Blacktown City Council v Roads and Traffic Authority of NSW

Land and Environment Court (NSW)|2006-02-03|Before: Bignold J, Mr J, Mr P, Lloyd J

CITATION : Blacktown City Council v Roads and Traffic Authority of NSW [2006] NSWLEC 37

APPLICANT: Blacktown City Council PARTIES : RESPONDENT: Roads and Traffic Authority

KEY ISSUES: Compulsory Acquisition of Land :- strip of land acquired for road purposes - land forming part of existing public open space being classified as "community land" under the Local Government Act

Ashfield Municipal Council v Roads and Traffic Authority (2001) 117 LGERA 203; Attorney General (NSW) v Parramatta City Council (1949) 49 SR (NSW) 283; Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; Blacktown City Council v Roads and Traffic Authority (2004) NSWLEC 772; Canterbury City Council v Roads and Traffic Authority (2004) NSWLEC 172; CASES CITED: Canterbury Council v Roads and Traffic Authority (2002) NSWLEC 161; City of Brighton v Road Construction Authority (1986) VR 255; Corrie v MacDermott (1914) AC 1056; Leichhardt Council v Roads and Traffic Authority [2005] NSWLEC 86; Sydney Sailor's Home v Sydney Cove Redevelopment Authority (1977) 36 LGRA 106; The Commonwealth v Arklay (1952) 87 CLR 159

APPLICANT: Mr J Robson SC SOLICITORS LEGAL REPRESENTATIVES: Norman Waterhouse RESPONDENT: Mr P Tomasetti, Barrister SOLICITORS Henry Davis York

THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

31127 of 2004 BLACKTOWN CITY COUNCIL v ROADS AND TRAFFIC AUTHORITY OF NSW

JUDGMENT HIS HONOUR: A. INTRODUCTION 1 This is an objection pursuant to the Land and Acquisition (Just Terms Compensation) Act 1991, s 66(1), (the Just Terms Act) against the amount of compensation offered to the Applicant in respect of the compulsory acquisition by the Respondent effected under that Act by Notice published in Government Gazette No 87 of 21 May 2004 of land fronting Sunnyholt Road, Kings Park comprising lots 33, 34 and 35 in Deposited Plan 1061455 with an aggregated area of some 1,305 square metres. The stated purpose for which the land was compulsorily acquired was "for the purposes of the Roads Act 1993". 2 The amount of compensation that was offered reflected the compensation determined by the Valuer-General in his Compensation Notice in the sum of $33,500 (comprising (a) market value of $30,500 and (b) disturbance of $3,000). The Respondent tendered as Exhibit D a valuation report of Mr D Chandra, a valuer with the Department of Lands (who I assume determined compensation on behalf of the Valuer General in this case) which Report proffered a valuation in support of those amounts. 3 In its Amended Points of Claim, the Applicant claimed compensation in the sum of $284,000 (comprising (a) market value of $270,000 and (b) disturbance of $14,000). In its Second Further Amended Points of Defence, the Respondent contended for an amount of compensation for market value in the sum of $33,000. (The amount of market value compensation contended for by the Applicant reflects a rate of $207 per square metre whereas the amount of compensation contended for by the Respondent reflects a rate of $25 per square metre). 4 These respective contentions were based upon the valuations prepared by the two valuers who prepared valuation reports, participated in a conference of experts and prepared a joint report and were cross-examined. Each valuer (Mr Kent Wood for the Applicant and Mr Peter Dempsey for the Respondent) is a highly experienced valuer who also were the competing expert witnesses in a similar case heard and determined by Lloyd J in November 2004 between the same parties. That case involved the compulsory acquisition by the Respondent of a strip of land (170 m in length and 6 metres in width) from an existing park (Alpha Park) vested in the Council and situate adjacent to the Blacktown Central Business District: see Blacktown City Council v Roads and Traffic Authority of NSW (2004) NSWLEC 772. 5 It will be instructive later in these reasons to consider more closely the judgment in that case, which bears many similarities to the present case. 6 The evidence of the two valuers was the only testimony that way given in the proceedings, where the other evidence given was documentary materials (including the valuation report of Mr Chandra that I have earlier mentioned). 7 The only disputed evidence in the case concerns the vastly disparate opinions of the two valuers concerning the market value of the compulsorily acquired land and my adjudication will need to resolve the conflicting opinion evidence. (At the conclusion of the hearing, the Applicant abandoned its claim to "disturbance" compensation, meaning that market value is the sole component of compensation claimed in these proceedings.) B. THE COMPULSORILY ACQUIRED LAND 8 The compulsorily acquired land came into its current existence as three adjoining or adjacent lots upon the registration of Deposited Plan 1061455 on 1 December 2003. That plan had been prepared by or on behalf of the Respondent and created some 16 lots (including the subject lots) situate on either side of Sunnyholt Road that were proposed to be acquired by the Respondent for the purposes of the Roads Act 1993. (A copy of the relevant sheets of Deposited Plan 1061455 is annexed hereto and marked "A".) Lots 33, 34 and 35 contain areas of 274.5 square metres, 401.8 square metres and 628.6 square metres respectively with an aggregated area of some 1,305 square metres. 9 Lots 33 and 34 adjoin one another and lot 34 is separated from lot 35 by an existing road (Garling Road which intersects at right angles with Sunnyholt Road before changing direction). 10 The compulsorily acquired lands have been excised from land comprising that section of (or adjunct to) Faulkland Crescent Reserve, having a width of some 15 metres and which is wedged between Sunnyholt Road and Garling Road, before the bulk of the land forming that Reserve extends in dog-leg fashion in a westerly direction. It is situate on the western side of Sunnyholt Road, some two to three kilometres north of the Blacktown Railway Station and CBD. 11 The location of the compulsorily acquired land is shown in relation to the six localised sales utilised by Mr Wood in his valuation on the map forming part of Appendix 5 to Mr Wood's Valuation Report (Exhibit 1) a copy of which map is annexed hereto and marked "B". 12 I have annotated on the annexed copy of that map the location of Mr Dempsey's principal sale situate at the intersection of Sunnyholt Road and Meurants Lane, so that reference to that map will embrace all of the sale properties in the Blacktown area that have been utilised by the two valuers in providing their respective valuation opinions. (Mr Dempsey also relied upon sales in more distant locations, namely Blackwattle Bay and Port Stephens.) 13 The zoning of the compulsorily acquired land (together with the land from which the compulsorily acquired land was excised) is Open Space 6(a) in terms of the Blacktown Local Environmental Plan 1988 (the LEP). Mr Dempsey, relying upon s 149 Certificates issued more than one year after the date of the compulsory acquisition adopted a "Special Uses - Arterial Road Widening" Zoning under the LEP with an underlying Open Space zoning. In this sense the parties have adopted the common position that the zoning of the compulsorily acquired land was relevantly "Open Space 6(a)" under the LEP. 14 That larger land unit comprising Faulkland Reserve is classified as "community land" under the Local Government Act 1993. It contains an aggregated area of some 16 hectares. The section of the Reserve from which the compulsorily acquired land has been excised functions more in the nature of a grassed landscape strip (with an average width of 15 m) separating Sunnyholt Road from Garling Road and the industrial/retail development on the western side of Garling Road and it is functionally an adjunct or entrance to the Reserve rather than forming part of the core area of that Reserve. 15 All normal services, including mains, sewer, water, telephone and electricity are available to connection to the subject land (by which reference I include the entire land unit from which the compulsorily acquired land was excised) and that entire land unit is good, flood free, building land without physical defect. It is surrounded by the established residential localities of Kings Park (to the west) Kings Langley (to the east) and Acacia Gardens (to the north). Land situate immediately west of the subject land (on the opposite side of Garling Road) is zoned under the LEP and is developed for Industrial 4(c) purposes and includes existing building/goods retail outlets and fast food outlets. 16 The consequences of the "Community land" classification under the Local Government Act 1993 (the LG Act) of the compulsorily acquired land (forming part of Faulkland Reserve) include the express denial of power vested in the Council "to sell, exchange or otherwise dispose of community land": vide s 45(1) of the LG Act. However, there is a legal capacity vested in the Council under the LG Act to reclassify "community land" as "operational land" (the alternate classification of "public land" that is provided for in Part 2 of the LG Act), such reclassification being achievable by way of local environmental plan prepared under the Environmental Planning and Assessment Act 1979 (vide ss 28 to 34 (incl) of the LG Act. Significantly, the LG Act does not impose counterpart statutory restrictions on the disposition by a council of operational land. 17 In large measure, the principal issue in dispute in the present case concerns the "community land" status under the LG Act of the compulsorily acquired land and in particular, the effect on the market value of that land of the statutory restrictions on the use and more especially the disposition of the community land. There have been a number of decisions since the enactment of the LG Act in this Court and in the Court of Appeal concerning the effect on the value of compulsorily acquired land of the statutory restrictions imposed by that Act on use and disposition applying to community land comprising a public reserve or public open space. The parties accept that the decisions of the Court of Appeal in Hornsby Shire Council v Roads and Traffic Authority (1998) 100 LGERA 105 and Roads and Traffic Authority v Hurstville City Council (2001) 112 LGERA 223 have established that the statutory restrictions applying to community land imposed by the LG Act are relevant to the assessment of the amount of compensation where such land has been acquired under the Just Terms Act in the sense that they may affect the market value of such land. In so holding, the decision of the Privy Council in Corrie v MacDermott (1914) AC 1056 was held to state the relevant principles for assessing compensation in respect of the compulsory acquisition of land where the disposition of the land is relevantly restricted, such as is expressly enacted by s 45(1) of the LG Act. 18 But the more difficult question is how to quantify that possible affectation of the market value. This problem arises not only because it is also necessary to assess the chances of such statutory restrictions being lifted or otherwise eliminated (eg in the present case by reclassifying the community land as "operational land" under the LG Act), but because "there is no practice or principle of law that makes a two-thirds discount appropriate in itself to a case involving restrictions of the type with which we are concerned. Every case turns upon its own facts": per Davies AJA in Ashfield Municipal Council v Roads and Traffic Authority (2001) 117 LGERA 203 at 231 (with whose judgment on this issue both Mason P and Heydon JA agreed). His Honour's reference to a "two-thirds discount" is a reference to the discount applied by Bannon J the trial judge in respect of the "community land" restrictions on disposition in the Hornsby Shire Council case. 19 In the present case, Mr Wood has applied a single discount factor of 50 percent (which includes an undifferentiated component for the effect of the statutory restrictions on the disposition of community land) to the value he has attributed to the compulsorily acquired land which he has deduced from transactions involving the purchase by the Council of lands for open space purposes where the purchase price reflects an underlying residential zoning. He supports that valuation methodology by reference to three decisions of this Court which have applied a single discount factor of 50 percent to deduced values based upon Council purchases of lands for open space, namely Canterbury Council v Roads and Traffic Authority (2002) NSWLEC 161; Canterbury City Council v Roads and Traffic Authority (2004) NSWLEC 172; and Blacktown City Council v Roads and Traffic Authority (2004) NSWLEC 772 in all of which cases it was held that there were no truly comparable sales (an entirely unremarkable situation given the absolute prohibition on the sale of community land created by s 45(1) of the LG Act). 20 In stark contrast to Mr Wood's single discount factor of 50 percent, Mr Dempsey applies two successive discount factors to his analyses of the same sales evidence utilised by Mr Wood, namely -

(i) an 85 percent discount to reflect the open space zoning in contradistinction to the underlying residential zoning; and

(ii) a further 50 percent discount to reflect the statutory restrictions on the disposition of community land. 21 This is to state in the starkest manner the radical difference in the valuation opinions of Mr Wood and Mr Dempsey where both valuers have employed precisely the same sales evidence in arriving at their respective valuation opinions, where Mr Wood applies a single discount factor of 50 percent to his attributed value (based upon his analysis of the sales evidence) and Mr Dempsey applies a cumulative discount factor of 93 percent to his attributed value (based upon his analysis of the same sales evidence). (The only difference between the valuers in their analysis of the sales is the fact that Mr Wood regards the sales as en globo residential lands, requiring adjustment in any comparison with the subject land which is fully serviced. Mr Dempsey disagrees that any adjustment is necessary. I agree with Mr Wood's analysis and application of the sales evidence.) 22 As will presently be seen, what I have just stated does not cover the field of the competing valuation opinions given in the present case. But it does highlight the very different opinions in respect of the effect on value of the "the subject land" of the statutory restrictions on use and disposition of the subject land. C. THE COMPETING VALUATIONS 23 As already noted, Mr Wood's valuation of the market value of the compulsorily acquired is in the sum of $270,000. That valuation is supported by his Valuation Report (Exhibit 1) his Report in reply (Exhibit 2) his participation (with Mr Dempsey) in the Valuer's Joint Report (Exhibit 3) and his oral testimony. 24 Mr Dempsey's competing valuation is in the sum of $33,000 which is supported by his Valuation Report (Exhibit B) his Report in reply (Exhibit C), his participation (with Mr Wood) in the Valuer's Joint Report (Exhibit 3) and his oral testimony. 25 Before considering in greater detail these competing valuation opinions, I should deal with Mr Chandra's valuation of $30,500 for the market value of the compulsorily acquired land. 26 The only evidence in support of that valuation is his written Report (Exhibit D) which was tendered in the Respondent's case. Mr Chandra was not called as a witness and the Respondent, other than tendering the Report, placed no reliance upon it at the hearing. (Although Mr Chandra's market valuation is very similar to Mr Dempsey's, their valuation methodologies are different and their sales evidence is different.) 27 In these circumstances, it is not necessary for me to consider in much depth Mr Chandra's Valuation Report other than to note the valuation methodology employed by Mr Chandra, which was to adopt a "piecemeal" valuation approach (rather than the "before and after" approach because he thought that the latter would not "adequately compensate the claimant for its loss") based upon his analysis of six sales (not being any of the sales relied upon by Mr Wood or Mr Dempsey in the present case) which he analysed as showing a rate per square metre ranging from $29 to $80 and his application of that sales evidence to the subject land which he valued at $70 per square metre yielding a valuation of $91,343 to which he applied a two-thirds discount producing a final valuation of $30,500. His valuation Report, after citing the Hurstville City Council case, the Hornsby Shire Council case and the Ashfield Municipal Council case, provides the following explanation at p 8 for applying a two-thirds discount: - The task of assessing a value having regard to the community land restriction is not an easy one because of the lack of evidence to support an opinion. The subject land is a narrow strip located between Sunnyholt Road, which is a busy road and Garling Road and as such it is unlikely to be used for any active recreational purposes apart from vacant open space land. After giving due consideration to the restrictions, the location of the subject land and having regard to the above Court matters I am of the opinion that the value of the subject land should be discounted by two-thirds for effect of community land restrictions. 28 The six sales relied upon by Mr Chandra included two sales transacted in 2000, which having regard to the rapid escalation in values that occurred between that year and the date of the compulsory acquisition, would require very significant upwards adjustments in order to achieve comparability with the subject land. That task does not appear to have been undertaken by Mr Chandra in his Valuation Report and that apparent failure in my judgment, entirely undermines Mr Chandra's valuation. For these reasons I can place little or no weight upon that valuation (even as corroborative evidence in support of Mr Dempsey's valuation). 29 Mr Wood's valuation methodology proceeds along the following lines:

(i) since there are no sales of truly comparable land to the subject land reliance is placed on three sales of lands zoned " open space " from private owners to the Applicant which paid prices reflecting an underlying or alternate residential zoning basis;

(ii) all those sales occurred in 2004 (the same year that the subject land was compulsorily acquired) and involved en globo lands situate at Parklea and Acacia Gardens (the sales are annoted as sales 1, 2 and 3 on the map being Annexure " B " hereto);

(iii) analysed on a rate per square metre (by dividing the sale price by the area of the sale property) the sales reveal rates per square metre of $260, (sale 2 ) and $280 (sales 1 and 3 );

(iv) the three sales, so analysed, reflect en globo residential values since the sale properties were not serviced land;

(v) comparison with and application to the subject land of the sales evidence requires upwards adjustment on account of the subject land being fully serviced land;

(vi) in addition to those three sales, regard is also had to three further sales of serviced residentially zoned lands situate in Balmoral Road, Blacktown acquired by the Applicant in 2001 and 2002 for incorporation into the existing Alpha Park, a major facility in Blacktown CBD area. These sales are annotated as 4, 5 and 6 on the map being annexure " B " hereto. (Two of these sales were relied upon by Lloyd J in the earlier case between the same parties where he determined the market value of the strip of land acquired from Alpha Park);

(vii) the analysis of these three sales required significant upwards adjustments of the purchase prices to reflect the significant escalation in values from the contract dates from 2001 and 2002 to the date of the compulsory acquisition of the subject land in order to achieve comparability between those sales lands and the subject land - such analyses revealing adjusted rates per square metre ranging from $ 401 to $785 per square metre , which yielded an average rate of $550 per square metre (being the rate that was adopted by Lloyd J in that case);

(viii) with the foregoing sales evidence showing (i) a rate of $260 to $280 per square metre for the unserviced en globo residential lands at Parklea and Acacia Gardens and (ii) an average rate of $550 per square metre for serviced residential land adjoining Alpha Park, Mr Wood's overall comparison of the sales lands with the subject land is that the subject is superior to the former lands but inferior to the latter, as is reflected in his adopting a value of the subject reflecting a rate of $415 per square metre ;

(ix) from this adopted value of the subject land a discount of 50 percent is applied to reflect the effect of the statutory restrictions of the subject land being " community land " under the LG Act (being the same discount factor that had been applied by this Court in the two Canterbury Council cases and the Blacktown case). 30 A convenient summary of Mr Wood's valuation methodology is included in his Report in reply (Exhibit 2) where after providing a trenchant critique of Mr Dempsey's valuation (a matter to which I shall presently return), Mr Wood states the following: It is considered that the approach of adopting sales of land zoned Open Space but acquired on an alternative or underlying Residential basis and discounted by 50% to accommodate both the Open Space zoning and Community Use restrictions as adopted by the Court is the best evidence as to value in the absence of directly comparable arms' length transactions and that the Market Value determined under Section 55(a) in the sum of Two Hundred and Seventy Thousand Dollars ($270,000) is fair and reasonable. 31 Mr Dempsey's valuation methodology proceeds along the following lines:

(i) the highest and best use of the subject land is for open space predominantly of a passive nature in the context of a public landscaped area;

(ii) in the hypothetical sale of the subject land, the purchaser would not assume a more liberal zoning than an open space zoning;

(iii) the most reliable valuation evidence is sales of comparable land used and zoned for open space;

(iv) in the absence of such sales evidence, other sales evidence can be used (albeit less reliably) in respect of sales reflecting a higher and better use than that of the subject land, but in applying such sales evidence, two adjustments are necessary - firstly that reflecting the open space zoning and secondly that reflecting the statutory restrictions applying to " Community land " under the LG Act ;

(v) sales evidence relied upon includes a sale of land at the corner of Sunnyholt Road and Meurants Lane, a sale at Blackwattle Bay and sales at North Arm Cove, Port Stephens in addition to the three sales of en globo lands at Parklea and Acacia Gardens relied upon by Mr Wood;

(vi) the sales relied upon by Mr Wood reflect a higher and better use potential than that of the subject land and accordingly, in utilising these sales, it is necessary to adjust them so that the effect of the assumed residential zoning is removed because the hypothetical purchaser of the subject land would not pay a price reflecting any assumed residential zoning of the land;

(vii) the level or degree of the requisite adjustment of the three Blacktown sales relied upon by Mr Wood is in the order of 80-90 percent , that discount reflecting the difference in the level of prices achieved in land sales at North Arm Cove, Port Stephens where the lands were zoned to permit residential development compared with the level of prices achieved in land sales in the same locality where the lands were zoned rural so as not to permit residential development (unless the land area was 40 hectares or more);

(viii) the subject land, being classified as " community land " under the LG Act was subject to severe restrictions on sale or disposal in the hands of the Applicant and the effect of these statutory restrictions was to further reduce by 50 percent the value of the subject land, as " community land " compared to the value of equivalent " operational " open space lands. 32 The sales evidence utilised by Mr Dempsey includes the three sales of lands at Parklea and Acacia Gardens that were relied upon by Mr Wood, a sale of land at Blackwattle Bay from the Waterways Authority to Leichhardt City Council, a sale of land at the corner of Sunnyholt Road and Meurants Lane Glenwood from Westminster Homes to the Applicant and the sales at North Arm Cove. 33 In his oral evidence, Mr Dempsey claimed that the Westminster Homes sale to the Applicant was his "most comparable sale". That was a sale of an irregularly shaped "left-over" lot of 89 square metres for the price of $5,500 transacted on 28 July 2003. The zoning of the land was "Open Space" Zone 6(a) under the LEP. A simple analysis of the sale reveals a rate of $62 per square metre (which when adjusted upwards to the date of compulsory acquisition of the subject land shows a rate of $71 per square metre). 34 Mr Dempsey's Report (Exhibit B) contains the following commentary on that sale: This is a small parcel of land that has little utility when the Open Space zoning is disregarded. The underlying use potential is limited and is not unlike the use potential of open space. It is therefore unnecessary to make a further reduction to reflect a restricted use potential as this characteristic is inherent in the land. The land cannot be developed as a separate parcel due to size and shape, it is not contiguous with other land that can be developed and is generally suitable only for landscaping, similar to the acquired land. I conclude that this sale provides good evidence of land with restricted use potential not unlike the use potential of the acquired land. I conclude that the Operational Land open space value of this site is $71 per square metre. Adopting a further 50% reduction with regard to the restriction on the sale of this land, the result is $36 per square metre representing the value of Community open space land for a small site. The sale is directly comparable to the acquired land being in close proximity and having the same amenity. This site is significantly smaller compared to the acquired land. Based on my knowledge and experience in valuing land I would expect a small site to sell for a higher rate per square metre compared to a large site. A downward adjustment in the rate per metre applied from this sale to the subject property is required. In this regard I consider a rate of $25 m2 is appropriate representing a 30% adjustment for size. 35 Mr Wood, in his Report in reply (Exhibit 2) entirely rejected the Westminster Homes sale in the following terms: This is the sale of a residue parcel of 89.2m2 which was completely surrounded by Ali Place, Meurants Lane and Sunnyholt Road. Of the 89.8m2 approximately 2/3rds (60m2) was the subject of an easement for water supply purposes - 4.5m (14.76ft) wide. The land, because of its location and size, was of no value for either active or passive Open Space purposes. Whilst the zoning of the land was Open Space 6(a) Recreation , when the scheme was introduced it was intended that Meurants Lane be closed to form a part of a public reserve, however this never eventuated. The subject land being a residue of the Westminster Subdivision on the eastern side of Sunnyholt Road and as such, it attracted minimum rates . Westminster were pleased to get it off their books as it was a liability. It could not, under any circumstances, be construed to be an arms' length transaction nor to conform to the definition of Market Value under Section 55(a). 36 In addition to Mr Wood's rejection of that sale, the documentary evidence relevant to the sale indicates that the sale price that was adopted (reflecting a rate of $62 per square metre) was based upon the price that had been paid by the Respondent in its purchase in June 2001 of land in the immediate vicinity at a rate of some $70 per square metre (which in turn reflected the same rate per square metre for the purchase by the Respondent of other land in the immediate vicinity in late 2000). 37 This evidence indicates that the sale price did not reflect market value current at the date of purchase (July 2003) but rather reflected 2000 and 2001 values in circumstances where land values had significantly escalated in the intervening years (at the rate of approximately 24 percent annually in the years 2002 and 2003 according to the Residex Index employed by Mr Dempsey in his valuation Report at p 13). 38 The Blackwattle Bay sale relied upon by Mr Dempsey was a sale transacted in April 2002 by the Waterways Authority to Leichhardt Council of 1440 square metres of waterfront land at a price of $310,000 (analysed at $215 per square metre). The purchaser immediately onsold the sale land to Australand (a developer) for a price of $3,622,500 (analysed at $2,516 per square metre) which included the land in its overall development site (thereby increasing the achievable residential density). In the ensuing development consent Australand rededicated to Leichhardt Council the same land that the Council had sold to the developer for $3.622 million. 39 Mr Dempsey was of the opinion that this obviously complex transaction provided evidence in the initial sale by the Waterways Authority of the value of land zoned for open space and by comparing that sale price with the sale price achieved by the purchaser in immediately onselling to the developer he noted that the initial sale price represented 8.5 percent of the "on sale" sale price leading to the following commentary: This outcome reflects the reduction in value arising from the use potential, with the land being otherwise identical (being the sale of the same purchase based on two different potentials). 40 Having adjusted the analysed rate of $215 per square metre derived from the original sale to $273 per square metre (to reflect differences in time between the sale date and the compulsory acquisition date of the subject land in order to compare the two lands) Mr Dempsey's commentary continues: This outcome equates to the value of land classified as Operational Land being waterfront open space land. This land is within a densely urbanised environment, with good street access, and has superior utility and amenity compared to the acquired land. By comparison, the acquired land represents passive open space fronting an arterial road. I have made an adjustment of 50% for this consideration to arrive at $137 per square metre. Having regard to difference in location (as reflected by the difference in median house prices in May 2004 between Leichhardt and Blacktown derived from the Residex Index), I have made a further adjustment of 52% to create equivalence with the subject lands to arrive at a value of $71 per square metre for operational open space. I have adopted a further 50% reduction to reflect the restriction on Community Land under the Local Government Act compared to operational Land, resulting in $36 per square metre representing the value of Community Land classified open space 41 In his Report in reply, Mr Wood entirely rejected the sale and Mr Dempsey's reliance upon it in the following robust terms: It is agreed that sales of Open Space land would provide the best evidence as to the value of the subject land, however, the only sale of land zoned Open Space is between government authorities and could not be construed to conform to the definition of Market Value as set out in: Spencer v Commonwealth [1907] 5 CLR 418. Canterbury Council v RTA [2002] NSWLEC 161 Pearlman J. Sales between government authorities are not the best evidence as to market value. Those sales were not at arms' length and at the very least some care should be taken in adopting them on the basis for deriving market value . This fact is further illustrated in the sale of Lot 1 in DP 1038645 (Report by P Dempsey) by Contract dated 4/02 for the sum of $310,000 ($215.28/m2) when the land resold by Contract dated 1991 (sic) for the sum of $3,622,500 ($2,516/m2) and must place some doubt as to the basis and soundness of the original transfer. My enquiries would indicate that the price was determined in 1991 some 13 years prior to the date of contract. The land was zoned Open Space on both occasions, the second sale showing the value that this land conferred on the owner of the adjoining parcel not only by increasing the density of the proposed development, but also by providing land which could be dedicated as Open Space in lieu of a Section 94 Contribution. The sale was rejected by the Court in Leichhardt Council v RTA 4/3/05 which adopted the sales of land zoned Open Space but acquired on an alternative or underlying zoning basis and then discounted to bring to account the zoning and Community Use restrictions. The adjustments made to this sale by Mr Dempsey in its application to the subject land, render it useless in determining the value of the subject parcels Viz: +27% price increase -50% for location - Waterfront v Sunnyholt Road -52% for location - Leichhardt v Balmain -50% for Community Use restrictions Net loss - 125% 42 Mr Wood's reference to this Court rejecting the sales is a reference to the decision of Lloyd J in Leichhardt Council v Roads and Traffic Authority [2005] NSWLEC 86. 43 In his judgment in that case (which involved the compulsory acquisition of parts of land owned and used by the Leichhardt Council as parkland) his Honour, after noting at par 10 that the parties' respective valuers had agreed that the best evidence of market value was to be derived from "sales of other properties within the Council's area, which had been bought for the purpose of open space" proceeded to consider each of the sale properties and to determine what evidence each sale provided as to the value of the acquired land. His consideration of the Waterways Authority sale is expressed in pars 18 and 20 as follows: Ferry Road and Forsyth Street, Glebe Also zoned open space, this land has a waterfrontage to Blackwattle Bay and adjoins Sydney University Women's Rowing Club. On 12 April 2002, the Waterways Authority sold the land to the Council for $310,000, representing a rate of $215 per square metre. The Council immediately on-sold the land to an adjoining owner, Australand, for $3,622,500. Australand was able to include the open space land in its floor space ratio calculation and thereby increase the density of the development on its land; and the Council, in turn, gained the benefit of foreshore land in the overall development being dedicated for open space purposes. The sale by the Council to Australand was clearly not a reflection of its value as open space land but rather its value to Australand as part of a development site and having special value to an adjoining owner. I am thus prepared to ignore it. The sale by the Waterways Authority to the Council, however, appears to have been on the basis of its value as open space land. This land is clearly superior to the acquired land and after making an adjustment for the time difference and the superior location, I agree with Mr Dempsey that it would be indicative of a value for the acquired land of about $175 per square metre.

Application of the sales evidence to the acquired land In applying the sales described above to the acquired land in the present case, it can be seen that they suggest a range of values from $175 per square metre to $1,800 per square metre. The sale in Ferry Road and Forsyth Street, Glebe, is however, so greatly out of step with the other sales and the circumstances appear to be so unusual that I am inclined to disregard it. The sales to which I have had regard suggest a value for the acquired land of about $1,175 per square metre.

North Arm Cove Sales 44 Paragraphs 92 to 107 (inclusive) of Mr Dempsey's Valuation Report contain his discussion of these sales involving some 12 sales of land zoned Rural 1(a) and some six sales of land zoned "Village". After tabulating the details of these 18 sale transactions, Mr Dempsey's Valuation Report continues at p 29: The difference in value between blocks which have similar amenity with views to the water and being largely identical, but for the uses permitted on them is clear, and extends in some cases towards 90%. Blocks in the Village 2 zone with water views in a good location, fronting a tar sealed road are selling for $150,000-$160,000. Blocks within the adjoining 1(a) zone with a similar outlook but with gravel track frontage are selling for around $20,000. This represents around 87% difference in value, predominantly relating to the use potential. In my opinion an 85%-90% reduction should be adopted, resolving any doubts in favour of the resume. 45 In his Report in reply, Mr Woods rejects the North Arm Cove sales in the following terms: My inspection of the sales quoted by the respondent's valuer Mr Dempsey, would indicate that those sales zoned Rural without residential potential did not have water views and lacked both the services and amenity of land zoned Residential which exhibited water views, had bitumen sealed access, power and telephone available/connected to the land. The difference in value as ascertained by Mr Dempsey equating to 80%-90% of land zoned for Residential use was therefore a summation of a multiple of factors briefly summarised. A north easterly outlook with: 1. Water views. 2. Tar sealed access. 3. Mains power and telephone. 4. Availability of a septic tank pump-out facility provided by the local Council and serviced by a local contractor. 5. The right to erect one cottage on the land. All of the above are not enjoyed by or available to land zoned Rural and will not be in the foreseeable future. To contend that the difference in value relates directly to the disparity in use potential is therefore incorrect. These sales are some 250km north of the Sydney CBD in an entirely different market in a rural environment where there is no demand and no community pressure for the provision of land for either passive or active Open Space by the several hundred residents compared to the Blacktown market where there is a population of some 1,000,000 and the availability of land in built-out areas is scarce and attracts premium prices. To adopt a comparison is to my mind incorrect and does not reflect the use potential of Open Space land within the Sydney basin. D. DETERMINATION OF THE MARKET VALUE OF THE COMPULSORILY ACQUIRED LAND 46 Having considered all of the valuation evidence that I have earlier summarised, and with the benefit of a view of the subject land and its immediate environs and of all seven of the sales lands located in the Blacktown City area, conducted with the parties and their respective legal advisors and with Mr Wood and Mr Dempsey, I am of the opinion that Mr Wood's valuation of the market value of the subject land in the sum of $270,000 is far and away to be preferred to Mr Dempsey's competing valuation of $33,000. In so concluding I make the following findings -

(i) Mr Wood's valuation methodology is sound and accords with proper valuation principle and the approach taken by this Court in similar cases which have involved the compulsory acquisition of lands zoned open space having the classification as " community land " under the LG Act .

(ii) The six sales relied upon by Mr Wood being sales of lands within the Blacktown City acquired by the Applicant for the purposes of open space are the most reliable sales evidence for determining the market value of the subject land. In particular, they provide much more reliable evidence from which the market value of the subject land may be deduced than do the other sales relied upon by Mr Dempsey (namely (i) the Westminster Homes sale; (ii) the Blackwattle Bay sale; and (iii) the North Arm Cove sales). Moreover, for reasons that will be developed, none of those three sales can be regarded as comparable sales or as providing any reliable evidence of the value of the subject land;

(iii) In respect of the three local sales (common to both Mr Wood's valuation and Mr Dempsey's valuation), Mr Wood's application of that sales evidence to the subject land is decisively to be preferred to Mr Dempsey's application. In particular, the single discount factor of 50 percent applied by Mr Wood is far more appropriate than Mr Dempsey's cumulative discount of 93 percent . In fact, although Mr Wood's single discount of 50 percent (reflecting in an undifferentiated manner both the open space zoning of the subject land and its classification as " community land " under the LG Act) accords with the approach adopted by this Court in a number of similar cases, it is my respectful opinion (and for reasons that I will later develop) that the 50 percent discount factor is almost certainly too high. Despite my opinion on this question, since the Applicant's case has not sought a determination of market value higher than Mr Wood's valuation and since his valuation faithfully and reliably reflects the valuation approach taken by this Court in other cases, I do not think it appropriate that I determine a higher market value (by adopting a lower discount factor) than the amount $270,000 contended for by the Applicant in reliance upon Mr Wood's valuation. However, my opinion on this matter enhances the confidence with which I adopt Mr Wood's valuation opinion in preference to the competing opinion of Mr Dempsey;

(iv) The market value of the subject land is determined in the sum of $270,000 . 47 It is appropriate that I give more detailed reasons for some of the foregoing conclusions. 48 Firstly, I should say why I have rejected the sales evidence relied upon by Mr Dempsey (in addition to his reliance upon the same three local sales as were relied upon by Mr Wood).

(a) the Westminster Homes sale 49 Whereas I agree with Mr Wood's reasons that I have earlier recited for rejecting this sale, it is apparent from the documentary evidence that the sale price was not determined by the parties according to values prevailing at the date of sale (July 2003) but by reference to historical data involving sales in 2000 and 2001 to the Respondent of nearby lands. Those transactions have not been closely examined in the evidence but it is apparent that the prices reflected values of en globo residential lands current when they were transacted in 2000 and 2001. 50 Those prices have no meaningful relationship to the drastically escalated levels of prices and values of en globo residential lands prevailing when the Westminster Homes sale was transacted in July 2003. Indeed the evidence of the sale prices achieved for en globo residential lands in early and mid July 2004 (Mr Wood's sales 1, 2 and 3) indicates values at the rate of $260 to $280 per square metre compared with the rate of $61 per square metre achieved by the Westminster Homes sale (adjusted to $71 per square metre for comparability in terms of time, with the subject land). 51 Accordingly, the Westminster Homes sale transaction did not reflect market value of the land at the date of sale and for that reason represents unreliable sales evidence. 52 Mr Dempsey's reliance on the sale price as reflecting the value of open space land (rather than the value of en globo residential land being the historical basis (reflecting 2000 and 2001 values) upon which basis the sale price was determined) is in my judgment an entirely gratuitous and speculative re-interpretation of the true facts pertaining to the sale transaction. For this reason, I must reject both the sale and Mr Dempsey's opinions based upon it.

(b) The Blackwattle Bay sale 53 The Sydney Harbour waterfront location of the sale property renders it blatantly non-comparable with the subject land. 54 But quite apart from that obvious fact, the evidence concerning this sale transaction and the related immediate on-sale and the subsequent dedication of the same land to the Council as a condition of development consent indicates that the overall transaction is shrouded in mystery and in this overall context it is dangerous in the extreme to isolate the original sale from the Waterways Authority as providing evidence of value of open space land in the locality of Leichhardt itself and far more so in the far removed location of the subject land. Even in the context of values of open space land in the locality of Leichhardt as I have earlier noted, in the Leichhardt Council case, Lloyd J found that the original sale was (i) greatly out of step with the other comparable sales evidence (indicating a value of $1,175 per square metre compared with the $175 per square metre achieved in the Waterways sale) and the circumstances surrounding it to be "so unusual" (which I take to be a reference to the immediate on-sale of the land for a greatly increased price and its ultimate dedication as open space) as to incline his Honour to disregard it (which he did). 55 In my judgment, the sale is not a comparable sale, provides no sound basis for either deducing a value of the subject land or for supporting Mr Dempsey's supposition based upon the original sale and resale of the sale land that a potential based upon an open space zoning represented some 8 percent of the value of a different potential based upon a residential zoning.

(c) The North Arm Cove Sales 56 Here again I accept Mr Wood's rejection of these sales which are situate some 250 km from Sydney and bear no meaningful relationship with the subject land either locationally, physically or by way of similar zoning or market wise. 57 I fully appreciate Mr Dempsey's conscientious attempt to find sales evidence which demonstrates a difference in values of similarly placed and physically endowed lands but nonetheless having radically different zonings and hence development potentialities. Even if, despite Mr Wood's rebuttal of Mr Dempsey's suggested similarities in amenity of the differently zoned lands, I were prepared to accept the evidence and some of Mr Dempsey's opinions based upon that evidence, that would in my respectful opinion, only establish matters relevant to the market embracing North Arm Cove land transactions and whatever was so established could not reasonably or logically be automatically translated to the entirely different market conditions applying to the subject land at the date of it being compulsorily acquired. 58 Accordingly, I find that not only are the sales not comparable sales but whatever legitimate analysis that can be made of those sales has no bearing upon the value of the subject land. 59 Mr Dempsey's analysis of the North Arm Cove sales yields the singularly unexceptional result that similarly physically endowed and located land with entirely disparate zonings allowing for entirely disparate development potentialities are apt to yield disparate sale prices if sold contemporaneously. 60 But this type of analysis of the sale transactions has no application to the estimation of the market value of radically differently zoned land in an entirely different geographic location and in an entirely different real estate market. Moreover, the analysis ultimately casts no light on the question of the value of the subject land that is zoned open space compared with its value if it were zoned instead for residential purposes, even in the context of the deployment of sales evidence such as is provided by Mr Wood's sales 1, 2 and 3 which were zoned open space and purchased by the Council for open space purposes albeit at prices reflecting an underlying residential zoning. This is for the simple reason that the sale lands were not zoned for open space purposes on the one hand and residential purposes on the other. 61 For all of the foregoing reasons, I reject the North Arm Cove sales as providing evidence of value of the subject land and I reject Mr Dempsey's attempted application to the subject land of the opinions he has derived from his analysis of those sale transactions. 62 In so concluding, I am conscious that Mr Dempsey's evidence based upon his analysis of the North Arm Cove sales was accepted by Lloyd J in the Leichhardt case when determining the extent to which "the restriction" affects the market value of the compulsorily acquired land (being part of a public park). 63 His Honour's reference in par 47 of his judgment to the "restriction" is a reference to "the restrictions of the kind described above (par 25)". According to the contents of par 25, the restrictions therein referred to were "the restrictions applicable to land which is classified as community land under the LG Act" and such restrictions relate to "the use and disposition" of community land. The relevant passages from Lloyd J's judgment are par 48 to 52 (inclusive) which state the following: Mr Dundas would make no deduction for the restrictions which apply to the acquired land. This approach is, however, contrary to principle. Mr Dempsey, was initially of the opinion that the restrictions gave the acquired land a value in the order of 66 per cent of land which is not subject to such restrictions. Mr Dempsey derived this deduction from a general rule of thumb from his knowledge and experience as a valuer with the Valuer-General's Department. However, having regard to other cases in the Court that have allowed discount between 50 and 66 per cent for the restrictions imposed on community land, and resolving all doubts in favour of the dispensed owner, he adopted a discount of 50 per cent.

In a subsequent report, however, Mr Dempsey expressed the opinion that a 50 per cent discount was not sufficient having regard to actual sales evidence. Whilst acknowledging his earlier adoption of a rule of thumb , he sought to quantify a discount from actual sales evidence, comparing the sale of land having development potential with sales of nearby land without development potential. Since no such sales evidence exists in Leichhardt, Mr Dempsey examined the sales of land in North Arm Cove, Port Stephens.

In North Arm Cove there is subdivided village land zoned Zone 1(a) Rural and Zone 2 Village in close proximity. The lots in the Zone 1(a) Rural cannot be used for residential purposes because the land must have an area of at least 40 hectares for the erection of a dwelling. There are no proposals in the foreseeable future for any changes to these planning controls. The subdivided village land in Zone 2 Village can be used for residential purposes. The lots in both zones have similar amenity. The sales evidence shows that the difference in value between the lots in the two zones is between 87 per cent and 90 per cent. In Mr Dempsey's opinion, the discount to be applied should be at least 80 per cent and may be up to 90 per cent given that there is less likelihood of the restrictions in Leichhardt being changed.

In the present case, the evidence shows that at the time of acquisition the likelihood of the restrictions being lifted or removed was extremely remote. As noted above, there was a shortage of open space land in Leichhardt and the Council had in place a policy of acquiring more land for open space. The evidence also shows that there was strong community opposition to the disposal of existing open space land, including opposition to the incorporation of Blackmore Park (of which the acquired land was an adjunct) into any redevelopment scheme or masterplan for the area. I find that the likelihood of the restrictions being lifted in the present case was at least as unlikely as, and probably more unlikely than, the land described by Mr Dempsey at North Arm Cove.

The only evidence of a direct comparison between the value of land which is subject to restrictions and land which is not is contained in the evidence of Mr Dempsey that I have described. It thus seems that the appropriate discount in the present case, based upon the evidence of the sales comparisons at North Arm Cove and the extremely remote possibility of the restriction being lifted in the present case, is in the order of 87 to 90 per cent. No contrary sales evidence has been adduced by Mr Dundas. Bearing in mind that in compensation cases doubts are resolved in favour of a more liberal estimate of value ( Commissioner of Succession Duties (SA) v Executor Trustee and Ageing Co of South Australia Ltd (1947) 74 CLR 358 at 373-374), and having regard to the sales evidence described by Mr Dempsey, I am thus prepared to adopt a discount of 80 per cent. 64 I would respectfully make the following observations on these passages from Lloyd J's judgment -

(i) Mr Dempsey's evidence was the only evidence " of a direct comparison between the value of land which is subject to restrictions and land which is not " and there was no contrary sales evidence.

(ii) Since his Honour accepted Mr Dempsey's evidence that the differently zoned lands on the North Arm Cove sales " had similar amenity ", it may be inferred that he also held that the difference in prices yielded in the sale transactions was solely on account of the different zonings of the sale lands.

(iii) The likelihood of the restrictions applying to the compulsorily acquired land (including the restrictions applying to community land under the LG Act ) being lifted or removed was " extremely remote " and the Leichhardt Council had a current policy of acquiring more land for open space. 65 None of these conditions or features applies in respect of the present case. In particular, Mr Wood's evidence, which I accept, satisfies me that it is not correct to conclude that the differently zoned sale lands had "similar amenity" and it is therefore not correct to infer that the differences in sale prices was solely (or predominantly) on account of zoning differences. 66 However, there are independent reasons (as I have earlier articulated them) why the North Arm Cove sales provide no assistance in the task of determining the market value of the subject land and why there is simply no legitimacy in translating Mr Dempsey's analysis of those sales to the determination of the market value of the subject land. 67 Moreover, and with great respect to his Honour, the North Arm Cove sales can have absolutely no bearing on the statutory restrictions forbidding disposition applying to "community land" under the LG Act. Those restrictions (or anything like them) are entirely foreign to the sale lands and any analysis of those sales can have no relevance to the determination of the effect on value of the statutory prohibition on the disposition of community land so classified under the LG Act. 68 Finally, it is to be noted that in the present case (unlike the Leichhardt Council case) Mr Dempsey's reliance upon the North Arm Cove sales has been for the exclusive purpose of justifying his 85 percent discount factor to be applied to the sales evidence so as to eliminate all components of development potentiality over and above the highest and best use of the land as open space. His additional discount factor of 50 percent reflecting the "community land" restrictions on disposition is entirely unrelated to the North Arm sales or his reliance upon them. 69 In the Leichhardt Council case, Lloyd J's acceptance of Mr Dempsey's analyses of the North Arm Cove sales and of his opinions based thereon led his Honour to ultimately make 80 percent discount in respect of all relevant restrictions (ie statutory zoning restrictions and the community land restrictions). 70 However, in the present case, Mr Dempsey uses those sales and his opinions based upon them to justify an 85 percent discount for limited development potential in addition to his further discount of 50 percent to reflect the restrictions on disposition of community land - surely a case of double discounting. 71 For all the foregoing reasons, I entirely reject the North Arm Cove sales and all reliance placed upon them by Mr Dempsey. 72 The second matter requiring some elaboration is my opinion that Mr Wood's single discount factor of 50 percent in respect of all statutory restrictions affecting the subject land represents a generous discount to the values based upon the sales of lands in the locality of the subject land which the Applicant acquired for open space purposes by paying prices reflecting an underlying residential zoning. 73 I have previously noted that Mr Wood's single discount factor of 50 percent accords with the approach taken by the Court in the two Canterbury Council cases and in the Blacktown Council case. I think that further reference to the Blacktown Council case decided by Lloyd J will be instructive for present purposes because like the present case, it involved a compulsory acquisition by the Respondent for road widening purposes of a narrow strip of land forming part of Alpha Park (having the same zoning under the LEP and the same classification under the LG Act as does the subject land). The acquisition occurred on 24 October 2003 (close to the date of the compulsory acquisition in the present case). As I also noted earlier, in that case Mr Wood gave valuation evidence for the Applicant and Mr Dempsey gave valuation evidence for the Respondent. 74 After noting the principal evidence given by each valuer, his Honour refers to two sales in Balmoral Street which adjoined Alpha Park. In the following passages (at pars 11, 12, 17, 18 and 19) his Honour succinctly states the effect of the two Canterbury Council cases that have been referred to and the valuation approach that he proposed to adopt in determining the market value of the acquired land: In Canterbury City Council v Roads and Traffic Authority of New South Wales [2002] NSWLEC 161 and in Canterbury City Council v Roads and Traffic Authority of New South Wales [2004] NSWLEC 172, the Court was faced with a similar problem where there were no comparable sales of open space land. In each case the Court had recourse to sales of residential land acquired for open space purposes and then applied a discount of 50 per cent to take into account the restrictions placed on the land by reason of its classification as community land including its zoning for open space purposes.

Similarly in this case where there are no comparable sales, in my opinion a discount of 50 per cent may be applied to the two sales in Balmoral Street which were residential properties acquired for open space and public recreation. Those sales, however, must be adjusted to take account of the movement in land values between the dates of each sale and the date of compulsory acquisition. …………….. ……………… In my opinion the sales of the two Balmoral Street properties are the most reliable indicators of value, particularly since they adjoin Alpha Park and were purchased for the purpose of addition to the park.

In considering the Balmoral Street sales, I am prepared to apply the principle that in compensation cases doubts are resolved in favour of a more liberal estimate of value: see Commissioner for Succession Duties South Australia v Executor Trustee & Agency Co of South Australia Limited ( 1947) 74 CLR 358 at 373 and 374.

I therefore adopt Mr Wood's estimate of the movement in property prices since those sales occurred. That is, I adopt an adjusted value of $550 per square metre for the acquired land to which should be applied a discount of 50 per cent to reflect both the fact that it was community land and its zoning for open space purposes, resulting in a market value of $275,000 for the acquired land.

75 In my respectful judgment, his Honour's valuation approach in that case is entirely supportive of Mr Wood's valuation approach in the present case. 76 I come finally to the considerations that inform my opinion that a single discount factor of 50 percent (as allowed in Mr Wood's valuation) is almost certainly greater than it might reasonably have been held to be. There are two reasons for my opinion. 77 The first reason is the obvious fact that the prices paid by Sydney Metropolitan councils in acquiring lands zoned for open space purposes may in certain circumstances aptly reflect the value of such lands even if the prices paid are based upon an underlying zoning (eg for residential purposes). 78 In this respect, I refer to the decision of Gobbo J in City of Brighton v Road Construction Authority (1986) VR 255 and in particular to the following passage at 263: Where a parcel of land is set aside for parkland use, its value will be related to the price that a purchaser of parkland will be prepared to pay, given that such purchaser will be using the land for that which constitutes for it the highest and best use of the land. It will also be related to what that purchaser would have to pay - assuming reasonable opportunity and not compulsion to effect a purchase - if it were to purchase other land that might equally meet its purpose. Such purpose of other land may lead it to have to pay the equivalent of residential values. The fact that emerges very clearly is that municipalities, especially those like that claimant in developed areas, cannot purchase land appropriately zoned for parkland purposes. They are obliged to buy residential land, at or near residential values, when they wish to secure parkland. The authority's valuers argued that where a municipality bought residential land for parkland purposes and then had imposed on the land a reservation for public open space, its value was immediately reduced. It is difficult to understand why this is so, for the municipality is the main factor in the market for parkland. It will clearly be prepared to pay the original price it paid for the very good reason that, if it did not buy this land at that price, it would be compelled to pay that price for residential land, there being no parkland so zoned available for sale. 79 In referring to that decision of Gobbo J (a distinguished judge and most experienced particularly in this area of the law) I am acutely conscious of the fact that Lloyd J in the Leichhardt Council case held at par 44 that the judgment of Gobbo J was "contrary to the principles explained in Corrie v MacDermott and the cases which follow and apply it, and contrary to the decisions of the Court of Appeal in the Hornsby, Hurstville and Ashfield cases…." 80 With the greatest respect to that observation I do not myself see anything in Gobbo J's judgment that is contrary to the binding authorities that are cited by Lloyd J. 81 Indeed, on the same page of his judgment which contains the passages I have recited, Gobbo J cites the Privy Council decision in Corrie v MacDermott. Moreover, in the Hornsby Shire Council case, Stein JA, in giving the judgment of the Court of Appeal cites (at 108) Gobbo J's judgment in City of Brighton. 82 Finally, although City of Brighton is not cited in the Court of Appeal's decision in the Ashfield Council case, the passages from Gobbo J's judgment that I have earlier recited are in my opinion, entirely consistent with the following observations in paragraphs 104 to 108 (inclusive) of the judgment of Davies AJA in the Ashfield case:

The position, therefore, is that the lots were lands which the RTA wished to acquire and did acquire and they were lands which the council had power to sell with consent. In this circumstance, the assessment to be made was an assessment of the fair market value of that which was taken. The first and most important factor to be considered was the land itself, its position and qualities. The subject lands were accessible, level land adjacent to the Parramatta River. They were in an area of Sydney in which the land available for public recreation was limited. The trial judge referred to a report which "highlighted the deficiency of the Council in open space".

The community would have regarded the lands as valuable public open spaces. Increasingly, public open space is regarded as a necessary and valuable community asset. Increasingly, councils are building up their reserves, not destroying them. In the area in which the subject lands were situated, there was not such an abundance of open space land that the subject lands would have been regarded as having only minimal value.

It was, therefore, significant that the comparable properties upon which the trial judge relied were properties which had been purchased by municipal councils for public recreation or public open space. Those sales demonstrated the value which communities in Sydney were prepared to pay to obtain such land. Although none of the land in the comparable sales was subject to any specific restriction, public open space was its highest and best use and, in each case, the land was purchased for that purpose. In no case was the land purchased for profit making, for development or for resale. It was purchased with the intention that it would be held and used as public open space or for public recreation.

In this context, the restrictions imposed upon the subject lots had little significance. The comparable sales were of lands which had been acquired for a comparable use. The comparable sales reflected the value which the community placed upon such land.

The task is always to assess the value of that which has been acquired. The subject lands were held by a municipal council and were devoted to public recreation. The comparable sales, which reflected acquisitions made by councils of land to be devoted to such a purpose, were good evidence of the value to the council of the lands from which it has been dispossessed. 83 The second reason concerns the effect on the market value of the subject land of the statutory restrictions on disposition of "community land" imposed by the LG Act, s 45(1). 84 Whereas it is true as Stein JA pointed out (at 107) in the Hornsby Council case that prior to the LG Act there was no concept of "community land", the Local Government Act 1919, s 518(2)(b) prohibited a local council from "selling or exchanging any public reserve, public place or cemetery or any land subject to a trust" as to the scope of which see Attorney General (NSW) v Parramatta City Council (1949) 49 SR (NSW) 283 and Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566. Accordingly, the absolute prohibition wrought by the LG Act, s 45(1) on the disposition of community land had legislative antecedents or counterparts under the 1919 Act. 85 As I have earlier noted, although the LG Act , s 45(1) absolutely forbids the disposition of "community land", that Act confers competency upon a local council to reclassify "community land" to "operational land" (which is not subject to any counterpart prohibition or restriction on disposition). This competency represents in the words of the Privy Council's judgment in Corrie v MacDermott "the chance of such restrictions being discharged" which is the matter that must be considered when assessing the effect on market value of the statutory restriction on disposition. 86 In the decided cases since (and including) the Hornsby Shire Council case, there is generally to be found some consideration of the prospects of the relevant restriction being lifted and relevant factors that are mentioned concern such matters as the importance of the community land in providing a public recreational asset or amenity, the question whether there is a community need for additional open space or whether the community need is presently satisfied by the current supply of open space lands, the likely reaction by members of the public to any proposal to sell or develop the land (otherwise than for recreational purposes). However, it is important to recognise that these considerations generally have addressed the "community land" as an existing entity and entirety even in cases where only a small portion of the land has been compulsorily acquired (as in the present case involving the acquisition of a very narrow strip alongside an existing road which is required to be widened). 87 In my respectful opinion, this focus on the entirety of the community land is not the appropriate focus in a case where only a small portion of it is compulsorily acquired leaving the remainder of the community land intact. 88 In such a situation, in my judgment, the appropriate focus for considering the chance of the restriction being lifted or removed is properly confined to that portion of the community land that is proposed to be compulsorily acquired. 89 Once that proper confined focus is recognised, it seems to me to be perfectly reasonable and plausible to assess as highly probable the chances of the restrictions being lifted or removed from the land proposed to be compulsorily acquired. Since the Just Terms Act, s 20(1) provides that upon acquisition the land is vested in the acquiring authority "freed and discharged from all estates, interests, trusts, restrictions, dedications…." it follows that the acquired land ceases to be "community land" and it stands to reason that it is in the legitimate financial interests of both the council in whom the community land is vested and of its citizens and ratepayers that they be justly compensated for the loss of the community land. 90 Accordingly, it is not to be supposed that the relevant council and its citizens and ratepayers would be inactive in the face of a proposal by a public authority (such as the Respondent in the present case) to compulsorily acquire community land, knowing that community land is not immune to the compulsory acquisition process of the Just Terms Act and that compensation payable for the compulsory acquisition is liable to be less than the cost of replacing it or less than full fee simple value simply because of the continuing existence of the statutory restriction on the disposition of community land (where that restriction has no continuing operation to preserve the community land as a public asset). 91 In such circumstances, it may readily be inferred that a council (acting in the best interest of its citizens and of the preservation and enhancement of the full value of community assets) will take whatever action that will be necessary to ensure at least the receipt of just compensation, representing the market value of the compulsorily acquired land without any diminution in that compensation on account of the existence of statutory restrictions on disposition which in the face of a proposal under the Just Terms Act for the compulsory acquisition of the community land (or part of it) are impotent to prevent the compulsory acquisition from occurring under the Just Terms Act. This is but to recognise the simple reality that the continuing existence of the statutory restrictions on disposition (unless lifted or removed) can only operate in favour of the acquisition authority and adversely to the legitimate financial interests of council and its citizens. 92 Faced with such a situation, it may readily be inferred that a council faced with a proposal under the Just Terms Act for the compulsory acquisition of "community land" (or a portion of "community land") will readily exercise the competency conferred upon it by the LG Act to reclassify the land to be compulsorily acquired as "operational land" and in exercising that competency, the council is likely to have the support (and not the opposition) from its citizens. 93 What I have just outlined concerning the probabilities of the relevant statutory restrictions on disposition being lifted or removed in a case such as the present is, in my opinion, supported by the type of reasoning in the Court of Appeal's decision in Sydney Sailor's Home v Sydney Cove Redevelopment Authority (1977) 36 LGRA 106, especially at 118 and 119 in the judgment of Hope JA. After emphatically stating at 118 that the Privy Council decision in Corrie v MacDermott "clearly requires the effect of restrictions on disposition to be taken into account in valuing land for compensation purposes" Hope JA proceeded to say the following (and I confine quotation to the opening paragraph of his extended discussion): - As was pointed out by Isaacs J, (in Corrie ) there are various ways in which an obstruction to the alienation of land may be removed, and a valuation of land which takes into account any such obstruction may vary according to the potential difficulty of removing the obstruction. Where charitable trusts have been established by a will or a private deed, the trustee having no power of sale, there would generally be little difficulty in obtaining the court's approval to a sale if it were beneficial to the performance of the trusts, although the court would want to be satisfied that the best price had been obtained for the land. If the charitable trusts had been established by statute, it would be necessary to look to the statute and consider the prospect or indeed the possibility of effecting and obtaining approval for a sale. 94 What I have said concerning the chances of the statutory restrictions being lifted also promotes the spirit and intendment of the stated object of the Just Terms Act "guaranteeing that the amount of compensation will not be less than the market value of the land…." (s 3(1)(a)) inasmuch as it legitimately resolves the apparent incongruity of the hypothetical "willing but not anxious seller" (a vital component to the definition of "market value" contained in the Just Terms Act, s 56(1)) being at the same time a seller lacking the capacity or competency to sell (by virtue of the existence of the prohibition on the disposition of "community land" imposed by the LG Act, s 45(1)). 95 Finally, I would observe that the application in a given case of what I have said concerning the chances of the lifting of the statutory restriction on disposition of community land, is not dependent upon the existence as at the date of compulsory acquisition of the requisite local environmental plan reclassifying as "operational land" the compulsorily acquired land, (although such a state of affairs may well exist in a given case in view of the usual lead time that occurs between the notification of the proposal for public acquisition and the implementation of the proposal by the compulsory acquisition being effected by notification published in the Government Gazette pursuant to the Just Terms Act). 96 This is because valuation law and principles are sufficiently flexible to accommodate the assignment of a present value to something to be the subject of a future action (ie to give a present value to the effect of the future existence of the requisite local environmental plan reclassifying as "operational land" under the LG Act the compulsorily acquired land). Such an application of principle proceeds along similar lines to the reasoning of the High Court in The Commonwealth v Arklay (1952) 87 CLR 159 where (in the context of the application of wartime price controls applying to the sale of land) the Court's judgment at 171 stated: What has to be ascertained as a measure of value is what the willing seller would demand, on the assumption that the consent of the controller would be forthcoming, and what a willing buyer would give, on the like assumption, on the footing that he is a buyer who must himself submit to the controls if and when his turn came to sell, should they not in the meantime be terminated. The least price at which a vendor could be reasonably expected to sell in these circumstances would be a price which would include, in addition to the price fixed by the controller if it could be ascertained, a sum to compensate him for the present value of the enhanced price which the purchaser might expect ultimately to obtain. This would be an ordinary business consideration which no vendor could be expected to overlook: McMahon v. The Housing Commission of New South Wales ; McMahon v. The Valuer-General (1946) [16 LGR 54, at p. 56]. This sum might be difficult to estimate but difficulty of estimation should never deter a Court from allowing in the assessment of compensation every item of value which should properly be taken into account. 97 For the foregoing reasons, I am of the opinion that the 50 percent discount factor allowed in Mr Wood's valuation is more generous to the Respondent than might otherwise by considered to be appropriate. It follows that in adopting Mr Wood's market value estimate of $270,000 for the reasons that I have earlier given I am afforded the greater assurance and confidence in my assessment of compensation payable in this case. E. ORDERS 98 For all the foregoing reasons, I make the following orders -

Compensation representing the market value of the compulsorily acquired land under the Land Acquisition (Just Terms Compensation) Act 1991 , is determined in the sum of $270,000.

The Respondent shall pay the Applicant's costs in the sum agreed, or failing agreement, as assessed (unless the Respondent, within 14 days files a Notice of Motion seeking a different order in which event costs are reserved).

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

(2001) 117 LGERA 203

(1998) 100 LGERA 105

(2001) 112 LGERA 223

At a glance

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Before

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Judgment (56 paragraphs)

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Cases Cited (9)

Cited By (3)