Finding on underlying zoning
34 At the outset I should note that the underlying zoning argument of the Respondent was initially based on two alternative scenarios in relation to the identification of public purpose. The primary scenario was that the public purpose, not subsumed by the Respondent's purpose underlying the acquisitions, was the release of the whole RHDA/BRRA area. That approach required the whole of the Applicants' land to be considered, not just the acquired land. This approach was not ultimately pressed at the end of the hearing after all the evidence and the substantive submissions had been received. It is therefore necessary to apply the evidence and submissions as relevant to the second scenario for the public purpose in relation to underlying zoning contended for by the Respondent, being that set out above in the summary of the Respondent's submissions. That has not been a completely straightforward exercise to undertake. My understanding is that, applying this approach, the underlying zoning of the acquired land only must be considered (not the whole of the Applicants' lands).
(i) planning history
35 The determination of market value under s 56(1) of the JT Act requires that the market value of the acquired land be determined disregarding any increase or decrease in the value caused by the carrying out of the public purpose. In Walker the High Court unanimously held at [53] - [54] (footnotes omitted):
The Foreshore Authority submitted that (i) the statutory definition required what might be called a Spencer's Case valuation in the sense explained above; but (ii) this was to be followed by any disregard which par (a) required; and (iii) the reference in par (a) of the objects set out in s 3(1) to eventual acquisition indicated that the proposal might predate by a significant period the acquisition of the land in question; (iv) but (iii) did not render applicable to s 56(1) the proposition drawn from San Sebastian as to the sufficiency of an "indirect relationship" where the maintenance of the planning restriction by the Council is seen as "a step in the process of resumption"; (v) this is because the market value disregard in par (a) looks to the public purpose for which the Land might by law be acquired by the Foreshore Authority by compulsory process under the Compensation Act and to "the proposal" to carry it out; (vi) "the proposal" here was not that of the Council as the proposed resuming authority, or some aggregation over time of the policies of the Council and later of the Carr Government; (vii) to give the statutory expression that operation, as had the primary judge in fixing upon "unity of purpose displayed by the two arms of government", was an error of law.
This reasoning should be accepted. The construction of the market value disregard in par (a) for which the Foreshore Authority correctly contends, links "the proposal" to that of the resuming authority. It puts aside anterior discussions or agitations by the Council and others in favour of classifying the Land as public space. In this way there is reflected in the terms of par (a) of s 56(1) a policy to require a disregard only of that increase or decrease (as in this case) in value for which the resuming authority is responsible.
36 The High Court's authoritative reasoning in Walker means that earlier case law which held that "steps in the resumption process" must be disregarded no longer applies. As stated in [54] the "disregard" relates to the proposal of the resuming authority rather than any other arm of government, such as the Council in this case. It is the decrease (or increase if relevant) in value for which the resuming authority is responsible that must be disregarded.
37 The "disregard" I am considering is in the context of the identification of the underlying zoning. Although decided before the High Court in Walker, the findings in Smith v Roads and Traffic Authority [2005] NSWLEC 438 of McClellan J are pertinent. His Honour held at [70]:
To my mind, (and I do not believe Walker Corporation requires me to determine otherwise, although Basten JA raises some doubts see [39]), in relation to matters of zoning, s 56(1)(a) requires that (a) a zoning imposed to facilitate the public purpose, and, (b) a zoning which has been maintained to facilitate such a purpose is to be set aside, when, in either case, the facts make plain that but for the proposal to carry out the public purpose some other zoning would have been imposed. A decision must then be made as to the zoning which the land would have had at the date of acquisition so that the development potential of the land, if any, can be identified and the market value, unaffected by the proposal to acquire the land, determined. Only then will the compensation be just.
38 As submitted by the Respondent, following Walker in the High Court, this approach continues to apply. When the imposition or maintenance of the particular zoning is caused by the proposal of the acquiring authority, that must be disregarded and the zoning which the land would have had at the date of acquisition separate from the acquisition determined.
39 As the planners' evidence addressed both scenarios propounded by the Respondent (as these were relevant until virtually the end of the hearing), care must be taken in understanding their evidence in light of the contraction of the Respondent's case to only one scenario for the public purpose. It is necessary to disregard the Special Uses 5(a) zone for the land as that is linked to the public purpose, as the parties agreed. The parties also agreed that Walker was the relevant authority on this issue. There were differences however in how the public purpose was defined in relation to the Respondent's purposes as the acquiring authority and those of the Council and the Department as the bodies responsible for the overall planning for the BRRA within the RHDA.
40 Mr Rowan/the Respondent considered that the public purpose of the Kinhill scheme identified in 1989 and as subsequently modified was the public purpose which the Respondent (then the Water Board) took over in 1991. This approach meant that what was to be disregarded was more limited than in the Applicants' approach. The Department and the Council's consideration of how drainage for the BRRA including Strangers Creek would be addressed was not to be disregarded at the time that the Respondent assumed responsibility for the provision of drainage in 1991. As the Department and the Council's consideration of trunk drainage must not be disregarded, the situation as at 1991 would have continued to prevail according to the Applicants up to 2005/2006 when the LEP was amended. The Council's approach was that land in creek corridors which was flood affected would be used for trunk drainage and this could not be disregarded. This approach would mean that the rural zoning of the flood affected land which existed at 1991 would have continued until the date of acquisition.
41 Mr Grech/the Applicants argued that the provision of trunk drainage for the BRRA was the public purpose which had to be disregarded. Consequently the scope of the public purpose to be disregarded under s 56(1)(a) was wider than argued by the Respondent and not limited just to the precise circumstances of the Kinhill scheme as modified (substantially) over time. On this basis the Applicants submitted that any consideration of zoning must ignore any trunk drainage usage of the land. At the time of LEP Amendment 5 in 2005 the acquired land would have been zoned residential as a result.
42 The application of the High Court's findings in Walker requires that the "disregard" under s 56(1) must be of the purpose of the acquiring authority. The Respondent had agreed by January/February 1991 that it would construct and maintain the trunk drainage system for the BRRA including the maintenance of the 1:100 year floodplain to levels suitable for drainage purposes. In doing so it adopted the existing scheme as had been developed by the Department through SREP 19 and the Kinhill scheme and the Council through its planning processes and contributions to the regional planning for the RHDA and the BRRA in particular. I agree with the Respondent's submissions that the public purpose of the Respondent as manifested in 1991 in its agreeing to undertake the delivery of a trunk drainage scheme for the BRRA, inter alia, as part of the RHDA does not mean that any trunk drainage use of the land is to be disregarded. Given the responsibility of the state and local levels of government for planning, particularly the Council in relation to the determination of zoning (ultimately with the approval of the Minister for Planning for any local environmental plan) the potential trunk drainage use of the land existed separately from the purpose of the Respondent as the acquiring authority. That responsibility for drainage in the whole RHDA and the BRRA is reflected in the planning instruments being developed from 1989 such as the SREP and the Council's LEP. The use of flood liable land for drainage purposes was referred to in these.
43 Considering the planning history set out above in par 15, the responsibility for planning the trunk drainage system was considered in SREP 19, gazetted in June 1989. At that stage that instrument considered a consortium would provide essential services including drainage for new urban releases. The Kinhill scheme developed in 1989 was at the request of the Department and the Council and adopted the 1:100 year flood line as the area of land required for trunk drainage with use of natural creek lines as far as possible. All further reports and studies on the implementation of drainage referred to in the chronology by the planners, while amending the detail of the implementation of that plan in relation to matters such as the location of basins, have continued with that essential scheme.
44 The underlying zoning as at the date of acquisition in 2007 (but effectively 2005 when the LEP Amendment 5 was made) therefore needs to be determined in light of the broader planning context. That is not subsumed by the Respondent's purpose of carrying out trunk drainage on the acquired land, inter alia.
45 It is necessary to determine whether by 2005/2006 the underlying zoning would have remained rural, as it was in 1991, or have been changed to residential as the Applicants argued. An important document in the Applicants' case is the Council officer's report dated 24 January 1991 which states that the land zoned Rural 1(a) to be acquired by Sydney Water for trunk drainage was to be zoned for special use, areas to be zoned open space would be acquired by the Council and land in private ownership would be zoned in accordance with the adjoining zone. This would mean that the land below the 1:100 year flood line not required for trunk drainage would be zoned residential in this case and be subject to development controls related to its flood prone nature. The Respondent argued that report had to be disregarded as it was driven by the public purpose of the Respondent. While the document is part of the planning history which must be considered up to the date of acquisition, I agree with the Respondent that it is not of great assistance to the Applicants as the approach to zoning is predicated on the involvement of Sydney Water as the provider of the trunk drainage system.
46 The BHLEP (gazetted in 1991) continued the Rural 1(a) zoning with a minimum 40ha lot area requirement for the acquired land. In December 1992 the Council was advised by the Department that the BRRA could be released earlier if there was a commitment of upfront funding of services including drainage provided by landowners and developers. I surmise that did not occur as the Respondent has continued to take responsibility for the delivery of trunk drainage in the BRRA. The BRRA area was declared available for land release under cl 6(1) of SREP 19 with the subject sites identified as "Living Area" in 1998. Subsequent studies concerning drainage were undertaken, in particular the 2002 GHD report and the PPK Report in which detailed planning for trunk drainage was undertaken. Based on these broader planning considerations and informed by those studies, the Council's LEP was developed over several years. The LES for the BRRA area was prepared in 2001. The BRRA structure plan was exhibited in 2003, adopted in 2004 and the LEP Amendment 5 which zoned the acquired land Special Uses 5(a) was then made. The adjoining land was then zoned residential. That all occurred in light of the involvement of the Respondent since 1991.
47 Mr Grech argued that even if the acquired land was zoned rural as at 1991 the zoning would have changed to residential over the period of 14/15 years up to the date of acquisition as the Council would have determined how a drainage scheme would be implemented through a s 94 contribution scheme under the EP&A Act. Mr Rowan considered that it would remain zoned rural because the development of the area required the implementation of a regional trunk drainage scheme for the entire BRRA area before this section of Strangers Creek could be developed. A private or public entity had to agree to take control of the provision of trunk drainage in the absence of the Respondent doing so in order for that to occur.
48 It is ultimately a matter of opinion as to how likely it was that from 1991 until the date of acquisition the rural zoning would have remained in place. The history outlined in par 46 whereby no other developer or landowner group has come forward to take responsibility for a trunk drainage scheme, despite that possibility existing according to the Department, suggests that absent Sydney Water or some other entity to provide that scheme the area would not be developed. While a s 94 scheme administered through the Council in the absence of an overall scheme undertaken by a single entity was an option raised by Mr Grech, I do not consider there is sufficient evidence to suggest that such an option was likely to have been implemented by the Council in the BRRA area so that a residential zoning would have been in place because of this. It is therefore likely that the rural zoning would have been maintained up to the date of acquisition. I therefore consider the appropriate underlying zoning is rural and that market value should be determined on that basis.
49 The Respondent argued this finding would mean that the Bewsher scheme could not get approval from the Council. While I have held that the underlying zoning would be rural in light of the overall trunk drainage planning by the Council and the Department for the BRRA it does not necessarily mean that the Applicants' lands have to be used for that trunk drainage scheme, as I consider in more detail in relation to whether the Bewsher scheme would gain approval in a later section of the judgment. The issue of underlying zoning requires consideration of the planning for the Strangers Creek area more generally. It does not require a determination of specifically what development a prudent, hypothetical purchaser would consider would be approved on the Applicants' land.
(ii) application of Murphy
50 In Murphy, rural-zoned land (subject of an unsuccessful residential rezoning application) near a turtle rookery in Queensland was acquired for the purposes of an environmental park. The National Parks and Wildlife Service (the resuming authority) had objected to the rezoning application, submitting that a subdivision of the residential land would effectively render the land unavailable for acquisition. The High Court referred to authority that restrictions on land use maintained as a result of consultation with the resuming authority must be ignored for the purposes of assessing the value of resumed land. The Full Court of the Supreme Court of Queensland had relied on this principle in finding (in the respondents' favour) that compensation should be assessed on the basis that the prospect of rezoning should be considered without regard to the pressures of the resuming authority on the local authority or to the possible impact of a subdivision upon the turtle population. While such restrictions should be ignored in assessing compensation, the High Court held at 496 that:
… a characteristic or attribute of the land which affects its value must be taken into account in the assessment of compensation even if the planning restriction which is a step in the process of resumption is dependent upon or directed to that characteristic or attribute.
51 The High Court referred to the finding of the Land Appeal Court that the existence of the turtle rookery adjacent to the land was an attribute which affected its value to the extent that the existence of the rookery itself militated against rezoning. Accordingly, the value of the land had to be assessed on the basis that a prudent purchaser would not pay any additional sum in expectation of a rezoning.
52 The Respondent submitted that the use of the flood liable land for trunk drainage is in this case a characteristic of the land which affects its value and should be taken into account in the planning process. I do not accept the argument that an inherent characteristic of the land as considered in Murphy is that it be used for trunk drainage. This statement is made in light of evidence considered in detail in the next section of the judgment concerning whether the Bewsher scheme could be implemented and would be considered by the Council for development approval. As submitted by the Applicants, based on the agreed hydrological evidence, parts of such a scheme such as the detention basin could be located other than on the Applicants' lands. While the use of lowlying, flood liable land for trunk drainage may well be a preferable option, that does not suggest it is an inherent characteristic of the land which would mean that the Applicants' lands had to be used for trunk drainage.
53 As stated by the Applicants, the fact that a large part of the land acquired is flood liable is a relevant consideration and will reduce its value and that should be taken into account. Development on flood liable land is theoretically possible under the NSW Floodplain Manual.
54 Had the Respondent's argument on Murphy been accepted, any development of the land other than for trunk drainage purposes would not be permitted by the Council and the Bewsher scheme would be considered highly unlikely to obtain development consent.