Blacktown City Council v Roads and Traffic Authority of New South Wales

LEGISLATION CITED: The Land Acquisition (Just Terms Compensation) Act 1991 ss 55 and 56

CASES CITED: Leichhardt Council v Roads and Traffic Authority of New South Wales [2006] NSWCA 353,

DATES OF HEARING: 27/11/2006; 28/11/2006 and 29/11/2006

APPLICANT: J E Robson SC SOLICITORS: Norman Waterhouse LEGAL REPRESENTATIVES: RESPONDENT: P C Tomasetti (barrister) SOLICITORS: Henry Davis York

JUDGMENT:

• 8 - IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

BLACKTOWN CITY COUNCIL v ROADS AND TRAFFIC AUTHORITY OF NEW SOUTH WALES [2007] NSWLEC 35

1 HIS HONOUR: On 22 October 2004, the Roads and Traffic Authority of New South Wales ("the RTA") acquired by notice of compulsory acquisition the following three areas of land: · lots 26, 27 and 28 in deposited plan 1063300, Sunnyholt Road, Blacktown ("site 1"); · lots 116 and 117 in deposited plan 231157, Old Windsor Road, Seven Hills ("site 2"); and · lot 251 in deposited plan 790614, Old Windsor Road, Seven Hills ("site 3"). 2 On 25 February 2005, the RTA acquired by notice of compulsory acquisition lots 3 and 4 in deposited plan 1074875, Old Windsor Road, Kings Langley ("site 4"). 3 The dispossessed owner of the land, Blacktown City Council, claims compensation for the compulsory acquisition of the land. The claim for the compulsory acquisitions of 22 October 2004 (proceedings No. 30133 of 2005) and the claim for the compulsory acquisitions of 25 February 2005 (proceedings No 30673 of 2005) were heard together. The question for determination is the amount of compensation to which the council is entitled. 4 For the land acquired on 22 October 2004, the council claims $1.28 million market value plus $5,000 for disturbance and the RTA has offered $305,000 market value plus $5,000 for disturbance. For the land acquired on 25 February 2005, the council claims $1.4 million market value plus $5,000 for disturbance and the RTA has offered $380,000 market value plus $5,000 for disturbance. 5 It can immediately be seen that the gap between the parties is vast, despite the fact that they each rely upon evidence of an experienced valuer. In cases such as this, where the valuations are poles apart, the Court would be greatly assisted by a court appointed expert. Unfortunately, this did not occur during the case management and by the time it came before me as the trial judge, it was too late to make such an appointment.

The acquired land 6 All of the acquired land comprises long narrow strips along existing main roads and was acquired for the purpose of road widening. All of the various parcels acquired were zoned "Open Space 6(a) Public Recreation" under Blacktown Local Environmental Plan 1988. The land was also classified as "community land" under the Local Government Act 1993 (LG Act"), except for one lot which was partly classified as "community land" and partly as "operational land". However, that part of the land which was classified as operational was because of the road reservation and the classification was thus a step in the process of acquisition. For the purpose of determining compensation the classification of the land as operational is to be disregarded: s 56(1) of the Land Acquisition (Just Terms Compensation) Act 1991 ("the Just Terms Act"). 7 Where land is classified as "community land", it cannot be reclassified except by the process of making a local environmental plan under the Environmental Planning and Assessment Act 1979 ("the EP&A Act"). Moreover, a council must arrange a public hearing in respect of any such proposal (s 29, LG Act). A council cannot "sell, exchange or otherwise dispose of community land" (s 45, LG Act). There are severe restrictions on the ability of a council to lease or licence such land (ss 46 - 47D, LG Act). Finally, such land can only be used and managed in accordance with a plan of management (s 35, LG Act). A plan of management applies to each of the acquired sites. The plans of management effectively prevented any built development on the land, with the exception of planting, landscaping, pathways, paving and seating. In Leichhardt Council v Roads and Traffic Authority of New South Wales [2006] NSWCA 353, the Court of Appeal held that these restrictions, which affect only the person whose land has been acquired, are not matters that must be applied when determining "market value" as defined in the Just Terms Act. Restrictions on use imposed by zoning, which affect all vendors and purchasers in the hypothetical sale, must, however, be considered. 8 The parties' respective town planning experts, Mr G Apps on behalf of the council and Mr A Rowen on behalf of the RTA, have produced a joint statement of evidence. I now briefly describe each site, together with the comments thereon of the town planning experts. 9 Site 1. Site 1 is an area of 776.2 square metres of variable width on the corner of Sunnyholt Road and Turner Street, Blacktown. It comprises a strip of land fronting both roads and was part of a larger area of public reserve known as Lynwood Park. Sunnyholt Road is a busy main road. The town planning experts agreed that the site is flood affected which would preclude any building development and that its highest and best use was for informal public open space and drainage purposes. 10 Site 2. Site 2 is a strip of land generally 15-16 metres wide along Old Windsor Road, Seven Hills, and having an area of 4,799.3 square metres. The northern end of the strip adjoins a public reserve known as Melody Park and the southern end adjoins the M2 Motorway. Old Windsor Road is a busy main road. The planning experts agree that this land acts as a buffer between Old Windsor Road and the residencies adjoining the strip; that although it may have been used for pedestrian access, the land did not serve any recreational function; that its topography and shape did not lend itself to any building development; that it would be unlikely to be developed with recreational facilities as it could not serve any recreational function; and, that its highest and best use was as a landscaped visual buffer to Old Windsor Road. 11 Site 3. Site 3 is a stript of land averaging about 18 metres wide along Old Windsor Road, Seven Hills and having an area of 2,458 square metres. The town planning experts agree that it acts as a buffer between an arterial road, Old Windsor Road, and industrial land; that it did not and could not serve any recreational function; that its topography and shape did not lend itself to any building development; and, that its highest and best use was as a landscaped visual buffer between the industrial area and Old Windsor Road. 12 Site 4. Site 4 comprises a strip of land of 10,781 hectares of variable width along Old Windsor Road, Kings Langley. The land formed an extension of a larger area at its northern end known as Troubadour Park. The town planning experts agree that the land primarily acted as a buffer between an arterial road, Old Windsor Road, and residencies, but it also served a passive recreation purpose and a drainage purpose. The same experts agree that the highest and best use of the land was for public recreation purposes, but I infer from their earlier comment that it could only have been used for passive recreation. Mr Apps, senior statutory planner for the council, contends that the land could have been embellished with additional passive recreational opportunities which could have included landscaping to further enhance its functions as a buffer and as a recreational area. Mr A Rowen, consultant town planner for the RTA, agrees that the land could have been further landscaped, but does not believe that formal recreational facilities would have been located on this part of the park due to its distance from an accessible road and its relationship to Old Windsor Road.

The valuation evidence 13 The parties respective valuers, Mr K D Wood for the council and Mr P Dempsey for the RTA, both agree that the appropriate method of valuation is the application of comparable sales evidence. They disagree, however, as to the selection and comparability of the sales evidence and the extent to which a discount must be applied to allow for the restrictions upon the acquired land as a result of its zoning and classification as community land. 14 Mr Wood relied upon a number of sales of land purchased for open space purposes by Blacktown City Council from private developers, but all the sales had a different use potential, being residentially zoned en globo land. It was necessary for Mr Wood to make adjustments to the sales evidence for topography and then apply a discount to compensate for both the open space zoning of the acquired land and its classification as community land under the LG Act. After reciting the range of discounts adopted by the Court in other cases involving the compulsory acquisition of open space and community land (which range from 50 per cent to 80 per cent), Mr Wood discounted the resulting sale evidence by 50 per cent to reflect both the open space zoning and the community land classification. 15 In discussing the rate of discount and the likelihood of the zoning and the restrictions on use or disposition of the acquired land "being lifted", Mr Wood's states: It would been axiomatic that council's citizens would support a reclassification to ensure that council is adequately compensated for the loss of its assets which it has to replace at an alternative or underlying value. 16 It seems to me, however, that if a re-zoning or a reclassification were to occur in such circumstances, then it would amount to a step in the process of compulsory acquisition which must be disregarded: see the definition of "market value", s 56(1), Just Terms Act. 17 Mr Dempsey relies upon three sales of land already zoned for open space purposes, purchased by Blacktown City Council in one case and purchased by Baulkham Hills Shire Council in the other two cases. These sales did not, therefore, involve land which had a higher use potential (unlike the sales relied upon by Mr Wood). After making an adjustment for movement in values over time (by reference to the Residex Index), Mr Dempsey made a further adjustment to reflect the restrictions under the community land classification of the acquired land. He is of the view that the discount factor should be greater than 50 per cent, but nevertheless applies that discount factor to reflect the community land classification. 18 It is thus apparent that although both valuers have adopted a discount rate of 50 per cent in applying the comparable sales evidence, Mr Wood has applied that discount to take account of both the constraints of the open space zoning and the community land restrictions, whereas Mr Dempsey has applied the discount to take account of only the community land restrictions, having first derived a figure which is already based upon the open space zoning.

Conclusions 19 Having read and heard the expert evidence and, in particular having had the benefit of a view of the acquired land and the land the subject of the sales relied upon by the valuers, I draw the following conclusions. 20 The sales relied upon by Mr Wood are not, in my opinion, comparable to the acquired land. The sales relied upon by Mr Wood are of land which is in every case of superior quality and amenity to the acquired land, being usable parcels surrounded by residentially zoned land and remote from any main or arterial roads. 21 The acquired land, on the other hand, in every case suffers from extremely poor amenity, being adjacent to major arterial roads with accompanying traffic noise and fumes. When the Court visited these sites it was after the morning peak hours and at a time of the day when one would expect the traffic to be light, yet there was the constant distraction of a steady flow of heavy trucks and other traffic which greatly detracted from any amenity of the land. In brief, they were simply not pleasant places to be or to remain at for very long. The view confirms the opinions of the planning consultants that the highest and best use of the acquired land in every case is merely as a visual buffer between the arterial road and the adjoining residencies. I thus disagree with the opinion of Mr Apps that site 4 could have been suitably embellished with additional passive recreational opportunities apart from landscaping. 22 Moreover, as noted in par [20] above, the sales relied upon by Mr Wood are in every case of land which, although acquired for open space purposes had an underlying value as residential land, which would in turn require a major adjustment in relating them to the subject land which did not have that underlaying value. The greater the adjustment required, the more unreliable is the resulting valuation. 23 I have noted in par [15] above that Mr Wood takes into consideration the fact that the council could easily re-classify the subject land from community to operational land (and, presumably, re-zone the land), thereby attracting a higher value. I have also noted in par [16] above that such a step would, however, if done for the purpose of obtaining a higher value upon compulsory acquisition, amount to a step in the process of compulsory acquisition and would have to be ignored. 24 Having rejected the sales relied upon by Mr Wood, the focus then turns upon the three sales relied upon by the respondent's valuer, Mr Dempsey. As noted above, each of these sales was of land already zoned for open space purposes and was acquired for open space by the local councils. 25 Sale No. 1 was a small parcel of 89.2 square metres at the corner of Sunnyholt Road and Meurant Lane, Glenwood, sold by Westminster Homes to Blacktown City Council. The sale price was $5,500, representing $61.66 per square metre. When adjusted for time it represents $68 per square metre. Although this sale is described by Mr Wood as being a small parcel left over from the adjacent subdivision development and had little utility to the vendor, it does have a similar amenity to the acquired land and would function in a similar way consistent with its highest and best use as a visual buffer. 26 Sale No.2 is a large area of 36,850 square meters sold by the developer of an adjacent subdivision to Baulkham Hills Shire Council. The sale price was $3,573,824, representing $96.98 per square metre. Some of the land, however, had an underlying zoning or higher use potential as residential land, and when that part of it is excluded the sale discloses a figure of about $70 per square metre for the open space component. When adjusted for time it represents $68.25 per square metre. Much of this land is flood liable, but it serves as a visual buffer between two residential subdivisions. It has a superior amenity to the acquired land in the present case. 27 Sale No. 3 is an area of 5,417 square metres purchased by Baulkham Hills Shire Council for $460,445, representing $85 per square metre. When adjusted for time it represents $83 per square metre. The land is adjacent to a residential subdivision, it falls steeply down to Cattai Creek and is partly flood affected. Its highest and best use is for passive open space and as a visual buffer to the subdivision on the opposite side of the creek. The land has a superior amenity to the acquired land in the present case. 28 In each case Mr Dempsey made an adjustment for the time of these sales based upon the movement in residential values as indicated by the Residex Index. This methodology was criticised by Mr Wood as being related solely to the movement in residential values rather than open space land, but as it is the only evidence of the movement in land values I am prepared to accept Mr Dempsey's adjustment. 29 Mr Dempsey made a further adjustment by way of deduction of 50 per cent in applying these figures to the subject land. He did so to take account of the restrictions upon the sale of the subject land which is classified as community land under the LG Act. In fairness to Mr Dempsey, he did so in the light of previous decisions of this Court and before the recent decision of the Court of Appeal in Leichhardt Council v Roads and Traffic Authority of New South Wales [2006] NSWCA 353. As noted in par [7] above, in that case, which was about a compulsory acquisition of land which was community land under the LG Act, the Court of Appeal held that the restrictions resulting from the classification such as the restriction on sale must be ignored since the definition of "market value" in the Just Terms Act requires an assumption that there is a sale. 30 In applying these sales to the subject land, Mr Dempsey concluded that its market value at the date of acquisition was $70 per square metre before he made his deduction of 50 per cent. Having regard to the fact that two of Mr Dempsey's sales (being sale No. 2 and sale No. 3) are of land having a superior amenity to the subject land, I feel that he is being generous towards the applicant council. Nevertheless, I accept Mr Dempsey's valuation and his overall approach, except for his deduction of 50 per cent. Consistently with the decision of the Court of Appeal in the Leichhardt case, the full value of $70 per square metre should be applied to the acquired land.

Orders 31 I therefore determine the compensation to which the applicant is entitled as follows. 32 Proceedings No. 30133 of 2005:

I determine the market value of lots 26, 27 and 28 in deposited plan 1063300, corner Sunnyholt Road and Turner Street, Blacktown, at $54,334. I determine the market value of lots 116 and 117 in deposited plan 231157, Old Windsor Road, Blacktown, at $335,951. I determine the market value of lot 251 in deposited plan 790614, Old Windsor Road, Seven Hills at $172,060. 33 The formal orders are:

(1) The total compensation under the Land Acquisition (Just Terms Compensation) Act 1991 is determined as follows: (i) Market value pursuant to s 55(a) in the sum of $562,345;

(ii) by consent, loss attributable to disturbance pursuant to s 55(d) in the sum of $5,000.

(3) The exhibits may be returned. 34 Proceedings No. 30673 of 2005:

I determine the market value of lots 3 and 4 in deposited plan 1074875, Old Windsor Road, Kings Langley, at $754,670. 35 The formal orders are:

(1) The total compensation under the Land Acquisition (Just Terms Compensation) Act 1991 is determined as follows: (i) market value pursuant of s 55(a) in the sum of $754,670;

(ii) by consent, loss attributable to disturbance pursuant to s 55(d) in the sum of $5,000.

(2) The question of costs is reserved. (3) The exhibits may be returned.

I hereby certify that the preceding 35 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd.

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