: town planning, land surveying, quantity surveying, hydrology, easements and valuation. In this respect, the Applicants provided the following helpful (but not exhaustive) table: Evidence Applicants Respondent Joint expert reports Town planning Statement of Evidence of Mr Murray Donaldson Statement of Evidence of Mr Garth McKenzie Joint Statement of Evidence dated 18 August 2017 Land surveying Statement of Evidence of Mr Adam Richardson and Ms Tasy Moratis Nil Nil Quantity surveying Statement of Evidence of Mr Michael Dakhoul Statement of Evidence of Mr Stephen Bolt Joint Statement of Evidence dated 29 September 2017 Hydrology Statement of Evidence of Dr Brett Phillips Statement of Evidence of Dr Daniel Martens Joint Statement of Evidence dated 4 August 2017 Easements Supplementary statement of Mr Michael Hodges dated 18 October 2017 Statement of Evidence of Dr Daniel Martens Joint Statement of Evidence dated 18 August 2017 Statement of Evidence of Mr Mark Ellis Joint report dated 20 October 2017 Valuation Supplementary report dated 18 September 2017 Statement of Evidence of Mr David Lunney Joint report dated 1 November 2017 Joint report dated 4 November 2017"

1. Given the nature of the hearing of these proceedings as a "paperless trial", the written expert evidence, as contained within the substantial Court Book (comprising 140 documents), was admitted into evidence as Ex A and the Tender Bundle (containing 100 documents) was admitted into evidence as Ex B on the same USB stick. Many of the 100 documents in the Tender Bundle were substantial public reports addressing planning and infrastructure policy, some of which were many hundreds of pages in length. In addition to these 240 electronic exhibits, three documents were tendered into evidence: a bundle of relevant photographs - Ex C; an LJ Hooker advertisement - Ex D; and an e-mail from Mr Donaldson, the Applicants' town planner - Ex E.
2. One significant aspect of the Applicants' evidence is that which relates to "conceptual examples of potential redevelopment schemes of the [Underwood Land]". In particular, the Applicants relied upon the following three schematic concepts of residential flat building developments: 1. Schematic Option 1A - this proposed redevelopment option prepared by Ghazi Al Ali Architect comprises two high density residential flat buildings (106 units) divided by the existing stormwater channel with basement parking extending under the stormwater channel. 2. Schematic Option 1B - this proposed redevelopment option prepared by Ghazi Al Ali Architect comprises two high density residential flat buildings (106 units) divided by the existing stormwater channel with basement parking restricted to the northern side of the stormwater channel. 3. Schematic Option 2 - this proposed redevelopment option prepared by Moderinn Pty Ltd comprises one high density residential flat building which features a rebuilt stormwater channel that is incorporated into the building and basement superstructure.
3. It should be noted that, in response to RMS' objection, the Applicants pressed for a three-dimensional model of the above schematic options to be admitted into evidence as an exhibit. After confirming with the Applicants' senior counsel that the only purpose of the model was to visualise what may or may not be possible on the Underwood Land, the Court ruled that the model would remain as only being marked for identification (MFI 1): T601.
4. As is to be expected, the Applicants and RMS focused upon what each understood to be the most pertinent and relevant aspects of the overall body of evidence in their respective submissions. Hence, given the detailed summary of submissions below, it is not necessary to set out here an independent account of all the relevant evidence before the Court - that task would be well-nigh impossible. This does not mean that the Court has simply relied on each party's account of the evidence. Rather, the Court has independently examined and considered what it has determined within the evidence is most relevant to determining the issues in contention. As the aggregate size of the Court Book and the Tender Bundle amounted to many thousands of pages, the Court's pathway through this material necessarily had to be guided by the parties and their experts drawing attention to pertinent passages relevant to the issues to be determined by the Court. Not surprisingly, each party found passages which they submitted supported their respective perspective of the issues. The Court has, within practical limits, endeavoured to read cited passages in context in order to reach conclusions on the veracity of opposing contentions.
5. In the Court's experience, this case was remarkable for the extent to which the parties' experts had reached diametrically opposed conclusions on the evidence in the areas of planning, hydrology, the implications of the easements and with respect to valuation. In short, areas of agreement, as one might desirably find with joint reports, were minimal in stark contrast to the wide range of areas remaining in contention.
6. Notwithstanding this, it is appropriate to set out here a short (simplified) summary of the primary valuation approach taken by each expert valuer in determining the value of the Underwood Land at the material date. This summary should be read with Annexure B to this judgment which was the spreadsheet of the consolidated R3 comparable sales jointly analysed by the valuers and incorporated in to their 'Supplementary Joint Expert Report of Valuation Experts' dated 4 November 2017, being Ex A, F06. This spreadsheet includes the original four sales analysed by Mr Lunney and set out in his original analysis table (Ex A, F03, p 35) which he revised for the final Ex A - F06 version. Mr Ellis' spreadsheet of the comparative R4 sales upon which he originally relied was set out in his original sales analysis table (Ex A, F01, p 35). For reasons which will become apparent, the table of R4 zoned properties are not annexed to the judgment.
7. It is stressed that these primary valuation approaches are not the only valuation exercises that each expert engaged in (as will become apparent). For example, the valuers provided a useful table of adjustments to 11 identified comparable sales of R3 Zone land that would, however, be unnecessary to consider if the Court was to completely agree with and adopt either valuers' primary valuation approach in undertaking the judicial valuation exercise (Ex A, F06, p 5). Nevertheless, it is considered to be sufficient for present purposes to only set out each expert's primary valuation approach.
8. Prior to setting this out, it should be recorded that the Court undertook a view on 6 November 2017 of, inter alia, the Underwood Land, its neighbourhood and the relevant properties relied upon by the valuers.

Mr Ellis' valuation approach

1. Mr Ellis' valuation approach, as set out in his primary report (Ex A, F01) proceeded on the basis that the "highest and best use of the subject property is rezoning to R4 High Density Residential redevelopment with residential apartments" (with a likely timeframe of early 2019) and that "a residential development of around 10,000 m2 can be built upon the subject site" (Ex A, F01, p 15).
2. On this basis, Mr Ellis identified the following eight potentially comparable sales: 1. 12-16 Boundary Street and 13-17 Grosvenor Street, Croydon; 2. 180 Burwood Road, Burwood; 3. 17 Deane Street, Burwood; 4. 9 Hassall Street, Parramatta; 5. 125-129 Arthur Street, Parramatta; 6. 9-13 Parnell Street, Strathfield; 7. 2-6 Hillcrest Street, Homebush; and 8. 4-8 Smallwood Avenue, Homebush.
3. In so doing, Mr Ellis acknowledged that "[t]here have not been many sales upon which to utilise in the immediate area" but that the above sales "reflect land that has similar use potential to the subject site amongst other factors including but not limited to location, area, date of sale and zoning".
4. In analysing the above sales, Mr Ellis adopted the following approach (Ex A, F01, par 15.6): (a) I have determined the GFA [gross floor area] by multiplying the land area by the FSR [floor space ratio] or used the DA approved GFA where provided. The resultant figure provides the total floor area of building able to be constructed on the property. This figure is divided into the sale price to derive the rate per square metre of GFA. (b) The rate per square metre of site area is derived by dividing the land area into the sale price. (c) I have adjusted for market movement on the basis of around 2% per month around the relevant date in late 2015. Those sales that have sold proximate in time to the relevant date required less adjustment and are considered more reliable than sales that have occurred well before the relevant date and require a greater adjustment factor for market movement. (d) The potential unit yield is based on the estimated unit size in the right hand column, and this rate can vary widely depending on the mix of unit bedrooms and the size of each proposed unit. This is considered to [be] a less reliable method in comparison to the GFA analysis of market value.
5. After weighing up the analysed market evidence, Mr Ellis concluded that the gross floor area (GFA) of the Underwood Land "has a conservative market value range of $2,500 m2 to $3,200 m2 at the relevant date and for practical purposes I have adopted $2,800 m2 GFA".
6. Critically, Mr Ellis next determined the market value of the Underwood Land (assuming R4 zoning) (adopting the "direct comparison [top-down] method") by multiplying the derived rate of $2,800 m2 by the determined achievable GFA of 10,000 m2 (rounded down) to identify a prima facie market value of $28,000,000.
7. However, recognising a need to adjust this figure for the "risk of rezoning not occurring or being delayed", Mr Ellis allowed for a 7% risk. Similarly, Mr Ellis adjusted the figure for the 3.25-year period in which the purchaser would be waiting for the Underwood Land to be rezoned (determined to be 5% per year). Hence, after making these adjustments, Mr Ellis arrived at a final figure of $21,900,000.

Mr Lunney's valuation approach

1. Mr Lunney's valuation approach, as set out in his primary report (Ex A, F03) proceeded on the basis that the highest and best use of the Underwood Land would be that of two individual dwellings rather than as an amalgamated development site (Ex A, F03, pp 32 and 33).
2. On this basis, Mr Lunney searched for sale properties located within the same zoning as the Underwood Land, in close proximity to the Underwood Land and with the same or similar potential for a future rezoning as the Underwood Land. As a result of this, Mr Lunney accumulated the following relevant sales: 1. 66 Ismay Avenue, Homebush 2. 60 Ismay Avenue, Homebush 3. 4 Ismay Avenue, Homebush 4. 3 Ismay Avenue, Homebush
3. In order to create equivalence between these sales and the Underwood Land (or, more accurately, 90 Underwood Road and 92 Underwood Road), Mr Lunney made various adjustments to each of the Ismay Avenue sales including an adjustment for "flooding, easements and canal".
4. Having done so, Mr Lunney derived an adjusted value range for 90 Underwood Road of $1,412,775 to $1,708,100 (the average being $1,555,470) and an adjusted value range for 92 Underwood Road of $1,225,800 to $1,528,300 (the average being $1,390,565).
5. However, in light of Mr Lunney's conclusion that greater weight should be given to the sales at 60 and 66 Ismay Avenue (due to their closer proximity and the sale being closer in time), Mr Lunney determined the respective market value of 90 Underwood Road and 92 Underwood Road at $1,700,000 and $1,500,000. Accordingly, this produced an en globo market value of $3,200,000 for the Underwood Land at the material date.

Land Acquisition (Just Terms Compensation) Act 1991

1. The Just Terms Act, being an Act relating to the acquisition of land on just terms by authorities of the State, has the following objects: 3 Objects of Act (1) The objects of this Act are: (a) to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and (b) to ensure compensation on just terms for the owners of land that is acquired by an authority of the State when the land is not available for public sale, and (c) to establish new procedures for the compulsory acquisition of land by authorities of the State to simplify and expedite the acquisition process, and (d) to require an authority of the State to acquire land designated for acquisition for a public purpose where hardship is demonstrated, and (e) to encourage the acquisition of land by agreement instead of compulsory process.
2. Part 3 of the Just Terms Act provides the framework governing compensation for the acquisition of land. Relevantly, Div 4 of Pt 3 sets out the provisions concerning the determination of the amount of compensation. For the purposes of this judgment, it is convenient to set out the relevant provisions in ss 54-56 and 59. Division 4 Determination of amount of compensation 54 Entitlement to just compensation (1) The amount of compensation to which a person is entitled under this Part is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land. (2) … 55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division): (a) the market value of the land on the date of its acquisition, (b) any special value of the land to the person on the date of its acquisition, (c) any loss attributable to severance, (d) any loss attributable to disturbance, (e) the disadvantage resulting from relocation, (f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. 56 Market value (1) In this Act: market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid): (a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and (b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and (c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law. (2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition. (3) If: (a) the land is used for a particular purpose and there is no general market for land used for that purpose, and (b) the owner genuinely proposes to continue after the acquisition to use other land for that purpose, the market value of the land is taken, for the purpose of paying compensation, to be the reasonable cost to the owner of equivalent reinstatement in some other location. That cost is to be reduced by any costs for which compensation is payable for loss attributable to disturbance and by any likely improvement in the owner's financial position because of the relocation. … 59 Loss attributable to disturbance (1) In this Act: loss attributable to disturbance of land means any of the following: (a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land, (b) valuation fees of a qualified valuer reasonably incurred by those persons in connection with the compulsory acquisition of the land (but not fees calculated by reference to the value, as assessed by the valuer, of the land), (c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs), (d) stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired), (e) financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage), (f) any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition. (2) Subject to the regulations, a reference in this section to a qualified valuer is a reference to a person who: (a) has membership of the Australian Valuers Institute (other than associate or student membership), or (b) has membership of the Australian Property Institute (other than student or provisional membership), acquired in connection with his or her occupation as a valuer, or (c) has membership of the Royal Institution of Chartered Surveyors as a chartered valuer, or (d) is of a class prescribed by the regulations.

Strathfield Local Environmental Plan 2012

1. The Land Use Table under Pt 2 of SLEP 2012 regulating development on R3 Zone land was in the following terms at the relevant date. Zone R3 Medium Density Residential 1 Objectives of zone • To provide for the housing needs of the community within a medium density residential environment. • To provide a variety of housing types within a medium density residential environment. • To enable other land uses that provide facilities or services to meet the day to day needs of residents. 2 Permitted without consent Home occupations 3 Permitted with consent Attached dwellings; Bed and breakfast accommodation; Boarding houses; Building identification signs; Business identification signs; Child care centres; Community facilities; Dual occupancies; Dwelling houses; Environmental protection works; Group homes; Home businesses; Multi dwelling housing; Neighbourhood shops; Places of public worship; Recreation areas; Residential care facilities; Residential flat buildings; Respite day care centres; Roads; Secondary dwellings; Semi-detached dwellings; Seniors housing; Water recycling facilities 4 Prohibited Any development not specified in item 2 or 3
2. Additionally, it should be noted that SLEP 2012 provided for maximum building heights and maximum floor space ratios (FSR) for buildings as shown on the relevant maps: cll 4.3 and 4.4. I interpose here to note that the parties agreed that the maximum building height and maximum FSR controls for the Underwood Land at the material time were 9.5 m and 0.65:1 (Ex A, C05, pp 2‑3). Similarly, by dint of cl 4.1A, the minimum lot size for development for the purpose of a residential flat building on land zoned as R3 or R4 was 1,000 m2.

Preliminary Note

1. As a preliminary note to the Court's analysis of relevant provisions of the Environmental Planning and Assessment Act 1979 (EPA Act), this case was heard some months before the EPA Act was substantially amended by the Environmental Planning and Assessment Amendment Act 2017 (EPA Amendment Act), which commenced on 1 March 2018. As the exercise that is required of the Court is to determine the appropriate amount of compensation payable to the Applicant at a fixed point in time, being the operative date of acquisition on 18 December 2015, my references to the EPA Act will be to the sections as they were at that time. However, in order to facilitate an understanding of the transition to the EPA Act after 1 March 2018, in this judgment, where appropriate, both the previous section references of the Act and the updated section references in the now extant Act are set out.

Planning proposals and Ministerial Directions

1. The process under the EPA Act for making a local environmental plan (LEP), set out under Div 4 of Pt 3 of the EPA Act (now s 3.33), was in the following terms at the material date: 55 Relevant planning authority to prepare explanation of and justification for proposed instrument - the planning proposal (1) Before an environmental planning instrument is made under this Division, the relevant planning authority is required to prepare a document that explains the intended effect of the proposed instrument and sets out the justification for making the proposed instrument (the planning proposal). (2) The planning proposal is to include the following: (a) a statement of the objectives or intended outcomes of the proposed instrument, (b) an explanation of the provisions that are to be included in the proposed instrument, (c) the justification for those objectives, outcomes and provisions and the process for their implementation (including whether the proposed instrument will comply with relevant directions under section 117), (d) if maps are to be adopted by the proposed instrument, such as maps for proposed land use zones; heritage areas; flood-prone land - a version of the maps containing sufficient detail to indicate the substantive effect of the proposed instrument, (e) details of the community consultation that is to be undertaken before consideration is given to the making of the proposed instrument. (3) The Secretary may issue requirements with respect to the preparation of a planning proposal.
2. Separately, under s 117 of the EPA Act (now s 9.1), a power was conferred on the Minister to make particular directions: 117 Directions by the Minister (1) The Minister may direct a public authority or person having functions under this Act or an environmental planning instrument to exercise those functions at or within such times as are specified in the direction. (2) In addition to any direction which may be given under subsection (1), the Minister may direct a council: (a) to exercise its functions under Division 4 or 5 of Part 3 in relation to the preparation of a local environmental plan in accordance with such principles, not inconsistent with this Act, as are specified in the direction, and (b) without limiting paragraph (a), to include in a planning proposal prepared by the council provisions which will achieve or give effect to such principles or such aims, objectives or policies, not inconsistent with this Act, as are specified in the direction, and (c) to provide the Minister, in the manner and at the times specified in the direction, with reports, containing such information as the Minister may direct, on the council's performance in relation to planning and development matters. (2A) A direction under subsection (2): (a) may be given to a particular council or to councils generally, and (b) may require the inclusion in planning proposals of provisions to achieve or give effect to particular principles, aims, objectives or policies, and (c) may require planning proposals to be strictly consistent or substantially consistent with the terms of the direction (or provide for the circumstances in which an inconsistency can be justified). Any such direction may be given to councils generally by its publication in the Gazette or on a website maintained by the Department (or both). (2B) A reference to a council in subsections (2) and (2A) includes a reference to a relevant planning authority under Division 4 of Part 3 that is not a council. (3) A public authority or person to whom a direction is given under subsection (1) or (2) shall comply, and is hereby empowered to comply, with the direction in accordance with the terms of the direction. (4) Before giving a direction under subsection (1) or (2), the Minister shall consult with the responsible Minister concerned. (4A) Before giving a direction under subsection (2) (c), the Minister is to consult with the Local Government and Shires Association of New South Wales and any other industry organisation the Minister considers to be relevant, in relation to the information that the Minister is proposing to seek. This requirement is in addition to the requirement under subsection (4). (5) A local environmental plan (or any planning proposal or purported plan) cannot in any court proceedings be challenged, reviewed, called into question, prevented from being made or otherwise affected on the basis of anything in a direction under subsection (1) or (2).
3. As will become apparent, the following s 117 Ministerial Direction is of some significance in these proceedings: 4.3 Flood Prone Land Objectives (1) The objectives of this direction are: (a) to ensure that development of flood-prone land is consistent with the New South Wales Government's Flood Prone Land Policy and the principles of the Floodplain Development Manual 2005, and (b) to ensure that the provisions of an LEP on flood-prone land is commensurate with flood hazard and includes consideration of the potential flood impacts both on and off the subject land. Where this direction applies (2) This direction applies to all relevant planning authorities that are responsible for flood-prone land within their LGA. When this direction applies (3) This direction applies when a relevant planning authority prepares a planning proposal that creates, removes or alters a zone or a provision that affects flood-prone land. What a relevant planning authority must do if this direction applies (4) A planning proposal must include provisions that give effect to and are consistent with the NSW Flood Prone Land Policy and the principles of the Floodplain Development Manual 2005 (including the Guideline on Development Controls on Low Flood Risk Areas). (5) A planning proposal must not rezone land within the flood planning areas from Special Use, Special Purpose, Recreation, Rural or Environmental Protection Zones to a Residential, Business, Industrial, Special Use or Special Purpose Zone. (6) A planning proposal must not contain provisions that apply to the flood planning areas which: (a) permit development in floodway areas, (b) permit development that will result in significant flood impacts to other properties, (c) permit a significant increase in the development of that land, (d) are likely to result in a substantially increased requirement for government spending on flood mitigation measures, infrastructure or services, or (e) permit development to be carried out without development consent except for the purposes of agriculture (not including dams, drainage canals, levees, buildings or structures in floodways or high hazard areas), roads or exempt development. (7) A planning proposal must not impose flood-related development controls above the residential flood planning level for residential development on land, unless a relevant planning authority provides adequate justification for those controls to the satisfaction of the Director-General (or an officer of the Department nominated by the Director-General). (8) For the purposes of a planning proposal, a relevant planning authority must not determine a flood planning level that is inconsistent with the Floodplain Development Manual 2005 (including the Guideline on Development Controls on Low Flood Risk Areas) unless a relevant planning authority provides adequate justification for the proposed departure from that Manual to the satisfaction of the Director-General (or an officer of the Department nominated by the Director-General). Consistency (9) A planning proposal may be inconsistent with this direction only if the relevant planning authority can satisfy the Director-General (or an officer of the Department nominated by the Director-General) that: (a) the planning proposal is in accordance with a floodplain risk management plan prepared in accordance with the principles and guidelines of the Floodplain Development Manual 2005, or (b) the provisions of the planning proposal that are inconsistent are of minor significance. Note: 'flood planning area', 'flood planning level', 'flood prone land' and 'floodway area' have the same meaning as in the Floodplain Development Manual 2005. Direction 4.3 - issued 1 July 2009

The final positions of the parties on compensation

1. In circumstances where the Applicants' claim "evolved", transitioning from its initial Points of Claim to a final Further Revised Points of Claim (Ex A.09) and with respect to its claim in relation to losses attributable to disturbance, which similarly evolved, ending with an "Amended Applicants' Schedule of Losses" under s 59(a)-(f) (Ex A.05), but which does not address the claim for stamp duty under s 59(1)(d) or (f), a final further table titled "Disturbance Issues" summarising the claim, including that relating to stamp duty, was produced (Ex A, 248243505-1).
2. The following table endeavours to summarise the final positions of the parties, acknowledging that the figure claimed for stamp duty would vary should the Court determine to adopt a different market value to that claimed by the Applicants. Just Terms Act (Section) Applicants' claim RMS' position Agreed position Market value - s 55(a) $21,900,000.00 $3,200,000.00 In dispute Legal costs - s 59(1)(a) $29,599.77 Valuation fees - s 59(1)(b) $26,950.00 Stamp duty - s 59(1)(d) $1,189,990.00 Nil In dispute Any other financial costs reasonably incurred - s 59(1)(f) $59,459.33, but revised down to $44,019.83 (inclusive of $33,459.33 in relation to DA 2013/006) $10,560.50 Partially in dispute (agreed up to $10,560.50) $1,189,990.00 stamp duty in the alternative to s 59(1)(d) Total $23,213,219.00 $3,267,110.27 In dispute

The agreed valuation principles

1. The parties agreed on the following summary of the relevant general valuation principles guiding the determination of the market value of land. Conveniently, the Applicants' counsel set out those principles at pars 19-23 in their closing submissions, which were in turn adopted by RMS' counsel in its closing submissions at par 4.2. It is convenient to set out this summary from the Applicants' submissions in full (citations amended): The Court is acting as the judicial valuer: Sydney Water Corporation v Caruso (2009) 170 LGERA 298 at [3], [35], [37], [146] and [150]; [2009] NSWCA 391 and Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156. The Court is not confined to accept one party's case or the other party's case, and is able to use the evidence adduced in the proceedings to make its own assessment of the compensation payable for the compulsory acquisition, perhaps at a point somewhere in between the 2 parties' contended valuations (Leichhardt Council v Roads and Traffic Authority (NSW) (2006) 149 LGERA 439; [2006] NSWCA 353 at [83]). As a general principle, in determining compensation doubts should be resolved in favour of a more liberal estimate: Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Ltd (1947) 74 CLR 358 at 374; [1947] HCA 10; see also Sydney Water Corporation v Caruso at [3]. The market value of land under s 55(a) of the Just Terms Act must be valued according to its 'highest and best use': Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7; Spicer v Valuer-General (1963) 10 LGRA 319. The Court will therefore approach the task of determining compensation by determining what was the 'most profitable potential use' of the Parent Parcel: Vilro Pty Ltd v Roads and Traffic Authority NSW (2010) 179 LGERA 47; [2010] NSWLEC 234 at [17]. Further: The parties to the hypothetical sale are assumed to be 'fully informed' and to make 'all proper enquiries': Everest Project Developments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (2010) 177 LGERA 43; [2010] NSWLEC 88 at [58]; The land must be valued at the relevant date in its existing condition with all its potentialities as potentialities: Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156 at 175-176; 73 LGRA 47 at 65-66 citing Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] AC 302 at 313 and Turner v Minister for Public Instruction at 268-289; The valuation exercise must assume that both parties (to the hypothetical transaction) are 'perfectly acquainted with the land, and cognizant of all circumstances which might affect..[its] value': Spencer v the Commonwealth of Australia (1907) 5 CLR 418 at 441 per Isaacs J; Kenny & Good Pty Ltd v MGICA (1992) Ltd at [49]-[50] per McHugh J, specifically adopted by the High Court in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority; and The valuer, and indeed the Court as judicial valuer, often expresses its approach as 'doing the best [it] can', and sometimes, in the absence of available market evidence, the valuer must make the best guess that can be made: Jameson v Rail Corporation New South Wales [2014] NSWLEC 83 at [65].
2. In addition to these general principles, it should be noted that RMS added two further valuation principles. First, that the hypothetical purchaser must be assumed to have a knowledge of all matters that affect the value of the relevant land: citing Kenny and Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413; [1999] HCA 25 at 436. Secondly, that events subsequent to the acquisition date are to be ignored unless relied upon to confirm foresight: citing, inter alia, Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547 at 557-558.

Highest and best use - the Applicants' submissions

1. The Applicants prefaced their submissions on the highest and best use of the Underwood Land with the claim that the highest and best use of land may be a "potential use where the landowners is holding the land speculating that future changes to planning instruments will permit a more profitable use" rather than the "current apparent use" (land banking).
2. In the present case, the position of the Applicants is not that the highest and best use of the Underwood Land was its redevelopment for the purpose of residential flat buildings as is currently permissible with consent in the R3 Zone land under the applicable SLEP 2012 (relevantly, with a maximum height control of 9 m). Instead, the position of the Applicants is that the highest and best use of the Underwood Land was - given the "strong potential and likelihood for rezoning to the R4 High Density Residential Zone by the first quarter of 2019 (relevantly, with a maximum height control of 42 m) or change of planning controls without rezoning" - that of land banking.
3. In support of this fundamental claim, the Applicants made detailed submissions with respect to the relevant expert hydrological, easement and town planning evidence. The Applicants emphasised that the Court's findings with respect to the expert evidence concerning hydrological issues (including the effect of the three easements) and town planning issues will be fundamental to the Court's determination of the question of what was the highest and best use of the Underwood Land at the material date. On the Applicants' case, it was said that the existence of the easements on the Underwood Land "could not possibly affect the rezoning capabilities of [the Underwood Land]".
4. In considering this expert evidence, the Applicants suggested that the Court should understand that the hydrological evidence has informed the town planners' evidence as to the redevelopment potential of the Underwood Land, the likelihood of the land being rezoned as R4 High Density Residential land and, therefore, the highest and best use of the Underwood Land. Ultimately, the Applicants submitted that the Court should accept the oral evidence of Mr Hodges, Dr Phillips and Dr Martens, and Mr Donaldson relevant to the question of highest and best use.

Hydrological evidence

1. The Applicants conceded that the Underwood Land was flood liable on the material date. However, the Applicants contended that, on the expert evidence concerning hydrological issues, this flood liability "is not an insurmountable impediment to redevelopment and its highest and best use for residential flat building purposes within an R4 or R3 Zone". In other words, it was asserted that the "flood liability of the [Underwood Land] was not a serious prohibiting constraint which would have prevented the redevelopment of the [Underwood Land] under either an R4 or R3 zoning - despite the Respondent's pessimism". Prior to setting out its case in support of these claims, the Applicants emphasised that, given the value of land in metropolitan Sydney, the development of land almost always "involves overcoming, mitigating and managing constraints (particularly constraints on urban consolidation)": citing the development of Sydney Olympic Park.
2. The Applicants advanced the following propositions in support of their claim concerning the significance of the flood liability of the Underwood Land.
3. First, the Applicants submitted that, on Dr Phillips' evidence, the flood liability of the Underwood Land would be controlled by the prospective residential flat building: adopting a ground floor level higher than the probable maximum flood (PMF) level at any entry point; being constructed of flood compatible materials below the PMF level; being structurally designed to withstand hydraulic forces in all floods up to the PMF. In this respect, the Applicants noted Dr Phillips' evidence that the key flooding considerations for development in the relevant Powells Creek catchment including: flooding behaviour in a 100-year ARI flood event (the relevant metric for planning purposes); flooding behaviour in a PMF; and the need to mitigate risks to future occupants of a site and limit off-site impacts.
4. Secondly, the Applicants relied upon Dr Phillips' evidence that flood risks for the prospective residential flat building would be addressed by an emergency flood management plan (including a flood emergency response plan) enforced by a condition of development consent. In this respect, Dr Phillips gave evidence that an approach of sheltering in place was more realistic and safer than an evacuation plan given that the land is affected by urban temporary flash flooding rather than long flooding events. In this respect, the Applicants highlighted that the Powells Creek catchment in a small, highly developed urban catchment in which the "critical storm duration which generates the greatest amount of water is a relatively short duration storm of between 1 and 2 hours" (T102). It was also submitted that the relevant parts of "Floodplain Development Manual 2005" (FDM) must be understood in this context.
5. In fact, the Applicants submitted that the opposite conclusion - that evacuation would be the appropriate response to a flooding event - would be ludicrous. Why, the Applicants rhetorically asked, would Emergency Services attempt to evacuate people in a short flash-flooding event (especially when the general area would be in chaos anyway)? Overall, the Applicants hotly denied that the potential for high density development on the Underwood Land would be sterilised "merely because the [Underwood Land] may be inaccessible by emergency and SES vehicles for 1-2 hours".
6. Thirdly, with respect to the Applicants' different schematic prospective residential flat building developments, the Applicants submitted that, at the very least, the proposed development was "not unachievable" with some amendments such as reducing the size of the buildings. Relying on Dr Phillips' evidence, the Applicants submitted that the schematic developments would be capable of approval because they address the existing and future flood risks conformably with, inter alia, the FDM and SLEP 2012. Moreover, the Applicants submitted, relying on Dr Phillips' evidence, that the development schematics would not have unacceptable off‑site flood impacts. The Applicants also said that it is of some significance that the relevant stormwater channel has not prevented considerable upstream urban development.
7. Fourthly, the Applicants contended that the potential rezoning of the Underwood Land from R3 to R4 zoning would not be precluded due to flooding issues. In particular, the Applicants submitted that Dr Phillips' evidence is that such an upzoning would comply with any s 117 Ministerial Direction. In support of this claim, the Applicants argued that any blanket prohibition of high density residential development on flood-liable land would be unaffordable and contrary to good planning. Indeed, the Applicants suggested that this is both why much R4 Zone land in metropolitan Sydney is mapped as being flood-prone and why the FDM recognises that "flood-prone land is a valuable resource that should not be sterilised by unnecessarily precluding its development" and provides for "a flexible merits based approach to … dealing with development or redevelopment of flood‑prone land". In the present case, the Applicants reasoned that the relevant issues of flooding would be appropriately considered at the development application stage rather than at the time of a rezoning decision: citing, inter alia, cl 6.3 of SLEP 2012.
8. Fifthly, the Applicants argued that the example provided by the Court approval of a development application for three three-storey residential flat buildings in Courallie Avenue Pty Ltd v Strathfield Council [2015] NSWLEC 1128 is very instructive in considering the impact of flooding issues on the development potential of the Underwood Land. The Applicants submitted that the obstacle of a high hazard (flash flood) floodway was overcome, in order to approve the residential development, by a flood-engineered bridge and culvert driveway and appropriate flood-warning signage. The Applicants denied any suggestion that this approved development and the prospective development of the Underwood Land are not relevantly comparable. In particular, the Applicants said that Dr Martens' assertion that the approved development would not be isolated during a 1-in-100-year ARI flood event (because occupants could evacuate by climbing over adjoining neighbours fences) was unpersuasive.
9. Sixthly, the Applicants asserted that the development application and consent history of the Underwood Land is largely irrelevant.
10. Seventhly, although the Applicants conceded that the future high density development of the Underwood Land involves greater risk and cost due to being flood-prone, it was denied that this is of any significance beyond necessitating a downward adjustment in valuing the land.
11. Eighthly, the Applicants drew the Court's attention to a number of decisions where the Court "found that flooding constraints could be overcome to achieve redevelopment potential": see Gattuso v Liverpool City Council [2011] NSWLEC 110 (at [45]), Macarbell Pty Limited v Roads & Traffic Authority of New South Wales [2006] NSWLEC 366 (at [104]), Maggiotto v Roads and Traffic Authority of New South Wales [2006] NSWLEC 54 (at [64]), Lalic v Roads & Traffic Authority of New South Wales [2005] NSWLEC 430 (at [32]), Ballina Waterways Pty Ltd v Roads and Traffic Authority of New South Wales [2009] NSWLEC 96 (at [123]) and Davies v Sydney Water Corporation [2012] NSWLEC 130 (at [162]).
12. Further to these submissions, the Applicants emphasised the following points in support of their submissions relating to the hydrological issues in this case: 1. Dr Martens' evidence was that securing development consent for the Applicants' prospective schematic residential flat building developments was "not unachievable"; 2. the "Draft Parramatta Road Urban Transformation Strategy" (Draft PRUTS) was prepared with an understanding of the flooding characteristics of the Underwood Land and, despite this, proposed more intensive residential development for the Underwood Land. Importantly, according to the Applicants, the Draft PRUTS refers to Powells Creek and identifies that its vision can be realised by, inter alia, "managing flooding". Hence, the Applicants reasoned that, on a fair reading of the Draft PRUTS, the Court should infer that it was informed by flooding considerations; 3. the decision to zone the Underwood Land as R3 land "was selected in full knowledge of the flooding characteristics of the [Underwood Land]"; 4. the FDM highlights that flood-prone land should not be unreasonably sterilised for urban development; 5. "Flooding issues involve a merit based assessment"; 6. in other local government areas throughout metropolitan Sydney decisions have been made to zone flood-prone land as R4 land; 7. the approved development in Courallie Avenue Pty Ltd v Strathfield Council was able to address comparable flooding issues by adopting flood-engineering works; 8. no other property along the relevant drainage channel has been constrained by flooding from redevelopment; 9. for the purposes of the WestConnex Project, the relevant drainage channel was "simply reconstructed"; and 10. the earlier development consent for 92 Underwood Road "dealt with the flooding characteristics of the [Underwood Land]" (which was recognised by Mr McKenzie to be relevant in considering what advice to give to a prospective purchaser).

Easement evidence

1. With respect to the easements which affected the Underwood Land, the Applicants contended that they do not prevent redevelopment for the purpose of high-rise residential development under the likely R4 zoning (or R3 zoning). In other words, the Applicants claimed that "[t]he existence of the easements would not be a significant or serious impediment to the re-development of the [Underwood Land] on the acquisition date, and the advice provided to the hypothetical parties would confirm this position…". In fact, the Applicants asserted that "[i]t is absurd to suggest that 2 sewer pipes could prevent 106 dwellings on land close to 2 railway stations". In support of their position, the Applicants made the following primary submissions.
2. First, the Applicants submitted that it is important to have careful regard to the terms of the easements to understand the rights which Sydney Water has and, accordingly, the likely effect of the easements on the redevelopment potential of the Underwood Land.
3. Secondly, whilst recognising Mr Hodges' observations that the Underwood Land was "significantly constrained" by the easements and that they represented a "considerable risk and cost burden", the Applicants emphasised Mr Hodges' opinion that the relevant prospective high-rise development schematics would either be likely to be approved by Sydney Water (with respect to Schematic Option 1B) or capable of approval by Sydney Water (with respect to Schematic Options 1A and 2). With respect to the schematic options capable of approval, the Applicants said that Mr Hodges' opinion was predicated on the fact that "ultimately Sydney Water's only interest is in protecting its assets". The Applicants bolstered this point with the claim that Sydney Water infrastructure is intended to facilitate residential redevelopment rather than impeding such development.
4. Thirdly, the Applicants claimed that Sydney Water, by its policies, recognises that it will work with landowners to ensure that positive outcomes are achieved rather than hampering economic and residential growth: citing Sydney Water's "Asset Adjustment and Protection Manual" at pp 4 and 8 (Ex B, B04).
5. Fourthly, the Applicants drew the Court's attention to recent examples of development identified by Mr Hodges (and considered by Mr Donaldson) where easements of a similar nature to the Underwood Land did not prevent redevelopment: citing a development application concerning 29 Burlington Road and a development application concerning 92 Underwood Road, both in Homebush. Although the 29 Burlington Road development predated the relevant Sydney Water policies, the Applicants contended that this development supports its claim that Sydney Water would not prevent the prospective redevelopment of the Underwood Land (especially in light of the Underwood Land offering "a prime opportunity for urban consolidation and intensified residential accommodation").
6. Fifthly, the Applicants submitted that providing that the easement terms and the Sydney Water Act 1994 are adhered to, the existence of the easements would not significantly deter a prospective purchaser because he or she (or it) would be "reasonably confident of working with and obtaining Sydney Water's concurrence" (despite the lack of an "iron-clad guarantee").
7. Sixthly, in response to Dr Martens' "pessimistic" written evidence regarding the impacts of the easements, the Applicants submitted that Dr Martens' oral evidence was broadly consistent with the Applicants' claim that "[t]he existence of the easements would not be a significant or serious impediment to the re-development of the [Underwood Land] on the acquisition date". Rather, the Applicants said that "[t]he reality is that expert engineers like … [Dr] Martens deal with these situations every day".

Town planning evidence

1. The Applicants contended that, after considering the town planning evidence, the Court should make three critical findings bearing on the determination of the likelihood of achieving an R4 rezoning, the likelihood of achieving development consent for the schematic prospective developments and, therefore, the highest and best use of the Underwood Land.
2. First, that the Draft PRUTS would have sent a "significantly overt signal to the market that the [Underwood Land] would be upzoned to R4 in the short term, with accompanying amended planning controls permitting more intensive forms of residential accommodation". Secondly, that development consent would be granted for the schematic prospective residential flat building developments. Thirdly, that the Draft PRUTS was not a RMS strategy and, therefore, the WestConnex Project (for which the Underwood Land was acquired) could not "work to engage s 56(1)(a) of the [Just Terms Act]". Relevantly, the decisions made in relation to the prospective zoning of the Underwood Land were not anticipated to be made by RMS but by other government instrumentalities.
3. In support of its position, the Applicants made the following submissions with respect to Mr Donaldson's evidence.
4. First, the Applicants contended that the Underwood Land would have been rezoned as R4 land by early 2019. This prediction was said to be consistent with other site-specific planning proposals in the Parramatta Road corridor and the overarching action of Principle 1 of the Draft PRUTS - being the action of the Department of Planning and Environment working with council to rezone land and update the planning provisions within the precincts consistently with the Draft PRUTS through LEP amendments in the short term (2015-2021): Ex B, C26, p 105. In support of this fundamental claim, the Applicants stressed the following aspects of the Draft PRUTS (published immediately before the material date): 1. The Homebush Structure Plan Map described the Underwood Land as suitable for "residential development" of on "[a]verage 8 storeys - max 12 storeys [42 m]". In this respect, Mr Donaldson opined that a 12‑storey limit would apply to the Underwood Land in accordance with "a transitional approach to building scale and densities adopted in the [Draft PRUTS]" and that it would be likely that a rezoning of the Underwood Land would occur in 2019: citing Ex A, C03, pp 58-66. 2. The Draft PRUTS contained multiple express statements that it would be implemented in critical planning decisions concerning the affected Parramatta Road corridor. Hence, the message was conveyed to the broader community and property market that the Draft PRUTS would fundamentally shape planning outcomes. For example, under the heading "Delivering the Strategy", it was stated that: Every planning decision made in the Parramatta Road Corridor will be influenced by this draft Strategy. This includes day-to-day planning proposals and development applications, and local statutory planning documents such as Local Environmental Plans (LEPs), Development Control Plans (DCPs) and contributions plans. The project will also be a mechanism to translate A Plan for Growing Sydney, Sydney's framework to guide land use decisions over the next 20 years, at a regional level.
5. Secondly, the Applicants denied that the references to "staging" and the implication of a staged implementation approach within the Draft PRUTS over 20-30 years means that rezonings contemplated in the Draft PRUTS may, therefore, not be adopted for 20-30 years. Instead, the Applicants submitted that the Draft PRUTS makes clear that the rezonings will be achieved according to a "short-term" implementation plan (2015-2021). To be sure, the full realisation of the Draft PRUTS may take 20-30 years. However, critically, the Applicants said that there "is no serious doubt that the [Underwood Land] would not have been upzoned very shortly after the [Draft PRUTS] given the close proximity to 2 train stations and in light of the government's preference to increase urban densities around heavy rail stations" (by 2019). Hence, whilst the Underwood Land may not be developed for a number of years, the Applicants reasoned that they are entitled to compensation for the value of their land on the basis that the Underwood Land "will achieve the rezoning by 2019".
6. Thirdly, the Applicants submitted that Mr Donaldson's evidence demonstrated that rezoning the Underwood Land to become R4 Zone land would have been consistent with the applicable s 117 Ministerial Direction for flooding because, inter alia, "[t]he development proposal addresses the existing, future and continuing flood risk in a manner which is consistent with the NSW Flood Prone Land Policy and the principles of the FDM 2005": citing Ex A, C03, p 65.
7. Fourthly, the Applicants said that the schematic prospective developments would have obtained development consent if the Underwood Land was zoned as R4 land and the maximum height and FSR controls were amended. In this respect, the Applicants submitted that there would have been a range of viable basement design options to address the easement issues.
8. Fifthly, the Applicants submitted that Mr Donaldson's evidence shows why there is no causal relationship between the carrying out of the WestConnex Project and the upzoning of the Underwood Land to become R4 Zone land. In response to the claim that the future R4 rezoning was part of the WestConnex public purpose, the Applicants countered that this claim is factually and legally erroneous because: 1. The rezoning of the Underwood Land would have occurred irrespective of the WestConnex Project. In support of this, the Applicants submitted that the Draft PRUTS was prepared so as to facilitate urban renewal along the Parramatta Road corridor because it was identified as ripe for urban renewal. Moreover, the Applicants rejected the proposition that the expected traffic improvements generated by the WestConnex Project would have caused any upzoning of the Underwood Land on the basis that the environmental impact statement for the project shows that there would be no such improvements in Homebush. 2. As RMS has no capacity to rezone land, the WestConnex Project could not trigger s 56(1)(a) (citing Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5 (Walker) at [53] and [54]) and there could not be any link between an upzoning and the WestConnex Project. In fact, the Applicants submitted that the Draft PRUTS itself is "based on a multi‑layered governance framework": citing Ex B, C26, p 92. 3. "The mere circumstance that the public purpose is a contributing factor to changes which in turn affect value is not necessarily sufficient, particularly if the changes depend also on discretionary decisions made by other authorities" [Applicants' emphasis added]: AMP Capital Investors Ltd v Transport Infrastructure Development Corporation (2008) 163 LGERA 245; [2008] NSWCA 325 (AMP Capital Investors) at [99] (cited in MMTR Pty Ltd v Roads and Maritime Services [2015] NSWLEC 177 (MMTR)). Here, even if the WestConnex Project contributed to an uplift in land value due to a prospective rezoning from R3 to R4, it was said that such a decision depends upon discretionary decisions of a number of government entities which are independent of RMS, such as UrbanGrowth NSW and the Department of Planning and Environment. Moreover, the Applicants claimed that the available public documents amply demonstrate that, but for the WestConnex Project, the urban transformation of Parramatta Road would still have been pursued. 4. Despite bearing the burden of proof that RMS and its WestConnex Project was directly responsible for the potential rezoning of the Underwood Land from R3 to R4, the Applicants argued that RMS has not called any evidence from any relevant government entity to make good the claim that the Draft PRUTS would not have been pursued if the WestConnex Project had not existed. 5. The claims that (1) the Underwood Land would not have been rezoned as R4 and (2) if it was rezoned it would be due to the WestConnex Project are inconsistent. 6. Land being rezoned for residential purposes would normally require roads to service the future residential development. Hence, "this serves to demonstrate that the 'indirect' link which the Respondent seeks to impress upon the Court is not what s 56(1)(a) is directed towards". 7. In order to understand the relevance of the WestConnex Project to the Draft PRUTS, it is important to have regard to the following extract of the strategy: The vision and principles are designed to optimise the benefits of the New South Wales Government's investment in WestConnex, which will connect the eastern end of the M4 Motorway with the eastern end of the M5 Motorway to serve longer distance journeys into, out of and through the Corridor. WestConnex provides an accelerated opportunity to transform Parramatta Road - it will change traffic volumes in some areas and, in particular, provide an alternative route for trucks and heavy vehicles. This will free up road space for better public transport, while encouraging walking and cycling and improving public areas and streets. Improved north-south connections will also come from the transformation process. 1. In response to Mr McKenzie's relevant evidence - said to ultimately be that the WestConnex Project helped the implementation of the Draft PRUTS - it was said that this evidence does not support the proposition that "WestConnex positively influenced land values".
9. In addition to these points, the Applicants also contended that the "Final Strategy" is significant (although not a document for the Court to rely on directly) in confirming that, at the material date, there were strong prospects of future high density residential development on the Underwood Land (albeit to a 30 m height limit and with a FSR control of 2.2:1): in contradiction to the "doom and gloom predictions" in the evidence of Mr McKenzie.
10. With respect to the other postulated constraints on the redevelopment of the Underwood Land, the Applicants made the following points. Any traffic noise would easily be resolved by appropriate mitigation treatments (noting that other residential developments closer to the M4 have been approved). Whilst trees on the Underwood Land may need to be removed, they would ultimately be replaced with new deep soil landscaping. The irregular lot shape and configuration has been demonstrated, by the schematic concept developments, to not be an impediment.
11. Finally, it should be noted that the Applicants submitted that the Court ought to prefer Mr Donaldson's evidence to Mr McKenzie's. One basis for so doing, according to the Applicants, is that "Mr McKenzie would consistently default toward negativity and pessimism about the [Underwood Land's] characteristics, even though such answers were not responsive to the questions": citing T319.3-8.

Summary of evidence regarding the highest and best use

1. In summary, the Applicants submitted that the evidence of Mr Donaldson, Dr Phillips and Mr Hodges supports the following material propositions bearing upon the highest and best use of the Underwood Land at the material date: 1. The fact that the Underwood Land was flood liable in the 100-year ARI flood event would not prevent its redevelopment under either an R3 or R4 zoning consistently with the schematic designs or a rezoning from R3 to R4 (and consequent maximum building height amendments). 2. The fact that the Underwood Land was burdened by easements would not prevent its redevelopment because, following negotiations with Sydney Water, viable engineering solutions would have been available. 3. The WestConnex public purpose was not "causative of the rezoning of the [Underwood Land]". 4. RMS' contention that the Underwood Land had no redevelopment or rezoning capability is unsustainable in light of, in particular, the evidence of Mr Donaldson, Dr Phillips and Mr Hodges.

Highest and best use - RMS' submissions

1. RMS fundamentally disagreed with the Applicants' position that the highest and best use of the Underwood Land "may not be the current apparent use". Contrary to Mr Donaldson's initial assertion that the highest and best use would be a residential flat building up to 42 m in height, RMS contended that the highest and best use "can only be a town planning use which is permissible under the current planning regime". RMS also rejected the subsequent position of Mr Donaldson that the highest and best use was that of an R3 residential flat building with the potential for R4 zoning.
2. Ultimately, RMS' contention is that the highest and best use of the Underwood Land is (in accordance with its current R3 zoning) that of two detached dwellings. RMS structured its submissions in support of this claim to address the following issues: the potential for rezoning of the Underwood Land; the likely timing of the rezoning; the development potential of the Underwood Land and the likelihood of obtaining development consent for the high density development of the Underwood Land. Yet, prior to addressing these issues, RMS summarised the relevant evidence concerning the constraints of the Underwood Land.

Town planning constraints

1. RMS contended that there is no dispute that the Underwood Land was subject to numerous constraints at the material date (which the hypothetical purchaser would have been advised of) including: being within a 1‑in‑100‑year ARI flood event area; a high hazard floodway; sewer easements; stormwater channel easement; traffic noise from the M4 motorway; large individual trees; site excavation; irregular shape and access; and unsuitability for on-site car-parking due to flood-related issues.

Flooding constraints

1. RMS submitted that the hydrology experts agreed that the Underwood Land was burdened by the following flooding constraints: it would be affected by flood waters in events more frequent than a 1-in-100-year ARI flood event; evacuation would not be possible during a 1-in-100-year ARI flood event (or greater); it is affected by two floodways; and it is subject to flash-flooding.
2. The flood-related characteristics of the Underwood Land were said to be unique in the following ways. First, the land is a confluence point of four distinct water flows, being flow from: the stormwater channel; under the overpass on Underwood Road; along Underwood Road from the opposite direction; and the stormwater system: citing the evidence of Dr Martens - T105-106.
3. Secondly, the Underwood Land was said to be "encircled by 'high hazard' floodways", which entails a broad range of serious risks to human life. Given this, RMS submitted that it is not clear that a strategy of "shelter in place" would be approved in order to enable high density development.
4. Thirdly, the relevant flood-related risks were said by RMS to be so significant that such risks have "previously impeded proposals to redevelop the [Underwood Land]": citing the refusal of a 2005 development application on flood-related grounds and the imposition of conditions of a 2013 development consent prohibiting the parking of vehicles of the Underwood Land.
5. Fourthly, given that the Underwood Land is located at the bottom of a valley and encircled by floodways, it could not be accessed during flood conditions. Hence, RMS said that it would be "very difficult to develop" the land.
6. RMS submitted that the overall consequence of these flood-related constraints is that there would be "additional risks, delay and cost burdens for developing the [Underwood Land]" including: 1. the risk that the Underwood Land would not be rezoned; 2. regardless, flooding would be a mandatory relevant consideration in determining a development application and this could result in an application being refused or approved subject to significant restrictions; 3. the Underwood Land would be a difficult site to develop (which would translate into higher design costs, construction costs and flood mitigation costs); 4. an expensive flood impact assessment would need to be undertaken prior to the consideration of a development application; and 5. climate change would exacerbate the flooding risks.

Easement constraints

1. RMS submitted that it was agreed that the Underwood Land is subject to the following three easements: Easement A - 10.06 m wide (sewer line) vested to Sydney Water; Easement B - stormwater easement 3.66 m wide and variable Homebush Stormwater Drainage - Powells Creek Stormwater Channel (open concrete-lined drain 2,600 mm wide and 1,400 mm deep); and Easement C - easement 3.66 m wide (sewer line) vested to Sydney Water.
2. RMS also submitted that it was agreed that the hypothetical purchaser would receive the following advice concerning these easements: 1. the Underwood Land was "significantly" constrained by easements that would impose a risk and cost burden on prospective development; 2. the additional risks include: 1. the risk that the easements would restrict the scope of potential development; 2. the risk that a solution would have to be devised and implemented for the drains and sewerage pipes (including potential issues with neighbouring properties); 3. the risk that the easements would result in additional design and construction costs; and 4. the risk that time-consuming applications would have to be made to Sydney Water (which may be refused).

Potential for rezoning

1. RMS contended that the hypothetical purchaser would have been advised that the Underwood Land would have remained zoned as R3 for the reasons given by Mr McKenzie and Dr Martens. Yet RMS accepted that the hypothetical purchaser may also have been given competing advice as to the likelihood and timing of the rezoning of the Underwood Land from R3 to R4 land. In particular, RMS submitted that, absent the public purpose of the WestConnex Project, the Underwood Land would not have been rezoned.

The Draft PRUTS

1. RMS argued that, due to the "overwhelming evidence … that there is a direct causal nexus between WestConnex and the [Draft PRUTS]", the Draft PRUTS: arose directly from the WestConnex Project; would not otherwise have occurred; and, therefore, should be disregarded in determining the market value of the Underwood Land pursuant to s 56(1)(a) of the Just Terms Act.
2. Prior to setting out its submissions in support of this argument, RMS drew the Court's attention to the following principles from the relevant case law. First, RMS emphasised that "[w]here there is a 'nexus between planning controls and the intended resumption, such steps in the planning process which had an effect upon the value of the land must be ignored'": citing Pamalco Pty Ltd v Minister Administering the National Parks & Wildlife Act 1974 (No 3) (1991) 71 LGRA 441 at 447 and Housing Commission of New South Wales v San Sebastian Pty Ltd (1978) 140 CLR 196; [1978] HCA 28 (San Sebastian).
3. Secondly, the effect on value must be ignored if there is a "direct relationship" between the potential rezoning and the public works: San Sebastian at 206‑207 (although something less than a direct relationship may be sufficient: citing R v Murphy (1990) 71 LGRA 1; [1990] HCA 42 at 595).
4. Thirdly, the connection between the zoning and the subsequent resumption must be considered, which will involve questions of fact and degree: citing San Sebastian at 207.
5. Fourthly, whilst there are no clear rules, the particular purpose should be properly identified prior to determining the effect of this public purpose on value: citing Roads and Traffic Authority of New South Wales v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251 at [100].
6. With this context established, RMS proceeded to make the following submissions.
7. First, RMS submitted that it is common ground that the Underwood Land was resumed for the WestConnex Project. In properly identifying the nature and ambit of this project, RMS reiterated the description of the WestConnex Project as being "more than just a motorway" and a project "intended 'to develop as an integrated land use and transport scheme delivering on road transport, urban renewal and public transport outcomes'": citing, inter alia, Infrastructure NSW, First Things First: The State Infrastructure Strategy 2012-2032 (October 2012) (Ex B, C05, p 88). In this respect, it should be noted that RMS provided the Court with an aide-memoir listing the salient references to which the Court should have regard in identifying this public purpose (Ex A, J, "Public Purpose - Key Documentary References"). This document is Annexure A to this judgment.
8. Secondly, RMS submitted that but for the WestConnex Project, the Draft PRUTS would not have existed because: 1. a substantial body of documentation demonstrates a nexus or causal link between the Draft PRUTS and the WestConnex Project: citing, inter alia, the town planning evidence of Mr McKenzie; 2. the evidence demonstrates that the relevant council treated the traffic congestion affecting Parramatta Road "as a fundamental barrier to … rezoning the land" and would not consider any rezoning until 2021: citing Ex B, D26 at p 1 (correspondence between the First Applicant and a council officer); and 3. as confirmed by Mr Donaldson, the Draft PRUTS would have taken another form absent the WestConnex Project: citing T383. In particular, absent the WestConnex Project, the issue of traffic congestion along Parramatta Road would have had to have been addressed. Relevantly, RMS noted that "the Council had undertaken no steps to ameliorate the traffic congestion in the area with respect to the roads for which it was the traffic authority": citing T363.
9. Thirdly, RMS submitted that, contrary to the Applicants' suggestion, the decisions of MMTR (at [130]-[155]) and AMP Capital Investors "support the Respondent's contention that the [Draft PRUTS] should be disregarded".
10. Fourthly, in response to the Applicants' contention that RMS has provided insufficient evidence to demonstrate the requisite connection between the WestConnex Project and the Draft PRUTS in that it has not called evidence from a person from RMS or UrbanGrowth, RMS submitted that there is "substantial documentary evidence before the Court from multiple New South Wales Government agencies which demonstrates a direct connection between WestConnex and the [Draft PRUTS]". Referring to its aide-memoir (which is Annexure A to the judgment), RMS referred in particular to: 1. Infrastructure NSW, First Things First: The State Infrastructure Strategy 2012-2032 (October 2012) - (Ex B, C05); 2. Transport for NSW, NSW Long Term Transport Master Plan (December 2012) - (Ex B, C08); 3. Department of Planning and Environment, Draft Metropolitan Strategy for Sydney to 2031 (March 2013) - (Ex B, C09); 4. Sydney Motorways Project Office, WestConnex Business Case Executive Summary (September 2013) - (Ex B, C14); 5. Transport for NSW, Sydney CBD to Parramatta Strategic Transport Plan (September 2015) - (Ex B, C25); 6. AECOM Australia Pty Ltd and GHD Pty Ltd (prepared on behalf of RMS) Environmental Impact Statement for the M4 East Motorway (September 2015) - (Ex B, E3a and E3b); and 7. The Draft PRUTS.
11. Hence, RMS said that these documents demonstrate - consistently with the evidence of Mr McKenzie - that there is a causal nexus between the WestConnex Project and the Draft PRUTS. RMS asserted that, absent the WestConnex Project, the Underwood Land would not have been rezoned due to its flooding constraints or, alternatively, "not before 2021 at the very earliest" (in light of the 2012 land use study and correspondence with the council). With respect to Mr Donaldson's evidence, RMS alleged that Mr Donaldson "had not formed his own view in his written evidence as to whether or not the [Draft PRUTS] would have existed but for the public purpose but was 'advised' that it was not": citing (Ex A, C05, p 5).
12. Finally, RMS criticised the Applicants on the basis that they relied on limited extracts of the Draft PRUTS to present a distorted perspective that it was not influenced by the WestConnex Project. On a fair reading of the Draft PRUTS, RMS submitted that it identifies the WestConnex Project as, inter alia, "a unique catalyst" that causes or facilitates the urban transformation envisaged by the Draft PRUTS: citing pp 20 and 94. Accordingly, RMS said that "the urban renewal to be facilitated in the [Draft PRUTS] is directly dependent on WestConnex being delivered on behalf of the New South Wales Government by RMS".

The potential for rezoning - the evidence

1. RMS submitted that the Court must determine what would have been "the range of advice that would have been provided to the hypothetical purchaser at the Acquisition date as to the potential for rezoning of the acquired land to R4". The position of RMS in this respect is that there would be no certainty as to whether the Underwood Land would be rezoned (regardless of whether or not the Draft PRUTS is to be disregarded) and that the hypothetical purchaser would have been given a range of expert advice on this issue. RMS highlighted the following propositions (said to be agreed between the relevant experts) from the evidence to make good its claim in this regard: 1. the Draft PRUTS was merely a draft strategy and, consequently, "there was no certainty as … to the final strategy or the density of rezoning of the acquired land that would flow from its implementation - relevantly as to height and FSR controls"; 2. although the Draft PRUTS provided for a staged process of rezoning, the Underwood Land "was not part of a priority precinct for rezoning purposes as at that date, no such precincts had been identified" and, therefore, there was no way of knowing when the Underwood Land would be rezoned pursuant to the Draft PRUTS; 3. the flooding constraints and characteristics of the Underwood Land (including its liability to a 1-in-100-year ARI flood event, status as flood‑prone land, liability to a high hazard floodway, and lack of safe access during a high hazard flood) made it unlikely that the land would be rezoned to R4. This was said to especially be the case given that other land suitable for rezoning existed. In this respect, RMS emphasised Mr Donaldson had confirmed that, based on the expert hydrology evidence, "he could not say that there was better than a '50:50 chance' of the acquired land being rezoned in the light of the flooding risks", citing T399. Indeed, RMS said that the evidence showed a "double [flooding-related] risk" to the hypothetical purchaser: that the land would not be rezoned and would not receive development consent even if rezoned; 4. given the presence of a high hazard floodway within the Underwood Land; any potential rezoning would be contrary to cl 4.3 of the s 117 Ministerial Direction for flooding: citing Ex B, A14, p 21. In this respect, RMS noted that Dr Phillips conceded that the hydrological profile of the Underwood Land might not satisfy the requirements of the Ministerial Direction; and 5. the redevelopment of the Underwood Land is significantly constrained by the Powells Creek Stormwater Channel (subject to an easement and a statutory covenant), and two sewer easements.

Timing for potential rezoning

1. According to RMS, even if the rezoning of the Underwood Land from R3 to R4 was to occur, any consideration for such a rezoning by the relevant authorities would not have occurred "until at least 2021 when the next comprehensive LEP review was to commence, and in all likelihood much later": citing the evidence of Mr McKenzie. Thus, RMS rejected the evidence of Mr Donaldson that such a rezoning would have occurred within 3.5 years (by early 2019). Nevertheless, RMS identified the relevant question as being: "what is the range of advice that would have been provided to the hypothetical purchaser at the Acquisition date as to the likely timing for any potential for rezoning of the Acquired Land to R4"?
2. In order to properly answer this question, RMS submitted that the Court ought to consider the following five critical stages of the rezoning process and the attendant risks which a hypothetical purchaser would consider: 1. The planning proposal stage - s 55 of the EPA Act requires a planning proposal to include a justification as to whether the proposed instrument will comply with a relevant s 117 Ministerial Direction. RMS said that Mr Donaldson's evidence was that if a hydraulic engineer concluded that the planning proposal did not comply with the s 117 Ministerial Direction, then the rezoning would have no prospects; 2. The gateway stage - a decision may be taken that the proposed planning instrument does not proceed beyond the gateway stage or can only proceed subject to conditions; 3. The community consultation stage - a decision may be taken, based on the content of public submissions, not to allow the proposed planning instrument to proceed; 4. The assessment stage - a proposed planning instrument may not be finalised because, inter alia, it is inconsistent with a s 117 Ministerial Direction; and 5. The finalisation stage - a discretionary decision may be made: not to make the proposed planning instrument law; to only make it law with significant variations; or to renotify the proposed planning instrument if material changes are proposed.
3. Additionally, RMS submitted that it is of some significance that the "benchmark timeframe" (which is not binding) for the finalisation of a new LEP for urban renewal is 12-18 months.

Development potential and development consent

1. With respect to the Applicants' different schematic prospective residential flat building developments, RMS contended that "none of these schemes are relevant" because: 1. at the material date, there was no certainty that the Underwood Land would be rezoned in the manner the concept designs assume (as R4 land and with a particular allowable density); 2. only three of the five concept designs proposed by the Applicants were relevantly considered in the joint hydrology report (1A, 1B and 2); 3. the town planners agree that only Scheme 4 (that of two detached dwellings) has a high likelihood of approval; 4. Even if the Underwood Land was rezoned from R3 to R4 land: 1. development consent would be required for the proposed developments but would not be obtained (the assessment and determination of any application would be lengthy in any event); and 2. the consent of Sydney Water would be required for the proposed development (due to the stormwater channel and easements) but would not be obtained.

Summary of evidence regarding the highest and best use

1. Ultimately, RMS concluded that, at the time of acquisition, the hypothetical purchaser would have been advised that: 1. the Underwood Land is burdened by a number of constraints which affect its development potential; 2. the flood constraints of the Underwood Land will have consequences for the "time, risk and cost" to develop the land under its current R3 (or potential R4) zoning compared to other properties. In particular, the hypothetical purchaser would be advised that: 1. the Underwood Land is burdened by the stormwater channel; 2. no assumption could be made that the Underwood Land will be rezoned (in fact, such a rezoning was highly unlikely and, even if it did occur, would only happen from 2021); 3. no assumption could be made that the height and FSR controls applicable to the Underwood Land would increase; 4. the stormwater channel and easements would impose a considerable risk and cost burden on developing the Underwood Land; and 5. obtaining development consent and Sydney Water consent for the proposed schematic developments "would be time consuming, costly and, ultimately, unlikely to be forthcoming".
2. RMS noted that Mr Lunney, having had regard to all of these matters, was of the opinion that the highest and best use of the Underwood Land would have been two individual dwellings (and not an amalgamated development site). In justifying this opinion, Mr Lunney was said to have observed that: rezoning from R3 to R4 land would be required before the Underwood Land was "ripe" for redevelopment; it was significant that a recently approved development application precluded on-grade car-parking due to flood risks; and the market has only been willing to pay a dwelling use value for other properties within the locality (and, therefore, the top-down and bottom-up valuation approaches are inappropriate).

Direct comparison analysis - the Applicants' submissions

The "top-down" approach

1. The Applicants prefaced their submissions concerning the application of the "top-down" approach to valuing the Underwood Land at the material date by setting out a number of relevant principles.
2. First, the Applicants identified that the determination of market value involves searching for, identifying, analysing and adjusting sales of similar land to the subject land.
3. Secondly, the Applicants submitted that the valuation approach of deriving a dollar rate per square metre of floor space area from comparable sales and applying that to the subject land has been adopted and used in other WestConnex acquisition cases such as, Hatzivasiliou v Roads and Maritime Services [2017] NSWLEC 9 (Hatzivasiliou) (see [103]-[139]) and Dan Wei Zheng v Roads and Maritime Services [2017] NSWLEC 77 (Zheng) (see [43]-[145]).
4. Thirdly, although acknowledging that the "top-down" approach of valuing land is less orthodox, the Applicants submitted that this method - as explained in cases such as, inter alia, Sandhurst Trustees Limited v Roads and Traffic Authority of New South Wales [2006] NSWLEC 243 (Sandhurst) (at [75]), Maidment v Roads and Traffic Authority of New South Wales (2006) 153 LGERA 249; [2006] NSWLEC 606 (Maidment) (at [51]) and Al Amanah College Inc v Minister for Education and Training [2011] NSWLEC 189 (Al Amanah) (at [67])) - may (and perhaps should) be used in circumstances where land is "highly likely to be rezoned in the short term". Relevantly, the Applicants said that this approach should be used to value the Underwood Land because, "as disclosed by the Draft PRUTS [and confirmed by the Final Strategy]", the land was "highly likely" to be rezoned from R3 to R4 in the short term.
5. The Applicants submitted that Mr Ellis' evidence was consistent with the above principles. In particular, the Applicants contended that Mr Ellis' decision to adopt the "top-down" valuation approach was soundly based and proper. Mr Ellis' preference for the Applicants' non-valuation evidence was justified on the bases that the Homebush market was earmarked for urban transformation and upzoning and that the market was confident. Similarly, Mr Ellis' conclusion that, after considering the expert evidence, the flooding and easement constraints could be overcome to redevelop the Underwood Land was well-founded (I interpose here to note that the Applicants denied that the proper valuation approach was to assume that the purchaser would take a 50/50 approach to competing evidence - rather, the competing evidence is weighed up and a decision is made as to what evidence is preferred).
6. In this context, the Applicants proceeded to identify the salient points of Mr Ellis' valuation approach justifying a finding that the market value of the Underwood Land should be assessed to be $21,900,000.
7. First, Mr Ellis identified eight potentially comparable sales of land zoned R4. Although none of these properties were truly comparable, the selection of these properties was said to be justified in circumstances where there were no available sales of proximate R3 Zone land of the requisite minimum area to permit high density residential development (1,000 m2). Despite this, these properties were similar in that: they are geographically proximate to the Underwood Land; they were sold close in time to the material date (that is, when the market was "strong and hot"); and "[t]hey are similarly zoned and/or have the same development potential" as the Underwood Land.
8. Secondly, the Applicants referred to Mr Ellis' explanation of the next stage of his analysis (Ex A, F01, p 16): My sales analysis has been undertaken as follows: (a) I have determined the GFA by multiplying the land area by the FSR or used the DA approved GFA where provided. The resultant figure provides the total floor area of building able to be constructed on the property. This figure is divided into the sale price to derive the rate per square metre of GFA. (b) The rate per square metre of site area is derived by dividing the land area into the sale price. (c) I have adjusted for market movement on the basis of around 2% per month around the relevant date in late 2015. Those sales that have sold proximate in time to the relevant date required less adjustment and are considered more reliable than sales that have occurred well before the relevant date and require a greater adjustment factor for market movement. (d) The potential unit yield is based on the estimated unit size in the right hand column, and this rate can vary widely depending on the mix of unit bedrooms and the size of each proposed unit. This is considered to a less reliable method in comparison to the GFA analysis of market value."
9. Thirdly, Mr Ellis, after making relevant appropriate adjustments to each sale to create equivalence, derives a value range for the Underwood Land of $2,500 to $3,200/m2 of floor space area. Accordingly, "doing the best he can" by resolving doubts in favour of a more liberal estimate", Mr Ellis adopts a mid‑point value of $2,800/m2 of floor space area.
10. Fourthly, Mr Ellis assessed the market value of the land as being $28,000,000 based on the value of $2,800/m2 of floor space area and the maximum floor space of 10,000 m2.(as a "check", Mr Ellis determined that the resulting figure of $264,150 per unit is within the "upper market value range" and, therefore, consistent with the requirement to make a "liberal estimate").
11. Fifthly, Mr Ellis makes allowances for the delays and risk associated with the rezoning. More specifically, "[a]fter deferring the market value amount by 3.25 years at 5% and allowing for risk at 7%", he determined the market value to be $21,900,000.
12. With respect to this fifth stage of analysis, the Applicants criticised Mr Lunney's competing relevant evidence. The Applicants contended that Mr Lunney's evidence that he would adopt an 80% discount rate (if applying the "top-down" approach) was not explained and constitutes an unsound, erroneous and "classic example of 'reverse engineering' in order to arrive at the original assessment of market value of $3,200,000".
13. Furthermore, the Applicants denied Mr Lunney's contention that his comparable sales in Ismay Avenue were more comparable than the sales relied upon by Mr Ellis because his sales capture the value of development potential. Critically, the Applicants argued that these sales are of no assistance because the relevant parcels of land are too small to be capable of high density residential redevelopment (cf the Underwood Land, which enjoyed an area almost double the minimum lot size control of 1,000 m2): citing Hatzivasiliou at [136]. Consequently, the Ismay Avenue sales were said not to capture development potential because "they simply do not have any potential".

The "bottom-up" approach

1. In the event that the Court was disinclined to adopt the "top-down" approach, the Applicants submitted that the Court would apply the "bottom-up" approach to find that the market value of the Underwood Land was $7,160,000. This approach was said to be explained in Sandhurst (at [75]), Maidment (at [51]) and Al Amanah (at [67]). In essence, the Applicants observed that this approach involves identifying sales of similarly zoned land and then making an appropriate upward adjustment to account for the potential of a rezoning.
2. In applying this approach, Mr Ellis was said to have identified the comparable (R3) sales in the additional joint reports, made relevant adjustments, and derived appropriate adjusted figures. However, given that the adjusted figures from the relevant sales were significantly inconsistent, the Applicants warned that it would be dangerous to rely on this analysis. Nevertheless, if the Court was to adopt the "bottom-up" approach, the Applicants said that the Court ought to select the highest adjusted figures (in accordance with the need to make a liberal estimate).
3. In response to the relevant evidence of Mr Lunney, the Applicants submitted that Mr Lunney accepted that neither valuer had found an R3 sale within the Draft PRUTS area that was in excess of 1,000 m2. The Applicants suggested that this makes the available R3 sales unhelpful. Additionally, the Applicants contended that Mr Lunney's failure to allow for the advantage of the Underwood Land (cf the Ismay Avenue sales) conferred by its "immediate compliance with the minimum lot size for residential flat building development" and adoption of a subjective approach made his analysis erroneous.
4. In this respect, the Applicants submitted that the objective evidence of the sales from Smallwood Avenue constitutes actual market evidence demonstrating the impact of the aggregation of sales (and, therefore, said to be of direct relevance to the market behaviour in Ismay Avenue). If this market evidence was to be applied to a hypothetical aggregation of Ismay Avenue properties (to achieve the same development potential as the Underwood Land), the Applicants claimed that the Underwood Land had a market value of $7,160,000.
5. However, the Applicants said that the Court ought to select the highest adjusted figure from the R3 sales. The Applicants rejected Mr Lunney's arbitrary and erroneous alternative approach of removing the upper and lower "outlier" figures: citing, inter alia, The Commonwealth v Milledge (1953) 90 CLR 157; [1953] HCA 6 at 161.

Comparable sales approach - RMS' submissions

1. RMS prefaced its submissions concerning the comparable sales approach by setting out what is said were the relevant legal principles.
2. First, RMS identified that the conventional valuation method is the comparable sales approach: citing, inter alia, River Bank Pty Ltd v The Commonwealth (1974) 31 LGRA 244 at 653.
3. Secondly, RMS relied upon Robson J's summary of the four-step approach ("accumulation, analysis, adjustment and application") to the comparable sales method of valuation set out at [97] in New South Wales Cremation Company Pty Limited v Valuer General [2016] NSWLEC 135.
4. Thirdly, RMS claimed that it "is only where there are no sales which are directly comparable that either a 'top down' or a 'bottom up' approach is commonly used": citing Sandhurst at [74]; Maidment at [50]; and Attard v Transport for NSW (2014) 205 LGERA 396; [2014] NSWLEC 44. If a decision is made to use such an approach, the selection between the top‑down or bottom-up methods will depend "on the degree of likelihood that existing restrictions will be relaxed and the likely time frame for their relaxation": citing, inter alia, Maidment at [51].
5. With this context established, RMS proceeded to make submissions as to what is said are the fundamental differences between the parties in how the comparable sales methodology should be applied.
6. First, the valuers disagreed as to whether they should undertake their assessment of market value "by being informed by all of the non-valuation evidence or, alternatively, whether it was necessary or appropriate to 'prefer' the evidence" of particular experts. In this respect, RMS submitted that Mr Lunney did not "prefer" one expert or particular experts but, instead, adopted the correct approach of considering the range of expert evidence.
7. In contrast, RMS argued that Mr Ellis "preferred, relied on and/or 'adopted'" the evidence of the Applicants' experts. In particular, RMS submitted that Mr Ellis: wrote his primary report without reference to RMS's town planning and hydrology evidence; adopted the evidence of Mr Donaldson and Dr Phillips in his primary report; maintained his agreement with and adoption of the conclusions of Mr Donaldson in his supplementary report; understood that he was to prefer one expert over another; and agreed that he relied on the town planning evidence of Mr Donaldson only and gave only little weight to the evidence of Dr Martens.
8. On this point, it should be noted that RMS contested the Applicants' allegation that it was adopting a 50/50 approach to competing evidence in the valuation exercise as misconstruing its position. RMS submitted that it is clear that: (1) where there is competing expert evidence the Court is to determine what the content of the advice provided to the hypothetical purchaser would be; (2) the Court may determine that a range of possible advice could have been given to a hypothetical purchaser and that the purchaser would be fully informed of this range of advice; and (3) the Court does not imagine a hypothetical competition between different hypothetical purchasers each with different advice: citing Carlewie Pty Ltd v Roads and Maritime Services [2017] NSWLEC 78 at [79] and [83].
9. Hence, RMS submitted that "[h]aving regard to the evidence of the expert witnesses which the Court has engaged with and evaluated, the Court would assume that the fully informed hypothetical purchaser would have a range of reasonable views on town planning and hydrology evidence provided to it and that such a range of views would inform the price the hypothetical purchaser is willing to pay". However, RMS also submitted that even if the Court were to prefer the Applicants' expert evidence rather than the range of views, a hypothetical purchaser would still be advised "that there are significant risks, costs and delays in developing the [Underwood Land]".
10. Secondly, the valuers disagreed (in their written evidence) as to whether there is an absence of comparable sales such that a "top-down" approach is appropriate. RMS contended that there "is no basis for the application of the "top-down" approach" given that (inter alia): the sales of land on Ismay Avenue in Homebush are relevant comparable sales (they are located within the same R3 Zone, closely proximate to the Underwood Land, and have the same rezoning potential); even if these sales are not comparable, there is no market evidence to support the adoption of a top-down approach (nor a finding that sales are being affected by the potential rezoning in the Draft PRUTS); and, having regard to the prospects of the Underwood Land being rezoned (and likely timeframe), the bottom-up approach would be more appropriate (which would involve the adding of a discounted "premium" to a base land value).
11. Notwithstanding the above, RMS submitted that the top-down approach is no longer relevant because Mr Ellis agreed (repeatedly) that the approach was inappropriate (in his own words) "based on the evidence and the uncertainty, which has increased since reading the [non-valuation] reports": T548.
12. Thirdly, RMS submitted that if the Court was to apply the top-down approach, then its case is that: 1. the sales of 22-28 and 32-36 Underwood Road, properly analysed and adjusted, indicate that Mr Lunney's valuation of $3,200,000 is fair and reasonable - Ex A, F04 at par 36; 2. the necessary adjustment to account for cost and risk would by a downwards adjustment of 80% (which RMS said was supported by market evidence rather than being reverse engineered) - Ex A, F04 at par 25; and 3. given the atypical development costs associated with building the schematic options 1A and 1B, the development costs would amount to $6,050,000 and $5,350,000 respectively: citing the evidence of Mr Bolt.
13. Fourthly, RMS reasoned that even if its evidence was rejected by the Court and the Court applied the top-down approach, the oral evidence of Mr Ellis was that: 1. he made no "allowance for rezoning on the basis of the hydrological evidence"; 2. he relied on the assumptions that: the hypothetical purchaser would take into account the Draft PRUTS as a "near certainty"; the market would continue to rise by 2% per month; the land would be rezoned from R3 to R4 within 3.5 years; and the hypothetical purchaser would be confident that the rezoning would occur; and 3. his adjustments of 7% for rezoning risk and 5% for delay would need to be adjusted given the evidence of Dr Phillips and Mr Donaldson as to risk and timing. In this respect, he agreed with Mr Donaldson's oral evidence that there was a high degree of uncertainty as to the rezoning within 3.25 years.
14. Fifthly, RMS submitted that once the Court accepts that the Ismay Avenue sales identified by Mr Lunney are comparable (same zoning, close proximity and similar potential for upzoning - see Ex A, F03, p 29), then the Court must determine the appropriate adjustments to create equivalence (such as market movement, lot size, flood constraints, easements, dwelling size and condition - see Ex A, F03, pp 30-36). Having done so, RMS submitted that the market value of the Underwood Land at the relevant date is $3,200,000 ($1,700,000 for 90 Underwood Road and $1,500,000 for 92 Underwood Road).
15. Finally, it should be noted that RMS criticised the Applicants for alleging (without evidence) that Mr Lunney had not given evidence in accordance with the expert code or that Mr McKenzie's evidence was affected by unconscious bias.

Disturbance - the Applicants' submissions

1. The Applicants asserted that their disturbance claims were or will be reasonably incurred: McDonald v Roads & Traffic Authority of New South Wales (2009) 169 LGERA 352; [2009] NSWLEC 105. More specifically, the Applicants relied on the evidence of the First Applicant to contend that RMS should pay the Applicants' stamp duty costs (under s 59(1)(c) or (1)(f) of the Just Terms Act) for two primary reasons.
2. First, it was submitted that the Applicants were using the Underwood Land in their business as property investors by holding the land until it was rezoned and redeveloped: citing, inter alia, Blacktown Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259.
3. Secondly, it was submitted that the Applicants' ownership of the Underwood Land was not a passive investment and that their circumstance is distinguishable from Speter v Roads and Maritime Services [2016] NSWLEC 128 (Speter), Hatzivasiliou and Zheng.

Disturbance - RMS' submissions

1. RMS identified that whilst the parties are in agreement that the Applicants are entitled to an amount of $67,110.27 under s 59(1)(a)-(f) of the Just Terms Act (as set out in the "Barkat Disturbance Issues" aide-memoir - Exs A, J), the parties disagree on the issues of stamp duty compensation and costs incurred in relation to DA 2013/006.

Stamp duty

1. RMS criticised the two bases upon which it said the Applicants' claim for stamp duty costs (under s 59(1)(c) and (1)(f)) rests upon.
2. First, RMS challenged the Applicants' claim that they are relocating their investment in the Underwood Land to an alternative site. RMS submitted that an intention to purchase a replacement property is not sufficient. Rather, something must be relocated such as a person, business or objects: citing Speter. Hence, RMS noted that the Applicants used the Underwood Land for the purpose of a boarding house rather than residing there.
3. Secondly, RMS challenged the Applicants' claim that they are entitled to stamp duty costs under s 59(1)(f). Relevantly, RMS submitted that the holding of land as a tenanted investment does not involve the "actual use" of land for the purposes of s 59(1)(f): citing Speter at [94]; G Suonaf Holdings Pty Ltd v Roads and Maritime Services (2016) 219 LGERA 118; [2016] NSWLEC 116 at [61]; Hatzivasiliou at [141]-[144]; and Zheng at [155]‑[162].
4. In support of its position, RMS provided the following reasons as to why there was no actual use of the Underwood Land for the purposes of s 59(1)(f): 1. the Applicants did not occupy the Underwood Land and were not using the Underwood Land for any purposes of their own; 2. the Underwood Land was used, at its highest, as an investment property as (inter alia): the two extant properties were used for the purpose of a boarding house; it had been owned for more than 20 years as an investment property; and no actual work had commenced for the alleged residential units purpose - citing, inter alia, Blacktown Council v Fitzpatrick Investments Pty Ltd; 3. the Underwood Land was used as a passive investment and any decision to purchase new land would not be a "direct and natural consequence" of the compulsory acquisition - citing, inter alia, Bezzina Developers Pty Limited v Leichhardt Municipal Council (2006) 146 LGERA 249; [2006] NSWLEC 175; 4. the intention to develop the Underwood Land in the future was a mere potential future use - citing, inter alia, Blacktown Council v Fitzpatrick Investments Pty Ltd; and 5. the Underwood Land was not, on the available evidence, being held as "stock in trade" for land banking because there is no evidence that the Applicants were in the business of developing land - citing Blacktown Council v Fitzpatrick Investments Pty Ltd.
5. Finally, even if the Applicants were to be correct that the Underwood Land was ripe for development and would be certain of redevelopment in the near future, RMS submitted that s 61 of the Just Terms Act would apply to preclude the stamp duty claim.

Development application

1. RMS denied that the Applicants are entitled to their costs incurred in relation to Development Application 2013/006. RMS submitted that these costs do not relate to an actual use of the Underwood Land (that of passive investment) "but merely to one of two potential future uses": citing Kirela Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (No 2) (2004) 132 LGERA 90; [2004] NSWLEC 68.

Costs - the parties' positions

1. As the approach to costs in Class 3 matters usually follows the standard course of a successful applicant receiving its costs, only the Applicants made a submission addressing costs, simply confirming that, on the assumption they would succeed, RMS should pay the Applicants' costs as agreed or assessed.

Consideration and Determination

1. At [47] above I set out the relevant principles of valuation which I have applied in this judgment. There was no disagreement that these principles should be accepted by the Court, albeit compiled by the Applicants, as they were adopted by RMS, in its closing submissions at par 4.2, as a correct summary.
2. It is convenient to sequentially determine the key issues which were in contention between the parties as these have had a fundamental influence on the course of the valuation exercise and the decision the Court has reached. Cognizant of the first judicial valuation principle identified, that the Court is not bound to accept one or the other party's entire case, the Court has found itself embracing propositions submitted by one or the other party, depending upon the issue in question, arriving at a blended outcome, determining that the compensation offered by RMS was too low, but determining that the final sum is considerably less than the sum sought by the Applicants.

The public purpose and the status of the Draft PRUTS

1. Determining what is embraced by the public purpose in this case is a fundamental threshold consideration due to the statutory disregard in s 56(1)(a). In determining the market value of the Underwood Land on the date of its acquisition by RMS, being 18 December 2015, the Court is required to disregard, for the purpose of determining the amount that would have been paid (by a willing but not anxious seller to a willing but not anxious buyer) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.
2. As said at [1] above, RMS acquired the Underwood Land under the Roads Act for the purpose of the WestConnex M4 East Project. The WestConnex Project was described by RMS as forming "part of the WestConnex program of works". It was RMS' contention that for an extended period of years, planning and transportation strategies were inexorably advancing and explaining the WestConnex Project, one of which was the Draft PRUTS. Together these strategies confirmed that "the public purpose", in terms of s 56(1)(a), which was being implemented was not just a road‑building project. In short, the WestConnex Project was the core part, referred to as the catalyst, for a coordinated strategy intended to lift "the West", relevantly for the purposes of understanding the issues in this case, inter alia, the corridor or locality of Parramatta Road in Homebush (Parramatta Road corridor). As will have been understood by now, the Underwood Land falls within this Parramatta Road corridor. Consequently, RMS commenced its closing submissions with the contention that the Draft PRUTS "is part of the public purpose and is to be disregarded". One consequence of that disregard, as submitted by RMS, was that with the Draft PRUTS, and its effect on the market, is to be disregarded. Consequently, the "top down approach" to the valuation taken by the Applicants cannot be sustained. In short, if increase in market value can be attributed to the Draft PRUTS and that strategy was part of, interconnected with, or a consequence of, the WestConnex program of works, then that increase in value must be disregarded.
3. Mr Ellis' valuation approach, on behalf of the Applicants, was based on his assessment that the highest and best use of the Underwood Land would be residential apartments extending over some 10,000 m2 which would be achievable after the Underwood Land was rezoned to R4 High Density Residential. Rezoning to R4 was predicated on the Draft PRUTS coming to fruition. Accepting the advice of the Applicants' town planner, Mr Donaldson, Mr Ellis proceeded on the basis that the upzoning to R4 would occur and that this upzoning would have had no causal relationship to the carrying out of the WestConnex Project. If, however, the Draft PRUTS is taken by the Court to be part of body of strategic documents arising out of the WestConnex Project "public purpose", then the predicted upzoning to R4 would be a consequence of that public purpose and so would have to be disregarded by the Court. That is the position which the Court has reached.
4. At [73]-[82] above, the Court set out a summary of the Applicants' submissions in which they contended that the Draft PRUTS sent a clear signal to the marketplace that the Underwood Land would be upzoned to R4 and that the resultant planning controls would permit more intense forms or residential accommodation. They stressed that these planning changes had no causal relationship to WestConnex. Then, at [95]-[107] above, the Court set out a summary of the submissions from RMS regarding its contention that there was a direct nexus between the public purpose, being the WestConnex Project, and the planning document upon which the Applicants placed so much reliance, the Draft PRUTS. The Court has concluded that RMS' analysis is accurate and that the Applicants' contention that there is no causal relationship between WestConnex and the Draft PRUTS is unsustainable on the evidence.
5. The Applicants contended that the Draft PRUTS was not an RMS strategy, whereas the acquisition of the Underwood Land was an acquisition for the purposes of just the WestConnex Project which was RMS' public purpose, and that accordingly the Draft PRUTS and its influence on upzoning to the likely R4 could not be disregarded. The Applicants sought to characterise the WestConnex Project, specifically the M4 East, as a road construction project, pure and simple. The Court rejects this argument. On the basis of its analysis of a multiplicity of planning and transport strategic documents, the Court has concluded that the nexus is inextricable between the WestConnex Project (of which a very small part was the acquisition of the Underwood Land) and the determined objective to stimulate urban renewal of the Parramatta Road corridor. The Homebush precinct, one of eight precincts identified in the Draft PRUTS, includes the Underwood Land.
6. The Applicants' related contention was that the upzoning to R4 could never have come about by action of RMS, for it is only a road construction authority and not a planning authority, there being many other government instrumentalities which would have to be involved in the planning decisions likely to result in the predicted uplift to R4, and that RMS does not have any statutory role with respect to the rezoning proposal. The Court similarly rejects these contentions, as on the facts in this case, the inextricable nexus is so close that the WestConnex Project effectively charges each authority to cooperate and coordinate within the overall scheme to carry out their respective roles to implement that scheme, orchestrated to occur in a connected manner. It is irrelevant that RMS is not the actual responsible public entity who would be charged to place a proposed LEP amendment into the public arena (thereby leading to an awareness in the market of the uplift potential of the Underwood Land to R4), as RMS was specifically charged to carry out its role so as to bring about the very planning renewal which was intended to lead to the sort of uplift, not only predicted, but designed to occur.
7. In the context of the huge volume of planning and transport policies and strategies placed before it, to which the planning experts repeatedly referred, the Court has been challenged to adequately summarise the pertinent material which has led to its conclusions regarding the ambit of the public purpose. Amongst the material referred to were some 42 documents within the Tender Bundle providing background to the development of relevant planning and transport strategies, being Ex B documents C01-C42; in addition to the 14 planning instruments, policies and guidelines, being Ex B documents A01-A14; all examined in the context of the statements of evidence within the Court Book, Ex A, from Mr Donaldson and Mr McKenzie, both of which in turn referred to a multiplicity of annexures to their statements. Further, also contained within the Tender Bundle Ex B, were six documents, including the two-volume WestConnex M4 East EIS (E03a and E03b); the two-volume EIS Submissions Report (E04a and E04b); the Secretary's Environmental Assessment Report which followed (E05); and then finally the Instrument of Approval (E06).
8. The Court found its review of this material was facilitated by a document provided by RMS titled "Public Purpose - Key Documentary References" which is contained within Ex A, J - Additional Documents. Although this document is over 13 pages in length itself, it provides a most convenient table of pertinent extracts from many of the documents reviewed by the Court. Most critically, this document effectively provided a "road map" to many relevant statements throughout a continuum of strategic documents, from June 2010 right up to and past the 18 December 2015 date of acquisition, which repeatedly confirmed that one of the prime objectives of the WestConnex Project, including the M4 East, was to be the catalyst for integrated land use leading to urban renewal which was specifically intended to embrace "regeneration" along the Parramatta Road corridor. With the Court having cross-referenced to each passage in each of the documents referred to in this RMS table, thereby confirming its accuracy, the Court adopts it as a convenient means of setting out a summary of confirmatory statements in strategic documents which have underpinned its conclusions regarding public purpose. Accordingly, given the importance of the statutory disregard issue in this judgment, the Court has decided that the whole of this RMS document should be incorporated as Annexure A to this judgment.
9. A selection of indicative key statements, confirming the inextricable nexus (as the Court judges it) between the WestConnex Project and urban development stimulus relevant to the location of the Underwood Land, all of which are set out in Annexure A (together with their provenance), amongst many other such similar statements , are as follows: WestConnex is intended as an integrated land use and transport scheme delivering on road transport, urban renewal and public transport outcomes Key benefits include: acting as a catalyst for urban regeneration along key corridors, particularly Parramatta Road One of the aims of the WestConnex program is to support the regeneration of the Parramatta Road corridor Recommendation: Infrastructure NSW recommends that urban renewal - in particular, the transformation of Parramatta Road - should be placed at the heart of the WestConnex scheme from the beginning WestConnex is more than a motorway. … WestConnex is intended to develop as an integrated land use and transport scheme delivering on road transport, urban renewal and public transport outcomes … overall benefits of WestConnex include: New opportunities for urban renewal in the inner west, including along Parramatta Road, especially east of North Strathfield. It is clear that WestConnex is not just a road project a project of WestConnex's scale would provide the opportunity to reshape and revitalise the Parramatta Road corridor and open up development opportunities for new residential sites and businesses The WestConnex Motorway will provide opportunities to transform the local centres that exist alongside the Corridor… The Parramatta Road Corridor offers prime regeneration opportunities to create lively, well-designed centres …This will help to deliver a diversity of housing In summary, WestConnex is needed to: …Provide for new opportunities for land development and wider land use planning changes How WestConnex will trigger urban revitalisation... In consultation with councils and communities, sections of Parramatta Road corridor will be rezoned to encourage construction of new apartments and homes …
10. The Court has concluded that had WestConnex M4 East not been proposed then the transformation of the development potential of the Underwood Land, as mooted by the Applicants and their experts, would not have occurred. This land would have remained within its R3 Zone, blighted by all the identified problems within the Parramatta Road corridor, as described in the many WestConnex documents, which were some of the very reasons why the WestConnex Project was conceived as being necessary in the first place. The traffic congestion, traffic noise and all the other associated adverse implications for urban development would have remained as disincentives for renewal. Of course, over the long term, with the population of the Sydney metropolis ever increasing, and with the location of the Underwood Land being within reasonable proximity, but not close convenience, of two railway stations, there would, over an extended number of years, gradually have arisen greater redevelopment interest. However, the Court's focus must be an assessment of hypothetical development potential of the Underwood Land as at December 2015, disregarding WestConnex and all the associated strategic planning initiatives which are an integral part of the public purpose.
11. The Court has concluded that, but for the public purpose which is to be disregarded, the Underwood Land would have remained zoned R3 for an indeterminate number of years. This conclusion is influenced by its analysis of many of the strategic planning and transport documents tendered into evidence, passages from some of which are in Annexure A to this judgment. This analysis was assisted by a consideration of the analysis provided by RMS' planner, Mr McKenzie (Ex A, Court Book, C02, C04 and in his evidence within the joint planners' report C05), in the context of the contra analysis provided by the Applicants' planner, Mr Donaldson. The Court is satisfied that the WestConnex Project was determined by government as being necessary in order to address the many congestion problems identified in, inter alia, the Parramatta Road corridor, and that those congestion problems were giving rise to a range of planning, economic and social issues which were adversely impacting upon the redevelopment capacity within the Parramatta Road corridor. In the context of the WestConnex Project being the public purpose which must be disregarded, the Court accepts that the unresolved problems within the Parramatta Road corridor provide the relevant context to consider the likelihood of the R3 Zone being upzoned to R4.
12. In short, the hypothetical prospective purchaser would have been advised that, although there would be no debate that integrated transport and planning reforms would be required in order to lift the area (and that such reforms would be inevitable in the future), because such reforms would have only been achievable on a corridor-wide basis, it would not have been possible to assume that the necessary changes would occur in a relevantly timely fashion (absent a project such as WestConnex). The Strathfield Economic Land Use and Employment Strategy of June 2010, whilst acknowledging amenity suitable for small industrial businesses, confirmed that congestion was a significant issue for the Underwood Road, Homebush, precinct and that consideration of alternative zoning was "reliant on comprehensive planning and improved transport connections" (Ex A, C01, p 41).
13. As RMS conceded in its closing submissions, the hypothetical purchaser, having received advice which might be considered pessimistic (albeit realistic), regarding extended delays before upzoning, would most probably seek additional planning advice. Hypothetically, such further advice might reflect a more optimistic assessment from a planner such as Mr Donaldson. Nevertheless, as RMS highlighted at par 4.11 of its closing submissions and Mr Donaldson clarified in cross-examination, the highest and best use was R3 with a FSR of 0.65:1, producing a yield of 14 residential flat units, with a potential for R4 rezoning within a possible 3.5-year timeframe. The Court concludes that a hypothetical purchaser would weigh up this contrasting advice and proceed on a cautious basis, discounting the offered purchase price accordingly. In the Court's opinion the uncertainty with respect to the number of years likely to pass before beneficial rezoning was gazetted, could well impact on the willingness of a hypothetical purchaser to proceed unless they secured a more conservative purchase price.

Relevant case law on public purpose and the statutory disregard

1. There is much case law to assist in analysing "public purpose" and the required nexus to processes, such as rezoning, which may lead to an uplift in market value. In Pamalco Pty Ltd v Minister Administering the National Parks and Wildlife Act 1974 [No 3] (1991) 71 LGRA 441, Hemmings J at 447 observed: Housing Commission of New South Wales v San Sebastian Pty Ltd was a landmark decision which put beyond doubt that in assessing compensation where there is a nexus between such planning controls and the intended resumption, such steps in the planning process which had an effect upon the value of the land must be ignored. Such principles may apply not only to alterations in the provisions of an environmental planning instrument, but to any other step which has an effect upon the value of the land, either up or down: Griffith City Council v Polegato (1990) 20 NSWLR 696; 71 LGRA 208. However, San Sebastian also acknowledged that a change in zoning might be taken into account if it arose merely in the ordinary discharge of the duty of the consent authority to implement planning controls.
2. The effect on value must be ignored if there is a "direct relationship" between the potential rezoning and the public works. The following passages from San Sebastian at pp 206-207 are relevant. … it is necessary to go to s. 124 of the Public Works Act which, so far as is material, provides that the assessing tribunal shall assess the compensation according to what they find to have been the value of resumed lands at the time of publication of notification of the resumption without reference to any alteration in such value arising from the establishment of railway or other public works upon or for which such land was resumed. This provision states in statutory form a principle which had been developed in the cases independently of express statutory provision. See Pointe Gourde Quarrying and Transport Co. Ltd. v. Sub-Intendent of Crown Lands, (1947) A.C. 565, at p. 572. A difficulty which arises in the application of this principle is that valuation is in the ordinary case based on market value and, if the proposed public purpose and the possibility or likelihood of resumption therefore has become known prior to the date of resumption, the market value at the time of resumption will probably reflect by way of increase or decrease the possibility or likelihood of resumption for that public purpose. Therefore that value cannot be accepted. Yet it is inevitably in most cases the starting point of the process of valuation. With the actual market value at the time of resumption as the starting point it is then necessary to determine whether that value has been depressed or elevated by the market's foreknowledge of the possible or likely public purpose and consequent resumption. It is therefore inevitable in such circumstances that the public purpose has to be taken into account in the process of valuation but it can be taken into account only for that purpose. A greater difficulty in applying the principle of assessment which is enacted in s. 124 of the Public Works Act arises as a result of planning and land use legislation and the processes whereby statutory restrictions on land use are imposed. Restrictions on land use, so that, explicitly or practically, use is restricted to a use for a public purpose for which the land might be resumed are commonly imposed as a result of consultation with or direction by the public authority concerned with the carrying out of the particular public purpose. In such a case where there is a direct relationship between the restriction on land use and the proposed establishment of the public works the effect on value of the zoning or restriction ought to be ignored.
3. With the Court having accepted on the evidence that the WestConnex Project was not just a road project but determinedly intended to be a project to stimulate urban renewal, with the Parramatta Road corridor specifically highlighted as an area where new development would bring about transformation, including new housing, to use the words from San Sebastian, land values would become "elevated by the market's foreknowledge of the possible or likely public purpose". The predicted upzoning from R3 to R4, as forecast by Mr Donaldson, of the Underwood Land would be a consequence, again citing San Sebastian, "of planning and land use legislation and the processes" … "as a result of consultation with or direction by the public authority concerned with the carrying out of the particular public purpose" thereby confirming the "direct relationship".
4. It follows that with the Court having concluded that the nexus between a material predicted upzoning to R4 and WestConnex is such that it is to be disregarded, it means that the Court has concurrently concluded that such forecast upzoning is not "a change in zoning (which) might be taken into account if it arose merely in the ordinary discharge of the duty of the consent authority to implement planning controls", to quote from Hemming J's reference in Pamalco to the qualification to the principle confirmed in San Sebastian. In short, the foreseeable upzoning of the Underwood Land, in the Court's opinion, is attributable to the WestConnex Project and so not attributable "to the ordinary discharge of the duty of the consent authority to implement planning controls". Of course, as mentioned above at [170], it is to be presumed, given the population pressures in Sydney, that such areas in Homebush would eventually in any event be amenable to higher density development, but the uncertainty of such inevitable long-term transformation means that it is not material to the valuation exercise in this case. Accordingly, the Court has determined that it should value the Underwood Land under its R3 zoning, absent WestConnex, without expectation of a zoning uplift to R4 within an identifiable timeframe.
5. In the context of a need to be satisfied of a "direct relationship" between the public purpose and likely upzoning, in the Court's opinion there is a multiplicity of statements across a range of strategic documents (see Annexure A), commencing more than five years before the acquisition date, which confirm a determined strategy on the part of the New South Wales Government that "WestConnex is intended to develop as an integrated land use and transport scheme delivering, inter alia, urban renewal". With repeated reminders in a succession of documents, the reader of these documents was reminded that "WestConnex is not just a road project".
6. Although the Court has concluded that there is a direct and sufficient nexus in this case between WestConnex and the predicted zoning uplift, RMS submitted that there was authority for the proposition that something less than a direct relationship may be sufficient. As an example, RMS cited R v Murphy per curium at 595 citing San Sebastian at 206-207 (dealing with the Acquisition of Land Act 1967 (Qld)). Obviously questions of fact and degree will be involved in determining the sufficiency of the connection between the potential rezoning of the Underwood Land and the public purpose of the acquisition. As explained, the Court has concluded that it is established on the evidence that there is sufficient connection in this case.
7. RMS submitted that, as a starting point, it is necessary to identify the "public purpose for which the land was acquired" before determining whether that public purpose causally affected the market value of the property. RMS correctly observed that there are no clear rules for determining how the "public purpose" should be defined (citing Roads and Traffic Authority of New South Wales v Perry per Hodgson JA at [100]). Relevantly for present purposes, Hodgson JA examined the parameters or scope of the highway construction, being the public purpose, in that case: 98 In Emerald Quarry Industries Pty. Ltd. v. Commissioner of Highways (1979) 142 CLR 351, the High Court proceeded on the basis that the scheme in question was "the building of a freeway"; and there was no submission that the scheme should be given any narrower characterisation, or that the quarry had any potentiality of value to the acquiring authority apart from this scheme. 99 In a case such as the present, it is necessary to determine what is the public purpose for which the claimant's land was acquired, including the appropriate level of generality at which the purpose should be identified. In this case, at the most general level, the purpose could be identified as the upgrading of the Pacific Highway between Sydney and the Queensland border; and there are other possible identifications, including the Raleigh Deviation generally, or particular versions of the Raleigh Deviation, or the extension of the Raleigh Deviation to Perry's Hill. 100 I do not think there are any clear rules determining how the relevant purpose or the appropriate level of generality is to be determined. Factors to be taken into account would, in my opinion, include the degree of continuity and consistency of various elements of what is proposed and done, and fairness to both the claimant and the acquiring authority. In the present case, I think it unlikely that the relevant public purpose could be as wide as the upgrading of the Pacific Highway between Sydney and the Queensland border; while on the other hand, assuming there have been a number of versions of the Perry's Hill extension, I think it unlikely that the public purpose could be as narrow as just the last of those versions. The public purpose could be as wide as the Raleigh Deviation generally, encompassing all the variations of that project including all versions of the Perry's Hill extension, or it could be somewhat narrower.
8. The Applicants stressed in their submissions that, relevant to the question of whether there is a nexus between the public purpose and the potential upzoning, was that RMS has no power to rezone land. Therefore, they said, WestConnex is not encompassed by s 56(1)(a) in these circumstances (relying in part on Walker at [53] and [54]). They contended that any decision to rezone land would be made by government entities (both State and local) other than RMS, and so it is impossible to conclude that there could be any link between the upzoning to R4 due to WestConnex.
9. With respect to Walker, the Court considers that the analysis of the interrelationship between the authorities and their respective responsibilities in that case reveals a starkly different situation to the factual situation in the case before me. In Walker, Leichardt Council had maintained an industrial zoning in order to thwart a zoning change that might, had it occurred, stymie a public acquisition of Battery Point that was finally acquired, after some years, for public park purposes by the Sydney Harbour Foreshore Authority. The nexus between the non-acquiring Council's "anterior discussions and agitations", as the High Court described them, and the Authority's eventual public purpose acquisition, was not such as to be capable of being characterised as an integrated proposal. In contradistinction, in this case there is no doubt that WestConnex was a project specifically designed to be the catalyst for much more than a road development scheme, rather it was purposely an urban renewal project, from the outset by design interfacing with, for instance, the Parramatta Road Urban Transformation Program, involving an 'Integrated Project Team', as it was described, including the WestConnex Delivery Authority, RMS, the Department of Planning and Environment, Strathfield Council and others. In the circumstances of this case, it was not necessary for RMS to be the rezoning authority as it was sufficient for its WestConnex Project to be the intended catalyst for predicted urban renewal and associated rezoning that would most likely follow - all being interrelated components of the same public purpose.
10. There was then raised by the Applicants an argument that WestConnex might be a mere part contributing factor to the predicted upzoning of the Underwood Land, which would be insufficient. In its submissions the Applicants relied upon MMTR, wherein the Court cited the Court of Appeal's decision in AMP Capital Investors, where at [99] the Court (Hodgson JA) said: 99 The mere circumstance that the public purpose is a contributing factor to changes which in turn affect value is not necessarily sufficient, particularly if the changes depend also on discretionary decisions made by other authorities.
11. The Applicants contended that even if it could be that WestConnex is a contributing factor to achieving an uplift in value through an upzoning of the Underwood Land from R3 to R4, the decision to change that zoning depends on enquiries and discretionary decisions involving UrbanGrowth NSW, the Department of Planning (and Minister for Planning) and Strathfield Municipal Council. These government bodies are separate to and independent of RMS and the WestConnex delivery authorities. Further, they submitted that the publicly available material explains that the urban transformation of Parramatta Road is a project which is being pursued in the background of, but not dependent upon, the WestConnex project.
12. RMS submitted that the Applicants had selectively quoted from MMTR (and therefore from AMP Capital Investors) without referring to the broader context and conclusions in that case in the context of distinguishing evidence before the Court in this case. The Court agrees. Craig J at [130]-[141] of MMTR analyses the relevant case law including Walker and AMP Capital Investors. In particular, Craig J in MMTR quotes paragraphs [98]-[100] of AMP Capital Investors which state that: [98] Once the public purpose is thus identified, it may then be necessary to identify what is comprehended by 'the proposal' to carry it out and/or 'the carrying out of' the purpose. Then it may be necessary to identify the scope of what occurs, 'by reason of' or is 'caused by' these things. In these steps also, I do not think there are clear rules, but there may need to be judgments of degree which take into account considerations of reasonableness and fairness. [99] The mere circumstance that the public purpose is a contributing factor to changes which in turn affect value is not necessarily sufficient, particularly if the changes depend also on discretionary decisions made by other authorities. [100] The primary judge made the judgment that planning changes, to which the PRL was a contributing factor but which also involved discretionary decisions by other authorities, should be disregarded for the purposes of s 55(f). In my opinion, there was no error of law in that decision.
13. Craig J then concludes in MMTR at [135] that: 135 Despite the absence of any express distinction drawn by his Honour between the phrase 'by reason of' in s 55(f) and 'caused by' in s 56(1)(a), I do not take his Honour's reasons as necessarily excluding the relevance for the purpose of s 55(f) of an indirect connection between the increase or decrease in value of residual land as a consequence of the proposal to carry out an identified public purpose by an acquiring authority and the manner in which that land has been zoned under a planning instrument. His Honour's reference to a 'contributing factor' as not being 'necessarily sufficient' and his ultimate conclusion that the decision made on the facts before the trial judge did not result in an error of law being demonstrated, rather suggests that the relevant nexus will depend on the facts that are proved. That understanding of his Honour's judgment would be consistent with his observations at [98], particularly his reference to the absence of 'clear rules' and the possible need for "judgments of degree.
14. His Honour then considered, at [142]-[155], the evidence in that case and ultimately concluded that the upzoning of residual land was a consequence of the carrying out of the relevant public purpose, the Oxley Highway Upgrade (OHU), even though the rezoning was carried out by bodies separate to RMS as the resuming authority, and should be disregarded. Craig J, at [142] stated that: Applying the judicial exegesis that I have discussed to the phrase 'by reason of' in s 55(f) of the Compensation Act, I have concluded that the evidence available to me does demonstrate the increase in value of the residual land to have occurred by reason of the proposal by the RTA to carry out the OHU. Without the urban zoning imposed by the LEP, that increase in value would not have occurred. Further, the evidence satisfies me that the decision by the Council to adopt the draft LEP and to request its making by the Minister would not have occurred had the proposal for the OHU not been adopted by the RTA. In this way the practical application of causation principles resulted in that rezoning effecting the increase in the value of the land at Thrumster. Expressed differently, while the immediate cause of the value uplift is the rezoning, that effect is the consequence of the proposal by RTA to carry out the public purpose of the OHU.
15. The Court is of the opinion that, properly analysed, both MMTR and AMP Capital Investors support RMS' contention here that the Draft PRUTS should be disregarded for the purposes of s 56(1)(a).
16. Concluding this section of the judgment, I am of the opinion that in the case of the WestConnex Project, it is not necessary for the Court to explore with any particularity, the full extent of the public purpose nexus to the multiplicity of intended and probable planning changes within a reasonable proximity to the whole freeway works. Rather, I need only be satisfied that with respect to the Underwood Land that there is such a nexus. I am satisfied that the Underwood Land falls within a precinct or area within the sights of, or targeted by, the strategic transport and planning processes identified in the WestConnex documents in evidence, one such document being the Draft PRUTS. I have no doubt that in this case the Parramatta Road corridor, which includes the Underwood Road area, is specifically identified as part of an area targeted for urban regeneration as part of the WestConnex Project. Therefore, for the purposes of the statutory exclusion, the envisaged planning changes as promoted by the Draft PRUTS, including the predicted upzoning from R3 to R4, is within the public purpose and so is to be disregarded.

The highest and best use

1. It is trite law to confirm that a dispossessed owner should be compensated on the basis of the land's highest and best use: Boland v Yates Property Corporation Pty Ltd (1999) 167 ALR 575 at [271]. It follows from the immediately foregoing section of this judgment that the highest and best potential use of the Underwood Land as at the date of acquisition was not the development of residential towers as described by the Applicants in accordance with an anticipated R4 zoning.
2. The Applicants' anticipated R4 rezoning is to be disregarded, essentially because strategic planning documents leading to the predicted upzoning R4, primarily instanced by the Draft PRUTS, are a part of or a consequence of the public purpose. The Court has found that the relevant context of the valuation exercise of the Underwood Land was an area zoned R3 in need of urban renewal, suffering from urban blight due to traffic congestion and noise rendering the area comprising properties "relatively unattractive places to live, work or socialise" (citing WestConnex Business Case Executive Summary, Ex B, C14, p 25). Although that description had a far broader application than just the area surrounding the Underwood Land, it nevertheless remains apposite describing the impacts of the M4 on land proximate to it, including the Underwood Land.
3. The Court considers the somewhat sorry history of the Applicants' efforts over many years to obtain development consents for a range of potential uses to be developed and carried out on the Underwood Land is indicative of the problematical state which the Court considers underlies potential development of the Underwood Land. The detail of four refused development applications and the one successful final application are set out in [274] below. The Court rejects the Applicants' submissions that the history of past development applications are irrelevant. Given that there were probably a range of reasons why each application was refused, peculiar to the facts of the proposal in each instance, the Court draws its conclusions in this respect warily, however they nevertheless, in aggregate, in the broad, confirm, prior to the acquisition date, the difficulties of identifying an acceptable development on, and use of, the Underwood Land. In the context of the valuation exercise, a hypothetical prospective purchaser would be advised of and have regard to the history of development applications relevant to the Underwood Land. Thereafter, a prospective purchaser would consider the implications of successive refusals and be, in effect, forewarned of the difficulties of the Underwood Land and its immediate locale.
4. With the statutory disregard applying pursuant to s 56(1)(a), the hypothetical prospective purchaser would be informed by its planners that any renewal of the area within which the Underwood Land sits would be long term. However, there would nevertheless be an awareness of the need to rejuvenate the district, given that the issues blighting the area were sufficiently apparent to stimulate the New South Wales Government to propose the WestConnex Project in the first place. So it would not be a case of there being no likelihood of efforts to address the issues and devise strategies to lift the area, rather the issue would be how far into the future. The hypothetical prospective purchaser would be advised of these issues and the potential for considerable delay. Part of the remedy would be obvious - to address the transport issues and thereby allow the remedy of those transport issues to be the catalyst for change. But with the WestConnex Project itself being excluded from consideration, by reason of the statutory disregard, the degree of uncertainty and so associated delays would be considerable, and likely to weigh upon the hypothetical purchaser.
5. The 'highest and best use' would be identified in that context. The Court concludes that the hypothetical prospective purchaser would seek to buy the land, cognizant of its inherent problems (having gained the requisite advice), with an objective of seeking to develop it to its maximum potential under the R3 Zone. The Court sees little basis for a prospective purchaser simply accepting that the Underwood Land's highest and best use would merely be two dwellings. The Court accepts Mr Donaldson's evidence that a residential apartment building would be foreseen by the prospective purchaser as the highest and best use of the amalgamated properties, albeit built within the parameters of the R3 zoning. This purchaser would be aware that the maximum lot size of a residential flat building was 1,000 m2, that the maximum height for development was 9.5 m and that the FSR was 0:65:1. It follows that the Court does not accept the RMS' contention (see [114] above) that the highest and best use is simply two individual dwellings on their individual lots, that is, with the Underwood Land not being treated as an amalgamated development site.
6. With the Court deciding that the Underwood Land would be developed as an amalgamated site, it follows that, for reasons explained below at [207]-[208] and [231], although the purchaser would adopt a cautious approach to the floodway issues and the related need to address the three easements traversing the Underwood Land, the Court accepts the Applicants' contentions that with appropriate engineering neither the floodway nor the easement issues would curtail the achievement of the highest and best use of the Underwood Land under the R3 Zone. Rather, the consequence of those issues would give rise to greater costs and extra delays in securing the necessary approvals to manage the easements and secure the necessary development consents. Those extra costs and extra delays would be reflected in the market price a prospective purchaser would be prepared to offer.

Land banking - a legitimate use

1. The Court has concluded that the most accurate characterisation of the Applicants' use of the Underwood Land as at the date of acquisition was that of land banking. Rather than set out the Court's rationale for that decision here, the Court refers to passages [254], [257], [265]-[276], [283]-[284] and [294]-[296] below.

Hydrological issues - implications

1. The Underwood Land is significantly affected by flooding issues. The Court has concluded that the significance of those flooding issues and the consequential flood risk management considerations are such that any prospective purchaser would very seriously consider the implications of flooding in the course of their deliberations whether they should or should not acquire the Underwood Land. The Court has no doubt that those considerations would negatively influence the purchase price offered by a hypothetical prospective purchaser.
2. The hydrologists called by the parties, Dr Phillips for the Applicants and Dr Martens for RMS, were in agreement in a few respects, being that: 1. the site is expected to be affected by flood waters in events more frequent than a 1-in-100-year ARI flood event and possibly as frequent as the five-year ARI flood [joint statement of hydrology experts, Ex A.D04, p 3]; 2. there is a risk that floodwaters could enter during construction on the site; and 3. the FDM defines floodway areas as (at p 22): "Those areas of the floodplain where significant discharge of water occurs during floods. They are often aligned with naturally defined channels. Floodways are areas that, even if only partially blocked, would cause a significant redistribution of flow, or a significant increase in flood levels". Sadly, in all other respects the hydrologists were at loggerheads.
3. There were extant, at the relevant date when the hypothetical prospective purchaser would have been considering a possible purchase of the Underwood Land, numerous policies which, the Court accepts, would have soon come to the attention of the prospective purchaser doing due diligence of their prospective purchase. These policies included the NSW Flood Prone Land Policy and the principles of the FDM, the requirements of the SLEP 2012, the Strathfield Development Control Plan 2005 (SDCP 2005), the 1999 Strathfield Council Interim Flood Prone Lands Policy and the 1994 Strathfield Council Stormwater Management Code. The hydrologists had divergent views as to how these policies would be applied.
4. With the purchaser being alerted to the seriousness of the flooding issues and having their attention drawn to one or more of the relevant floodway policies, the hypothetical prospective purchaser would have inevitably sought professional advice from persons with relevant hydrological expertise. This pathway of inquiry would have seen that purchaser obtain the opinion of a hydrologist and, with the provision of that initial advice, would most probably have sought a second opinion. In the context of the likely significant capital expenditure to acquire the Underwood Land and that any purchaser would only be pursuing this course with an aim to secure a site with the maximum development potential, the Court is convinced that the hypothetical prospective purchaser would inevitably seek the opinion of two hydrologists. The receipt of even a more positive report, such as that provided to the Court by Dr Phillips, would nevertheless, given expressed reservations regarding delays and extra cost, have raised sufficient concern for the prospective purchaser to obtain a second opinion.
5. With respect to the likelihood that more than one expert would have been consulted by the prospective purchaser, acting prudently, the Court accepts that Mr Lunney's approach described earlier at [138], wherein it was noted that he adopted the approach of considering the range of expert evidence, was the proper one. It follows that Mr Ellis' more selective consideration of just the Applicants' experts was a flawed approach - see [139]. The Court is of the view that in the 'real world', a prospective purchaser, when forewarned of a serious issue to be considered, such as floodway management, would, if acting prudently, seek and consider the advice of more than one expert to assist their understanding of relevant issues so as to enable them to then formulate a purchase price reflecting market value.
6. One of the reasons the Court is of the opinion that at least two hydrologists would have been consulted is the "touchstone" - at least to the Court - of the rather dramatic disparity between the evidence of the two hydrologists in this case. Rarely has the Court experienced such an extreme difference of opinion apparent in a joint expert report. With both hydrologists having such extensive, and similar professional experience, both having almost identical academic qualifications at Honours and PhD levels, and both having similar professional accreditation, including fellowships, the experts were effectively matched. However, the difference of opinion with respect to critical conclusions was extraordinary. In this context, the Court concludes that it is undeniable that the flooding issues are serious. Accordingly it can be presumed, given the likely capital outlay with any development, a prudent purchaser, informed by mapping and policies that flooding is a significant issue, would advisedly seek a second opinion, being a cautious but necessary approach in any due diligence exercise. Accordingly, as the Court found itself grappling with wildly divergent views, so it would be the case that the prospective purchaser would find themselves confronted by a range of conflicting conclusions.
7. The Court is of the view that, although the purchaser must be characterised as being a person who is not over-anxious, the purchaser would nevertheless have a degree of keenness to acquire the Underwood Land given their perception of the development potential of the land, guided by town planning opinion they would have obtained. They would weigh the potential benefit of acquiring the land for development against the risks, which they would accept, of delay and greater development costs. They would ask themselves whether any or which development scenario would be likely to obtain development consent. They would also ponder whether the floodway risk management policies applying to the land would fetter the development potential of the land. The Court has concluded that the prospective purchaser would approach their acquisition cautiously, given the hydrological issues, but nevertheless would not be deterred. The purchaser would be guided by the following factors that would most probably encourage them to proceed with a purchase, but nevertheless the hydrological issues would temper the price such a purchaser was willing to pay, thereby impacting upon the market value. The purchaser would accept that, whatever development they would seek to place upon the land, they would have many hurdles to jump, resulting in delays with approvals and more expensive engineered responses to the flooding risk.
8. First, the purchaser would have received confirmation from the hydrologists that the period during which the flood levels were extreme, say of the order of two metres in depth, would be extremely ephemeral, lasting a mere hour, perhaps an hour-and-a-half, after which time the floodwaters would have dissipated. In this respect, the Court accepts the evidence of Dr Phillips at [56]-[57]. The Court is of the opinion that the shortness of time during which the Underwood Land and particularly, the access roads to the Underwood Land, would be flooded, would invite the prospective purchaser to adopt the approaches suggested by Dr Phillips. Although not a certainty, the prospective purchaser would form the view that the engineering design approaches explored by Dr Phillips were such that development consent would likely to eventually be obtained, albeit delayed and for a development more costly to construct.
9. Secondly, the purchaser would have received advice regarding the s 117 Ministerial Direction 4.3 'Flood Prone Land' - see [44] above - including, in particular, the FDM (Ex A - A06). The purchaser would be advised the development of flood-prone land is to be consistent with New South Wales Government's Flood Prone Land Policy and the principles of the FDM. Given that the 'willing' prospective purchaser is to be taken as being vitally interested to understand what the highest and best use of the land is potentially, the purchaser could be taken to be apprised, inter alia, of the following material passages: Foreword … the policy recognises the benefits flowing from the use, occupation, and development of flood-prone land. The policy promotes the use of a merit approach which balances social, economic, environmental and flood risk parameters to determine whether particular development or use of the floodplain is appropriate and sustainable. In this way the policy avoids the unnecessary sterilisation of flood-prone land 1.1 Flood Prone Land Policy The primary objective of the New South Wales Flood Prone Land Policy, as outlined below, recognises the following two important facts: • flood-prone land is a valuable resource that should not be sterilised by unnecessarily precluding its development; and • if all development applications and proposals for rezoning flood-prone land are assessed according to rigid and prescriptive criteria, some appropriate proposals may be unreasonably disallowed or restricted, and equally, quite inappropriate proposals may be approved. "
10. The prospective purchaser would take away from such information a distinct unwillingness in the NSW Flood Prone Land Policy to allow flood-prone land to be sterilised if there are means of rendering such land capable of being developed. However, the purchaser will have also received advice that an alternative interpretation of the guidelines was possible by which a more cautious approach might be adopted. The Court is of the opinion that a prospective purchaser would decide that proceeding with the purchase was "worth the risk", it being assessed as more likely than not that the requisite consents would be obtained.
11. Thirdly, the Court believes that the prospective purchaser would accept that there are relevant precedents of developments where engineered responses to flood risk have been accepted by consent authorities. During the Court's view of the district and immediate neighbourhood of the Underwood Land, the Court was shown driveway humps at the entrance to basement car-parks, with the height of the humps being set above determined flood levels. An example was the crested driveway ramp at the property at 113‑115 Parramatta Road (and associated addresses), Homebush, shown in photograph 6 in Ex C. Another example is shown in photograph 41 in Ex C. The Court was also shown buildings where habitable rooms, such as offices and retail spaces, were set above determined flood levels. Examples are shown in photographs 5, 6 and 21 in Ex C. Exhibit C is a collection of 56 photographs which largely provides a photographic record of many of the properties visited during the Court's view.
12. The Court was taken to premises at 21-23 Mandemar Avenue, Homebush West (being the seventh comparable sale property on the R3 Sales Table which is Annexure B to the judgment) at which a number of engineering and building responses had been adopted to deal with potential flooding. Like the Underwood Land, this site is similarly identified as being impacted by predicted short-term, but nevertheless prospectively severe, flooding. At this site, amongst other measures, a crested driveway hump and grated driveway to take floodwaters away were incorporated into the development. Photographs 21-26 in Ex C show the floodway management measures at this property which the Court inspected. Consent had been granted for the development of multi-storey apartments at this site, following a successful Class 1 appeal by the developer applicant to this Court: Courallie Avenue Pty Ltd v Strathfield Council.
13. Fourthly, the Court accepts the evidence of Dr Phillips that a floodway management plan for a development on the Underwood Land could be developed which would be capable of satisfying consent authorities. The Court accepts that by reason of the predicted short-term ephemeral characteristic of the hazardous flooding in the vicinity of the Underwood Land, the strategy most likely to be adopted would embrace a "wait in place" approach. In such circumstances, concerns to identify evacuation routes by either foot or car are of less importance. Accepting Dr Martens' evidence that at times of a 100-year ARI flood event it would be highly hazardous to attempt to leave the Underwood Land via Underwood Road, Ismay Avenue or Allen Street, the Court concurrently accepts the evidence of Dr Phillips which, in effect, questions why anyone should attempt to leave a future building on the Underwood Land during the hour or two when such conditions prevail. This questioning is even more pertinent in circumstances where the risk would be significantly higher during greater floods, up to and including the PMF. It was Dr Phillips' evidence that "in a 100-year ARI flood event it would be unsafe for drivers to attempt to enter or depart 90-92 Underwood Road for 30 mins-60 mins depending on the size of vehicle, while in a PMF it would be unsafe for drivers to attempt to enter or depart 90-92 Underwood Road for 80 mins-90 mins depending on the size of vehicle". Providing the occupants of a building on the Underwood Land were above the ground floor level, the Court rhetorically asks: would the occupants seek to place themselves in a hazardous situation, or would they avoid it by waiting for the floodwaters to dissipate in 30 to 90 minutes? The "wait-in-place" strategy would seem to be a likely preferred scenario.
14. Finally, to show precedents of dealing with stormwater in the same floodway system, the Court was taken to a number of properties where the drainage channel which traverses the Underwood Land has been entirely enclosed in a large subterranean tunnel over which development has been allowed. Both upstream and downstream of the Underwood Land, differing approaches had been adopted. In some instances the channel had been totally obscured, passing under roads, such as in locations where car-parking areas were built on top. Instances of this approach were seen at 100 Underwood Road [Ex C, photo 4] and at 65-67 Rochester Street [Ex C, photo 19]; under Parramatta Road [Ex C, photo 8]; under Burlington Road [Ex C, photos 16 and 17]. The Court was also shown sites where buildings were placed on top of the stormwater channel, examples being at 27 Burlington Road and 38 Burlington Road [Ex C, photos 16, 17 and 18]. Newly approved multi‑storey developments in the vicinity, which are being built over the stormwater channel, were shown at 29-35 Burlington Road and 30 The Crescent, Homebush [Ex C, photos 9, 10, 14 and 15]. At other locations, the Court was shown open floodway channels where adjoining sites had been developed, some with buildings immediately abutting. Examples are shown in Ex C, photos 20, 22, 24, 33, 34, 35, 36, 37-42, 45-46 and 49 at various properties. Finally, the Court was taken to a number of sites where new development had incorporated pillars and the like to allow the passage of flood waters, ensuring habitable rooms were above the risk [Ex C, photos 47, 48, 50 and 51].
15. The Court's exercise, as judicial valuer, is effectively to predict what the likely influences will be on the mind of the prospective purchaser when determining whether or not to purchase the Underwood Land. Part of that exercise is to predict what is most likely to be the response from consent authorities to a range of development scenarios that may be within contemplation by the prospective purchaser. This exercise is to objectively assess what consent authorities would be likely to decide, within the context of the applicable development controls such as the floodway management policies being considered in this section of the judgment. Merely comparing the analysis of the floodway policies carried out by one hydrologist against the analysis carried out by the other, confirms that there is a range of interpretations and conclusions possible. The Court cannot deny that such a diversity of opinion is possible and so, the hypothetical prospective purchaser would likely be confronted with such a range of opinion.
16. The Court may be of the opinion that, if presiding over a Class 1 application for the Underwood Land, it would exercise its discretion conservatively, most probably exercising its judgment in accordance with the precautionary principle, but that would be an irrelevant assessment for the purposes of valuation. Similarly, with respect to a number of the other sites that have been, or are being developed, to which the Court was taken, the Court might also not have granted consent in such close proximity to drainage channels intended to deal with flood waters. It is not for the Court, in its role as judicial valuer, to make an assessment of the merits of a particular proposal, such as a residential apartment development that might be within the contemplation of the Applicants, beyond whether or not such a proposal may have been considered feasible by a hypothetical prospective purchaser. The judicial valuer must form a number of assumptions, or make some predictions, as to what was most likely to have been probable scenarios at the relevant date of acquisition. Objectively, the Court has no doubt that a prospective purchaser would proceed with their purchase of the Underwood Land and would have had a reasonable, far from improbable, chance of securing development consent for higher density development on the land. The fact that the Court may itself have been moved to refuse to grant consent, had a Class 1 application for such development at the confluence of floodways been before it, is entirely irrelevant. Its task is essentially to predict the influences on the mind of the hypothetical prospective purchaser in determining what they would have been prepared to pay for the land on the acquisition date, in the light of the risks of which they are taken to have been informed.
17. Accordingly, the Court concludes as follows: the flooding potential of the Underwood Land would have been a significant factor influencing price. The hypothetical prospective purchaser would have been prepared to proceed to purchase the land for its development potential, but would only offer a price significantly discounted due to the flooding consideration. They would have assumed they would face design challenges, but that those challenges would be capable of being overcome, in similar ways to those viewed by the Court in the district. They would have assumed they would eventually obtain development consent, following a delayed process. The Court accepts that such a scenario would be likely.
18. So, in relation to the floodway considerations, Mr Lunney adopted a negative adjustment of 25%, whereas Mr Ellis adopted a less conservative negative adjustment of 15%. In the context of the circumstances explained above, the Court considers Mr Lunney's negative adjustment of 25% is too great whilst Mr Ellis' is too optimistic. Whilst acknowledging the seriousness of the peculiar confluence of floodways in the vicinity of the Underwood Land, the Court nevertheless perceives a strong message in the New South Wales Government policy documents relating to flood-prone land, that such land ought not to be sterilised if a responsible means of designing development around the issue is conceivable. Accordingly, with respect to flooding issues, I adopt as the appropriate discount to be applied to determine value a negative adjustment of 20%.

Floodway issues - implications of climate change

1. As a necessary adjunct to the Court's examination of the floodway issues, the Court, being cognizant of cl 6.3, relating to flood planning, in the SLEP 2012, had observed that in par (b) of cl 6.3(1), one objective of the clause is "to allow development on land that is compatible with the land's flood hazard, taking into account projected changes as a result of climate change" (emphasis added). The following extract from the transcript, setting out part of the hydrologists' cross-examination is pertinent to the Court's decision regarding the implications of the floodway affecting the Underwood Land. HIS HONOUR: Now, if I can ask for A01 to be put on the screen, which is the Strathfield LEP clause 6.3, page 37 of 90. Gentlemen, you will see that the objects of this clause are as follows, 'to minimise flood risk of life and property associated with the use of land, and to allow development on the land that is compatible with the land's flood hazard, taking into account projected changes as a result of climate change'. In giving your respective advice with respect to the floodway management, and predicting what may or may not happen with respect to the water flowing down that channel, do either of you consider it relevant to consider the aspects of the projected changes as a result of climate change, and what would that mean? WITNESS PHILLIPS: I'm happy to go first. So, in relation to climate change, the site is an elevation where I don't believe sea level rise is a consideration. The other aspect of climate change is a potential increase in rainfall intensities. There is some guidance available at this point in time; it's a little bit general, but it is in terms of potential 10% or 20%, maybe even a 30% increase in rainfall intensities, and that would be a consideration for the 100 year event. At this point in time, I am unaware of any guidance with regards to climate change and adjustments of the probable maximum precipitation, which in turn generates the PMF, so at this point in time the PMF is estimated in the way that it has always been estimated when considering climate change. WITNESS MARTENS: Thank you. Ordinarily, climate change would be considered. In this circumstance, perhaps disagree a little bit with Dr Phillips in the sense that sea level rise would probably affect, given the position of the channel with respect to the tidal limit, what's called the backwater effects. So if sea level were to be higher than the base level to which the site drains to would also be higher, it would reduce the gradient of the flow which would cause a minor elevation of the flood levels. So, in my experience in these sorts of circumstances, it may raise the flood level in the order of between 100 and maybe 250 millimetres, and I haven't modelled that, that is just an educated guess. The second factor, as Dr Phillips pointed out, is that ordinarily, if climate change is to be assessed in accordance with the LEP requirements, the other factor is rainfall intensity. There has been a lot of debate about how much rainfall is likely to increase in terms of intensity, but the ranges of 10%, 20% and perhaps 30% increase mentioned by Dr Phillips are the ones that would ordinarily be considered, they may add another, for example if the 20% rainfall intensity increase were utilised, perhaps another 100 millimetres to the flood levels. HIS HONOUR: In light of your answers, as hydrologists giving advice, should a hydrologist adopt a cautionary approach and take a more conservative estimate of what may or may not be the flow of water when examining what the impact of a floodway might be on, say, the subject land? Is there any relevance for the precautionary principle being applied to the interpretation? I assume both of you understand what the precautionary principle means? WITNESS PHILLIPS: Yes. HIS HONOUR: In that context, what is the position a hydrologist should adopt in giving advice to their client? WITNESS PHILLIPS: My advice would remain unchanged, in relation to statements that I have put into my evidence, that my recommendation to anybody considering developing on this site is that the appropriate approach would be to set the ground floor level above the PMF level, and I would expect that under those circumstances any potential climate change impacts would be less than the resulting flood levels, or lower than the PMF level, and accordingly, if development was set above the PMF level, then that is taking into consideration all possible flooding regimes through the property. WITNESS MARTENS: So my response to that is that I would advise a developer at a site that if the words "climate change to be considered" are in the instrument, then that is something they would need to do. ….If those words were in the instrument, and they are not in all instruments but in this case they appear to be, then I would advise the developer that that needs to be considered. I would advise the developer that the council may not necessarily have any standards in relation to what level of climate change impacts need to be considered. So it would be a position where you take the first step and council would respond to that position. I agree with Dr Phillips that an appropriate response for the building would be to have the floor levels at the PMF but I would also advise the developer that the other factors that come out of considering climate change are that the risks, in terms of hazard and floodway conditions to the access road, Underwood Road in particular, would be potentially made more hazardous and that would be something that the consent authority would consider. HIS HONOUR: In the context of your responses being an agreement that PMF is the appropriate yardstick by which one designs a response to the possible floodway, again adopting a cautionary approach, on the site, the subject site, is it your expectation that it would be better to, what one might describe in the former times as over engineer as distinct from adopting a precautionary approach and increasing the level of protection, defensiveness against the highest levels of floods that might be predictable? WITNESS MARTENS: Well I think the adoption of a PMF as a design floor level … would be over-engineering of a site in response to the hazard that the site presents HIS HONOUR: All right. And Dr Phillips? WITNESS PHILLIPS: I think, so in relation to the probable maximum flood level because of the relationship on this particular site between the probable maximum flood and the one hundred year flood level, that is it's within a reasonable range above that flood-prone land it's my view that it is entirely feasible to adopt that for development of property like this. Involved with properties on flood-prone land elsewhere in Sydney where the PMF is 4 metres higher than the one hundred year flood level and under those circumstances sorry. Under those circumstances it is less feasible to base the ground floor level 5 metres up in the air. But in this particular instance the PMF level in relation to the surface level within the property is of the order of a metre, possibly to 1.2 metres, and in that particular instance I think that form of development is amenable to adopting the PMF for the ground floor level.
2. RMS in its closing submissions at par 3.11(f) submitted that this evidence showed that: "it is agreed that climate change would exacerbate the flooding risks associated with the Acquired Land".
3. Considering the responses to the Court's questions, the Court has concluded that: 1. hydrologists would advise a hypothetical prospective purchaser that when considering the potential floodway impact on the Underwood Land that the implications of climate change should include projected increases in rainfall intensity within a range of 10% to 30%; 2. that with respect to such climate change implications, it is appropriate to adopt a precautionary approach; 3. that in the context of a potential redevelopment of the Underwood Land that ground floor levels should be constructed above the PMF level; 4. that on current estimations, extra floodwaters that might result from increased rainfall intensity as a consequence of climate change would give rise to flood levels below the PMF level in the vicinity of the land; and 5. it would remain feasible for development of the land to proceed providing the necessary cautionary engineering designs are adopted taking into account the need to be above the PMF level.
4. On the basis of the foregoing anticipated advice that hypothetical hydrologists would give to a hypothetical prospective purchaser, such advice being responsible and within the scope of advice that they would be professionally obliged to give, the Court concluded that the prospective purchaser would accept such advice. Taking these considerations into account, they would accept that, after proposing an appropriately designed compatible development, using the words in cl 6.3(1)(b), consent authorities would "allow development on [the] land that is compatible with the land's flood hazard". Accordingly, a hypothetical prospective purchaser would make an offer to purchase, but adjust the purchase price downwards to reflect the required precautionary approach described above.
5. With reference to the adjustment discussed earlier at [214], being a 20% negative adjustment for floodway effect which the Court considers appropriate, that adjustment would embrace the downward adjustment discussed in the preceding paragraph. In short, with the hypothetical prospective purchaser being cognizant of the likelihood that the final design of any prospective development of the Underwood Land would reflect an application of the precautionary approach as a consequence of anticipated climate change, the appropriateness of an adjustment of that scale is reinforced. Easements - implications
6. Earlier in [13] above the Court described the three easements in favour of Sydney Water which burden the Underwood Land. Then at [65]-[71] the Court summarised the arguments submitted by the Applicants and at [93]-[94] touched on RMS' submissions, after fully considering its contentions. In analysing the issues regarding the three easements the Court was assisted by a joint report (Ex 1 - H01) to which five experts contributed: Dr Phillips, Mr Hodges and Mr Donaldson for the Applicants and Dr Martens and Mr McKenzie for RMS. Mr Hodges subsequently clarified his opinion in a supplementary statement (Ex 1 - H02).
7. In order to assess the experts' evidence, the Court found it necessary to consider their opinions within the context of nine Sydney Water guideline/policy documents, being tendered documents Ex 1 B01 - B09, which were found to be enlightening. When analysed, these documents demonstrated that Sydney Water works within a comprehensive policy regime which has necessitated the release of guideline documents to assist those dealing with or impacting upon the water, drainage and sewerage management assets of Sydney Water. Without elaborating on the detail, which is unnecessary for the purposes of this judgment, the titles alone convey the reality that in a rapidly expanding globally-significant city, urban consolidation and commensurate development pressure is increasingly requiring agencies like Sydney Water to accommodate an ever evolving and expanding metropolis. Drainage assets which would in earlier generations have remained unchanged for decades are now required to accommodate an increasing need to make allowance for the multi-use of urban space in addition to coping with increased demands flowing from an increasing population density.
8. The Sydney Water documents the Court refers to are: B01 is Sydney Water's "Guidelines - Easements"; B02 - "Building bridges over Sydney Water's open stormwater channels"; and B03 - "Policy - Building bridges over Sydney Water's open stormwater channels". These two documents together confirm that Sydney Water sees itself able to "support urban development" whilst ensuring "bridges don't interfere with us operating and maintaining the open stormwater channel". B04, which the Court referred to at [68] above, is titled "Asset adjustment and protection manual. Managing new development process". This document reinforces Sydney Water's accommodating approach to adjusting its assets: Developing new land and consolidating urban space is a major part of the continued economic growth of the Sydney region. As part of this, the 'Government', either federal, state or local, are planning new transport infrastructure to move population and goods around the region. Additionally new home sites are being built to accommodate the future needs of a growing city. Depending on the project's needs, Sydney Water's systems may be required to be adjusted, amplified or protected to so the services used by our customers are maintained. This manual provides comprehensive information about how Sydney Water's assets can be adjusted and or protected to meet your project needs.
9. B05 is a policy document titled "Policy - Building over or adjacent to Sydney Water stormwater assets" which is aimed at "owners and developers of land who want to build over or adjacent to a Sydney Water stormwater asset". B06 is similarly titled "Building over or adjacent to Sydney Water stormwater assets". B07 is titled "Technical guidelines - Building over and adjacent to pipe assets". In this document the developer is assured that "These guidelines are to help you and your professional advisors including architects, engineers and designers to better plan and construct works that are near to our assets". B08 is titled "Land Development Guide" in which comprehensive guidance to developers including cross-referencing to other complimentary Sydney Water guides. B09 is "Managing new development process - Task Summary" in which the chapeau to the document states: "To manage new development, you, your service provider or Sydney Water may need to extend, adjust, amplify or protect Sydney Water systems, depending on your needs". The Court has concluded, after reviewing these documents, that there is a well-established process which enables urban development to be built adjacent to or over Sydney Water assets providing the authority is able to continue to provide ongoing local drainage and broader flood mitigation services.
10. Consistent with the Court's conclusions regarding the floodway issues, with respect to the three easements traversing the Underwood Land, the Court finds itself largely in agreement with the Applicants' submissions. The Court accepts that the various legal obstacles associated with these easements would be capable, with perseverance, of being overcome. The Court's expectation is that Sydney Water would reach the opinion that its legal rights in the easements would not be compromised in that its assets, the pipes, channel and engineering works protected by the easements, would be capable of being protected and continue to be able to serve the purposes for which they have been constructed. A resolution would be reached with Sydney Water by which the Applicants (or a hypothetical prospective purchaser) would secure an agreement to the mutual satisfaction of themselves and the servicing authorities.
11. The Court accepts the evidence of the Applicants' own witness, Mr Hodges, that there would be "considerable risk and cost burden" in resolving the easements issues but that nevertheless an outcome would be reached that would not curtail development options. Assisted by the view of a number of sites whereat drainage channels had either remained extant or had been engineered in such a way that new development was able to proceed, either on top of or adjacent to the channel, the Court is satisfied that options would be available. Between the three schematic high-rise tower options, described earlier at [18] and marked MFI 1, Mr Hodges was most comfortable with Option 1B, but believed both Options 1A and 2 were still capable of approval.
12. The Court's expectation is that an agreement with Sydney Water would be reached with respect to each easement but that such agreement would be at considerable cost, most likely due to the necessity to retain professional assistance from lawyers, engineers and surveyors. If as an outcome of necessary negotiations it was necessary that the course of any of the easements were to change, quite likely resulting in physical works to reflect the altered circumstances of the easements, the process bringing about those changes and any physical works that would follow would be entirely a cost to the Applicants (or rather a hypothetical prospective purchaser).
13. Further to the costs associated with the resolution of the easement issues, both costs leading to and post-resolution, such negotiations would, most probably, be protracted and so cause considerable delays to be suffered pending final agreement. There can be no doubt that the resolution of the easement issues would be addressed with great care by all involved given the accepted seriousness of the floodway issues which, in part, the drainage channels are designed to address. The seriousness of this issue at the Underwood Land is particularly acute, given that, on the hydrologists' evidence, it is located at the confluence of a number of floodway channels. In these circumstances, Sydney Water could be expected to be responsible and take great care for public safety and liability reasons. As a consequence there would be considerable increase in the opportunity-costs associated with the potential redevelopment of the Underwood Land, due to the commensurate delays associated with resolving the easement issues.
14. In the context of the foregoing, the Court finds that the following concluding statement in the joint report on easements by Mr Hodges is most likely correct, comprising responsible advice that could be expected to be conveyed to the hypothetical prospective purchaser and, secondly, encapsulating a realistic assessment that, providing the necessary time and money is allocated, that there would be agreed engineering solutions identified. I would advise a purchaser that the site is significantly constrained by a number of sewer and stormwater easements and that these would present a considerable risk and cost burden in developing the site. I would advise that relocating the sewer lines and easements would take considerable time to negotiate with Sydney Water and that there are engineering solutions to relocating, upgrading and protecting the sewer services. Access to sewer within a deviated Easement A can be provided and that amendments to Easement A based on the easement only containing a sewer line since its creation would indicate that there is no known reason that Sydney Water would not consider an amendment although not guaranteed. Access to Sewer in Easement C would be no different to the Approved building in Attachment E1 (i.e. limited to either side of any structure) I would advise the purchaser that reconstructing the stormwater channel would come at considerable cost and time risk to the project. An alternative to maintain Easement B and the existing channel would be a more favourable outcome to Sydney Water (i.e. No construction over or under).
15. It follows that the more pessimistic opinions expressed by both Dr Martens and Mr McKenzie, on behalf of RMS, are not preferred by the Court. Although a hypothetical development option that did not build over the open channel would have been the most likely option preferred by Sydney Water, accepting that Mr McKenzie made the enquiries of Sydney Water which he describes in his evidence, the Court does not believe the statement that "Sydney Water would not permit buildings affecting the stormwater channel particularly building over the channel" advances the issue. The whole point of the policy regime set up by Sydney Water is to arrive at engineered outcomes whereby its assets are not compromised or adversely "affected", the clear implication being that if the stormwater channel is not compromised by a development proposal then Sydney Water will not decline to grant permission. Dr Martens' answer to questions in cross-examination, mentioned at [64] above, which was thereafter stressed by the Applicants' counsel (see pars 67 and 68 in the Applicants' closing submissions) is telling: that securing Sydney Water's cooperation, had development consent for the Applicants' prospective schematic residential flat building development been obtained, was "not unachievable".
16. Accordingly, the Court, as judicial valuer, believes the costs and delays associated with overcoming the issues with respect to the three easements would be factors that would weigh on the mind of a hypothetical prospective purchaser. That prospective purchaser would seek professional advice from a range of advisers in different disciplines and would arrive at a conclusion that the easements could be accommodated with the adoption of an appropriate engineered resolution in a prospective redevelopment of the Underwood Land. The costs of negotiation, settlement and then addressing, legally and physically, the easement issues would be accepted as being costly and associated with protracted delays. The Court does not believe a prospective purchaser would believe that the easement issues would be insurmountable, however is of the view that the purchaser would seek a discount in the purchase price of the Underwood Land to account for both the extra costs and the extra delays.
17. In reaching my conclusion with respect to the easement issues, considering the discussion summarised earlier at [139]-[141] as to what evidence might be taken into account by a hypothetical purchaser whilst determining what offer they might make for the Underwood Land, the Court is of the view that with respect to easements, apart from legal advice, and the necessary involvement of surveyors identifying the "lie of the easements" in the context of titles, it is likely that just one engineering firm would be consulted to determine the feasibility of physically addressing the easement issues "on the ground". Despite Dr Martens' more pessimistic view with respect to the likelihood of obtaining agreement with Sydney Water, the Court is of the view that had Mr Hodges' advice been communicated to the prospective purchaser, it would had been accepted, albeit cautiously acknowledging the risk and cost. This situation is in contradistinction to that examined with respect to floodway issues, where the hydrologists in this case were so much in disagreement, that it is reasonable to assume the hypothetical purchaser would adopt a very cautious approach and consult at least two experts in that field, before, in the Court's view, deciding to take the risk and offer to purchase the land, offering a commensurately lower purchase price.
18. As for the appropriate adjustment in the estimated market value to be made in response to this easement issue, there would be no justification to determine a separate negative adjustment to the estimated derived value of the Underwood Land, as the adjustment for the flooding issues (at [215]) would embrace the necessity to design remedies, which would be in the form of easement modifications and, conceivable, drainage channel realignment.

Market value - determination

1. On the basis of the foregoing analysis of the threshold issues in contention, the Court has reached the following conclusions in order to arrive at the market value of the Underwood Land.
2. An analysis of R4 Zone comparative sales is not necessary as the purported relevance of those sales had been dependent upon the Court deciding that the prospective purchaser could rely upon advice - on the basis of the Draft PRUTS - that the R3 zoning of the Underwood Land would be upzoned to R4 by the first quarter of 2019. With the Court having found that the Draft PRUTS is part of the public purpose and so to be disregarded, the concept of upzoning to R4 within a material timeframe is to be dismissed. Having rejected those submissions, whilst acknowledging that at some uncertain time in the future it could be predicted that there would be rezoning to R4 (simply because of the population and urban consolidation pressure in Greater Sydney) that upzoning would be long term and outside any timeframe relevant to a valuation as at December 2015.
3. With the removal of the R4 property sales from consideration, the approach to the valuation of the Underwood Land preferred by the Applicants' valuer, Mr Ellis, the 'top-down' approach, is considered inappropriate. As the Applicants submitted, see above at [118], the top-down approach may be used in circumstances where land is highly likely to be rezoned in the short term. With that scenario dismissed by the Court, no reliance should be placed on the top-down approach.
4. Further, the consideration of the various alternative high density residential tower developments submitted by the Applicants as conceptual approaches to the redevelopment of the Underwood Land, had the R4 zoning come to fruition (see above at [18]-[19]) are not within contemplation. However, the models (which were marked MF1) were nevertheless useful, for at least demonstrating engineering or design approaches by which the Sydney Water easements might conceptually be dealt with in any redevelopment of the Underwood Land.
5. As the direct comparison method of valuation is considered appropriate, it is then necessary to focus on the R3 property sales, adjusting each sale to arrive at relativity. A consolidated table of the experts' R3 sales is set out at Annexure B to this judgment.
6. The Court has determined that it is more probable that a prospective purchaser would endeavour to develop the Underwood Land to its maximum extent as a combined whole, within the limiting constraints of the R3 Zone provisions. With the lots amalgamated as one development site, the R3 Zone requirement for a minimum lot size of 1,000 m2 before a residential flat building may be approved (see [40] above) would be thereby satisfied. Given the relative uniqueness of two properties adjoining each other, as was apparent from Mr Lunney's reliance on his comparative sales which were all smaller single blocks in Ismay Avenue, the Court has concluded that Mr Lunney's opinion that the highest and best use of the Underwood Land is two individual dwellings rather than as an amalgamated development site would not have been the preferred approach in the mind of a 'willing' but not anxious purchaser. The Court therefore proceeds on the basis of treating the Underwood Land as a consolidated development site. Accordingly, the Court has adopted Mr Ellis' positive 10% adjustment, reflecting the greater potential of an amalgamated Underwood Land.
7. The Court having concluded that the prospective purchaser would consider, on the advice they received from relevant experts, that the Underwood Land could be developed by putting in place appropriate engineered design approaches to the floodway issues and obtain from Sydney Water consent to the modification of the easements, including potentially building over the drainage channel, the Court has determined that the estimated value derived from the comparative sales needs to reflect the difficulty, delays and costs of addressing the floodway/easement issues. As explained earlier at [232], addressing the floodway issues and modifying the easements are essentially the same issue as far as adjustments are concerned. The Court has adopted a mid-way point between Mr Ellis' 15% negative adjustment and Mr Lunney's more pessimistic 25% negative adjustment. The Court considers the NSW Flood Prone Land Policy sends so many signals that flood-prone land should not be sterilised (see earlier at [206]) and the Sydney Water guidelines described earlier at [222]-[223] demonstrate such a clear pathway to obtaining cooperative approval, that Mr Lunney's pessimism is unwarranted. However, Mr Ellis' more optimistic approach does not sufficiently reflect the gravity and difficulty of responsibly addressing (no doubt at considerable cost and delay) the confluence of the floodways in the vicinity of the Underwood Land, nor the relevant accentuation of the flooding issues due to conceivably 30% more rainfall in the Greater Sydney region by reason of climate change (see above at [217]). Accordingly, the mid-point negative adjustment of 20% is appropriate.
8. The Court accepts the Applicants' observations in their closing submissions at par 111 that an analysis of the R3 Zoned comparable sales as identified by Mr Ellis reveals a somewhat inconsistent outcome between the adjusted figures. Counsel for the Applicants submitted that with such inconsistency the analysis is dangerous to rely upon. Counsel for the Applicants went further to observe that neither valuer had found comparable sales within the R3 Zone that was located within the Draft PRUTS area and was a lot size in excess of the minimum 1,000 m2 required. It was submitted that both elements were needed in order to have reliable comparable sales. Although the effect of the Draft PRUTS on value is to be disregarded, the Court agrees that it nevertheless provides useful delineation of the relevant geographical area from which comparable sales should be sourced, as it essentially identifies relevant proximity. These concerns regarding the more remote properties put forward as comparable sales are indeed real.
9. With respect to the comparable size issue, the Court accepts that it is desirable, in order to avoid risky adjustments, to identify comparable sales with lot sizes as near as possible to the size of the subject, being 1,705 m2. It is central to the Court's decision that the highest and best development potential of the Underwood Land is most likely to be achievable with the two lots consolidated into one development site. The Applicants criticised the RMS' reliance upon Mr Lunney's four comparable sales in Ismay Avenue, pointing out that they were all too small to be comparable. However, just as the Court has looked at the likelihood of the two lots within the Underwood Land being developed as one, so it is that it is perfectly plausible for the properties along Ismay Avenue to be similarly the target of aggregation. Indeed, tendered into evidence by the Applicants themselves was Ex D, an LJ Hooker Real Estate leaflet titled 'Homebush. Three Large Development Opportunities'. This leaflet was promoting the availability of three aggregations of lots in Ismay Avenue, with words referring to a "rare and exciting development opportunity", "Three separate, raw sites, all with motivated owners", "Ideal for investors or developers alike" and "Don't miss this opportunity to secure your part of this ever growing Homebush market".
10. This undated Ex D emerged in the course of the hearing, being some two years after the acquisition date of the Underwood Land. The three aggregations referred to in the Ex D leaflet comprised first, six lots amounting to 3,935 m2; secondly, seven lots amounting to 3,668.5 m2; and thirdly, five lots amounting to 2,807.5 m2, being a site directly adjacent to properties that had been, two years earlier, the Underwood Land. The 'take away' message the Court gains from the Ex D LJ Hooker leaflet, was that the comparative sales evidence that Mr Lunney extracted from the four sales is Ismay Avenue, two before acquisition and two after, is far from being irrelevant. On the contrary, even some two years before the Ex D leaflet emerged there were most probably prospective purchasers in the marketplace, looking to the middle- to long-term potential of a probable upzoning. Accordingly, although the adjustments to Mr Lunney's sales evidence are of the order of 20%, they are nevertheless instructive.
11. The Court has decided that the Applicants' criticism of Mr Lunney (see earlier at [130]), for not making a more positive adjustment for land size when adjusting the Ismay Avenue comparative sales, is fair (although it is to be noted that Mr Ellis matched Mr Lunney's 20% negative adjustment, so the criticism should apply equally to him). Both valuers correctly observed that smaller lots tend to achieve higher per-square-metre sales than larger lots, stating in footnote 2 (at p 4) of their Supplementary Joint Expert Report of Valuation Experts: "In relation to land size, we note that, despite the benefits of amalgamation and economies of scale, it is our general experience and the available market evidence generally indicates that the value of a development site (on either a $/sqm site area or a $/sqm potential GFA basis) decreases as the size and scale of the development increases". Mr Ellis prepared a scatter plot which was Annexure 2 to that Supplementary Report which demonstrates this general market phenomenon. However the point is soundly made (in par 114 of the Applicants' closing submissions), that an allowance for the advantage of the Underwood Land over the Ismay Avenue properties was warranted "on account of the potential enjoyed by the Subject Land in terms of its immediate compliance with the minimum lot size for residential flat building development in the R3 Zone". The Court considers this factor is a real benefit of the Underwood Land, so rather than accept the valuers' negative 20% adjustment, the Court considers that, based on the Ismay Avenue sales, only a negative 10% adjustment is justified given the special circumstances of this case.
12. In the context of considering the effect of the aggregation of lots, the Applicants submitted that the Court should take the lead from the sales of three properties in Smallwood Avenue (see earlier at [131]), the sales of which were set out at p 21 of the Supplementary Joint Expert Report of Valuation Experts and the focus of extrapolated figures prepared by Mr Ellis which were set out in a document marked only for identification MFI-2. It was contended for the Applicants that these figures constituted direct market evidence which could be used and applied to a hypothetical aggregation of Ismay Avenue properties in order to achieve the same development potential as the Underwood Land, ie a larger site ripe for development for residential apartments. It was submitted that on a cursory analysis the computation would lead to a market value of $7,160,000. The Court has no doubt that a hypothetical aggregation would lead to higher market values for the Ismay Avenue properties, despite Mr Lunney being troubled by such a proposition with respect to the Smallwood Avenue comparable sales during a vigorous cross-examination on the point (T432-438). Mr Lunney would not agree that the significant increases in the successive sales of Smallwood Avenue properties was due to successive owners taking advantage of the momentum of adjoining properties fetching premium prices from a developer keen to aggregate the sites. Despite Mr Lunney's efforts to avoid accepting such a proposition and although he could honestly say that he didn't know the detail of the sale arrangements which might provide an explanation for the escalating sale prices, the Court does consider that the prospect of aggregation would materially affect market value, especially if the zoning and the resultant opportunity meant that the properties became ripe for redevelopment.
13. The question for the Court is how to extrapolate those realistic observations as to what occurred in Smallwood Avenue, apply the escalated values to the sales of the Ismay Avenue properties whilst hypothetically assuming that an aggregation of lots was feasible or achievable, and then extend it to the Underwood Land, which was ready and able to be developed (within the constraints of the R3 Zone limits). This exercise would all be, of course, within the context of the Court having already decided that the floodway and easement issues could, eventually, be satisfactorily addressed. The Court considers that this scenario embraces too many uncertainties, too many hypothetical circumstances overlaid on hypothetical circumstances. However, the Court is prepared to accept that the large size of the Underwood Land offered a premium opportunity to be developed within the constraints of the R3 Zone. The Court is prepared to accept adjustments to the Ismay Avenue sales of which it does have evidence, albeit unsatisfactory for the reasons already explained, which reflect the benefit of the available aggregation of the two lots within the Underwood Land. The Court is prepared to accept that there are enough indicators of an area that would inevitably be upzoned and redeveloped, thereby creating special circumstances that would not justify the usual negative 'large size' adjustment of the Ismay Avenue sales. The fact that the valuers struggled to find comparable sales of properties of a comparative size within the Draft PRUTS area highlighted that the size of the Underwood Land is a somewhat unique attribute in the area. The Court does not consider that the larger size of the Underwood Land is a disadvantage which would warrant the 20% negative adjustment, despite both valuers explaining that would be the normal adjustment. The Court does not accept that such an adjustment is warranted in the circumstances of this case.
14. In arriving at its market value for the Underwood Land, the Court has chosen not to consider any of the R4 properties that were placed before it. Secondly, although it has considered all of the R3 properties, it considers that those outside the area of the Draft PRUTS have too many influencing factors on their values, requiring too many adjustments, for them to be worth using to determine the market value of the Underwood Land. Thirdly, the Court does consider the Ismay Avenue properties to be comparable sales which assist, albeit it accepts that all four properties are significantly smaller. Fourthly, due to the opportunity for redevelopment which an aggregation of the two lots on the Underwood Land offers, which is clearly a unique opportunity given the scarcity of comparative sites of relevantly similar size as at the acquisition date, the Court will not apply the usual discount for large size, instead applying a lesser discount. The Court appreciates that it has already accepted the valuers' assessed positive 10% adjustment for amalgamation, but sees no reason to accept that the interplay between amalgamation and land size should result in a negative 10%. So the positive 10% adjustment for amalgamation effectively cancels out the negative 10% adjustment for land size, resulting in a neutral adjustment in relation to those two factors.
15. The Court's adjusted figures for the four Ismay Avenue properties are at Annexure C to this judgment. Acting in accordance with the long standing principle that as judicial valuer the Court should determine compensation in favour of a more liberal estimate (see above at [47]), the Court takes the highest adjusted figure, that which was extrapolated from the 60 Ismay Avenue sale of $2520/m2, multiplied by the 1,705.3 m2 of the Underwood Land, and rounds it up to $4,300,000 for the aggregated Underwood Land.

The disturbance claim

1. There are four component categories to the Applicants' disturbance claim in this case: the first two in relation to which the parties have reached an agreed position; the other two still in contention. The categories claimed are as follows. 1. The first two categories relate to disturbance claim items under s 59(1)(a) and (b), being legal costs and valuation fees. 2. The third relates to a claim under s 59(1)(f) for financial costs said to be reasonably incurred arising out of a development application, DA 2013/006, made by the Applicants. 3. The fourth claim seeks compensation for the stamp duty estimated to be likely to be payable on the acquisition of a replacement property of equivalent value to the Underwood Land, under either s 59(1)(d) or s 59(1)(f).
2. Confusingly, the Applicants' submissions, both in their opening submissions at par 51 and in their closing submissions at par 120, claim stamp duty pursuant to s 59(1)(c), in addition to relying upon s 59(1)(f), but not pursuant to s 59(1)(d) which is the usual pathway by which stamp duty claims are pressed. The Court has had to proceed on the assumption that the reference to s 59(1)(c) was a typographical error, albeit a repeated one.
3. The Applicants' claim for stamp duty came late in the proceedings. In the "Amended Applicants' Schedule of Losses Attributable to Disturbance under s 59(a)-(f) of the Just Terms Act", dated 17 May 2016, there was no claim for stamp duty. With the filing of their initial Points of Claim on 12 October 2017, a claim for stamp duty first arose (in par 26) seeking $1,180,990. The specific pathway was not specified, rather there was a global reference to all the paragraphs in s 59. In the Revised Points of Claim dated 24 October 2017 in par 27, it was stated that the Applicants' disturbance claim for stamp duty is made under s 59(1)(d), whilst expanding on their particulars in par 30, they confirm their claim is brought under s 59(1)(f). Finally, in the Applicants' Further Revised Points of Claim, dated 27 October 2017, the Applicants' position was finally clarified with expanded and corrected pleadings. Paragraphs 28, 29 and 31 are material. It is to be noted in this final iteration of their Points of Claim, that the Applicants press their claim for stamp duty as a component of disturbance under s 59(1)(d) and s 59(1)(f), and not pursuant to s 59(1)(c) as pressed in their submissions. Accordingly, the Applicants' claim is assessed in the judgment pursuant to (d) and (f) in s 59(1). 28. The applicants claim for the stamp duty that will have to do be paid in order to purchase an equivalent property to that acquired. But for the acquisition of the subject land they would have held onto the ownership of the land and developed it in due course for high density residential flat purposes. The applicants disturbance claim for stamp duty under s 59(1)(d) is $1,189,990. 29. The applicants claim stamp duty on the basis that they were landbanking the acquired land in anticipation of it being rezoned R4 High Density and now are relocating or are required to re-invest in other land with a high density residential potential. … 31. The applicants claim for the stamp duty that will have to be paid in order to purchase an equivalent property to that acquired. But for the acquisition of the subject land they would have maintained ownership of the land and sold it as an en globo parcel for a profit to be developed by others for high density residential flat purposes the applicants disturbance claim for stamp duty $1,189,990 is made under s 59(1)(f).

Disturbance claim - agreed items under s 59(1)(a), (b) and (f)

1. The Court was advised that with respect to those elements of the disturbance claim under the allowable heads pursuant to s 59(1)(a)-(b), there was agreement to the extent of $67,110.27, which the Court was requested to award to the Applicants as part of its determination (RMS' closing submissions, par 5.1), specifically pursuant to s 59(1)(a), (b) and (f). Considering the parties' submissions, determining that the identified costs have been reasonably incurred, the Court sees no reason to upset this agreed sum and so, accordingly, finds that it should be awarded to the Applicants.
2. Agreement was not reached with two aspects of the Applicants' disturbance claim. First, a claim for stamp duty pursuant to s 59(1)(d) and/or (f), by which $1,189,990 is sought (assuming the Court adopted the market value for the Underwood Land pressed by the Applicants). It follows that if the Court adopted a lesser market value, then the stamp duty, if awarded, would be commensurately less on a pro rata basis. Secondly, costs incurred in relation to DA 2013/006, being in relation to a new dwelling proposed for 92 Underwood Road, also supposedly pursuant to s 59(1)(f), by which $33,584.68 is sought. The Applicants submitted that these outstanding disturbance claims were or will be reasonably incurred, relying on McDonald v Roads & Traffic Authority of New South Wales (Applicants' closing submissions, par 118).

Rocco Fraietta v Roads and Maritime Services - useful guidance

1. In the context of the Court determining that the Applicants can legitimately characterise their active use of the Underwood Land as land banking, the decision of Robson J in Rocco Fraietta v Roads and Maritime Services [2017] NSWLEC 11 (Fraietta) provides an instructive analysis of a number of authorities regarding s 59(1). Fraietta is a useful example of a case wherein a non-passive investor was able to demonstrate "actual use" of a property which the Court accepted as being 'land banking'. I consider a number of passages in Fraietta useful in clarifying the approach I have adopted in this case.
2. Confirming that the term 'financial costs' should be interpreted broadly, the Court in Fraietta at [172] observed: 172. As outlined in McDonald v Roads and Traffic Authority of New South Wales (2009) 169 LGERA 352; [2009] NSWLEC 105 at [110] (which was upheld on appeal), the term 'financial costs' should be interpreted broadly. In the present case, each of the relocation costs involve actual costs that would be incurred by the applicant, excepting the potential future costs relating to the relocation of plant and equipment, which the applicant may determine to undertake himself. However, given that the term should be interpreted broadly, and that he may indeed pay others to undertake the work, I therefore find that the relocation costs are 'financial costs' for the purposes of s 59(1)(f) of the Just Terms Act.
3. The provision in s 59(1)(f) required the Court to consider whether the costs have been reasonably incurred or, pertinent to this case, whether (prospectively) such costs might reasonably be incurred. The Applicants have obviously already incurred the development application costs which led to them obtaining DA 2013/006. With respect to stamp duty on the acquisition of a replacement property to occur prospectively, that gives rise to costs that might reasonably be incurred. In Fraietta at [173] the following conclusion was reached: 173. Given the applicant's intention to purchase another property as a replacement to the acquired property, I consider that the relocation costs might reasonably be incurred by the applicant. Whilst the future surveying costs may not eventuate, it is sufficient that something 'might' occur, rather than it being 'likely' that it occurs. As such, I find that each of the relocation costs might be incurred, and that if they were incurred, this would be reasonable pursuant to s 59(1)(f) of the Just Terms Act.
4. The next issue required to be addressed under s 59(1)(f) is whether the financial costs being claimed relate "to the actual use of the land". In this regard, the Court's decision is that the Applicants' enterprise on the Underwood Land, impacted upon (or stymied by) the acquisition, is strategic 'land banking' of the property for future major redevelopment, whilst pursuing whatever highest and best opportunities for which they could gain approval. Again, Fraietta at [174]-[176] is instructive 174. Pursuant to s 59(1)(f) of the Just Terms Act, an applicant is entitled to seek financial costs which are either reasonably incurred or might reasonably be incurred, that both arise from the actual use of the land, and were incurred as a direct and natural consequence of the acquisition. 175. The principles relating to 'actual use' were recently summarised in Speter, where this Court stated at [91]: This provision has been the subject of much judicial discourse, from which the following principles may be distilled: … (2) the actual use must exist in fact at the time of the acquisition, and cannot be either 'a future use or potential use': Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259 at [26]-[27] (Brownie AJA) ('Fitzpatrick'), Kirela at [12] (Cowdroy J); (3) actual use can include 'land banking' for future development of that land (Fitzpatrick at [31] (Brownie AJA)) and construction that is being conducted on the land at the date of acquisition (Al Amanah College Inc v Minister for Education and Training (No 2) [2011] NSWLEC 254 at [44] (Biscoe J)); (4) an applicant must be more than 'a passive investor': Fitzpatrick at [34] (Brownie AJA); and (5) holding land as an 'investment rather than as trading stock' is not an actual use of the land: Cannavo v Roads and Traffic Authority of New South Wales [2004] NSWLEC 570 [sic] at [46] (Talbot J).' 176. It has recently been determined, both in Speter at [94] and by Preston CJ of LEC in G. Suonaf Holdings Pty Ltd v Roads and Maritime Services [2016] NSWLEC 116 at [61], that properties held as tenanted investments did not involve the actual use of those properties.
5. Reflecting on those distilled principles, in the case of the Applicants' use of the Underwood Land at the time of acquisition, the Court is satisfied that their use of the land for land banking was current and active as at the acquisition date. They were not passive investors, as the evidence was that they commenced efforts to add value to the land even prior to their original purchase by seeking to secure rights over additional easements or reserved land. The evidence shows they determinedly followed that course, with perseverance, for some years. They also actively pursued development opportunities, seeking the highest and best use of the land, but they repeatedly had development applications refused (see [274] below), not for want of trying the Court might observe. They quite obviously, in the Court's opinion, never wavered from their intention to develop the Underwood Land to its highest potential and their conduct throughout was preparatory to that end. Effectively, their use of the Underwood Land was akin to 'trading stock', to use the term referenced by Talbot J in Sebastian Cannavo and Alfia Jennifer Busa v Roads and Traffic Authority of New South Wales [2004] NSWLEC 570 (Cannavo).
6. The summary at [177]-[180] in Fraietta of other decisions is additionally helpful: 177. Further to the principles above, it is also instructive to consider a number of authorities with similar factual scenarios in more depth. In Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259, where the Court of Appeal considered whether land held by a company for a proposed subdivision was an 'actual use', Brownie AJA stated: [23] S59(f) of the Just Terms Act used a different expression: 'actual use'. [The primary judge] found that the business of the respondent was 'the development of land by subdivision'; that it held the acquired land 'for the purpose of development by way of residential subdivision'; that the 'actual use for which it held the acquired land [was] for the purpose of development by way of subdivision'; that by reason of the acquisition, the respondent 'lost its developable land', and replaced that land by 'acquiring other developable land'; and that but for the acquisition the respondent could have developed the acquired land. [24] these findings of fact mean that 'the use' to which the respondent put the land for its purposes, prior to the acquisition, was use for the purpose of residential subdivision. The acquired land formed part of what was called the respondent's 'land bank', being land acquired and held for the purpose, when the time was ripe, of being subdivided and resold for profit. 178. In Kirela, Cowdroy J considered whether the applicant was engaged in the 'actual use' of a block of land which was intended to be used either for overflow parking, or to increase the FSR of a development planned on an adjacent block of land. His Honour found at [12] that the land 'was not being used for any purpose but rather was awaiting development for some future purpose' at the date of acquisition, and continued at [19]: The Court finds that the acquired land was not used in the sense referred to in Fitzpatrick Investments Pty Ltd v Blacktown City Council (No 2). There is no evidence of actual use of the land as a land bank. The proposal for its use remained only potential therefore the applicant is not entitled to recover compensation for stamp duty pursuant to s 59(f) of the Act. 179. In Al Amanah College Inc v Minister for Education and Training (No 2) [2011] NSWLEC 254 ('Al Amanah'), Biscoe J considered whether the applicant was 'actually using' land on which a school was being constructed at the date the acquisition was announced. His Honour stated at [37]: …There is a distinction between land simply held in reserve for some future activity and land in respect of which work is being done - which does not have to be physical work on the land - preparatory to an intended use. The latter is, but the former may not be, an actual use of the land…The present case falls into the latter category. By the date of announcement of the acquisition on 20 July 2009, the applicant had caused work to be done preparatory to the intended use of the land as a school, for which it had incurred costs. The work included physical work on the land. 180. His Honour continued at [38] and [41] to outline a number of steps that the applicant had taken, including obtaining development consent, employing teachers and enrolling over 100 students. His Honour also noted that work was about to commence on the site. The respondent's contention is in error if it is equating an actual or present use of land with its physical use. Even so, the facts do not support the contention. In addition to the evidence of actual use noted by the referee, the following uncontested evidence, including evidence of physical use, supports the conclusion of actual use: (a) Actual work had commenced at the time of the resumption announcement as trees had been marked and fences removed; (b) Geotechnical work and site measurements by leading hand carpenters were done on the site; (c) At least 132 students had been enrolled in the school; and (d) Teachers had been employed by the school and were being trained in 2009 by existing teachers at Liverpool and Bankstown, but their contracts of employment required them to devote their time to the new school.'"
7. Assisted by the analysis of the case law, the Court in Fraietta found on the facts that the claimant had properly established he was land banking. 181. It is clear on the evidence (and I find) that the applicant is more than simply a passive investor. He deposed that he intended to construct a stone house on the property, that he had taken active steps towards doing so, and that now the property has been acquired, he intends to purchase land (and has taken active steps to look for such a property) on which he can either construct a new house, or improve an existing dwelling. The photographs attached to his affidavit show a pile of large stones that could be used for building that is bigger than the truck pictured beside it. It does not matter that Mr Fraietta was open to selling the land, if the right offer was made at the right time; the same would likely be true of a company holding land for future development, or a person occupying a residential dwelling. Further, Mr Elwaw deposed that he approached Mr Fraietta originally, and that he had made two offers to Mr Fraietta which were both rejected. This is evidence that the RMS made the conscious decision not to challenge in cross-examination or otherwise. 182. However, despite my finding that the applicant is more than a passive investor, something more is required to establish that he was engaged in the 'actual use' of the property at the date of acquisition. Importantly, whilst such a use does not need to have been physically commenced, it must exist at the date that the acquisition is announced. 183. I find that the applicant was involved in actual use of the land for two alternate reasons. First, as outlined by Biscoe in Al Amanah at [37], work that is preparatory to an intended use means that there is actual use of the land. Mr Fraietta had deposited a large pile of stones on the property which were to be used in the construction of a dwelling, and had not allowed the land to lie idle insofar as he had managed the weeds onsite. Whilst the applicant had not undertaken the same level of preparatory work as the applicant in Al Amanah, this is of little consequence. He had undertaken sufficient preparatory works to establish that his intention to construct the dwelling was more than simply a 'potential' or 'future' use. As such, I find that the applicant was involved in the actual use of the property for this reason. 184. Second, I also consider that the applicant has used the land in a manner similar to 'land banking'. The only evidence before the Court suggests that the applicant held the land with a specific development purpose in mind, being the construction of the stone house, when the time was ripe. It is understandable, given the death of his mother, that he had placed such plans on hold at the date the acquisition was announced. However, this does not change the fact that he was engaged in the actual use of the land, and that 'but for' the acquisition of the property, he would have constructed the stone house when the time was right. 185. This can be distinguished from Kirela for two reasons. First, Kirela involved a parcel of land which was intended for two alternate and inconsistent potential outcomes, and as such the contended uses were only potential future uses. Conversely, Mr Fraietta was holding the land so that he could develop his stone house. He was holding the land, and therefore had an actual use of the land, so that he could meet an established objective. Second, there is evidence that Mr Fraietta was holding the land so that he could construct the stone house insofar as there were construction materials being stored on the site that were intended for that development. As such, I separately find that the applicant was engaged in the actual use of the land for these reasons as well.
8. Applying the sensible approach adopted in Fraietta to the facts in this case, I consider that the Applicants had consistently and actively used their property for the purposes of land banking, as evidenced by the matters referred to in [258] above. Additionally, the final success, after repeated earlier failures with other development applications (see [274] below), in obtaining the consent DA 2013/006, is a further instance of their persistent efforts to pursue their property ownership and development strategies until stymied by the acquisition. Adopting the conclusions in both Fraietta and Al Amanah, it is not necessary that actual physical work be commenced on the land in order for an active use to be identified, rather it is sufficient if it can be shown on the evidence, as I have found, that there were determined efforts or a course of conduct on the part of the Applicants over many years which are consistent with the characterisation of their use as being land banking.
9. Focusing on the question whether the relocation costs in Fraietta related to the actual use of the land for land banking, the Court concluded at [186] that the costs (including stamp duty) did have that nexus. Likewise at [187], the Court determined that such costs were a direct and natural consequence of the acquisition. I have reached the same conclusions in the case before me. 186. I consider that the relocation costs relate to the actual use of the land. The purchase of new land will likely involve a new mortgage, the payment of stamp duty and the use of a conveyancer who will charge a fee. Further, the relocation of the plant and equipment to the new property will be necessary to allow the dwelling to be constructed. Finally, the survey costs would similarly relate to the actual use, as they may be necessary before construction can begin. As such, I find that the relocation costs relate to the actual use of the land pursuant to s 59(1)(f) of the Just Terms Act. 187. I find that, but for the acquisition, the applicant would not be in the position where he might have had to incur the relocation costs, and as such that they are the direct and natural consequence of the acquisition.

Disturbance claim - the new dwelling DA application costs and stamp duty

1. The Court's brief conclusions with respect to the disturbance claims under s 59(1)(f) in this case, following the structured approach to the analysis of the relevant considerations as found in Fraietta, must now be elaborated upon in order to set out the Court's reasoning. Given the extent to which the parties were at loggerheads both on the law and the facts, and given the vigour with which the competing contentions were pressed, the Court has decided it must clearly set out its reasons in full fashion.
2. Dealing first with the claim for costs associated with the Applicants' DA 2013/006 by which they were granted approval on 22 July 2013 to demolish existing buildings on 92 Underwood Road, Homebush and then construct a new two-storey dwelling [Ex A, B01.9]. This development application did not impact on the dwelling located on 90 Underwood Road, it being intended that it should remain. The Applicants' claim amounts to $33,584.68. The Court notes a slight discrepancy with respect to this figure, as although this figure is set out in the Barkat affidavit at par 13 and is set out in the Amended Applicants' "Schedule of Losses Attributable to Disturbance" [Ex A05], the figure is expressed as $33,459.33 in the final tendered document titled "Disturbance Issues" [Ex A, J, 248243505]. As no explanation is apparent for the different figure, the Court has proceeded to consider this issue on the basis of the figure in the "'Amended Applicants' Schedule", as the arithmetic in that document appears to be correct.
3. The Court rejects the submissions from RMS on this aspect of the claim. It was submitted, in accordance with the principles examined in Speter at [91], that the Applicants' actual use of the acquired land was that of a mere passive investment. The Court was pressed to conclude that the costs in relation to DA 2013/006 do not relate to the actual use of the acquired land, but rather related to one of two potential future uses and are thus not compensable. The same argument was used by RMS to resist the Applicants' stamp duty claim. The Court has concluded that Speter is clearly distinguishable from the factual history in this case. Far from being passive investors, the Court has concluded that from a time even prior to their purchase of the Underwood Land, the Applicants have consistently pursued a course of action which has all the hallmarks of land banking. In accordance with Blacktown Council v Fitzpatrick Investments Pty Ltd, the determined course of action of the Applicants over many years demonstrated their "actual use" of the Underwood Land was in accordance with a clear plan.
4. The Court's findings on the Applicants' usage of the Underwood Land arise from the evidence placed before it, findings which provide a plausible rationale for the Applicants' ownership of the Underwood Land. In short, far from being passive investors, the Applicants appear to have determinedly pursued every opportunity to improve the development potential of the Underwood Land, with such efforts commencing prior to their purchase of the Underwood Land, extending to well after they were informed that their land was to be compulsorily acquired. It is clear that they endeavoured to place alternative proposals to the WestConnex Delivery Authority whereby they floated a proposal that their land be returned to them after WestConnex tunnel works were completed or, alternatively, that they be allowed to develop their land beside or concurrent with WestConnex works. Persistence and perseverance are the words that spring to mind to describe the Applicants' determined efforts.
5. In March 2000, prior to purchasing 92 Underwood Road, the Applicants first approached the then Roads and Traffic Authority (RTA), by letter dated 16 March 2000, to enquire whether they could acquire Lot 2 DP 609880, a parcel of land abutting the Underwood Land, so that it could be consolidated with their properties, with the aim of facilitating access and concurrently increasing their proposed aggregate land area [Annexure A to the Barkat affidavit]. It is to be noted that March 2000 was a date more than 15.5 years prior to the formal "Notice of Acquisition" (dated 18 December 2015) and some 13.5 years prior to the receipt of the first WestConnex letter of 2 December 2013 advising of RMS' intentions regarding the Underwood Land.
6. On 15 October 2002, the Applicants put a formal proposal to the RTA to acquire Lot 2 DP 609880 [Ex A.B01.2]. The proposal was rejected by RTA letter dated 17 October 2002, indicating, inter alia, that although the land appeared to be surplus to the RTA requirements it had "not been authorised for disposal at this time" [Ex A.B01.3 being Annexure C to the Barkat affidavit].
7. The Applicants commenced, in 2003, and eventually settled, in 2008, litigation against their former solicitors in relation to advice that they had received regarding access difficulties across the RTA's Lot 2 DP 609880 impacting upon the potential use and development of 92 Underwood Road. Evidently the Applicants had understood that Lot 2, which they had sought to acquire, nevertheless had the status of "public road" over which they could secure access to their acquired 92 Underwood Road property. The Court is satisfied that this litigation is consistent with the Applicants being sorely upset with the legal advice they had received, frustrating their intentions for the Underwood Land.
8. Between late 2008 and April 2010 the Applicants pursued their endeavours to secure access rights over Lot 2 DP 609880, eventually securing an "easement for right of carriageway" from the RTA on 15 April 2010. The registered "Transfer Granting Easement AF640724G" is Annexure F to the Barkat affidavit.
9. In July 2012 the Applicants continued in their efforts to secure Lot 2 DP 609880 from the RTA, obtaining the assistance of their local MP, Mr John Sidoti, to lobby the Minister for Roads, Mr Duncan Gay, to encourage the RTA (now RMS, as of 1 November 2011) to sell Lot 2 to the Applicants. The Minister, entirely properly, responded by letter dated 18 September 2012, [Annexure H, Barkat affidavit] in the following terms. I am advised that RMS owns a number of parcels of land adjoining the M4 Motorway at Homebush. These parcels of land are being retained by RMS for future road widening and associated operational requirements for the M4 Motorway. Some surplus land has been sold in the vicinity in instances where a final boundary has been determined. Following road construction, any surplus land will be offered for sale. Land that is capable of independent development must be offered for sale by public competition.
10. The Applicants then sought strategic planning advice at an unspecified date in 2012 from the Strathfield Council Director of Technical Services regarding the then pending commencement of the SLEP 2012 which rezoned the Underwood Land R3 Medium Density Residential. The Applicants were considering making submissions seeking rezoning of their lands to either R4 High Density Residential or B4 Mixed Use. Advice was said to have been received which suggested they should wait a few more years as the lands would eventually be rezoned to R4, given its proximity to the M4 Motorway. As explained at [15] above, par 10 in the Barkat affidavit, containing an account of this conversation, was objected to by RMS on the basis of relevance and hearsay. Although the Court rejects the objection that the whole paragraph is irrelevant, it nevertheless treads cautiously as, given the clear hearsay content, it is impossible to determine or verify precisely what was said. However, the Court accepts the account was admissible as evidence simply to the extent that a conversation did occur and that from that conversation the Applicants gained the impression, right or wrong, that sometime in the future their land could be rezoned from R3 to R4.
11. So it is apparent from the evidence that throughout the earlier years of their ownership of the Underwood Land, the Applicants were determinedly trying to "improve" the potential of their investment in the Underwood Land. Their repeated efforts (see [274] below), largely frustrated, demonstrate that they were far from passive investors, rather they were adopting strategies and endeavouring to pursue them.
12. They were determined to retain their land, if at all possible, so as to still be able to pursue a vision for development as they originally conceived it. The Court cannot identify a deviation from that intention. Whilst the Applicants were actively using the Underwood Land as a land bank they recurrently tried to generate income from it by seeking to have different "schemes" approved. All of their development applications were refused until they finally obtained an approval for their "holding residence", as the Court will call it, apparently made necessary by the impending sale and need to move from their existing residence at Hillcrest Street, Homebush.
13. Development application No 0203/171, dated 22 May 2003, was for a change of use to an office and storage facility at 92 Underwood Road, Homebush - which was refused by Strathfield Council [TB-D01]. Development Application No 0203/254, dated 18 December 2003, was for erection of two steel-framed-and-clad temporary sheds for use as a factory making plastic goods at 90 Underwood Road, but it was also refused by Strathfield Council [TB-D02]. Development Application No 0405/311, dated 13 September 2005, was for alterations and additions to an existing building to convert it to a medical centre and addition of 12 car spaces at 90-92 Underwood Road. This development application was also refused [TB-D03]. Development Application No 0506/0231, dated 5 March 2007, was for construction of a car-parking area over the drainage channel and the use of a building for consulting rooms at 90-92 Underwood Road. Again, this development application was refused [TB-D10]. The Applicants were finally successful with their "holding residence" proposal, being DA 2013/006, granted 16 July 2013 (subject to appropriately stringent conditions addressing the flooding concerns).
14. As the Applicants have never resided at the Underwood Land, living at all material times at their residence at 5 Hillcrest Street, Homebush, their proposal was never about the relocation of themselves, until such time as their plans to move to the Underwood Land concurrent with the sale of the Hillcrest property. The Court believes the "holding residence" proposed for the Underwood Land was inextricably fused with their development plans for the Underwood Land. Throughout, it is very apparent their concerns have been about the frustration of their long-standing arrangements, which were well advanced, to eventually develop their land. As said, the level of consistent conduct and activity on the part of the Applicants, over no less than 15 years prior to acquisition, could never be characterised as passive. The Court has concluded that the aggregated lots comprising the Underwood Land were private family investment properties, acquired as a land bank for development purposes. It may be the land banking was forward investment planning for retirement purposes, but nevertheless simply because there was a stated nexus to retirement does not negate the active pursuit of the development potential of the Underwood Land. The underlying retirement end-purpose is mentioned at par 3 in the Barkat affidavit, whereat it was said: "I purchased the Properties in hope of redeveloping them for residential flats and, in turn, on-selling many of the resulting units to fund my retirement".
15. With respect to the Applicants' intentions, as revealed by the development consent following their DA 2013/006, at par 11 in the Barkat affidavit, Mr Barkat said he "had planned to build my new living house on 92 Underwood Road for me and my family in the meantime and live there for a few years, and when the time came me and my family (my wife and three sons) would build the high-rise on the combined properties together". The Court accepts that the words "in the meantime" reveals that sometime in the future it was envisaged by the Barkats that the entire Underwood Land would be sold or redeveloped profitably, ensuring that the "retirement" investment was a good one. The contemporaneous correspondence from and to the Applicants over many years present a convincing history of what their intentions were with respect to the Underwood Land. In the Court's assessment there is no indication of passivity at any stage, rather there is clear evidence of consistent successive pro-active effort on the part of the Applicants. The Court has concluded that, in terms of s 59(1)(f), the facts in this case reveal "actual use of the land" and that the Applicants should be entitled to their financial costs reasonably incurred as a direct and natural consequence of the acquisition.
16. One of the most compelling exhibited documents was Ex A.B01.14, being a letter from the Applicants to WestConnex Delivery Authority dated 21 July 2014. That letter referred to meetings in late 2013 and early 2014, together with earlier correspondence. The letter confirms that as early as 16 March 2000, the Applicants had been trying to acquire additional abutting land from RTA/RMS to aggregate with the land at 92 Underwood Road which, at that stage, they had not yet acquired. Efforts extended over 2002/2003 through to 2010 at which point, legal egress over, rather than purchase of, RMS land was obtained. Interactions with politicians were described in order to achieve their plan (see [270] below). Referring to DA 2013/006, it was stated: "Our intention in building our living house on 92 Underwood Road, is and always has been to wait until RTA/RMS residual land is available to purchase". Their development strategies were assisted by a planning feasibility report, a valuation report and a financial adviser report, all of which were provided to the WestConnex Delivery Authority and confirmed the longevity of the Applicants' proactive pursuit of their development goals. Noting that the Underwood Land was being acquired so as to enable the construction of a tunnel, the Applicants' letter then suggested options by which alternative approaches to losing their land might be explored, including the return of their land after the tunnel is built so that they could still pursue the development of their land. Proposed scenario 1 (one of three) in the letter is instructive, revealing the dogged determination of the Applicants to still pursue their long-held development plans to fruition: Please review the final tunnel design in the vicinity of our properties at 90 & 92 Underwood Road Homebush thoroughly and if it is concluded that the tunnel is not going under our property at 92 Underwood Rd and will not affect the foundation of our new building as well as old building on 90 Underwood Rd, then please provide us a copy of the final design of the tunnel so that we can build our future living house and live there until 2021, after which time we will build our future development as per planning feasibility report.
17. A pertinent question was whether the investment in the Underwood Land, intended for retirement funding purposes, was to be for the long term, middle term or, as Mr Barkat inferred, for a short term, saying that the family would live there "for a few years". As quoted above, we know from the letter in Ex A.B01.14 that they were contemplating 2021. Reaching a conclusion on this point is important in assisting to determine whether the Applicants were in the business of land investment as an active business or whether they were simply a private family seeking to buy land wisely, at a location that they perceived would be likely to rise in value, so as to best underpin the retirement financial planning of the family. The distinction is important when determining whether a claim for losses attributable to disturbance under s 59(1)(d) and/or (f) can be legitimately sustained.
18. With Mr Barkat not being called to be cross-examined, it is more difficult for the Court to assess for itself the veracity of the gentleman's evidence. On the one hand his evidence was largely not challenged by RMS, so it usually follows that such evidence should be accepted as being credible; whilst on the other hand, if there are inconsistencies or indications of improbability then the Court is entitled to question the evidence. In this instance, the Court was assisted by being able to review the 33 documents annexed to the Barkat affidavit, which were contemporaneous to the various events, initiatives and communications referred to in the Barkat affidavit.
19. Paragraph 10 in the Barkat affidavit was objected to by RMS on the basis of relevance and hearsay. It was the supposed advice from a local council officer, recounted in that paragraph, which was said to have caused Mr Barkat to decide to "wait a few years more" and in the meantime build their "new living house". As expressed at [271] above, the Court upholds the objection on hearsay, but limited to content. Irrespective of the actual content of that conversation, the Court accepts the evidence that a conversation occurred which appears to have influenced the Applicants' planned occupancy of the Underwood Land.
20. The Court has carefully examined the development plans approved by Strathfield Council in response to DA 2013/006 and notes that the proposed new house was akin to a modern-day mansion, comprising, inter alia, five double-bed bedrooms, three with sizeable ensuites and a multiplicity of other sizeable rooms, such as a lounge room 9.3 m x 5.5 m. Given that there were already two houses on the Underwood Land, sizeable enough for each of them to have been used as boarding houses, if the Applicants were simply intending to hold on for a "few years" - eight years to 2021 - before developing the land for high-rise, the Court considered whether it would not have been more plausible (if they were truly intending to move from their Hillcrest Avenue home) to simply renovate one of the dwellings used as a boarding house and move in for a few years? Instead, the Court was asked to accept that the Applicants were seriously proposing to construct a modern‑day mansion and, just eight years later, knock it down in favour of a high-rise towers development. Although many would find such a proposition implausible, indeed wasteful, in the context of Mr Barkat not being called for cross-examination, the Court has concluded that it should give Mr Barkat the benefit of the doubt and so find that the proposal was not inconceivable if the family was wealthy and intended to provide housing for their three adult sons.
21. Therefore the Court accepts that the Applicants bought the Underwood Land for private family investment business purposes as a land bank - primarily for its development opportunities, strategically assessing its long-term potential, as a means of securing the long-term retirement of the Applicants from their other business interests (referred to in passing at par 10 in the Barkat affidavit as factory interests in Bangladesh). The Court accepts that the Applicants identified the Underwood Land's strategic location between Homebush and North Strathfield railway stations, its close proximity to the M4 and Parramatta Road, perceiving the likelihood that the locality would inevitably move towards becoming an area amenable to higher density development. The Court accepts that the Underwood Land was purchased to be held by the Applicants for redevelopment on the middle to long term, either by themselves or by a purchaser should they on-sell the land for development after living eight or so years in the new home they planned. The Court accepts that the obtaining of development consent (DA 2013/006) was an integral component of their strategic forward-planning for their land.
22. The Court is satisfied that from the earliest days of their interest in the Underwood Land, even prior to their purchase of 92 Underwood Road, the Applicants perceived the development potential of the Underwood Land, and set about over the many years that followed prior to acquisition, to take steps to incrementally add value to the development potential of that land or "position" it so as to eventually realise the full potential of the Underwood Land. The fact that their efforts were largely frustrated does nothing to undermine their rationale for holding the Underwood Land, however, concurrently, the successive refusals do reinforce an assessment that the Underwood Land would be fraught with difficulty to develop.
23. With the Court having decided that the Applicants' primary purpose for holding the Underwood Land was for land banking whilst intending to establish their "holding" residence on the land, holding the land simply as investment property until such time as land values rose due to higher demand, driven by expected increased development potential, the question is whether the determination of compensation under s 59 for loss attributable to disturbance is properly claimable due to this "domestic" land banking use. There are ramifications arising out of this land bank characterisation: first, given that the Applicants did not live on the Underwood Land at the relevant date, "relocation" expenses, which in other circumstances would arise out of their occupancy, do not arise as a head of claim.
24. In passing, simply for the purpose of addressing a loose end, it necessarily follows that the extant use of the dwellings on the Underwood Land at the time of occupancy, the boarding house use, was simply ephemeral usage of convenience whilst the primary purpose of land banking - for domestic family investment purposes - continued. As clarification, as said at [12] above, the boarding house use was unlawful, lacking a requisite granted development consent, accordingly no legitimate reliance on the boarding house use can lay the foundation for any claim for compensation under any head. In fact, pursuant to s 56(1)(c) "any increase in the value of the land caused by its use in a manner or for a purpose contrary to law" is required to be disregarded for the purposes of determining the market value that should be paid upon acquisition. In short, with the boarding house use ceasing, relocation of that use to other premises could never be contemplated as a head of claim in this case, hence, in their case before this Court, the Applicants wisely ignored the illegal boarding house use.
25. Accordingly, the Court accepts that, at the relevant date, the subject land was being held as a domestic land banking property for its development potential, which the Applicants lost upon compulsory acquisition.
26. In the context of the Court of Appeal's recent decisions in Melino v Roads and Maritime Services, [2018] NSWCA 251 (Melino) and Moloney v Roads and Maritime Services, [2018] NSWCA 252 (Moloney), it is necessary to clarify certain aspects of the Applicants' claim under s 59(1)(f) with respect to the Underwood Land.
27. First, the Applicants lost, by way of acquisition, their entire property, so questions of severance or the principles in the case law as they relate to 'residual' land, which were a prime focus of the Melino and Moloney decisions, are irrelevant to the circumstances of this case.
28. Secondly, the Applicants did not own other land in the vicinity of the acquired Underwood Land, so, as there does not arise any question of a nexus to other land (either adjoining or severed from it) that might be affected by the acquisition, this is not a case where the principles developed in relation to s 55(f) arise.
29. Thirdly, as the Applicants lost their entire landholding because it was acquired by the RMS, their loss of the land and any associated financial disadvantage as a consequence is directly related to the acquisition. Again, this is a distinction to aspects of the fact situations examined in Melino and Moloney wherein the claimants in those cases both retained land adjoining the acquired lands and consequently made claims under s 59(1)(f) with respect to the 'impact' of the acquisition on their use and development of the lands they retained, specifically in relation to decisions to move residences. By "impact" I refer to circumstances giving rise to "reasonably incurred financial costs … relating to their actual use of the land, as a direct and natural consequence of the acquisition". In Moloney the claimants' extant residence was on the residual land, whereas in Melino the claimants' residence had been on the acquired land.
30. In the case before me, the Applicants have never had their own residence on the Underwood Land, rather they had the benefit of a development consent (DA 2013/006) to build a residence on that land. This necessarily means that this is not a case where relocation considerations arise pursuant to s 59(1)(c), as the "those persons" to which the subsection relates are the Applicants themselves. The Applicants' proposed residence, as explained earlier, has been interpreted by me, accepting the evidence of the First Applicant, as a 'holding residence' to be occupied pending the eventual upzoning of the Underwood Land at which point in time it would become 'ripe' for redevelopment. That long-term strategy, the Court considers, does not negate the proposition that the Underwood Land was held as a land bank property, but it does concurrently negate, perhaps ironically, any suggestion that the Applicants were expecting the upzoning anytime soon (such as early 2019 as suggested by Mr Donaldson, the Applicants' planner).
31. Fourthly, it follows that the situation with respect to the Applicants is in contradistinction to the situation that arose in Moloney, wherein claims were identified as being a consequence of the public purpose rather than the acquisition - eg moving a residential dwelling from one place on the unacquired land to a more distant place on that unacquired land so as to avoid unpleasant amenity impacts of a major highway now constructed across the acquired land too close to an extant dwelling. The Court held that that undesirable amenity impact was a consequence of the public purpose - the new highway construction - rather than a consequence of the acquisition. Therefore, the costs of moving the extant dwelling to a new more distant location was not a financial cost reasonably incurred which was capable of being claimed under s 59(1)(f).
32. The situation in this case is materially different. The Applicants in this case claim they have lost their entire investment property which was held by way of, or for the purpose of, land banking until such time as they could develop it for a more remunerative use or sell it on, at a premium reflecting its potential, to another developer. Either way, the facts in this case demonstrate a track record of effort on the part of Applicants to pursue opportunities to achieve the highest and best use of the Underwood Land. The Court has confirmed earlier that it accepts the land was held in accordance with a land banking arrangement, as was apparent by repeated efforts to obtain development consents seeking to better utilise, clearly for more remunerative purposes, the investment asset they held. The Court has concluded that the Applicants were not benignly sitting back awaiting an increase in land values, rather they were actively pursuing 'value-adding' opportunities. The acquisition of the Underwood Land has deprived the Applicants of what the Court will describe as their 'working asset' - or as their 'trading stock', as coined in Cannavo at [46].
33. With the Underwood Land being acquired, the unchallenged evidence of the First Applicant is clear: the Applicants would need to replace their working asset with another working asset. They had two blocks of land, their land bank, in relation to which they repeatedly pursued what they perceived as development opportunities. Essentially, the Applicants' land was being held until the best development opportunity came their way. It is likely and accepted that the Applicants considered the Underwood Land was strategically located in a corridor that, one day, would inevitably be more intensely utilised for higher density development opportunity - simply because Greater Sydney was showing all the stress of a metropolis bursting at the seams. Proximity to railway stations (although not ideally located) and proximity to a highway (once the authorities 'got their act together' to overcome traffic congestion) were most probably identified as positives. Unfortunately for the Applicants, once the authorities 'got their act together' to address the congestion issues, the very remedy that they had awaited or anticipated, the WestConnex Project, became the public purpose which deprived the Applicants of their land whilst concurrently becoming the catalyst for the very urban renewal which will lead to higher density development that the Applicants had expected would eventually come their way. Sadly for the Applicants, as it was WestConnex that brought them what they expected, the benefits of it must be ignored as it is the public purpose (for which their land was acquired) which must be disregarded.
34. Accordingly, because the Applicants have lost their working asset - the Underwood Land - which they actively held as their land bank - the Court has concluded that it is reasonable for the Applicants to claim pursuant to s 59(1)(f) the primary extra cost of finding an alternative land bank property, the stamp duty that they would have to pay on a similarly valued piece of land elsewhere. The Court accepts that having been deprived of their entire working asset, the Applicants would most probably seek to replace that working asset with another. The Court surmises they would seek to purchase a new property, probably in another future development corridor with potential, so that they could at that property pursue development opportunities, as they identify them, as a means of achieving the highest and best use of that other newly purchased land. In land banking terms, that highest and best use is most probably the most remunerative use they can achieve.
35. Accordingly, in terms of s 59(1)(f), the Court has decided that the stamp duty that would be paid on that other property in order for the Applicants to carry on their 'land bank to development' enterprise would constitute financial costs which they might reasonably incur (applying the words in the brackets within the paragraph), relating to the actual use of the land, as a direct and natural consequence of the acquisition.
36. Similarly, as explained above at [292], it is for similar reasons that the Court has concluded that the costs of securing DA 2013/006 are similarly financial costs that the Applicants had reasonably incurred, by reason of the costs arising in relation to a proposed "holding residence", as the Court has chosen to describe it, pending the expected inevitable redevelopment. The Court is cognizant of the need to reflect on the question whether there is a prospect of double-dipping with respect to the costs of the DA 2013/006. As was confirmed by the Court of Appeal in Moloney at [100], when compensation has been obtained in full for losses occasioned by acquisition in the claim for market value under s 55(a), (b) or (f), a separate claim for the same amount as disturbance under s 55(d) (under any of the heads identified in s 59(1)) is not maintainable. The Court has concluded that the market value under s 55(a) determined in this case would not have included the costs associated with the DA 2013/006, costs which were limited to the strategic land bank purpose of the Applicants, but otherwise not value-adding to the property. Further, the costs in question do not fall within s 55(b) as rather than the value of the development consent being "incidental to the person's use of the land" the Court has found, far from being incidental, there was a direct nexus to their land bank use of the land. Finally, as for s 55(f), as said earlier, there is no "other land" involved which adjoins or is severed from the acquired Underwood Land in this case.
37. There may be a thought that the Applicants would be double-dipping if they secured stamp duty pursuant to s 59(f) whilst concurrently receiving the market value of the acquired Underwood Land pursuant to s 55(a). Such a thought would be erroneous. Careful dissection of the hypothetical replacement property transaction reveals that there is no double-dipping. First, embodied in the hypothetical marketplace acquisition of the Underwood Land would be the price that the market would pay for that property to a willing-but-not-anxious vendor. Conceptually, that vendor could be expected to have in mind that when they originally purchased the property they paid the then market value and then subsequently had to pay the State Government the stamp duty on that acquisition, so the vendor would set their market sale price, which they would be willing to accept, as covering the cost of their purchase plus the stamp duty they paid, plus of course, realistically, a sum reflecting market increase since their original purchase. Having accepted the purchase price and sold, that vendor (in the land banking scenario of the Applicants) would now, flush with funds, move to acquire a replacement property. They would be faced with having to pay the market price of that new property to another vendor, who in turn has in mind to secure the best price covering their original purchase, costs such as stamp duty, and any increase in the market price. However, the Applicants, having paid the market price on which the vendor was willing to sell, would now, inconveniently, face the additional cost of having to pay stamp duty to the State on that new property. It is therefore a cost which they legitimately seek to be recompensed under s 59(1)(f) - as a financial cost they will reasonably incur. The Court accepts that compensation for that cost is appropriate and available under a proper application of that statutory provision.
38. With the Court having determined that the market value for the aggregated Underwood Land was $4,300,000.00 as at the date of acquisition, applying the rate of duty that was chargeable, pursuant to s 32(1) of the Duties Act 1997, as at 18 December 2015, the Applicants are entitled to receive the sum of $221,990.00 in compensation pursuant to s 59(1)(f) attributable to stamp duty they would have paid on the purchase of a replacement property.

Costs

1. As I have awarded the Applicants compensation in an amount greater than the amount offered in the "Notice of Compensation" and contended for by the Respondent, the Applicants should be awarded their costs of the proceedings.

Orders

1. Compensation shall be paid by the Respondent to the Applicants as follows: 1. Market value for the aggregated 90 Underwood Road, Homebush and 92 Underwood Road, Homebush - $4,300,000.00 2. Disturbance: $67,110.27 - comprising $29,599.77 for legal costs pursuant to s 59(1)(a); $26,950.00 for valuation fees pursuant to s 59(1)(b); and $10,560.50 for financial costs relating to actual use pursuant to s 59(1)(f). 3. Disturbance as compensation for the loss of the costs associated with obtaining DA 2013/006 being $33,584.68. 4. Disturbance in relation to stamp duty pursuant to s 59(1), being $221,990.00.
2. The costs of the Applicants in the proceedings, as assessed or agreed on the usual basis, shall be paid by the Respondent.

ANNEXURE A RMS document from Court Book, Exhibit A, J - Additional Documents "Public Purpose - Key Documentary References" BARKAT v ROADS AND MARITIME SERVICES (2016/158064) Respondent's references to particular evidence on public purpose No. Extract Reference Strathfield Economic and Land Use and Employment Strategy: TB C01 (June 2010) This precinct [i.e., Underwood Road Homebush] is well connected by road, particularly Homebush Bay Drive and the M4. However, congestion is a significant issue in this area as uses which are not anticipated by the zoning have developed. The closest station is North Strathfield which is not within walking distance. The area is close to the Bay to Bay cycle path, with the RTA cycle path maps noting that moderately difficult on-road routes connect the area to Flemington Station. The 525 - Parramatta - Burwood bus serves this area. The precinct is located opposite Bressington Park and Mason Park, with some residential areas nearby. Sydney Olympic Park is close to this area. 1.1 Underwood Rd, Homebush: The Future CB C01 p 41 (PDF p 44) Underwood Road will continue to provide accommodation for small industrial business in a high amenity location, adjacent to a large shopping centre. Additional retail or office based activities on industrial land will be avoided. Over the longer term, if the area can be shown to be part of, or better linked to Olympic Park - Rhodes, then an alternative zoning could be considered. However, this is reliant on comprehensive planning and improved transport connections. JBA Strathfield Residential Land Use Study: TB C03 (November 2011) The IWSS [i.e., draft Inner West Subregional Strategy] is intended to guide land use planning in the Strathfield, Ashfield, Burwood, Canada Bay and Leichhardt LGAs until 2031] outlines how the State Government will act to improve transport access to key centres, including the following projects that are planned or currently underway that directly impact Strathfield: 2.1 … TB C03 p 10 (PDF p 20) M4 East Extension; First things first: The State Infrastructure Strategy 2012-2032: TB C05 (October 2012) 3.1 WestConnex is intended to be more than a motorway. It is a scheme designed to act as a catalyst to renew and transform the parts of Sydney through which it passes. WestConnex is intended to develop as an integrated land use and transport scheme delivering on road transport, urban renewal and public transport outcomes. TB C05 p 88 first paragraph (PDF p 88) Key benefits include: • Relieving congestion on the existing M4/Parramatta Road and M5 East • Supporting freight movements between Sydney's Gateways and the logistics hubs in Western and South Western Sydney 3.2 • Supporting people movements to Sydney Airport TB C05 p 88 (PDF p 88) • Acting as a catalyst for urban regeneration along key corridors, particularly Parramatta Road • Enhancing orbital road connectivity South and West of the CBD • Facilitating improvements in public transport, particularly on the Parramatta Road corridor 3.3 Consideration has also been given to the urban regeneration potential provided by the scheme, particularly along Parramatta Road. This is a significant opportunity for rejuvenation of a tired corridor that has the potential to play an important economic role in Sydney's future. TB C05 p 88 (PDF p 88) Redeveloping Parramatta Road 3.4 … TB C05 p 89 (PDF p 89) One of the aims of the WestConnex program is to support the regeneration of the Parramatta Road corridor. Infrastructure NSW believes that a slotted road concept would enable this more than a tunnelling approach. The slotted concept sinks the motorway below surface level while constructing a new local road at surface level. 6.6.5 Next Steps The scale and complexity of the problems along the M5 and M4 corridors, and the latter's inadequate connectivity to Sydney's Gateways suggests a transformational solution is needed. The solution needs to fit within and connect with the existing transport network and must also enable urban renewal. 3.5 The feasibility study that Infrastructure NSW has led with Transport for NSW and RMS suggests WestConnex is the solution to these issues… TB C05 p 90 (PDF p 90) … Recommendation: Infrastructure NSW recommends that Government progress the development of WestConnex, an integrated toll-road scheme designed to innovatively and affordably deliver the M4 Extension and M5 East Expansion projects within the next ten years, Recommendation: Infrastructure NSW recommends that urban renewal - in particular, the transformation of Parramatta Road - should be placed at the heart of the WestConnex scheme from the beginning. 3.6 Infrastructure NSW has identified in outline a scheme - WestConnex - that can help support freight and people movements across the city, and support major urban redevelopment. Infrastructure NSW believes that, while ambitious, WestConnex can be delivered in ten years with sufficient will. TB C05 p 93 (PDF 93) WestConnex - Sydney's next motorway priority: TB: C06 (October 2012) 4.1 WestConnex is more than a motorway. It is a scheme designed to act as a catalyst to renew and transform the parts of Sydney through which it passes. WestConnex creates opportunities for urban renewal and public transport improvements, especially along Parramatta Road. It will strengthen access to industry and commercial centres along the full corridor, improving growth opportunities for local businesses. WestConnex is intended to develop as an integrated land use and transport scheme delivering on road transport, urban renewal and public transport outcomes. TB C06 p 3 (PDF p 3) While there are still decisions to be made about the scope of WestConnex it is clear that infrastructure investment in WestConnex would offer major strategic benefits for transport, productivity and liveability in Sydney. The overall benefits of WestConnex include: …. 4.2 • New opportunities for urban renewal in the inner west, including along Parramatta Road, especially east of North Strathfield. TB C06 p 21 at [3] (PDF p 21) … It is clear that WestConnex is not just a road project. A number of the key benefits it offers to the urban fabric, the economy of Sydney and public transport are discussed in more detail in the following sections. The WestConnex scheme would transform Parramatta Road. The separation of high volume through traffic into a mixture of deep tunnel and road cutting or "slot" would allow the creation of a transit boulevard - a lesser trafficked, high quality public transport corridor - within a revitalised and reshaped built environment. This transformation would take time. New development next to the transit boulevard would combine residential, business, civic and shopping land uses, capitalising on the improved public transport opportunities and the lower noise and congestion from the removal of through traffic and freight. A coordinated approach to redeveloping the Parramatta Road corridor supports Sydney's recent development patterns, with around 80 per cent of development taking place through urban in-fill. It also supports the preference Sydneysiders have shown for mixed use development. The reshaping of the corridor would have a significant effect on the productivity, sustainability and liveability of this area and Sydney as a whole. It would help create the opportunity for a thriving urban environment and a residential growth area close to the city and existing key transport linkages. In time communities alongside the corridor would benefit and a high quality and permeable public domain along the Parramatta Rd precinct promoting social and economic activity would be established. 4.3 Design principles for this transit boulevard vision would address: TB C06 pp 21-22 at [3.1] • A high quality built form with a diverse mix of housing and business land uses so that opportunities for economic growth are captured and a vibrant living and working environment created day and night. (PDF pp 21-22) • The accessibility and connectivity along and across the new Parramatta Road boulevard, for all public transport modes and local traffic, with shared paths, frequent crossings, parking, bus stops and bridging over the slot motorway at key intersections and desire lines. • The greening of the corridor with trees and open space to provide shade, air quality improvements, recreation opportunities and a green backdrop. • The safety of the corridor so that pedestrians and traffic are safely organised and that security and surveillance is maximised and crime prevented. • The integration and design quality of the slot motorway so that a high quality motorway environment is created for road users that minimises disruption and traffic impacts on the surrounding built environment. • Other issues and opportunities identified by the local community and stakeholder groups. The Federal Urban Design Protocol indicates that high quality urban development achieves benefits in productivity, sustainability and liveability. Investing in transport infrastructure in the Parramatta Road corridor supports these benefits by not only improving transport but by changing the role and environment of Parramatta Road. It does this through the separation of through traffic and freight from local traffic and the reorganisation of Parramatta Road itself. 4.4 … TB C06 pp 26 at [4.2] (PDF p 26) a project of Westconnex's scale would provide the opportunity to reshape and revitalise the Parramatta Road corridor and open up development opportunities for new residential sites and businesses. WestConnex will be an urban renewal project as well as a transport project. It is intended that public and private sector investments in WestConnex will support renewal objectives as part of the delivery of the motorway program. 4.5 The organisation responsible for the planning and delivery of WestConnex will work with the newly established Urbangrowth NSW to develop a master plan for urban renewal along the Parramatta Road corridor and strategies for its achievement. TB C06 p 32 at [5.4] (PDF p 32) The master plan will be developed through extensive consultation and collaboration with key stakeholders, relevant authorities, potential developers and landowners in the corridors. Planning and urban design objectives, principles and projects will flow from the consultative process. NSW Long Term Transport Master Plan: TB: C08 (December 2012) An integrated approach to land use and transport planning can meet the community's social, environmental and economic objectives. Integrated planning recognises that land use generates demand for travel while the transport system influences how land is used for a particular purpose. Our ability to access employment, education and other services from where we live impacts on the quality of our lives. Likewise, the ability of a business to move its goods and people affects profitability. 5.1 … TB C08 p 37 at [1.9] (PDF 37) A growing population and changing patterns to where we live and where our jobs are located will create new pressures that require far-sighted and exible planning for our future transport system. The Long Term Transport Master Plan takes into account future land use planning, particularly in areas where significant growth will occur both from green eld developments and in ll in existing residential areas. Ensuring that land use and transport planning continue to be fully integrated will help us strengthen our transport planning processes. 5.2 Integrated planning: Sydney's roads hierarchy - Our approach to planning road investments will create a cohesive road network that features integration with land use planning, integration across all modes and integration with Sydney's wider public transport network. TB C08 p 141 (PDF p 141) Draft Metropolitan Strategy for Sydney to 2031: TB: C09 (March 2013) Parramatta Road Corridor The Parramatta Road Corridor connects Global Sydney and Parramatta via Sydney Olympic Park. It is one of the busiest road corridors in Sydney.29 The WestConnex Motorway will provide opportunities to transform the local centres that exist alongside the Corridor and better connect them as Sydney Olympic Park grows. The Parramatta Road Corridor offers prime regeneration opportunities to create lively, well-designed centres with improved north-south and east-west linkages currently limited by the busy Parramatta Road. This will help to deliver a diversity of housing and jobs choices, close to the shops and services in a new, liveable context. Priorities for Parramatta Road Corridor 6.1 • deliver improved road connections through the WestConnex Motorway, ensuring improvements allow for better links between local centres so they can flourish and attract new investment TB C09 p 23 (PDF p 23) • deliver stronger east-west connections along, and at grade north-south connections across, Parramatta Road • focus on Sydney Olympic Park as a Specialised Precinct to be a major location for employment, high density housing, sports and entertainment • use the planned regeneration31 to better integrate Sydney Olympic Park into adjacent areas • facilitate delivery of Urban Activation Precincts at Carter Street and Wentworth Point as part of the wider regeneration of Sydney Olympic Park • create high quality places and spaces at key points along and adjacent to Parramatta Road • plan for well-designed housing including smaller dwellings and apartments to ensure the Corridor achieves a higher population density that can stimulate business and retail investment • plan for a viable and frequent public transport service the length of the Corridor 6.2 The Corridor between Liverpool and Sydney Airport will benefit from work to widen the M5 Motorway and the proposed WestConnex Motorway will be a catalyst for major urban renewal and regeneration along the Parramatta Road corridor. TB C09 p 71 (PDF 71) 6.3 Our city shapers (see Objective 4, page 18) - including areas for transformative urban renewal and regeneration within the Parramatta Road Corridor, the North West Rail Link Corridor and the Anzac Parade Corridor - will be supported by enhanced accessibility and connectivity through new infrastructure and improved transport services. The WestConnex Motorway will, with a sympathetic design, allow the transformation of centres and suburbs as traffic lessens on the busy Parramatta Road Corridor. TB C09 p 73 (PDF 73) WestConnex Strategic Environmental Review: TB C13 (September 2013) 7.1 There is arguably no greater opportunity in Sydney for urban renewal than the Parramatta to CBD Corridor. The Draft Metropolitan Strategy recognises it as one of nine 'city shapers' critical to Sydney's future success. An integrated land use and multimodal response will be required to service renewal of this corridor and to improve amenity in local movements along and across the corridor. As such, the urban renewal of the Parramatta Road Corridor relies initially on a major improvement to existing traffic conditions. TB C13 p 13 (PDF p 28) The strategic need for WestConnex is established in Chapter 2. In summary, WestConnex is needed to: • Address poor urban amenity along the Parramatta Road corridor due to heavy traffic volumes and congestion throughout weekdays and on weekends. 7.2 • Provide new opportunities for urban renewal in the inner west, along Parramatta Road, especially east of North Strathfield. TB C13 p 105 (PDF p 121) • Improve liveability for residents and businesses in the corridor. • Provide for new opportunities for land development and wider land use planning changes. 7.3 The WestConnex scheme will deliver significant long-term benefits to the economic growth and development of NSW and to the nation. It will deliver substantial amenity and environmental benefits, improve the function of the city and assist to reduce the negative effects of traffic congestion along key corridors. This will provide an important catalyst for urban renewal in areas of the city that currently experience poor amenity due to excessive traffic on local and arterial roads TB C13 p 109 (PDF p 125) WestConnex Business Case Executive Summary: TB: C14 (September 2013) Urban revitalisation will be achieved by: 8.1 • fixing transport - putting trucks and cars underground and improving above ground public transport in the inner west TB C14 p 25 (PDF 25) • investing up to $200 million to improve the living environment in the Parramatta Road corridor • amending planning controls to encourage new investment in residential, retail and commercial enterprises How WestConnex will trigger urban revitalisation WestConnex will connect communities like never before. Currently, sections of Parramatta Road are an urban blight because traffic congestion and noise has made them relatively unattractive places to live, work and socialise. Parramatta Road has become a barrier between communities north and south of it. 8.2 Travel speeds have fallen as little as 21 km per hour for morning and afternoon peak periods while the M4 is congested 13 hours a day. TB C14 p 25 (PDF p 46) It needs to be fixed, and WestConnex will help enable that to happen by putting traffic underground and allowing the above ground landscape to be transformed into a quieter more appealing environment. In consultation with councils and communities, sections of the Parramatta Road corridor will be rezoned to encourage construction of new apartments and homes, commercial and retail space, recreational, community and other civic and government buildings. By taking a holistic approach, Parramatta Road can be truly transformed for the better. Strategic Review of the WestConnex Proposal - SGS Final Report: TB C21 (February 2015) 9.1 The strategy is particularly focused on employment and the economy, with actions including accelerating urban renewal across Sydney around train stations, growing a more internationally competitive Sydney, growing Parramatta as Sydney's second CBD, improving productivity in Western Sydney, and enhancing capacity at key international gateways and managing long term growth. TB C21 p 13 (PDF p 19) WestConnex was also promoted as supporting freight and people movements to Sydney Airport, relieving congestion and facilitating improvements in public transport. The strategic justification of the projects in the SIS included: • relieving congestion on the existing M4/Parramatta Road and M5 East • supporting freight movements between Sydney's Gateways and the logistics hubs in Western and South-Western Sydney 9.2 • supporting people movements to Sydney Airport TB C21 p 17 (PDF p 23) • acting as a catalyst for urban regeneration along key corridors, particularly Parramatta Road • enhancing orbital road connectivity South and West of the CBD • facilitating improvements in public transport, particularly on the Parramatta Road corridor. Sydney CBD to Parramatta Strategic Transport Plan: TB C25 (September 2015) 10.3 WestConnex is the catalyst initiative that will substantially contribute to the Corridor's transformation. TB C25 p 20 (PDF p 20) 10.4 In the long term, WestConnex will improve access through the inner west and precincts along Parramatta Road and to key regional destinations such as Sydney Airport and Port Botany from both Western Sydney and within the Corridor. It will also reduce traffic congestion on the M4and M5 Motorways, Parramatta Road and the wider road and rail network, particularly in peak periods. This will facilitate urban transformation and improve public and active transport along Parramatta Road and its immediate surrounds. TB C25 p 24 (PDF p 24) Draft Parramatta Road Urban Transformation Strategy: TB C26 (September 2015) 11.1 WestConnex provides an accelerated opportunity to transform Parramatta Road - it will change traffic volumes in some areas and, in particular, provide an alternative route for trucks and heavy vehicles. This will free up road space for better public transport, while encouraging walking and cycling and improving public areas and streets. Improved north-south connections will also come from the transformation process. TB C26 p 8 (PDF 8) 11.2 The draft Strategy presents an integrated approach that considers the Corridor as a single strategic entity. We have planned the Parramatta Road Corridor from a regional perspective, while also recognising it as a place of many individual but linked places with unique values and characteristics. The draft Strategy looks at 'big picture' issues with the depth of local knowledge required to plan for existing and future communities. TB C26 p 12 (PDF 12) What can be done? One of the most significant influencers that can help address issues on the Corridor is WestConnex. 11.3 WestConnex will connect the eastern end of the M4 Motorway with the eastern end of the M5 Motorway to serve longer distance journeys into, out of and through the Corridor. It provides an accelerated opportunity to transform Parramatta Road - it will change traffic volumes in some areas and, in particular, provide an alternative route for trucks and heavy vehicles. This will free up road space for better public transport, while encouraging walking and cycling and improving public areas and streets. Improved north-south connections will also come from the transformation process. TB C26 p 20 8 (PDF 20) In this way, WestConnex provides a unique catalyst to transform the Corridor. Its delivery, and the corresponding efforts to revitalise the Corridor, will be realised in stages. What is New Parramatta Rd? New Parramatta Rd is the project to transform the Corridor … Delivery mechanisms Intervention Mechanism/Tool Effect Applied to 11.4 Catalytic Infrastructure delivery … All lands in the Corridor where additional growth is projected TB C26 p 94 (PDF 94) Significant projects Kick-start the urban transformation process in affected areas

Parramatta Road Economic Analysis Report: TB C27 (September 2015) 12.1 Many parts of Parramatta Road have an associated stigma attached, largely due to traffic congestion, poor quality of built form, poor connectivity and lack of public domain amenity. Critical to the success of the PRUTP is government investment in alleviating traffic congestion (WestConnex) and in carrying out amenity improvements along the Corridor. In its current form without any intervention, large scale renewal is unlikely to occur. TB C27 p 15 (PDF p 19) With regard to the Parramatta Road Urban Transformation Program it is understood UrbanGrowth NSW is leading an Integrated Project Team that includes Department of Planning and Environment, Transport for NSW, Roads and Maritime Services and WestConnex Delivery Authority and the local councils along the PRC. 12.2 The Integrated Project Team is collaborating with councils along the corridor. One of the key projects apart from the Parramatta Road Urban Transformation Program which will significantly transform the way Parramatta Road is used is WestConnex. TB C27 pp 23-24 at [1.2] (PDF pp 27-28) … WestConnex is one the New South Wales Government's key infrastructure projects which aims to ease congestion, create jobs and connect communities. The 33 kilometre WestConnex motorway will run from Parramatta along the M4/Parramatta Road corridor to Rozelle, before heading south through Camperdown to St Peters and Sydney Airport, and then west to Beverly Hills. WestConnex will serve longer distance journeys into, out of and through the corridor - most notably for heavy freight, commercial and business. It will enable key parts of the transport system to be reshaped to better serve existing and new customers from a revitalised corridor. 12.3 Conclusion TB C27 p 144 (PDF p 148) Many parts of Parramatta Road have a stigma associated with them, largely brought about by traffic congestion, poor quality of built form, poor connectivity and lack of public domain amenity. Critical to the success of the PRUTP is government investment in alleviating traffic congestion (WestConnex) and in carrying out amenity improvements along the Corridor. In its current form without any intervention, large scale renewal is unlikely to occur. Draft Parramatta Road Urban Design Guidelines: TB C28 (September 2015) The objectives of the draft Guidelines are to ensure that: 13.1 … TB C28 p 5 at 1.2 (PDF p 5) - the opportunity to transform and improve the amenity of Parramatta Road resulting from WestConnex is fully realised; Parramatta Road Precinct Transport Report: TB C29 (September 2015) The Catalyst - WestConnex 14.1 The strategic importance of Parramatta Road in the structure and on the functioning of metropolitan Sydney is clear, connecting the two main economic hubs of the Sydney CBD in the east and the Parramatta CBD in the west. However, traffic congestion and associated poor amenity have placed the road under increasing pressure to the point where its many other attributes, including its role as a high street or focus for shopping and trade, have been significantly eroded. This is evidenced by the declining economic vitality of traditional strips of shops, high levels of vacancy in commercial space and an overall degradation of the quality of the street environment over time. From a planning perspective, multiple jurisdictions and levels of Government mean that planning decisions are not easily coordinated. Planning controls are inconsistent and restrict how the land can be used, diminishing incentives for an improved urban environment. TB C29 p 4 (PDF 7) The WestConnex Motorway represents an opportunity to deliver the largest integrated land use and transport project in Australia - a 33km motorway and a 20km urban transformation corridor. It will change traffic volumes, divert traffic and, in particular, provide an alternative route for trucks and heavy vehicles. This will free up road space for better public transport, while also encouraging walking and cycling. Better transport options and improved urban amenity will enable urban transformation to occur that can optimise the Corridor's well-established retail and service centres and help to provide significant volumes of diverse, well-located housing and jobs. 14.2 The Transport Plan acknowledges in conjunction with WestConnex, the long term vision for how the Study Area will grow and develop to 2050 by capitalising on WestConnex to develop new housing and employment opportunities. It integrates land use and built form with public domain initiatives to meet Parramatta Road's future population, housing and employment needs. The Precinct Transport Plans have been developed under the visions, directions and initiatives developed as part of the Transport Plan. TB C29 p 7 (PDF 10) A number of transport initiatives / projects have emerged as key opportunities to support / manage growth in the centres and Precincts along the Corridor: WestConnex: 14.3 - To improve access to the inner west and Sydney CBD and to key regional destinations such as Sydney Airport and Port Botany from both Western Sydney and within the Study Area. TB C29 p 8 (PDF 11) - To reduce existing traffic congestion on the M4 and M5 Motorways, Parramatta Road and the wider road and rail network. - To remove thousands of daily vehicle trips from Parramatta Road, including up to 3,000 daily truck movements. - To facilitate urban transformation and improved public and active transport along Parramatta Road and its immediate surrounds. WestConnex is the largest integrated transport and urban revitalisation project in Australia, linking Sydney's west and south-west with the CBD, airport and port in a continuous 33 km motorway that is completely free of traffic lights. 14.4 It will be the trigger for urban transformation providing new opportunities for residential and commercial development along the Parramatta Road Corridor, beautifying streetscapes, adding green corridors and parkland and making it a more attractive place to live, work and socialise. It will transform Sydney by making it easier for cars and trucks to move between employment hubs and the vast residential suburbs and growth centres that house millions of people. TB C29 p 41 (PDF 44) Delivered in three stages over the next decade, the WestConnex motorway project will augment and extend the M4 to the inner city, duplicate the existing M5 East and provide an airport link for journeys to Sydney's international gateways. WestConnex is a critical part of an integrated transport solution that includes roads and public transport. WestConnex will facilitate improved public transport services and revitalise local communities. Parramatta Road Open Space and Social Infrastructure Report: TB C30 (September 2015) 15.1 The Parramatta Road Urban Transformation Program (PRUTP) is the integrated, cross-agency project established by the New South Wales Government in 2013 to explore, capture and deliver on opportunities for urban transformation along the Corridor resulting from the WestConnex Motorway and in line with A Plan for Growing Sydney. TB C30 p 7 at [1.3] (PDF p 7) 1.8 The Catalyst - WestConnex TB C30 p 9 at (PDF p 9) 15.2 The strategic importance of Parramatta Road to the structure and function of the city is clear. It represents the spine of the city, connecting the two main economic hubs of Sydney CBD in the east and the Parramatta CBD in the west. However, traffic congestion and associated poor amenity have placed the road under increasing pressure to the point where its many other attributes, including its role as a high street or focus for shopping and trade have been significantly eroded. This is evidenced by declining economic vitality of traditional strip shopping, high levels of vacancy in commercial space and an overall degradation of the quality of the street environment over time. From a planning perspective, multiple jurisdictions and levels of Government mean that planning decisions are not easily coordinated. Planning controls are inconsistent and restrict how the land can be used, diminishing incentives for improvements. ] The WestConnex Motorway represents the opportunity to deliver the largest integrated transport and urban renewal project in Australia - a 33km motorway and a 22km urban renewal corridor. It will change traffic volumes, divert traffic and, in particular, provide an alternative route for trucks and heavy vehicles. This will free up road space for better public transport, while also encouraging walking and cycling. Better transport options and improved urban amenity enable urban transformation to occur that can optimise the Corridor's well-established retail and service centres and help to provide significant volumes of diverse, well-located housing and jobs. 15.3 Greater Sydney - Draft Metropolitan Strategy - Key findings relevant to PRUTP - The New South Wales Government plans to capitalise on the delivery of the WestConnex Motorway and staged urban transformation throughout the corridor's centres. TB C30 p 53 (PDF) Parramatta Road Urban Amenity Improvement Plan: TB C31 (September 2015) 16.1 In order to rectify the decay, UrbanGrowth NSW has identified a suite of amenity improvement works that will stimulate urban transformation. Typically, the works are those that local government authorities and the development industry find difficult to achieve as they cross boundaries and are not directly attributable to one particular land holding. TB C31 p 5 (PDF p 5) Utilising the Westconnex project as a catalyst for renewal, this Program supports the draft New Parramatta Road Urban Transformation Strategy. The works outlined in this Program are considered to offer the greatest opportunity to ameliorate urban decay and encourage urban transformation in an expeditiousmanner. Draft Parramatta Road Corridor Urban Transformation Summary: TB C32 (September 2015) 17.1 WestConnex is the first in a series of major investments in transport along the Corridor. By reducing congestion and improving connections, this project will act as a catalyst for the Corridor's transformation, enabling new public transport options and bringing new life to Parramatta Road. TB C32 p 5 (PDF p 5) WestConnex M4 East Environmental Impact Statement Vol 1: TB E03a, E03b (September 2015) 18.1 The [M4 East project] is a component of WestConnex. TB E03a p i (PDF 4) 18.2 The project and the urban renewal of areas along Parramatta Road would be consistent with Direction 3.1 of A Plan for Growing Sydney, which seeks to revitalise existing suburbs. As traffic has increased with the growth of Sydney, many areas along Parramatta Road have become degraded and unattractive to pedestrians and customers due to reduced amenity and limited parking, while areas away from the road are much more attractive. The project would enable the revitalisation of precincts along the Parramatta Road corridor consistent with the Draft Parramatta Road Urban Renewal Strategy. TB E03a p 3-7 (PDF p 74) The project, as part of WestConnex, is expected to reduce through traffic on Parramatta Road. 'Through traffic' in this context refers to traffic that travels more than five kilometres along Parramatta Road to destinations away from Parramatta Road. The reduction in through traffic, particularly trucks, would assist in improving public transport and urban amenity, both of which would support future growth along the corridor, in particular residential development. 18.3 …. TB E03b p 12-36 - 12-37 (PDF 69-70) The project, as part of WestConnex, would act as a catalyst for this urban renewal, which has the potential to significantly alter land use in these precincts. However, urban renewal in these precincts or in other parts of the Parramatta Road corridor does not form part of the project and would be subject to separate assessment and approval. WestConnex Updated Strategic Business Case: TB C34 (November 2015) 19.1 The objectives of WestConnex are to: TB C34 p 114 (PDF p 114) • Create opportunities for urban renewal, improved liveability and public and active transport improvements along and around Parramatta Road 19.2 The reduced traffic and improved active and public transport environment will result in the Parramatta Road corridor becoming attractive for a range of land uses, providing a unique opportunity for urban renewal TB C34 p 172 (PDF p 172) M4 East Submissions Report - Volume 1A: TB E04a (December 2015) 20.1 This project is therefore considered to play an important role in the implementation of the Parramatta Road Transformation Program and would be the first stage in the improvement of public transport along the Parramatta Road corridor by reducing the number of vehicles which use Parramatta Road and enabling the future provision of permanent bus lanes (as part of a separate project). TB E04a p 4-217 (PDF p 283) M4 East Submissions Report - Volume 1B: TB E04b (December 2015) 21.1 The project (as part of WestConnex) is identified within the Parramatta Road Strategy as a catalyst for the restoration of the Parramatta Road corridor, because it would remove through traffic from the Parramatta Road corridor. 'Through traffic' in this context refers to traffic that travels more than five kilometres along Parramatta Road to destinations away from Parramatta Road. The reduction in traffic, particularly trucks, would assist in improving public transport and urban amenity, both of which would support future growth along the corridor, in particular residential development. TB E04b p 5-19 (PDF p 53) The Parramatta Road Urban Transformation Program is being undertaken in parallel with the project to implement the Parramatta Road Strategy. A key element of this program is improved public transport services along Parramatta Road. The M4 East and the greater WestConnex would enable traffic reductions on Parramatta Road from Burwood to the CBD, which would in turn free up road space and create greater public transport options for existing and new residents along the Parramatta Road corridor. 21.2 As described in section 12.4.2 of the EIS, the project, as part of WestConnex, would be a catalyst for the urban renewal of Parramatta Road in line with the Parramatta Road Urban Transformation Program. TB E04b p 5-230 (PDF p 264) 21.3 WestConnex supports the needs of Sydney in terms of growth, and improving productivity and liveability through provision of a transport solution. The project would act as a catalyst for urban renewal and improvements to public transport along Parramatta Road by reducing surface traffic TB E04b p 5-276 (PDF p 310) Secretary's Environmental Assessment Report: TB E05 (February 2016) 22.1 While the direct provision of public transport is outside of the scope of the WestConnex M4 East project, public transport would facilitate urban revitalisation along the Parramatta Road corridor. Both the Transport NSW Plan and the UrbanGrowth NSW Strategy suggest that WestConnex is catalyst for Parramatta Road's transformation. TB E05 p 47 (PDF p 57) 22.2 The Draft Parramatta Road Urban Transformation Strategy identifies new proposed vehicular, pedestrian and cycling connections. The Department considers that the M4 East proposal should, to the greatest extent practicable, allow for integration with the connections outlined in the Strategy and has consequently recommended the Proponent consult with UrbanGrowth NSW during detailed design. TB E05 p 48 (PDF p 58) 22.3 Connectivity along the project corridor is currently constrained as a result of existing road infrastructure and traffic congestion. In particular, Parramatta Road currently acts as a boundary severing communities either side of the road. The project has the opportunity to enhance connectivity through improvements in network performance and reduced traffic volumes on Parramatta Road. This would assist in the revitalisation of the corridor which may improve community cohesion and connectivity. This revitalisation is being driven by UrbanGrowth's (2015) Draft Parramatta Road Urban Transformation Strategy. TB E05 p 90 (PDF p 100) Parramatta Road Corridor Urban Transformation Infrastructure Schedule: TB C38 (November 2016) 23.1 The Parramatta Road Corridor Urban Transformation Strategy (the Strategy) is an integrated land use planning and transport policy framework for the transformation of the Parramatta Road Corridor (the Corridor). Over the next 30 years, the Corridor is estimated to support up to 27,000 homes and 50,000 jobs. TB 38 p 3 (PDF p 3) Parramatta Road Corridor Urban Transformation Implementation Plan 2016-2023: TB C40 (November 2016) 24.1 WestConnex provides an opportunity to transform Parramatta Road. This new infrastructure will change traffic volumes in some areas and, in particular, provide an alternative route for trucks and heavy vehicles. This will free up road space for better public transport, improve amenity along Parramatta Road, and encourage walking and cycling. TB C40 p 8 (PDF p 8) Planning for the transformation of the Parramatta Road Corridor must be done in consideration of the staged delivery of the WestConnex Motorway and respond to the changed conditions along the Corridor.

ANNEXURE B ANNEXURE C Court's adjustment table of Ismay Avenue sales evidence A B C D E F G H I Derived value of Underwood Land R3 Sales Property Area of property Adjusted sale after market movement Amalgamation Land size Flood & easements Combined adjustments 30% of adjusted sale after market Adjusted sale after Court adjustments $ rate/m2 of site area of final adjusted sale I x J ** C + D + E B - F B - G H/A * 66 Ismay 546.2 m2 $1,682,000 +10% -10% -20% -20% $336,400 $1,345,600 $2,464 $4,201,120 60 Ismay 537.4 m2 $1,693,200 +10% -10% -20% -20% $338,640 $1,354,560 $2,521 $4,298,346 3 Ismay 663.9 m2 $1,404,000 +10% -10% -20% -20% $280,800 $1,123,200 $1,692 $2,885,063 4 Ismay 518.5 m2 $1,449,100 +10% -10% -20% -20% $289,820 $1,159,280 $2,236 $3,812,768

J = Underwood Land = amalgamated area of 1,705.3 m2 (comprising: 90 Underwood = 930 m2 and 93 Underwood = 775.3m2)

• For the purposes of this table, figures are rounded up to the nearest dollar ** Actual calculation of J x I (unrounded), then rounded up to nearest dollar 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: 19 December 2018