Barkat v Roads and Maritime Services

Court of Appeal (NSW)|2019-07-31|Before: Leeming JA, Molesworth AJ

Introduction The issue in this appeal is the quantum of compensation that should be paid to the appellants, Mr Mark Barkat and Ms Rubina Barkat (Mr & Mrs Barkat), in consequence of the compulsory acquisition by the respondent, Roads and Maritime Services (RMS), of land situated in Underwood Road, Homebush (the Underwood Land). Immediately prior to the compulsory acquisition, Mr & Mrs Barkat were the registered proprietors of an estate in fee simple in the Underwood Land. On 18 December 2015, the Underwood Land was acquired by RMS under the Roads Act 1993 (NSW) (the Roads Act). On 7 January 2016, the Valuer-General determined that the amount of compensation to be paid for the compulsory acquisition was $3,095,590, being $2,900,000 for market value and $195,590 for disturbance. RMS offered compensation to Mr & Mrs Barkat in that sum.

Mr & Mrs Barkat rejected the offer and, on 5 April 2016, commenced Class 3 proceedings in the Land and Environment Court of New South Wales (the L&E Court) objecting, under s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Just Terms Act), to the amount of compensation offered by RMS. On 18 December 2018, for reasons published on that day, a judge of the L&E Court (the primary judge) determined that RMS pay compensation to Mr & Mrs Barkat by as follows:

Market value - $4,300,000;
Disturbance (legal costs, valuation fees, financial costs relating to actual use, loss of costs associated with the development application and stamp duty) - $332,684.95. The primary judge also ordered RMS to pay Mr & Mrs Barkat's costs of the proceedings in the L&E Court.

Notice of intention to appeal from the orders made by the primary judge was served on RMS on 10 January 2019. By notice of appeal originally filed on 14 March 2019 and re-lodged on 11 April 2019, Mr & Mrs Barkat appealed from the orders made by the primary judge. The appeal is brought under s 57(1) of the Land and Environment Court Act 1979 (NSW) (the L&E Court Act), under which appeals are limited to questions of law.

The Underwood Land

The Underwood Land consists of three separate parcels as shown in the survey plan set out in Appendix 1 to these reasons. The parcels are known as 90 Underwood Road and 92 Underwood Road. At the relevant date, two freestanding dwellings were erected on the Underwood Land, one of which was a brick dwelling, the other being a weatherboard dwelling. Each was used for the purposes of a boarding house. Boarding house use was unlawful because consent had never been sought for such a use.
Three easements affect the Underwood Land, as shown on the survey plan in Appendix 1. The easements consist of a 10.06 m wide drainage easement, a 3.66 m variable width open stormwater drainage channel easement and a 3.66 m wide drainage easement. At the time of the acquisition by RMS, the Underwood Land was zoned under the Strathfield Local Environmental Plan 2012 (SLEP2012) as R3 - medium density residential land.

The Evidence

The evidence before the L&E Court included both lay evidence and opinion evidence. The lay evidence consisted of an affidavit sworn by Mr Barkat on 19 May 2016, which was read without objection except as to two paragraphs. The primary judge allowed both paragraphs. Mr Barkat was not cross-examined on his affidavit. Thirty three documents were annexed to the affidavit and were addressed by Mr Barkat in the affidavit.
In addition, opinion evidence was adduced from 12 witnesses whose area of expertise consisted of town planning, land surveying, quantity surveying, hydrology, easements and valuation. Ultimately, the issues before this Court depend upon the evidence of two valuers, Mr Mark Ellis, who gave evidence on behalf Mr & Mrs Barkat, and Mr David Lunney, who gave evidence on behalf of RMS. Messrs Ellis and Lunney provided joint reports dated 20 October 2017, 1 November 2017 and 4 November 2017. They incorporated into their joint report of 4 November 2017 a spreadsheet of comparable sales of R3 zoned land analysed by them. However, they proceeded on different assumptions.
Mr Ellis proceeded on the basis that the highest and best use of the Underwood Land was that of land banking, having regard to what was contended to be the strong potential and likelihood for rezoning to a R4 high density residential zone or change of planning controls without rezoning, by the first quarter of 2019. Mr Ellis assumed a residential development could be built on the Underwood Land having a gross floor area (GFA) of 10,000 square metres. Mr Ellis identified eight potentially comparable sales. In doing so, he acknowledged that there had not been many sales in the immediate area but that the sales identified by him reflected land that had use potential similar to the Underwood Land, based on factors including, but not limited to, location, area, date of sale and zoning.
Mr Ellis concluded that the Underwood Land had a conservative market value range at the date of acquisition of from $2,500 per square metre to $3,200 per square metre of GFA and, for practical purposes, adopted a rate of $2,800 per square metre. Mr Ellis then determined the market value of the Underwood Land by multiplying the derived rate of $2,800 per square metre by the determined 10,000 square metres GFA to identify a prima facie market value of $28 million. Recognising the need to adjust that figure for the risk of rezoning not occurring or being delayed, Mr Ellis allowed for a reduction of 7% for that risk. He also adjusted the figure at the rate of 5% per year for the 3.25-year period in which a purchaser would need to wait for the Underwood Land to be rezoned. Making those adjustments, Mr Ellis arrived at a final figure of $21,900,000.
Mr Lunney, on the other hand, proceeded on the basis that the highest and best use of the Underwood Land was a town planning use that was permissible under the current planning regime and that the highest and best use of the Underwood Land would be that of two individual dwellings, rather than as an amalgamated development. He therefore searched for sales of properties located within the same zoning as the Underwood Land, in close proximity to it and with the same or similar potential for future rezoning.
Mr Lunney identified four sales of such land, all situated in Ismay Avenue, Homebush. In order to establish equivalence between those sales and the Underwood Land, Mr Lunney made various adjustments to each of the sales in Ismay Avenue, including an adjustment for "flooding, easements and canal". Mr Lunney concluded that greater weight should be given to two of the sales in Ismay Avenue because of their closer proximity and the sales being closer in time. Mr Lunney then derived adjusted values for 90 Underwood Road and 92 Underwood Road. On that basis, he determined the respective market value of 90 Underwood Road and 92 Underwood Road as being $1,700,000 and $1,500,000. That produced a total market value for the Underwood Land at the material date of $3,200,000.

Relevant Statutory Provisions

Two of the objects of the Just Terms Act are:

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
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.

Section 54(1) of the Just Terms Act relevantly provides that the amount of compensation to which a person is entitled is such amount as, having regard to all relevant matters under Part 3 of the Act, will justly compensate the person for the acquisition of the land. Under s 55, in determining the amount of compensation to which a person is entitled, regard must be had to the following matters only:

the market value of the land on the date of its acquisition;
any special value of the land to the person on the date of its acquisition;
any loss attributable to severance;
any loss attributable to disturbance;
the disadvantage resulting from relocation; and
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.

Under s 56(1) of the Just Terms Act, the term market value of any 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. Section 56(1)(a) provides that, in determining that value, 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 must be disregarded. The operation of s 56(1)(a) is of critical significance in this appeal.
Section 59 defines the term loss attributable to disturbance of land when used in the Act. It is unnecessary to consider that definition further. There is no issue in the appeal concerning the amount awarded by the L&E Court for disturbance.

Reasons of the Primary Judge

The primary judge noted that the parties agreed on a summary of the relevant general valuation principles guiding the determination of the market value of land. It is convenient to restate those principles. After doing so, I shall explain the significance of the WestConnex M4 East Project (the WestConnex Project) and then deal with the valuation issues addressed by the primary judge.

Relevant Valuation Principles

In proceedings of the kind in which the primary judge was engaged, the L&E Court acts as a judicial valuer. [1] In that capacity, the L&E Court is not confined to accepting the case of one party or the other party, and may use the evidence adduced in the proceedings to make its own assessment of the compensation payable for compulsory acquisition. [2] That assessment will often lie at a point somewhere between the evaluations contended for on behalf of the parties. As a general rule, in determining compensation, any doubt should be resolved in favour of a more liberal estimate of value. [3]
The market value of land for the purposes of s 55 of the Just Terms Act is to be determined on the basis of the highest and best use of the land. [4] Accordingly, the L&E Court must approach the task of determining compensation by determining the most profitable potential use of the land in question. [5]
The parties to the hypothetical sale contemplated by s 56(1) are to be assumed to be fully informed and to have made all proper inquiries. [6] The land must be valued at the relevant date in its existing condition with all its potentialities as potentialities. [7] The parties to the hypothetical sale are also assumed to be perfectly acquainted with the land and cognisant of all circumstances that might affect its value. [8] In the absence of available market evidence, the L&E Court, as judicial valuer, must make the best guess that can be made. [9] Events subsequent to the date of acquisition are to be ignored except in so far as they may be relevant as confirmation of foresight. [10]

Significance of the WestConnex Project

As foreshadowed above, [11] a significant issue before the primary judge was the requirement in s 56(1)(a) of the Just Terms Act to disregard, for the purposes 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 Underwood Land was acquired. RMS acquired the Underwood Land for the purpose of the WestConnex Project. RMS contended that, for an extended period of years, planning and transportation strategies inexorably advanced and explained the WestConnex Project. One of those strategies was the draft Parramatta Road Urban Transformation Strategy, published by Landcom (the PRUTS).
As indicated above, [12] Mr & Mrs Barkat contended before the primary judge that the highest and best use of the Underwood Land was that of land banking, having regard to what they contended was the strong potential and likelihood of rezoning of the Underwood Land to a R4 high density residential zone by the first quarter of 2019, or change of planning controls without rezoning. They contended that the draft PRUTS would have sent a significantly overt signal to the market that the Underwood Land would be rezoned to R4 in the short term, with accompanying amendment of planning controls permitting more intensive forms of residential accommodation. They contended that, accordingly, development consent would be granted for their prospective residential building developments.
Mr & Mrs Barkat relied on the assessment of Mr Ellis that the highest and best use would be residential apartments extending over some 10,000 square metres, which would be achievable after the Underwood Land was rezoned to R4 high density residential, on the basis of the draft PRUTS. They contended that such rezoning to R4 would have had no causal relationship with the carrying out of WestConnex Project.
RMS contended, however, that the strategies outlined above confirmed that the public purpose that was being implemented was not just a road-building project and that the WestConnex Project was the catalyst for a co-ordinated strategy intended to lift "the West" in general and, relevantly, the corridor or locality of Parramatta Road in Homebush (the Parramatta Road Corridor). The Underwood Land falls within the Parramatta Road Corridor. RMS contended that the draft PRUTS was part of the public purpose for which the Underwood Land was acquired and must therefore be disregarded in assessing compensation.
That is to say, the draft PRUTS was part of a body of strategic documents connected with the public purpose consisting of the WestConnex Project. Since the increase in value of the Underwood Land was attributable to the likelihood of rezoning to R4 and that rezoning was the result of the draft PRUTS, which was part of, interconnected with, or a consequence of, the WestConnex Project, that increase in value must be disregarded. Accordingly, RMS relied on Mr Lunney's opinion that the highest and best use of the Underwood Land would have been two individual dwellings and not an amalgamated development site, since rezoning from R3 to R4 would be required before the Underwood Land could be redeveloped.
The primary judge concluded that the contention on behalf of Mr & Mrs Barkat that there was no causal relationship between WestConnex and the draft PRUTS was unsustainable. His Honour held that there was an inextricable nexus 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 Homebush precinct of the Parramatta Road Corridor, identified in the draft PRUTS, which includes the Underwood Land. His Honour considered that the inextricable nexus was so close that the WestConnex Project effectively charged each authority to co-operate and co-ordinate within the overall scheme to carry out their respective roles to implement the scheme, orchestrated to occur in a connected matter. His Honour considered it to be irrelevant that RMS was not the responsible public entity who would be charged with putting a proposed local environmental plan amendment into the public arena, thereby leading to an awareness in the market of the rezoning to R4 of the Underwood Land.
The primary judge then referred to the huge volume of planning and transport policies and strategies that was in evidence and to which the opinion evidence repeatedly referred. His Honour recorded that there were some 42 documents providing background to the development of relevant planning and transport strategies in addition to some 14 planning instruments, policies and guidelines and environmental impact studies for WestConnex M4 East, the Secretary's environmental assessment report and finally the instrument of approval. His Honour recorded that his review of that material was facilitated by a document provided by RMS by way of submission, titled "Public Purpose - Key Documentary References", which his Honour attached to his reasons as Annexure A.
The primary judge characterised Annexure A as providing a convenient table of pertinent extracts from many of the documents reviewed by the Court, effectively providing, most critically, as his Honour said, a "road map" to many relevant statements throughout a continuum of strategic documents, from June 2010 up to and past the date of acquisition of 18 December 2015. His Honour found that the relevant documents repeatedly confirmed that one of the prime objectives of the WestConnex Project 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. His Honour adopted the submission constituted by Annexure A as a convenient means of setting out a summary of confirmatory statements in strategic documents, which underpinned his Honour's conclusions regarding public purpose.
The primary judge concluded that, had the WestConnex Project not been proposed, the transformation of the development prospects for the Underwood Land, as mooted by Mr & Mrs Barkat and their witnesses, would not have occurred and the Underwood Land would have remained within the R3 zone, blighted by all the identified problems within the Parramatta Road Corridor as described in the many documents. His Honour concluded that the traffic congestion, traffic noise and all the other associated adverse implications for urban development would have remained as disincentives for renewal.
On the other hand, his Honour considered that, over the long term, with the population of the city metropolis ever increasing, and with the location of the Underwood Land being within reasonable proximity, but not close convenience, to two railway stations, greater redevelopment interest would gradually have arisen over an extended number of years. However, his Honour concluded that the Court's focus must be on an assessment of hypothetical development potential of the Underwood Land as at December 2015, disregarding WestConnex and all the associated strategic planning initiatives that are an integral part of the public purpose.
The primary judge concluded that, but for that public purpose, which his Honour concluded should be disregarded, the Underwood Land would have remained zoned R3 for an indeterminate number of years. His Honour's conclusion to that effect was influenced by the analysis of "many of the strategic planning and transport documents", passages from some of which were contained in the Annexure A. His Honour was satisfied that the WestConnex Project was determined by government to be necessary in order to address the many congestion problems identified in, inter alia, the Parramatta Road Corridor. His Honour accepted that the draft PRUTS was inextricably connected with the WestConnex Project, which was the public purpose for which the Underwood Land was acquired.
The primary judge did not consider it necessary 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 WestConnex Project. His Honour was 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 documents in evidence, including the draft PRUTS. His Honour had no doubt that the Parramatta Road Corridor, which included the Underwood Land, was specifically identified as part of an area targeted for urban regeneration as part of the WestConnex Project. Accordingly, his Honour concluded, the envisaged planning changes promoted by the draft PRUTS, including the predicted rezoning of the Underwood Land from R3 to R4, was within the public purpose and were therefore to be disregarded in determining compensation.

Highest and Best Use

In the light of the conclusion indicated above, the primary judge found 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 contemplated by Mr & Mrs Barkat, in accordance with expected R4 zoning, but that the relevant context for the valuation 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 a "relatively unattractive plac[e] to live, work or socialise". [13] His Honour referred to the efforts of Mr & Mrs Barkat over many years to obtain development consents for a range of potential uses for the Underwood Land as indicating the problematical state that his Honour considered to underlie potential development of the Underwood Land. His Honour found that a hypothetical prospective purchaser would be advised of, and would have regard to, the history of development applications and would therefore consider the implications of successive refusals, thereby being forewarned of the difficulties of the Underwood Land and its immediate locale.
The primary judge found that the hypothetical prospective purchaser would be informed that any renewal of the area within which the Underwood Land lay would be long-term although there would be an awareness of the need to rejuvenate the district. Accordingly, his Honour said, it would not be a case of there being no likelihood of efforts to redress the issues, but rather how far into the future it was necessary to consider such efforts. His Honour found that the hypothetical prospective purchaser would be advised of such issues and the potential for considerable delay. While part of the remedy of addressing the transport issues and thereby allowing the remedy of those transport issues to be the catalyst for change would be obvious, his Honour considered that the degree of uncertainty and so associated delays would be considerable, and would be likely to weigh upon the hypothetical purchaser. The highest and best use must, his Honour said, be identified in that context.
The primary judge concluded that the hypothetical prospective purchaser would seek to buy the Underwood Land cognisant of its inherent problems with the object of seeking to develop it to its maximum potential under the R3 zoning. His Honour rejected the contention by RMS that the highest and best use would be two individual dwellings rather than as an amalgamated development site. His Honour accepted 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 be 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 that a prospective purchaser would be prepared to offer. His Honour concluded that the most accurate characterisation of the use of the Underwood Land as at the date of acquisition was that of the land banking, in circumstances where the land in question remained in the R3 zone.

Comparable Sales and Adjustments

The primary judge considered that the direct comparison method of valuation was appropriate. [14] Accordingly, his Honour focused on sales of land in the R3 zone, adjusting each sale to arrive at relativity. A joint report of Mr Lunney and Mr Ellis of 4 November 2017 included a table of ten sales, six of which were identified by Mr Ellis as being comparable and four of which were identified by Mr Lunney as being comparable. The table made adjustments for each sale to ensure comparability with the Underwood Land. Factors for which adjustments were considered or made were:

market movement;
the advantage of an existing DA approval;
lot size;
location;
amalgamation;
potential influence of the PRUTS;
flooding and other development constraints; and
zoning and development potential. The table was reproduced by his Honour as an attachment to his Honour's reasons and marked as Annexure B.

RMS contended that, at the time of acquisition, the hypothetical purchaser would have been advised that the Underwood Land was burdened by a number of constraints that would affect its development potential and that flood constraints would have consequences for the time, risk and cost to develop the Underwood Land under its current R3 zoning compared to other properties. Specifically, RMS contended, the hypothetical purchaser would be advised as to the following matters:

the Underwood Land is burdened by the stormwater channel;
no assumption could be made that the Underwood Land would be rezoned, in fact any rezoning was highly unlikely and even if it did occur would only happen from 2021;
no assumption could be made that the height and floor space ratio (FSR) controls applicable to the Underwood Land would increase;
the stormwater channel and easements could impose a considerable risk and cost burden on developing the Underwood Land; and
obtaining development consent and consent from Sydney Water for the proposed developments would be time-consuming, costly and, ultimately, unlikely to be forthcoming.

The primary judge concluded that the significance of the flooding issues and the consequential flood risk management considerations were such that any prospective purchaser would very seriously consider the implications of flooding and that those considerations would negatively influence the purchase price that might be offered by a hypothetical prospective purchaser. His Honour concluded that the prospective purchaser would approach their acquisition cautiously, given the hydrological issues, but nevertheless would not be deterred. His Honour concluded, nonetheless, that the flooding potential of the Underwood Land would have been a significant factor influencing price but the hypothetical prospective purchaser would have been prepared to proceed but only offer a price significantly discounted due to the flooding consideration. The prospective purchaser would have assumed that development consent would eventually be obtained, following a delayed process.
Mr Lunney adopted a negative adjustment of 25% to take account of the hydrological issues whereas Mr Ellis adopted a negative adjustment of 15%. The primary judge perceived a strong message in 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 was conceivable. His Honour considered that the appropriate discount with respect to the potential flooding issues was a negative adjustment of 20%. His Honour considered that that negative adjustment would embrace any downward adjustment necessary to reflect a required precautionary approach in relation to the potential floodway impact and climate change.
The primary judge then gave consideration to the three easements affecting the Underwood Land. His Honour accepted that the various legal obstacles associated with the easements would be capable, with perseverance, of being overcome. His Honour expected that Sydney Water would reach the opinion that its legal rights in the easements would not be compromised and that the pipes, channel and engineering works protected by the easements would be capable of being protected and continue to be able to serve the purpose for which they were constructed. His Honour concluded that the adjustment for the flooding issues would embrace the necessity to design remedies that would be in the form of easement modifications and, conceivably, drainage channel realignment.
The primary judge proceeded on the basis of treating the Underwood Land as a consolidated development site. Accordingly his Honour adopted a positive 10% adjustment propounded by Mr Ellis, reflecting the greater potential of an amalgamated Underwood Land. His Honour then referred to the negative adjustment of 20% by reason of the difficulty, delays and costs flowing from the floodway and easement issues.
The primary judge accepted that it was desirable, in order to avoid risky adjustments, to identify comparable sales with lot sizes as near as possible to the size of the Underwood Land, being 1,705 square metres, since his Honour accepted that the highest and best development potential of the Underwood Land was most likely to be achieved with the parcels consolidated into one development site. His Honour therefore considered that it was plausible for four of the properties in Annexure B, situated in Ismay Avenue, Homebush, which is parallel to Underwood Road, to be similarly the target of aggregation.
The primary judge held that smaller lots tend to achieve higher per-square-metre sales than larger lots. His Honour accepted a note in the joint report that, despite the benefits of amalgamation and economies of scale, the available market evidence generally indicates that the value of a development site decreases as the size and scale of the development increases. His Honour referred to a draft prepared by Mr Ellis (the Scatter Plot Analysis) that was said to demonstrate that general market phenomena. However, his Honour accepted that an allowance for the advantage of the Underwood Land over the Ismay Avenue properties was warranted on account of the potential enjoyment by the Underwood Land in terms of its immediate compliance with the minimum lot size for residential flat building development in the R3 zone. His Honour considered that that factor was a real benefit of the Underwood Land. Accordingly, rather than accept the negative 20% adjustment suggested by both valuers, his Honour concluded a negative adjustment of 10% was justified, based on the sales in Ismay Avenue.
The primary judge considered that the sales of properties in Ismay Avenue were comparable, albeit that each of the four properties was significantly smaller than the Underwood Land. His Honour did not accept that the interplay between amalgamation and land size should result in a negative 10% adjustment. His Honour considered that the positive 10% adjustment for amalgamation effectively cancelled out the negative 10% adjustment for land size, resulting in a neutral adjustment in relation to those two factors.
The primary judge referred to a further attachment to his reasons, described as Annexure C, which was an adjustment table for the sales of the properties in Ismay Avenue. Annexure C is set out in Appendix 2 of these reasons. Thus, his Honour started with the sale price of 60 Ismay Avenue on 12 November 2015 of $1,660,000. That figure was adjusted to reflect market movement to $1,693,200. A positive adjustment of 10% for amalgamation and a negative adjustment for land size of 10% cancelled each other out. A negative adjustment of 20% for floodway and easements, amounting to $338,640 gave an adjusted sale price of $1,354,560. The area of the 60 Ismay Avenue property was 537.4 square metres. The value per square metre of the 60 Ismay Avenue property of $2,521 was derived by dividing $1,354,560 by 537.4. The derived value of the Underwood Land was then calculated at $4,298,346 by multiplying $2,521 by 1,705.3, being the area of the parcels that made up the Underwood Land. His Honour concluded that compensation should be arrived at on the basis of the most liberal estimate. His Honour therefore took the highest adjusted figure, being the figure for 60 Ismay Avenue of $4,298,346, which his Honour rounded up $4,300,000 for the aggregated Underwood Land.

The Appeal

Before dealing with the grounds of appeal, it is necessary to say something about the nature of the appeal, which is limited to a question of law. I shall then deal with the application by Mr & Mrs Barkat to adduce additional evidence before addressing the specific grounds of appeal.

Question of Law

As I have indicated, the right of appeal conferred by s 57 of the L&E Court Act is limited to appeals on a question of law. That requires the Court to identify a decision on a question of law made by the Court below. That identification is not merely a precondition to a right of appeal but identifies the subject matter of the appeal. Secondly, it must be demonstrated that the question of law was decided erroneously. What will amount to an error of law in any particular case will depend upon context. However, it is clear that neither erroneous findings of primary fact nor the drawing of illogical or inappropriate inferences will of themselves constitute an error of law. A perverse or unreasonable finding is not without more an error of law. If the reasoning whereby the finding of fact is arrived at is shown to be unsound, that does not suffice for there to be an error on a question of law.
A failure to comply with a valuation principle can, but will not necessarily be, an error of law. [15] While the nature and extent of adjustments in a valuation case may be contestable, it does not follow that an error of law is disclosed. Whether a sale of a particular parcel of land is comparable so as to assist in the valuation of the subject land is a matter of degree and judgment. [16] There may be an error of law if a finding that a particular sale is comparable with the hypothetical site sale required for a valuation was not reasonably possible or open the evidence. There may be an error of law in making an adjustment to a particular sale to ensure comparability if the adjustment was not reasonably possible or open on the evidence. [17] On the other hand, almost every sale that is said to be comparable to the hypothetical sale will require an adjustment. Whether or not an adjustment to a sale that is said to be comparable should be made, and if so by what amount, is a matter of degree and of judgment. [18]

Additional Evidence

Certain of the arguments of Mr & Mrs Barkat rely upon the admission of further evidence on the appeal that was not before the primary judge. The new evidence was contained in a supplementary blue book and consists of some nine documents amounting to a total of 364 pages. No notice of motion has been filed seeking leave to adduce further evidence. The only evidence relied on in support of the application made in the course of the hearing was an affidavit sworn by Mr Barkat on 26 July 2019, in which he described in some detail the relevance of the additional material on which Mr & Mrs Barkat seek to rely. In the affidavit, Mr Barkat asserted that he is entitled to rely on the additional material because of a statement that he identified in the website of the Supreme Court of New South Wales as to the contents of the blue book. The website states that the blue book contains the exhibits from the court or tribunal below and "will include any additional material relevant for the appeal". Mr Barkat asserts that "the clear and plain words of the website" have primacy over s 75A(8) of the Supreme Court Act 1970 (NSW). That contention is simply wrong. Section 75A requires Mr & Mrs Barkat to establish "special grounds" before this Court will receive further evidence from orders made after a hearing on the merits. The discretion conferred on the court by s 75A is unfettered but the requirement for special grounds reflects the importance of finality of litigation. [19]
As a general rule, three conditions need to be satisfied before fresh evidence will be admitted. First, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial. Secondly, the evidence must be such that there is a high degree of probability that there would be a different result. Thirdly, the evidence must be credible. The last requirement is satisfied in that the documents are public documents. Having regard to the limit on the jurisdiction of the Court to entertain the appeal, namely the limitation to a question of law, the second requirement is unlikely to be satisfied. In any event, for the most part, it is not disputed by Mr & Mrs Barkat that the first prerequisite was not satisfied, in that much of the material was clearly available and could have been obtained for use at the trial. Much of the difficulty for Mr & Mrs Barkat in seeking to rely on the additional evidence is that they seek to advance arguments and contentions that were not advanced before the primary judge. The application to adduce additional evidence should be refused.

Grounds of Appeal

Mr & Mrs Barkat rely on seven grounds of appeal, which may be summarised as follows: Ground 1: The Court erred in not applying an adjustment to the comparable sale primarily relied upon by the primary judge to recognise the fact that the Underwood Land had collectively or individually a larger land area than the area of the property that was the subject of comparable sale (the Ismay Avenue Land). Ground 2: The Court erred in making a negative 10% adjustment to the comparable sale in recognition of the evidence of values that larger lot sizes obtain a lower rate per square metre in the market than parcels of smaller size. Ground 3: The primary judge erred in adjusting the sale price in respect of the Ismay Avenue Land to reflect the nature and extent of flooding on the Underwood Land when the Ismay Avenue Land was also flood affected. Ground 4: The primary judge erred by not making a more significant adjustment to recognise that the Underwood Land, consisting of three parcels, had sufficient land area to enable it to be developed for residential flat buildings, whereas a developer of the Ismay Avenue Land would need to acquire further land by way of amalgamation to achieve that capacity. Grounds 5 and 6: The primary judge erred in disregarding the prospect that the Underwood Land may have been rezoned from R3 - medium density residential to R4 - high density residential, thereby allowing denser development in circumstances where:

there was no evidence upon which the Court could base a finding that the potential for R4 zoning was caused by the proposal to carry out the public purpose for which the Underwood Land was acquired by RMS; and
the primary judge erred in the application of the appropriate principles derived from case law. Ground 7: the primary judge erred in disregarding the prospect that at the date of acquisition the Underwood Land may have been rezoned to R4 independent of the public purpose.

It will be convenient to deal with the grounds under headings as follows:

Adjustments (Grounds 1 to 4);
Significance of the draft PRUTS (Grounds 5 and 6);
Prospect of rezoning apart from the draft PRUTS (Ground 7).

Adjustments

The first four grounds of appeal constitute complaints by Mr & Mrs Barkat concerning adjustments made by the primary judge to the sale of the Ismay Avenue Land in order to arrive at a comparability between that sale and the hypothetical sale of the Underwood Land. The primary contention of RMS is that none of the grounds involves any error of law. Mr & Mrs Barkat complained that the primary judge failed to take account of various factors or wrongly applied various factors in making adjustments. The appropriate adjustments to render a sale comparable are matters of degree and judgment and are findings of fact though contentions on behalf of RMS are well founded.
Further, even if it were demonstrated by Mr & Mrs Barkat that the primary judge adopted a wrong approach in making the four adjustments, a further significant impediment for Mr & Mrs Barkat is that the submissions now made to this Court were not made to the primary judge. The adjustments were based on a joint report by Messrs Lunney and Ellis of 4 November 2017. Submissions were made that Mr & Mrs Barkat did not have a full opportunity to consider the joint report, which was produced after the first two days of hearing. Mr Lunney and Mr Ellis gave evidence before the primary judge and each was cross-examined. No complaint was made by senior counsel for Mr & Mrs Barkat that he had had no adequate opportunity to consider the draft report. In any event, there is no ground of appeal alleging a denial of procedural fairness. It is necessary to consider the first four grounds against those general comments.
Area of land: Mr & Mrs Barkat contend that it was unreasonable for the primary judge to fail to make appropriate adjustments to the sale of the Ismay Avenue Land to take account of the fact that the two parcels of the Underwood Land had larger land area than the Ismay Avenue Land. They contend that his Honour ought to have made a positive adjustment in the valuation process.
In his first report, Mr Lunney accepted that there should be an adjustment for the difference in area between the Ismay Avenue Land and the Underwood Land. Mr Lunney suggested a 20% positive adjustment to the sale price for the Ismay Avenue Land and for 90 Underwood Road and a 10% positive adjustment to the sale price of the Ismay Avenue Land in respect of 92 Underwood Road. 90 Underwood Road has an area of 930 square metres, 92 Underwood Road has an area of 775.3 square metres and 60 Ismay Avenue has an area of 537.4 square metres.
Mr Lunney's original report was prepared on the assumption that the appropriate basis for valuation of 90 Underwood Road and 92 Underwood Road was as individual parcels. However, when it came for Messrs Lunney and Ellis to prepare their joint report, they did so on the basis of amalgamation of 90 Underwood Road and 92 Underwood Road. On that basis, there was no need for any adjustment for the respective areas. In the calculations contained in Annexure B to the reasons of the primary judge, which was a schedule in the joint report, the area of land is taken into account in arriving at the dollar rate per square metre. It was never put to either of the valuers that an additional adjustment should be made by reason of the fact that the area of the Underwood Land, being the two parcels in the Underwood Land, was greater than the area of the Ismay Avenue Land. Mr Ellis clearly recognised that, subject to the adjustments made in Annexure B to the reasons for judgment, the sale of 60 Ismay Avenue was comparable to the hypothetical sale of the Underwood Land. There was no appealable error by the primary judge.
Size of Land: Mr & Mrs Barkat sought to draw a distinction between an adjustment for the respective areas of parcels being compared and an adjustment for the size. They accepted that adjustment for size of land was not raised by either valuer in their original reports and only arose during the course of their joint consultation. Mr & Mrs Barkat contend that they were mistaken in their application of a negative adjustment as pertained to the Underwood Land, considering that the highest and best use was as a development site. They contend that an adjustment for the size of the land should be made based on the concept that smaller lots tend to generate a higher dollar rate per square metre than larger parcels. They sought to rely on evidence of sales of land situated in Box Hill, New South Wales during 2017. That material was not before the primary judge and there is no basis for permitting it to be adduced as evidence before this Court.
Mr & Mrs Barkat also relied on sales of parcels of land in Courallie Avenue, Homebush West during 2016, evidence of which was before the primary judge. They contend that that material demonstrated that an adjustment for size of land was not valid in circumstances where the Underwood Land is located in a zone where greater developments are permitted once lots of sufficient size are consolidated. They contend that the primary judge was misled by the inadequate evidence from both valuers and failed to follow proper valuation principles, thereby falling into error of law because an adjustment for size of land in the circumstances was unreasonable.
The fact that the Underwood Land was larger than the Ismay Avenue Land was expressly considered by the primary judge in finding that a negative adjustment for land size should be made. However, his Honour found that a positive adjustment for the benefit of amalgamation should also be made for reasons explained by his Honour in clear terms. Thus, his Honour said, the positive 10% adjustment for amalgamation effectively cancelled out the negative 10% adjustment for land size, resulting in a neutral adjustment in relation to those two factors. There was no appealable error by his Honour.
Amalgamation of Land: Mr & Mrs Barkat contend that it was unreasonable for the primary judge to apply such a minimal adjustment for the amalgamation of the parcels of the Underwood Land. They contend his Honour ought to have found that, because the parcels of the Underwood Land were in effect consolidated and amalgamated, a substantial positive adjustment should have been made in the comparison with the Ismay Avenue Land. Again, Mr & Mrs Barkat contend that his Honour was misled by the valuers in relation to the proper quantum applicable for an adjustment for amalgamation. Thus, it was only after the joint consultation and the joint reports that an adjustment was introduced on this basis.
Mr & Mrs Barkat sought to introduce additional evidence on the question of amalgamation, referring to sales of land in The Crescent, Homebush West, evidence in respect of which was not before the primary judge. No basis has been established for admitting it in this Court.
The primary judge made a finding that a positive adjustment of 10% for the benefit of amalgamation in relation to the Underwood Land should be made. In doing so, his Honour expressly adopted the evidence of Mr Ellis. It is clear that such an adjustment was open to his Honour in the light of the evidence before him. There is no reason why Mr & Mrs Barkat should not be held to the case conducted on their behalf by senior counsel before the primary judge. There was no appealable error on his Honour's part.
Flood Affectation: Mr & Mrs Barkat contend that an error of fact in relation to flood affectation of the Underwood Land as compared with the Ismay Avenue Land was an error of law because there was no evidence to support the inference drawn by his Honour. They assert that it was unreasonable for his Honour to have applied a negative adjustment by reason of flood affectation of the Underwood Land in circumstances where, they assert, there was no evidence before his Honour to indicate that the Ismay Avenue Land was free of flood affectation. Rather, they assert, there was evidence to suggest that the Ismay Avenue Land had similar flood affectation to that of the Underwood Land.
There was in fact no finding by the primary judge that the Ismay Avenue Land was free of flood affectation. The negative 20% adjustment made by his Honour was for flood and easements. The adjustment related not only to the liability of the Underwood Land to flooding but also to the difficulty, delays and costs of addressing the floodway/easement issues and the impact of "anticipated climate change".
While the evidence before the primary judge suggested that the Ismay Avenue Land was flood affected, that affectation did not have the same significance as the evidence in relation to the Underwood Land. Thus, it was common ground that the Underwood Land was burdened by numerous constraints, including that it was affected by a high hazard floodway. The primary judge found that the Underwood Land was flood liable and was burdened by the three easements in favour of Sydney Water described above. His Honour accepted the agreed position of the hydrologists and there was no dispute as to whether the Ismay Avenue Land was flood affected. Mr Lunney's opinion was that the Ismay Avenue Land, although designated as being flood liable, was less constrained than the Underwood Land. He was not challenged on that opinion. The hydrologists agreed in oral evidence that the Ismay Avenue Land was affected only in an area of the front yard, was shallow and would be characterised as low hazard floodway.
The primary judge ultimately found that the hypothetical purchaser would seek a discount of the purchase price for the Underwood Land to take account of both the extra costs and the extra delays associated with overcoming the issues in relation to the three easements. His Honour characterised the seriousness of those issues as being particularly acute, given that, on the evidence of the hydrologists, the Underwood Land was located at the confluence of a number of floodway channels. Once again, Mr & Mrs Barkat sought to rely on additional evidence. No basis for admitting that evidence has been demonstrated and it should not be admitted. This ground of complaint also fails.

Significance of the Draft PRUTS

Mr & Mrs Barkat contend that it was unreasonable for the primary judge to rely on case law to justify his Honour's finding that the WestConnex Project was sufficiently causally linked to the imminent rezoning of the Underwood Land. They contend that it was unreasonable for his Honour to apply s 56(1)(a) of the Just Terms Act so as to disregard the increase in the value of the Underwood Land caused by the carrying out of or the proposal to carry out the WestConnex Project. Section 56(1)(a) requires that any increase or decrease in the value of the relevant land caused by the carrying out of, or the proposal to carry out, the public purpose for which the relevant land was being acquired must be disregarded for the purposes of determining the amount that would have been paid by a willing but not anxious buyer for the purchase of the relevant land from a willing but not anxious seller. Mr & Mrs Barkat complain that the effect of his Honour's decision is to propound the proposition that the decision of RMS to carry out the WestConnex Project will result directly in the rezoning of the Homebush area in which the Underwood Land is located. They assert that such a proposition is absurd because RMS has no power to rezone land. They say that his Honour's finding of a direct relationship between the WestConnex Project and the imminent rezoning of the Homebush area is an error of law because there was no evidence before his Honour to indicate that the Homebush area would be rezoned as a result of the WestConnex Project.
Mr & Mrs Barkat contend that before it was possible to conclude that there was a direct relationship between the WestConnex Project and the imminent rezoning of the Homebush area, it would be necessary to establish that the WestConnex Delivery Authority, which is responsible for the construction of the tunnels that constitute part of the WestConnex Project, was the same as or so closely linked with UrbanGrowth NSW, the organisation responsible for proposing planning changes along the Parramatta Road Corridor through the draft PRUTS, such that it could be concluded that the WestConnex Delivery Authority and UrbanGrowth NSW should be considered the same organisation.
Mr & Mrs Barkat pointed to his Honour's conclusion 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 Project documents in evidence, including the draft PRUTS. His Honour found that the Parramatta Road Corridor, which includes the Underwood Land, was specifically identified as part of an area targeted for urban regeneration as part of the WestConnex Project. Accordingly, his Honour held, the planning changes envisaged in and promoted by the draft PRUTS, including the predicted rezoning of the Underwood Land from R3 to R4, is within that public purpose. Mr & Mrs Barkat complain that the draft PRUTS is not a WestConnex Project document but was a document produced by UrbanGrowth NSW. They assert that there was evidence to indicate that the WestConnex Delivery Authority gave no consideration to the draft PRUTS when planning the WestConnex Project. They point to the minutes of a meeting held on 15 October 2015 which was attended by Mr Barkat, representatives of UrbanGrowth NSW and Mr Matthew Webb of WestConnex Delivery Authority. The minutes record that Mr Barkat asked whether the draft PRUTS would be implemented if "WestConnex doesn't happen". Mr Webb is recorded as replying: "No consideration was given to the Draft [PRUTS] when determining WestConnex."
Mr & Mrs Barkat also refer to a statement in a report prepared for the purposes of the proceedings in the L&E Court by Mr Murray Donaldson, a town planner. Mr Donaldson stated in his report that a representative of UrbanGrowth NSW advised him that UrbanGrowth NSW did not have regard to the WestConnex Project in preparing the draft PRUTS as the final alignment or location of portals was not known at that time. Mr & Mrs Barkat contend that in the light of that evidence it is difficult to rationalise a finding that UrbanGrowth NSW and the WestConnex Delivery Authority was so closely linked that they ought to be considered the same organisation, let alone a finding that there was a direct relationship between the WestConnex Project and the imminent rezoning of the Homebush area, including the Underwood Land.
Mr & Mrs Barkat complain that the primary judge referred to the supposed benefits that the WestConnex Project would have on traffic in an attempt to link the traffic benefits to the public purpose and thereby establishing a direct relationship with the imminent rezoning. They assert that there was no evidence before his Honour to suggest that the WestConnex Project would improve traffic conditions in the Homebush area. Rather, they say, there was evidence suggesting that the traffic in the Homebush area would not be improved by reason of the WestConnex Project. They refer to a report dated February 2015 from SGS Economics and Planning entitled "Strategic Review of the WestConnex Proposal" (the SGS Report). The SGS Report examined the strategic justification of the WestConnex Project in the light of population and employment trends, the recently announced second Sydney airport at Badgery's Creek and future of freight movements.
The executive summary of the SGS Report asserts, relevantly, that it is not guaranteed that the WestConnex Project will remove traffic from local roads. It asserts that it appeared likely that M4 East, which is part of the WestConnex Project, would draw sufficient traffic off Parramatta Road to improve significantly the local amenity and lead to significant urban renewal unless the Parramatta Road capacity was reduced significantly which did not appear to be a favoured approach.
Mr & Mrs Barkat also refer to a submission made on behalf of Strathfield Council in February 2015 concerning the draft PRUTS. The Council said in its submission: "Council would also like to highlight that the Draft [PRUTS] have attempted to justify the proposed increased densities under the premise that the WestConnex motorway serving as the higher order traffic carrying route, would allow for the localisation of Parramatta Road and improve local movement and ease through traffic congestion. However, according to the Environmental Impact Statement to the WestConnex Project released in August 2014, the traffic modelling generally shows minimal to no improvement on the Parramatta Road traffic volumes in the Homebush/Strathfield precinct, particularly in the Parramatta Road/Concord Road/Leicester Avenue and Parramatta Road/Wentworth Road intersections even after the WestConnex Project is completed." For Mr & Mrs Barkat to succeed on this ground, it is, as they accept, necessary to demonstrate that there is no evidence or other material that could support the finding of fact made by the primary judge. [20]
The primary judge found that there was an inextricable nexus between the WestConnex Project and urban development stimulus relevant to the location of the Underwood Land. His Honour referred to statements, characterised as "indicative key statements", in the material in evidence, as set out in Annexure A to his Honour's reasons. His Honour selected the following as "key statements": "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 ..."
The primary judge found that the WestConnex Project was not just a road project but was 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, and land values would become "elevated by the market's foreknowledge of the possible or likely public purpose". [21] That conclusion is supported by the statements relied upon by his Honour as "indicative key statements".
Where there is a nexus between planning controls and a relevant resumption, the steps in the planning process that had an effect on the value of the land must be ignored. [22] The effect on value must be ignored if there is a direct relationship between the potential rezoning and the public works. [23] The connection between the zoning and the subsequent resumption must be considered. That will involve questions of fact and degree. [24] The particular purpose must be identified properly prior to determining the effect of the public purpose on the value. [25]
There was material before the primary judge capable of supporting a finding that, but for the WestConnex Project, the draft PRUTS would not have existed. Mr Donaldson said that the draft PRUTS would have taken another form but for the WestConnex Project. In the absence of the WestConnex Project, the issue of traffic congestion along Parramatta Road would have had to have been addressed. Traffic congestion affecting Parramatta Road was regarded by the Council as a fundamental barrier to rezoning the land.
Mr & Mrs Barkat complain that RMS did not adduce evidence from its officers or officers of UrbanGrowth NSW. However, there was documentary material before his Honour, particularised in Annexure A, that demonstrated a causal nexus between the WestConnex Project and the draft PRUTS. The material before his Honour included New South Wales Government strategy documents, the environmental impact statement and submissions, report for the WestConnex Project and the draft PRUTS, which clearly explained that the WestConnex Project was the catalyst for the draft PRUTS. While there was a difference in the opinions expressed by town planners in relation to the connection, it is clear that there was extensive evidence before his Honour that was capable of supporting the finding made by him. His Honour was satisfied that the Underwood Land is within a precinct or area that was within the sights of, or was targeted by, the strategic transport and planning processes identified in the documents in evidence, including the draft PRUTS. Whether or not his Honour reached the correct conclusion in making the finding that he made, it is clear that there was material before him that was capable of supporting that finding.
Mr & Mrs Barkat complain about the use made by the primary judge of the material in Annexure A. They assert that Annexure A was flawed because it was selective. However, while Annexure A is quite clearly a submission, it sets out verbatim the material in the relevant strategy and planning documents relied upon by RMS. It was, of course, open to Mr & Mrs Barkat, through their legal representatives, to make alternative submissions, drawing his Honour's attention to different material that may have pointed towards a different conclusion. However, in the context of determining whether or not there was evidence capable of supporting his Honour's finding, the material in Annexure A is adequate to support the conclusion that there was material before his Honour capable of supporting the finding that he made.
Mr & Mrs Barkat's complaint that the primary judge erred in interpreting the case law is not easy to follow. The primary judge considered that Mr & Mrs Barkat had selectively quoted from the decision of Craig J in MMTR Pty Ltd v Roads and Maritime Services [26] without referring to the broader context and conclusions in the context of distinguishing evidence before his Honour in the present case. Mr & Mrs Barkat assert that, in the approach adopted in their submissions in relation to MMTR, they were seeking to establish concisely the critical point of that case, namely: "The mere circumstance that the public purpose is a contributing factor to the changes which in turn affect value is not necessarily sufficient, particularly if the changes depend also on the discretionary decisions made by other authorities". [27] Mr & Mrs Barkat assert that they properly considered the context of MMTR and how it could be distinguished from other cases and that the primary judge did not have regard to that consideration but rather focused on the outcome of the decision. They assert that the context of the decision in MMTR was vastly different from that of the present case because MMTR was based on a range of materials and reports from sources other than the authority responsible for the particular project whereas in the present case, the WestConnex Project promotional material accepted by the primary judge is said to be lacking in scrutiny and critical reasoning.
Further, they say, in the present case many separate bodies claimed that the purported benefits of the WestConnex Project, such as traffic benefits, will not be realised. In addition, they say, the materials demonstrating a public purpose that were relied on in MMTR had a degree of specificity to the subject land in that case whereas, in the present case, the material relied upon by his Honour was based on generalisations that lack a direct relationship to the Underwood Land and are "based on promotional buzzwords such as catalyst, urban renewal and urban revitalisation". They assert that his Honour failed to consider properly the nature and weighting of the evidence before the Court in MMTR.
The primary judge referred to the submissions made on behalf of Mr & Mrs Barkat that relied in part on Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [28] (Walker's Case). His Honour referred to the contention on behalf of Mr & Mrs Barkat that any decision to rezone the Underwood Land would be made by government entities other than RMS, such that it was impossible to conclude that there would be any link between the rezoning from R3 to R4 because of the WestConnex Project. His Honour considered that the interrelationship between the authorities and their respective responsibilities in Walker's Case revealed a situation starkly different from the factual situation in the present case. His Honour distinguished Walker's Case on the basis that the nexus between the non-acquiring Council's anterior discussions and agitations and the Authority's eventual public purpose acquisition was not capable of being characterised as an integrated proposal. In contradistinction, his Honour said, there was no doubt that the WestConnex Project was specifically designed to be the catalyst for much more than a road development scheme in that it was purposely an urban renewal project from the outset, interfacing with the draft PRUTS involving an integrated project team including the WestConnex Delivery Authority, RMS, the Department of Planning and Environment, Strathfield Council and others. Accordingly, his Honour concluded, it is not necessary for RMS to be the rezoning authority but it was sufficient for its WestConnex Project to be the intended catalyst for predicting urban renewal and associated rezoning that would most likely follow. They were all interrelated components of the same public purpose.
There was no error on the part of the primary judge in distinguishing the authorities relied upon by Mr & Mrs Barkat. They do not point to any error of law on the part of his Honour. Whether it might have been possible to come to a different conclusion is not the point. The conclusion that the acquisition of the Underwood Land was for a purpose intrinsically connected with the draft PRUTS was open on the material and did not constitute an error of law.

Prospect of Rezoning Apart from the Draft PRUTS

Mr & Mrs Barkat contend that proper valuation principles were not adhered to in the primary judge's decision to ignore the potential for the Underwood Land to be rezoned to R4 in 2021. They assert that it was unreasonable for his Honour to ignore the potential for the Underwood Land to be rezoned in the Strathfield local environmental plan due to be introduced in 2021.
As set out at [31] of these reasons, the primary judge accepted that, over the long term, taking account of the increasing population of the Sydney metropolis and the proximity of the Underwood Land to two railway stations, greater redevelopment interest in the Underwood Land would gradually have arisen. His Honour considered that it was to be presumed, given the population pressures in Sydney, that such areas in Homebush, where the Underwood Land is situated, would eventually be amenable to higher density development. Mr & Mrs Barkat contend that by those observations, the primary judge acknowledged that the Underwood Land would eventually be rezoned to allow for greater density but failed to consider the value of that potentiality when carrying out the valuation exercise required by the Just Terms Act.
Mr & Mrs Barkat assert that the evidentiary basis for claiming potential rezoning of the Underwood Land to R4 in 2021 stemmed from discussions with officers of Strathfield Council in 2014, which indicated that the area within which the Underwood Land is located would be investigated for further increased density and zoning change when it came time to prepare the next Strathfield LEP in 2021. Mr & Mrs Barkat rely on an email received in April 2014 from an officer of Strathfield Council. The email stated that an earlier study had indicated that the precinct north of the M4, where the Underwood Land is located, would require further review. The email stated that such a review would be required in the future to determine if it would be appropriate for any density and intensification increase or zoning changes. The email stated that the Council was not planning to review precincts until the next comprehensive LEP was prepared, for example, 2021. However, that email by no means supports a conclusion that a rezoning was likely in 2021. Rather, it says that such a rezoning would not even be considered before 2021.
Mr & Mrs Barkat also relied on maps contained in the Strathfield comprehensive LEP investigations of February 2011. A cross corridor's mixed use map highlighted regions that were recommended for R4 zoning, including the Underwood Land. Mr & Mrs Barkat assert that not all of those recommendations were adopted in the final Strathfield LEP of 2012 because of the desire of the Council not to rezone all of the recommended land at once. Again, it is difficult to conclude from that argument that it is at all likely that there will be a rezoning in 2021.
Mr & Mrs Barkat rely on further material that was not in evidence before the primary judge as to "the expansive range of developments that have recently been completed or are currently underway along the Parramatta Road corridor in Homebush". No basis has been established for the receipt of that additional material as additional evidence before this Court.
The potential for the Underwood Land to be rezoned from R3 to R4 in 2021 was a matter of fact. Mr Donaldson agreed that, if the draft PRUTS were to be ignored, any increase in development potential of the Underwood Land would occur after 2021 and it was unlikely that even in 2021 densities were likely to be increased to a significant degree unless the traffic congestion concerns in the locality had been resolved or ameliorated. Mr Donaldson accepted that the Council had no plans to alleviate the traffic congestion. In effect, the planners were of the same opinion that, in the absence of the draft PRUTS, the Underwood Land would not be considered by the Council for rezoning before 2021. Further, unless traffic congestion issues were addressed, it would be unlikely even in 2021 that the densities in the relevant area would be increased to a significant degree.
The evidence before his Honour demonstrates that the likelihood and the timing of any future rezoning of the Underwood Land, in the absence of the draft PRUTS, was uncertain. On the basis of the evidence, it was certainly open to the primary judge to make a finding that the highest and best use of the Underwood Land was redeveloped in accordance with its maximum potential under the existing R3 zoning. The question of whether or not the Underwood Land was likely to be rezoned in the future and the timing of that rezoning was a matter of fact for his Honour. His Honour concluded, on the basis of material and in accordance with rational reasoning, that the possibility of rezoning in the future would not have influenced the price that might be paid under the hypothetical transaction that his Honour was required to consider. The ground is not made out.

Conclusion

The appeal should be dismissed. The appellants should pay the respondent's costs of the appeal.
SIMPSON AJA: I agree with Emmett AJA.

Appendix 1 Barkat (1.68 MB, doc) Appendix 2 Barkat (33.8 KB, doc)

Endnotes

See Yates Property Corporation Pty Ltd (in Liq) v Darling Harbour Authority (1991) 24 NSWLR 156; 73 LGRA 47.
See Leichhardt Council v Roads and Traffic Authority (NSW) [2006] NSWCA 353; (2006) 149 LGERA 439 at [83].
See Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Ltd (1947) 74 CLR 358; [1947] HCA 10 at 374.
See Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7.
See Vilro Pty Ltd (in Voluntary Liquidation) v Roads and Traffic Authority NSW (No 3) [2010] NSWLEC 234; (2010) 179 LGERA 47 at [17].
See Everest Project Developments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 [2010] NSWLEC 88; (2010) 177 LGERA 43 at [58].
See Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156; 73 LGRA 47 at 175-176.
See Spencer v The Commonwealth (1907) 5 CLR 418; [1907] HCA 82 at 441 and Kenny and Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413; [1999] HCA 25 at 436.
See Jameson v Rail Corporation of New South Wales [2014] NSWLEC 83 at [65].
See Housing Commission of NSW v Falconer [1981] 1 NSWLR 547 at 557-558.
See para [16] of these reasons.
See para [10] of these reasons.
Citing WestConnex Business Case Executive Summary, Ex B, C14, p 25.
See primary decision at [237].
See Maurici v Chief Commissioner of State Revenue (2003) CLR 111; [2003] HCA 8 at [8]; and Sydney Water Corporation v Marrickville Council [2014] NSWCA 438 at [28].
See Sydney Water Corporation at [30].
See ISPT Pty Ltd v Valuer General (NSW) [2009] NSWCA 31; (2009) 165 LGERA 25 at [23] - [25].
See Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541; (1973) 32 LGRA 170 at 180.
Interest reipublicae ut sit finis litium (it is to the interest of the state that there be an end to litigation).
See Australian Retailers Association v Reserve Bank of Australia (2005) 148 FCR 446; [2005] FCA 1707 at 587.
See primary decision at [176] citing Housing Commission of NSW v San Sebastian Pty Ltd (1978) 140 CLR 196; [1978] HCA 28.
See San Sebastian.
See San Sebastian at 206-207.
See San Sebastian at 207.
See Roads and Traffic Authority of NSW v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251 at [100].
MMTR Pty Ltd v Roads and Maritime Services [2015] NSWLEC 177.
See MMTR at [134] citing AMP Capital Investors Ltd v Transport Infrastructure Development Corporation [2008] NSWCA 325; 163 LGERA 245 at [99].
See Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; [2008] HCA 5. 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: 11 October 2019

Solicitors: Ashurst Australia (Respondent) File Number(s): 2019/9352 Decision under appeal Court or tribunal: Land and Environment Court of New South Wales Jurisdiction: Class 3 Citation: [2018] NSWLEC 209 Date of Decision: 18 December 2018 Before: Molesworth AJ File Number(s): 2016/158064

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] HEADNOTE [This headnote is not to be read as part of the decision] On 18 December 2018 a judge (the primary judge) of the Land and Environment Court of NSW determined that Roads and Maritime Services (RMS) was to pay Mr Mark Barkat and Mrs Rubina Barkat compensation of $4,300,000 for market value and $332,684.95 for disturbance for the compulsory acquisition of their land (the Underwood Land), which was acquired for the purposes of the WestConnex M4 East Project. The primary judge ordered RMS to pay Mr & Mrs Barkat's costs of the proceedings. By Notice of Appeal re-lodged on 11 April 2019, Mr & Mrs Barkat appealed from the orders made by the primary judge on the following grounds: 1. Adjustments (Ground 1 to 4): The Court erred in making adjustments to the comparable sale (the Ismay Avenue Land) to arrive at a comparability between that sale and the hypothetical sale of the Underwood Land. 2. Significance of the draft Parramatta Road Urban Transformation Strategy (PRUTS) (Grounds 5 and 6): The primary judge erred in disregarding the prospect that the Underwood Land may have been rezoned from R3 to R4, thereby allowing denser development. 3. Prospect of rezoning apart from the draft PRUTS (Ground 7): The primary judge erred in disregarding that at the date of acquisition the Underwood Land may have been rezoned to R4, independent of the public purpose for which the land was acquired. On 30 and 31 July 2019, the appeal was heard and the Court reserved its reasons. Dismissing the appeal Emmett AJA (Leeming JA and Simpson AJA agreeing) held: The Court firstly re-iterated that the appeal was brought under s 57(1) of the Land and Environment Court Act 1979 (NSW), under which appeals are limited to questions of law: Emmett AJA at [4]. What will amount to an error of law will depend upon context. However, neither erroneous findings of primary fact nor the drawing of illogical or inappropriate inferences will of themselves constitute an error of law. A failure to comply with a valuation principle can, but will not necessarily be, an error of law: Emmett AJA at [48]-[49]. Maurici v Chief Commissioner of State Revenue (2003) CLR 111; [2003] HCA 8 at [8]; and Sydney Water Corporation v Marrickville Council [2014] NSWCA 438 at [28] applied. In response to Mr & Mrs Barkat's application to adduce additional evidence, the Court outlined three general rules which must be satisfied before fresh evidence will be admitted. First, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial. Secondly, the evidence must be such that there is a high degree of probability that there would be a different result. Thirdly, the evidence must be credible. The first prerequisite was not satisfied and the second requirement was unlikely to be satisfied. The application to adduce additional evidence was refused: Emmett AJA at [51]. Adjustments (Grounds 1 to 4) An impediment for Mr & Mrs Barkat was that their submissions concerning adjustments were not made to the primary judge: Emmett AJA at [55]. For the reasons below, the Court found each ground did not constitute an appealable error by the primary judge:

(2008) 163 LGERA 245

(2006) 149 LGERA 439

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