Caruso and Ors v Sydney Water Corporation [2008] NSWLEC 320 | Case summary

Caruso and Ors v Sydney Water Corporation [2008] NSWLEC 320 | Case summary | Zoe

[16]

JUDGMENT 1 Her Honour: These five appeals are against the amount of compensation determined by the Valuer-General for the partial acquisition of five properties compulsorily acquired by Sydney Water Corporation (the Respondent) under the Sydney Water Act 1994. The land was acquired so that a trunk drainage system could be built. The acquired land is at Kellyville and all the properties are along Strangers Creek (previously known as Smalls Creek). Three of the properties front Windsor Road (D and N Caruso, N Caruso and Mesiti). The Polito and Nati lands fronted Arnold Avenue before the acquisition and have no road frontage after acquisition. The appeals are filed pursuant to s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (the JT Act) under which compensation for the compulsory acquisition of land is determined. The Court must determine compensation under s 66(2) of the JT Act. The acquisitions of the Applicants' lands were by notices all gazetted on 23 March 2007. 2 The Applicants' lands are within the Balmoral Road Release Area (BRRA) within the larger Rouse Hill Development Area (RHDA) in the north-west sector of the Sydney metropolitan area. The two attached plans marked Annexure A (extracts of Bewsher Figure 2) show the areas of land acquired. The red lines indicate the boundaries of the newly acquired lands and the blue lines indicate the extent of flooding in a 1:100 year flood event as agreed by the flood experts. Since acquisition, the N Caruso land (two lots) consists of four smaller lots, two fronting Windsor Road and two lots at the rear of the acquired land. The D and N Caruso land and the Mesiti land consist of one smaller lot facing Windsor Road. The Polito land and Nati land consist of one lot each which has no road access. A useful summary of the Applicants' land before and after acquisition is found in the following table: N Caruso D and N Caruso Mesiti Polito Nati Part Lot 1 in DP 215650 Land pre acquisition & Part Lot 3 in DP 135791 Part Lot 2 in DP 126309 Part Lot 52 in DP 224917 Part Lot 54 in DP 224917 Part Lot 2 in DP 215650 Lot 1 in DP 1103318 Acquired Land & Lot 1 in DP 1103337 Lot 1 in DP 1103861 Lot 1 in DP 1087791 Lot 1 in DP 1087785 Lot 1 in DP 1103329 2.027 ha Total Area of Land & 2.0242 ha 2.0241 ha 2.0592 ha 2.0258 ha 2.0274 ha 1.2819 ha Total Area of Developable Land Before Acquisition & 1.2196 1.4888 1.5314 1.5513 1.3842 1.658 ha Area of Land Acquired & 1.74 ha 9032m2 7612m2 8258m2 1.645 ha 3,690m2 Area of Residue Land & 2,842m2 1.1209 ha 1.2980 ha 1.2 ha 3,824m2

[17]

3 Since acquisition the Respondent has constructed catchment detention facilities on the acquired land for the catchment above Windsor Road. Cutting, filling and construction of large detention basins within the floodplain near and on the acquired land has taken place. 4 Large parts of the acquired land are subject to flooding in the 1:100 year flood. The extent of flooding on the properties is an issue. The hydrologist called by the Applicants, Mr Bewsher, provided a regional creek corridor development proposal in figure 2 (annexure A) which mapped the pre-development 1:100 year flood extent (the blue lines). The boundary of the proposed regional creek corridor is indicated by the solid yellow lines indicating the extent of flooding in a 1:100 year flood event if cutting and filling work is undertaken in accordance with Mr Bewsher's proposed scheme (the Bewsher scheme). These lines (hereafter the yellow lines) indicate flooding if all the lot owners perform the work together. A "development in isolation" option, where the cutting and filling is done on an individual basis for each lot, is indicated by the dashed yellow line on some properties. Mr Bewsher considered the lands were flooded to a minor depth with waters of low velocity. 5 The acquired land was almost all zoned 5(a) (Special Uses 5(a) (Existing and Proposed) Zone) under the Baulkham Hills Local Environmental Plan 2005 (the LEP) at the date of acquisition. The residue land was zoned Residential 2(a2) and Residential 2(b1) at the date of acquisition. 6 The determination of the appropriate amount of compensation is in accordance with the provisions of the JT Act (s 55). Compensation includes in this case the determination of market value (s 55(a)) and disturbance (s 55(d)). Injurious affection also arises for the Nati and Polito lands (s 55(f)). The relevant date for determination of compensation is the date of acquisition, 23 March 2007. 7 My role in a valuation matter such as this is to act as the judicial valuer. There is case law to suggest that doubts about valuation matters are to be resolved in favour of a more liberal estimate for the dispossessed. The Applicants relied on McBaron v Roads and Traffic Authority of New South Wales (1995) 87 LGERA 238 at 244-245 and Hyam, Alan A, The Law Affecting Valuation of Land in Australia, 3rd ed (Sydney: Federation Press, 2004) 233-235 in making that submission.

[23]

Planning history 15 The following documents were contained in the evidence tendered by the parties and relied on as relevant to the planning history. (i) 1984 - The Sydney Region North West Sector Regional Environmental Study, prepared by the Department of Environment and Planning (the Department (later known as the Department of Urban Affairs and Planning and the Department of Planning)), was the subject of a report (released for public comment in July 1994) to Baulkham Hills Shire Council (the Council), stating that government policy was to discourage any development within the area below the 1:100 year flood level. (ii) 1986 - Floodplain Development Manual and Flood Prone Land Policy, published by NSW government, stated that for local environmental plans (LEPs) in undeveloped areas, councils should maintain existing low development zones over land liable to significant flooding. (iii) 30 June 1989 - Sydney Regional Environmental Plan No 19 - Rouse Hill Development Area (SREP 19) gazetted, identifying land suitable for urban purposes and providing for its orderly and economic development. The structure plan identified the subject sites as within the "Living Area" zone. The area including the Applicants' lands was included in the RHDA. Mr Rowan, planner for the Respondent, noted that SREP 19 identified that there had been a commitment to provide "upfront finance for water, sewerage and drainage" from "a consortium of mainly private developers" (p 24 of Planning Report in SREP 19). This area of the RHDA was not identified for development under the Government's Urban Development Program at that time. Any draft LEP had to be prepared for the RHDA by the Council and had to have regard to the NSW Government Floodplain Development Manual. (iv) June 1989 - the Department commissions Kinhill to do the Rouse Hill Urban Release Area Drainage Investigation Study to "establish design flood extents, for planning purposes, and to develop principles for the conceptual design of the drainage system" (at p (i)). Kinhill scheme completed for whole of RHDA, generally adopted 1:100 flood extent to define the area of land required for trunk drainage. There is an assumption of funding of infrastructure by the private consortium RHIC (the Rouse Hill Infrastructure Consortium was comprised of major land owners who had approached the government in the 1980s because the land in the RHDA was not listed for release in this area due to lack of water and drainage services, inter alia. The RHIC was formed to fund the provision of these services). The drainage scheme proposed was to maintain a natural creek drainage system with minimal channel modification where practical. This would allow the retention of much of the existing vegetation and long term planning would include the maintenance of creeks to retain vegetation where practical. (v) 1989 - North West Sector (RHDA) structure plan in SREP 19 adopted by the Council. The map which identified the extent of the flood affected land included Strangers Creek. (vi) 1989 - 1991 - various studies undertaken investigating issues associated with future urban releases in the RHDA including the implementation of the Kinhill scheme. (vii) February 1990 - Council submission to Minister for Local Government raising concerns about development of RHDA if appropriate arrangements for the provision of services and drainage, inter alia, were not put in place. It noted that water and sewerage are closely linked to the agreement between the Water Board and the Consortium, which agreement was likely to be finalised shortly. That agreement was crucial to further works proceeding on a detailed drainage study and in order for areas subject to urban development to be serviced. It was Council's view that until acquisition of land below 1:100 flood level was resolved and the Water Board policy known, those lands should remain zoned rural. (viii) March 1990 - report prepared by Berkhout Planning and Development submitted to the Council notes that in a strategy of dual use of drainage and open space land, for the most part drainage will be left in its natural state except for between Memorial Avenue and Windsor Road, which will feature a series of formed, cascading drainage basins. (ix) 1990 - Sinclair Knight & Partners report considered the Kinhill scheme and changes the Kinhill proposal for Small's Creek to a basin (basin 15). (x) 29 May 1990 - a report prepared for a Council meeting stated "Land below the 1 in 100 year flood level is proposed to be unchanged in zoning pending more detailed drainage investigations". (xi) June 1990 - Kellyville-Rouse Hill Draft LEP Explanatory Information report of Council states on development of flood liable land at cl 15 that Council aims to reduce the impact of flooding. Any development on flood liable land to require the consent of the Council. (xii) July 1990 - Kellyville-Rouse Hill Draft LEP Planning and Urban Investigation report of Council stated on drainage issues that the Water Board was willing to acquire and maintain lands which would accommodate the designated trunk drains for drainage purposes. The Council would be responsible for: · development of land within the floodway but will seek the concurrence of the Water Board before granting any consents; · the completion of the detail drainage study… required before any decisions can be made concerning land uses below the 1 in 100 flood level and the final boundary of this area; · further discussion between the Water Board and Council… required before any arrangements can be finalised concerning ownership, operation and control of truck drainage land. A report to the Council by the Chief town planner dated 17 July 1990 stated that land below the 1:100 flood level would remain unchanged in zoning until the more detailed drainage study was completed. Results from the detailed drainage study would be incorporated into the draft plan and for the release areas as the study proceeded. A drainage strategy showed detention basin sites proposed for the BRRA generally. (xiii) 17 January 1991 - a Council report on progress on the draft LEP for stage 1 - RHDA states the Water Board would be responsible for drainage areas with the remaining land zoned for open space or retained under private ownership with restricted future development. (xiv) 24 January 1991 - a Council report proposed amendments to draft LEP as follows: Land previously zoned Rural 1(a) will be given one of the following designations : · Special Uses 5(a) (Trunk Drainage) to be acquired by the Water Board; · Open Space 6(a) (Existing and Proposed Public recreation) to be acquired by Council; and · Under private ownership in accordance with adjoining zone and subject to Special Development Controls, i.e. restricted development areas. The development of land below 1:100 year flood will require the concurrence of the Water Board.

[24]

(xv) June 1991 - RHDA stage 1 (which excludes the BRRA) was zoned for urban purposes. Mr Rowan noted the draft instrument prepared for the Department prior to exhibition showed the sites (land below the 1:100 year flood extent) zoned (before being excluded) as Zone 1(a) Rural. (xvi) 26 February 1991 - a report to a special meeting of Council states Water Corporation (now Sydney Water) agrees to construct and maintain the trunk drainage system and maintain the 1:100 year flood plain to a level suitable for drainage purposes. (xvii) January 1991 - Baulkham Hills Local Environmental Plan 1991 (BHLEP) gazetted. The BHLEP continued the Rural 1(a) zoning with minimum 40ha lot area requirement. (xviii) December 1992 - Mr Rowan noted Council advised by the Department that early release of BRRA would be considered if commitment of upfront funding of water, sewerage and drainage provided by the landowners/developers. (xix) 1998 - the Minister declared BRRA to be a release area under cl 6(1) of SREP 19. The subject sites were identified as "Living Area". (xx) 2001 - Local Environmental Study (LES) Balmoral Road Release Area Environmental Resource and Physical Infrastructure Assessment (for draft LEP and DCP for BRRA) prepared by PPK Environment and Infrastructure Pty Ltd (the PPK Report) to establish what extent of land was suitable for urban development and to establish guidelines for site planning and development. (xxi) 2002 - GHD report (prepared by Dr Joliffe) assessing potential trunk drainage strategies to be incorporated within the BRRA. Two strategies, involving either a single online detention basin or smaller off-line basins where catchments would discharge into main watercourses, were evaluated. (xxii) 28 October 2003 - Council resolution to exhibit draft BRRA Structure Plan. (xxiii) November 2003 - March 2004 - draft BRRA Structure Plan exhibited. (xxiv) 20 July 2004 - Council resolution for exhibition of draft BRRA DCP and LEP. (xxv) April 2005 - Floodplain Development Manual - The Management of Flood Liable Land, published by NSW Government to assist councils in preparation of floodplain risk management plans. (xxvi) 26 August 2005 - Baulkham Hills LEP gazetted. Clause 23 states that development on flood liable land requires consent and can only be granted if the aim of the plan is taken into account. (xxvii) April 2006 - LEP (Amendment 5) gazetted rezoning BRRA for urban purposes, with sites generally located within Zone 5(a). (xxix) 23 March 2007 - Applicants' lands compulsorily acquired.

[26]

Mr Grech, planner 18 The public purpose adopted by Mr Grech, town planner called by the Applicants, being the provision of a catchment drainage system for the purpose of facilitating future upstream development, is similar to that identified by Mr Rowan. The subject sites form part of an urban release area for the BRRA which is known as the "hole in the donut" because it is surrounded by earlier urban releases. It could therefore be expected that the area would develop relatively quickly. The underlying zoning and development of the subject sites would include expansion to the residential zones either side of Strangers Creek with the retention of some form of creek corridor for rural use, open space and drainage. The primary determinant of additional residential zoned land that could be achieved would depend on the acceptance of an alternate flood mitigation scheme for the creek corridor. 19 The Kinhill scheme in 1989 was conceptual advice to the Department about how drainage could facilitate future urban development for the whole of the RHDA over a 30 year period and was highly likely to change. While it proposed that detention basins be within the creek corridors not all detention basins were ultimately sited within the 1:100 year flood plain as that was not necessary in relation to water management. 20 Mr Grech did not consider that prior to the Respondent's commitment in 1991 that the Council had adopted a principle in relation to drainage corridors and basins along creek areas in the absence of any body being committed to a drainage scheme. He considered that in the 1989 Kinhill report it referred to the declaration by the Respondent under the Water Act of the BRRA as a drainage area (I have not been able to find any such statement in the Kinhill report). But for the Respondent agreeing in 1991 to accept responsibility to acquire and develop the trunk drainage corridors the land would have remained Rural 1(a) for some time but this would have changed by 2000. By that stage the Council would have adopted a s 94 Environmental Planning and Assessment Act 1979 (EP&A Act) plan to enable the implementation of trunk drainage with land purchased for open space but having a multiple purpose function. This is reflected in the planning documents prepared by the Council and the Department up to 1991 and to Amendment 5 of the LEP in 2006. A scheme could be implemented as something similar to the Bewsher scheme whereby owners agree amongst themselves to undertake the scheme jointly or by individual land holders or by a developer buying all the land. This would have resulted in the land being zoned for urban purposes, as occurred in the Glenhaven release area in the eighties and nineties. 21 The Council report in January 1991 identified that the land below the 1:100 flood line which is Water Board owned would be under its control and responsibility. That land was zoned rural. The balance of land within the 1:100 year flood not to be used by the Water Board would be zoned open space or retained under private ownership zoned in accordance with adjoining zoning and with development restrictions, and not necessarily restricted to the Rural 1(a) zone. Applicants' submissions 22 The High Court in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259; 242 ALR 383 at [53] and [54] has considered the issue of public purpose and the necessary "disregard" of the purpose under s 56(1)(a) of the JT Act. 23 The public purpose is trunk drainage for the catchment. The original strategy proposed by the Kinhill plan has changed over time. Inline (meaning located in the creek) detention basins were proposed but now the detention basins are off-line (located outside the creek). The number and location of the basins has also changed. An example is basin 32, now built next to and on the acquired land. It provides no current drainage function. The fact the land is required for catchment trunk drainage has to be disregarded, including the Special Uses 5(a) zone. There are several ways of considering what must be disregarded. Firstly the trunk drainage scheme from the Kinhill report should be disregarded. Alternatively the detail of the Kinhill proposal has significantly altered over time in any event from 1989. 24 The underlying zoning should be assumed to be residential in light of the planning history as at the making of LEP Amendment 5 in 2006 and continuing up to the date of acquisition. The land was zoned rural until the Water Board (now Sydney Water) committed to take over the catchment trunk drainage works in 1991. The RHDA draft LEP dated 17 July 1990 provided that all land below the 1:100 year flood line required for trunk drainage was zoned rural. Land not required for trunk drainage above the 1:100 year flood line was zoned residential. Changes were made to the plan after it was exhibited as a consequence of the Water Board's commitment to carry out the trunk drainage works. This is demonstrated by the report of Council staff dated 24 January 1991 on the draft LEP (2.12 exhibit B). The land above the trunk drainage line but below the 1:100 flood line would have the same zoning as that which it adjoins, namely residential. 25 In reality, when the land within the BRRA was released under Amendment 5 it was zoned residential (Map 11 in Mr Rowan's evidence). Until 24 January 1991 a rural zone was "retained" on land below 1:100 year flood. Once the Respondent's role was clarified, land otherwise zoned rural and required by the Respondent was zoned Special Uses 5(a) and land below the 1:100 year flood line not required for trunk drainage was zoned in accordance with its adjoining zone. Land above the rural 1:100 line was to be zoned residential. From that date in 1991 affectation by flood waters did not prevent rezoning of land to residential. The only thing that prevented rezoning was an affectation by catchment trunk drainage requirements which must be ignored under s 56(1)(a). (ii) application of The Crown v Murphy 26 The Respondent's submissions based on The Crown v Murphy (1990) 95 ALR 493, that the land has an inherent characteristic being use for trunk drainage which must be considered, are incorrect. Firstly, that case considered a different statutory regime. Secondly, while the Applicants' lands are flood affected it is not an attribute or characteristic of the lands that these are required for catchment trunk drainage. The Respondent cannot show a consistent coincidence between the characteristic of a "use for trunk drainage" and the public purpose. The evolving nature of the trunk drainage scheme since that proposed by Kinhill demonstrates that there is no necessity for the scheme to be located on the Applicants' lands. It is an entirely artificial construction designed to accept increased flow in water because of yet to be carried out upstream development. That scheme as built includes off-line detention basins, for example basin 32. 27 The Court is not to disregard the fact that the land is inundated by the 1:100 year flood given that is the physical characteristic of the land. It must also take into account that there will be development controls based on that flood liability. It is accepted that there are provisions in the relevant LEP which restrict and control development on flood liable land, but it is important to note that these do not prohibit it. Respondent's submissions (i) planning history 28 The trunk drainage scheme as proposed by the Respondent from 1991 must be disregarded. The drainage scheme commenced however with the Kinhill report in 1989 which proposed a policy that land below the 1:100 year flood along major creeks be used as part of a drainage corridor throughout the BRRA. This policy was adopted by the Minister for Planning/the Department and the Council. That policy was independent of any purpose of the Respondent. Further, that the Council and the Department preferred a strategy involving off-line detention basins within the drainage corridors is also something that cannot be disregarded under s 56(1)(a) because this was not something "caused by" the Respondent's proposal to carry out a public purpose on the subject lands. That preference predated the involvement of the Respondent. 29 If the Respondent's proposal had not been in place the situation would have been the same as in 1991 when the Council had the same concerns regarding flooding, drainage control and riparian corridor conservation. The Council wished to use lands below the 1:100 year flood line for drainage corridors and the construction of detention basins. Faced with the same problems in 2005/2006 as in 1991, the Council would have resolved the problem in the same way by maintaining a rural zoning on the subject lands as that would inhibit inappropriate residential zoning on flood affected land. There is no evidence that the Council's drainage strategy would have been replaced by an owner-initiated strategy that included the provision of detention basins under a s 94 scheme implemented by the Council. Nor is there any indication that the Council would be responsible for such works. 30 The evidence/facts relied on by the Applicants must be disregarded because the 24 January 1991 Council officer's report was brought into existence by the Council after the acceptance by the Respondent of the proposal to carry out the public purpose. The Council's proposal to rezone the land Special Uses 5(a) was caused by the Respondent's commitment to undertake construction of trunk drainage works on the subject land. Mr Rowan's concession relied on by the Applicants was in relation to Amendment 5 of the LEP which must also be disregarded. The question put to him was on the assumption that the lands were not required for trunk drainage. The fact the lands were zoned residential under Amendment 5 in actuality must also be disregarded. 31 The finding that the underlying zoning is rural because of the intended use of the land for trunk drainage would be a reason for refusal of the Bewsher scheme by the Council. (ii) application of Murphy 32 In Murphy the High Court held that "a characteristic or attribute of the land which affects its value must be taken into account in the assessment of compensation" at 496. That finding means in this case that the Court should identify that the subject lands have the characteristic of their inherent and unique suitability for use as part of the regional control over drainage. That is the cause of their acquisition and also the reason for planning restrictions on the use of the land. The Council and the Department would be unlikely to support changes to natural watercourses or fill being placed on flood plains for land below the 1:100 year flood. 33 Applying Murphy, such planning controls may be disregarded where these are part of the proposal to carry out a public purpose. It does not follow that all planning controls relating to flood affectation or all planning strategies promoting the use of the subject lands for regional drainage, meaning the Strangers Creek area, can be disregarded. Strangers Creek is a major creek in this area and therefore has to be the location for regional trunk drainage. The Council's adoption of planning controls and strategies to use the lands for the creation of a drainage corridor emerged before the Respondent had such a proposal and were not caused by it. For this reason, the Bewsher scheme would not be supported by the Council because it is inconsistent with the strategic need for those lands to be used as part of a regional strategy for drainage for the Strangers Creek area.

[27]

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.

[31]

additions and alterations related to an existing dwelling-house; advertising structures; agricultural products establishments; attached dual occupancies; bush fire fighting establishments; caretakers' dwellings; cemeteries; child care centres; clearing of bushland; community facilities; dams; dwelling-houses; environmental protection works; exhibition homes; exhibition villages; filling of land; firewood establishments; health care premises; home businesses; home industries; intensive animal industries; intensive horticulture establishments; landscape supply establishments; leisure facilities; places of worship; public buildings; public utility undertakings; recreation areas; recreation facilities; renewable energy facilities; retail plant nurseries; roads; roadside stalls; rural industries (other than poultry processing); rural workers' dwellings; sheds; stables; stock and sale yards; tennis courts in association with a dwelling; utility installations (other than gas holders or generating works); veterinary establishments; wholesale plant nurseries. Hydrology/drainage 59 The Applicants submitted that prudent hypothetical parties to the sale would have been advised that the highest and best use of the land included the implementation of the Bewsher scheme. 60 Mr Bewsher was called by the Applicants. Much of the hydrology discussion focussed on his hypothetical concept plan for a scheme for the development of flood prone land which could be carried out in this part of the Strangers Creek catchment including all the Applicants' lands and their neighbours (about 20 landholders). The Bewsher scheme involves the development of a drainage scheme in a regional (meaning for Strangers Creek) creek corridor as shown in figure 2. The region is those properties referred to in figure 2 along Strangers Creek upstream of Memorial Avenue. The corridor would be excavated, revegetated and the creek and its tributaries would be restored to naturally functioning systems. The approximate corridor width is 60 - 65m for Strangers Creek. Filling would take place on the remainder of the properties, elevating existing floodprone land lying beyond the creek corridor above the 1:100 year flood level. The design is for a cut and fill exercise so that there would be no adverse impact upstream or downstream (see exhibit G). The scheme is a design concept only, a more detailed plan would be needed to support a development application to the Council. Any works within 40m of the creek also require approval of the DWE. 61 Mr Bewsher considered that a hypothetical purchaser would be likely to obtain advice from a hydrological engineer that such a scheme could be achieved. According to Mr Bewsher it could be carried out in conjunction with other landowners or separately on an individual property basis. He considered it was more likely that either the landholders would coordinate their activities or sell to a development company. If individual lots were developed these could proceed by filling up to the dashed yellow lines (stage 1) shown on figure 2. They could progress to the solid yellow lines (stage 2) as soon as the immediate upstream property had developed. If his scheme was implemented, Mr Bewsher considered that 38,857m2 of the three Caruso lots, 14,888m2 of the Mesiti land, 15,314m2 of the Polito lot and 15,513m2 of the Nati land could be developed for residential or other purposes. 62 Dr Joliffe gave evidence that because the Bewsher scheme was a concept design only he could not determine if it was likely to receive Council and DWE approval. The scheme does not conform to the regional drainage strategy for the area and would require the Council to revise its planning principles. It requires the provision of detention storage at some location as the urban development impacts increase on most of the land between Windsor Road and Memorial Avenue. The scheme does not contain any formalised detention storage on the subject lands or compensatory detention storage at any other suitable location to satisfy the requirements of the regional stormwater management strategy (the Kinhill scheme). It would lead to a loss of over 50 per cent of the existing vegetation. It is unlikely Council would favour floodplain filling (based on the previously rejected Whitehart DA). Compensatory works downstream would need to take place and the benefits of the Bewsher scheme can only be realised if works are undertaken on the properties adjoining the Applicants' properties. Dr Joliffe did not consider the physical form being what he called a grassed floodway was a preferable design. Such a design had not been used for a number of years in similar schemes. 63 The hydrologists also met and produced three joint reports. They agreed that if the whole of the catchment upstream of Windsor Road was to be developed that some form of flow detention would have needed to be incorporated into the drainage strategy to prevent an increase in flow downstream of Windsor Road. The detention could have been potentially provided as regional facilities or as detention on individual allotments. 64 The experts agreed also that a potential site for catchment detention facilities could have included one or more lots along the main channel of Strangers Creek between Fairway Drive and Windsor Road, but they could have been located elsewhere. They agreed it was possible to construct the Bewsher scheme so that there was no adverse impact downstream. The scheme does not provide detention facilities to service the whole catchment. Council approval and DWE approval would be necessary. 65 The experts agreed that, as normal practice in NSW, filling of flood plains is allowed subject to impacts being satisfactorily addressed. 66 The experts agreed that: (a) If no net importation of fill is required; (b) Memorial Avenue works are excluded; and (c) A lower cost is adopted for the fencing (which is in part dependent on whether the corridor is built concurrently with or separately from the development); then the Bewsher estimate of $2.5 million is of the right order. 67 However, if importation of fill is required, or the Memorial Avenue works are included, or if the higher fencing cost is included, then additional costs would likely apply. 68 The Bewsher scheme provides drainage only for the properties in the relevant area along Strangers Creek and no catchment detention facilities. Catchment detention basins are proposed for this area but, if not constructed, alternative detention basins could be provided at other locations upstream of Windsor Road.

[32]

Applicants on Bewsher 69 Compensation must be assessed at the highest and best use of the land. Whether residential or rural zoning that use would include an expectation that the Bewsher scheme could be implemented in some form. The evidence before the Court is more detailed than would normally be available to a prudent hypothetical purchaser in any event and the Court is not required to embark on the exercise of determining whether development consent would be given. The Court is considering the advice that a willing but not anxious prudent hypothetical purchaser would obtain. Putting EEC aside (to be considered separately) there is no evidence to suggest that the prudent hypothetical purchaser or vendor would not assume the scheme would be approved on the basis that it did not give rise to adverse flood effects and an adequate riparian zone was provided. A requirement of any development at the date of acquisition was the provision of a riparian zone. 70 The Bewsher scheme provides a riparian corridor of 60-65m which is more than adequate for the EEC areas (James report on EEC specified 50m for "high conservation significance" vegetation, referred to later in this judgment). In a Council minute dated 20 July 2004 considering the release of the BRRA area, there is reference to consultation with the then Department of Lands and Water Conservation (DLWC) and their advice that a riparian zone of a minimum of 50m is adequate. 71 The experts agreed that for a cut and fill exercise, filling of flood plains can occur provided impacts can be satisfactorily addressed. This proposal is unlike the Whitehart DA scheme which provided for filling in the floodplain but no equivalent cut. A trunk drainage scheme can be implemented so that catchment trunk drainage, particularly detention basins, can be provided elsewhere. The Bewsher scheme could therefore be implemented in this section of Strangers Creek. 72 The estimated cost would be shared across all twenty properties. $2.5 million divided by 20 is $125,000, a reasonable cost for a purchaser to contemplate.

[33]

Respondent on Bewsher 73 The Bewsher scheme would not be approved for the development of the subject lands. No such concept was considered by the Council on the RHDA for the BRAA in relation to the possible development of land below the 1:100 year flood. A significant part of the EEC on the Caruso and Mesiti land would have to be removed if it was implemented (this issue is considered in the next section). The proposal requires the resiting of detention basins into areas outside the 1:100 year flood and on land beyond that of the Applicants. 74 It is not open to the Court to consider all the Applicants jointly but each must be considered separately. Otherwise the Court is taking into account the public purpose namely the acquisition of the adjoining land. There is (unspecified) case law to support this approach. 75 Further, it is unlikely that all 20 landowners would agree to undertake the scheme themselves as not all of them benefit under it. Several of the 20 landholders would not get a benefit including the owners of the Porto land (who are not a party to these proceedings). It would involve substantial additional costs, far more than the usual subdivision costs. Those costs are prohibitive and indicate the costs of dealing with the EEC located on the Mesiti and Caruso lands. (Those costs are considered in the next section and include, the Respondent argued, providing "like for like or better" through land acquired elsewhere or the costs of maintaining for five to 10 years the planting of EEC species lost if the Bewsher proposal was implemented). 76 Further, Dr Joliffe's evidence is that the Bewsher scheme would not be supported or approved by the Council. 77 If the Court considers that the BRAA would have been released for urban purposes in 2006 the areas of lands zoned Special Uses 5(a) would still have remained Rural 1(a). Implementation of the Bewsher scheme would have required rezoning to enable its use for residential purposes. Finding on Bewsher 78 I must determine what advice a prudent, hypothetical purchaser would obtain in relation to the possible development of flood affected land and whether that advice would cause such a purchaser (and vendor) to add additional value for the flood affected land on the assumption that it is potentially developable. 79 Firstly it is necessary to determine what information would be available to a prudent, hypothetical purchaser (and vendor). The RHIC flood information (blue line in figure 2 of the Bewsher scheme) was generated as part of the trunk drainage planning by the Department and the Council and the RHIC. I have held that should not be considered as part of the public purpose which was undertaken by the Respondent. That information would be available to a hypothetical purchaser. In any event, the experts agreed that a drainage strategy would have been developed to facilitate development and that would be likely to be available to a prudent purchaser. The details of the Bewsher scheme were provided in Mr Bewsher's evidence and are outlined above in the summary of his evidence. 80 Mr Bewsher's oral evidence was that a strategy plan would need to be approved by the Council before individual owners could develop their lots using his scheme. Such a process could be initiated by the Council, a private landholder or by a prospective purchaser. While Dr Joliffe considered the Council would not approve the scheme because the land was required for detention basins, the joint report stated that detention basins could go elsewhere in this region of Strangers Creek. There was cross-examination on this issue. Dr Joliffe raised doubts in oral evidence about whether other sites would be cost effective but also agreed that there was no physical necessity for the detention basins to be located in the 1:100 year flood plain provided that the water could drain out. The flood affected land was preferred by him in part because it was more cost effective being less costly to acquire. It therefore appears from this expert evidence there is flexibility in where the detention basins can go to accommodate the regional drainage needs of the Strangers Creek area. 81 I consider a prudent purchaser is likely to consider that it would be feasible to get development consent for proposals such as the Bewsher scheme on the basis that any detention basins planned for the area could ultimately be located elsewhere. Such a purchaser is likely to obtain some advice from an expert hydrologist such as Mr Bewsher or Dr Joliffe. In this case the advice presented to the Court has been conflicting. Mr Bewsher has proposed his scheme as one a prudent hypothetical purchaser could rely on. Mr Joliffe considered the proposal is unlikely to be approved by the Council. Dr Joliffe's knowledge of drainage matters is greater than the prudent, hypothetical purchaser and his adviser is likely to have, given Dr Joliffe's involvement in the planning of the trunk drainage scheme for Strangers Creek including preparation of the GHD report (2002). In this case the level of technical debate and evidence from the hydrologists is greater than a prudent hypothetical purchase would have before him or her. The Applicants submitted that when expert evidence is conflicting all doubts are to be resolved in favour of the claimant "where practicable in order to achieve a just result": McBaron at 244-245 and that is the approach I intend to adopt. 82 A prudent purchaser is likely to obtain the advice of a town planner concerning the likelihood of obtaining consent for a particular drainage scheme. As identified above, the LEP allows extensive development on rural zoned land including extensive display home villages such as Homeworld. I do not consider a rezoning would be needed before Bewsher could be implemented, contrary to the Respondent's submission. Filling in floodplains can be permissible under the NSW Floodplain Manual and there is otherwise no evidence (as opposed to submissions) before me suggesting that drainage works in a floodplain would not at least be considered by the Council as permissible development given that the scheme is designed not to have adverse flood impact off-site. 83 A purchaser would speak to a Council officer to obtain advice on whether a scheme such as that of Mr Bewsher is likely to be considered for possible approval. In this case Mr Rowan attended a meeting with Mr Gear, Waterways manager with the Council, and others on 2 January 2008 and the advice recorded in a minute prepared by Mr Rowan was that a scheme such as the Bewsher scheme would be considered. That Council officer considered the Bewsher scheme, as detailed to the same extent as in these proceedings, was adequate for the pre-DA stage. That suggests it is also adequate for consideration by a prudent purchaser to determine if value should be added based on an assessment of whether it would be approved. The relevant time for advice is that likely to be obtained by the prudent hypothetical purchaser at the date of acquisition (March 2007). The advice from the Council officers is based on a meeting held in January 2008. That advice is reasonably close in time to the date of acquisition. As recognised in Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547 at 558 events after the date of acquisition which confirm foresight can be relied on and I consider it is appropriate to take the information in that minute into account as information that a prudent hypothetical purchaser would be likely to obtain. 84 The Respondent relied heavily on the refusal of the Whitehart DA for filling in the floodplain on either side of Caddies Creek by the Council. The Respondent argued this suggested the Bewsher scheme would not be approved. That proposal included an application to fill in the floodplain without making any consequential "cut" to ensure the overall impact off-site in the floodplain was nil. In other words it moved the flood impact off-site without any compensatory measures. In those circumstances its refusal was not surprising. The Bewsher proposal is a cut and fill exercise whereby the introduction of any fill is balanced by a cut (reduction) of fill elsewhere on the same property. The overall impact in the floodplain is intended to be neutral. The Whitehart DA refusal therefore provides little support for the Respondent's submissions. 85 The five Applicants have essentially joined forces and had Mr Bewsher prepare his scheme on the basis that 20 property owners would be minded to join together and build such a scheme at the same time. He also advised that his scheme can be implemented on an individual property basis with some increase to the fill areas necessitated on some individual properties, particularly the Mesiti and Polito properties with fill required up to the dashed yellow line. While the case has for reasons of economy and good sense been run with five Applicants, it is necessary to consider each application as a separate claim under the JT Act. The extent therefore to which it is likely that the Bewsher scheme would be implemented at the one time is not supported simply by the fact that there are five applicants in the one proceedings. Given the large number of other landholders (another 14 properties) who would all have to be considered likely to be involved at the date of the acquisition in March 2007, I do not consider that a prudent hypothetical purchaser would assume that the scheme would be implemented at the same time with the cooperation of all the necessary landholders. That is reinforced by the Respondent's submission that not all landholders would benefit from the scheme in any event. The Applicants submitted that it was clear from Mr Bewsher's evidence that he was advising 10 of the 20 properties involved but I must consider what a prudent, hypothetical purchaser would do. Such a person would not assume uniform agreement from all relevant property holders would be achievable in my view. 86 A purchaser would be aware of the need to provide a riparian zone for any development proposed, which further supports my finding that there would be an assumption made that the Bewsher scheme was likely to be considered favourably by the Council. While I consider that a prudent purchaser would be prepared to add value to a purchase price on the basis that a scheme such as the Bewsher scheme may get development consent, I do not consider that extends to an assumption that all relevant property owners would cooperate and carry out the scheme at the same time. The Bewsher scheme is able to be implemented on a property by property basis according to Mr Bewsher. As represented on figure 2, that would mean that filling would occur to a greater extent on the Mesiti land and Polito land, up to the dashed yellow line being the "development in isolation" option. 87 In terms of the cost of the scheme, a rough approximation of cost is set out in par 66 as $2.5 million. The Applicants submitted that this equated to $6/m2, a negligible amount. Even if the purchaser assumed the scheme would be carried out individually, the Applicants submitted the cost would not be prohibitive. In light of the hydrologists' agreement on costs I accept that submission. I do not accept that the Respondent's submission that the development cost of the Bewsher scheme in terms of the necessary excavation and construction would be prohibitive in the eyes of a prudent hypothetical purchaser given the possible development achievable in a rural zone under the LEP. Part of the Respondent's costs argument on the Bewsher scheme relates to the cost of implementing the necessary measures for protection of the EEC. This is dealt with in the next section. 88 A further discrete issue arises in relation to the N Caruso, D and N Caruso and Mesiti lands because of the location of EEC vegetation on it. This is discussed in more detail in the next section but I raise it here because Dr Joliffe's evidence was that the cut and fill required in the Bewsher scheme would not be allowed on the Mesiti land due to the impact on that EEC. The amount of excavation necessary would not preserve that EEC. Mr Bewsher's response was that the whole scheme involves about 100,000m3 of cut and fill and this issue concerns 600m3, a very small amount in the context of the whole scheme. There is flexibility in that a riparian corridor of 60 - 65m is required and precisely where that is located is flexible. The location of excavation to implement the scheme is also flexible. In other words, Mr Bewsher did not consider that the presence of EEC on the Mesiti land would be an impediment to his scheme being approved. I will refer to this issue again after I have dealt with EEC issues in the next section.

[51]

115 Mr Fanning stated that he assumed that the Bewsher scheme would be constructed at one time. In cross-examination he stated that he also accounted for staged construction, as there would be no different effect on the outcome for the vegetated corridor. He admitted there would probably be additional development costs if the Bewsher scheme was implemented in stages and his advice to a hypothetical purchaser would include this. Applicants' submissions (i) whether EEC of conservation significance based on James and Biosis reports 116 There is no positive support for Mr Richardson's opinion that the community is of high conservation significance. His evidence relies on the James and Biosis reports. The author of the James report did not go on-site, and noted in the report that "field inspection is essential to provide an accurate assessment". It is difficult, due to inaccuracies in the Biosis figures, to determine whether any EEC on the subject lands is of high conservation significance. The report says the EEC is of "poor to moderate" condition, referring to properties 89 and 90 (N Caruso and D and N Caruso lands). As such, there is no EEC on those two lots. Mr Richardson agreed in cross-examination that the subject lands fall within the secondary conservation area as identified by the James report, and not a primary area as suggested by the Respondent's counsel. Further, he never expressed the opinion that the EEC on the subject land is of "high conservation significance", as opined in the James report. Alternatively, where any opinion of that kind is expressed (as opposed to a summary of prior reports) in his report (exhibit 3), such an opinion is not supported by any material either in oral or written evidence other than by reference to the Biosis and James reports. The Biosis and James reports cannot support that opinion in any event. While the EEC should be conserved, any advice would not state that it is of "high conservation significance". Mr Richardson admitted the map in the Biosis report incorrectly identifies a high conservation significance area on the D and N Caruso land. Mr Richardson's description of it is poor to moderate, unlike the definition of "high conservation significance" which is average to good. (ii) likelihood of development approval for Bewsher scheme on EEC land 117 The Applicants submitted that the EEC will be conserved within the riparian zone (that is, within the yellow lines) on the D and N Caruso and Mesiti land under the Bewsher scheme. Wholesale clearing of EEC is not required. The Bewsher scheme would replace all of the EEC within the riparian zone with, ultimately, a net benefit as the use of appropriate species indigenous to the EEC would conserve, enhance and enlarge it. The "Scientific Committee's Final Determination" (exhibit P, addendum P) determined that the EEC can be present with regrowth alone. Consequently, a compensatory habitat payment would not be required. In the event a payment is required, that is not enough to put an end to the Bewsher scheme. The experts agreed in the first joint report that the EEC is not a barrier to development, and a similar conclusion was drawn by Preston J in Gerroa [66] and [67]. In relation to the D and N Caruso land, the Court would be satisfied the EEC on this land was unlikely to prevent development. In relation to the Mesiti land, the EEC within the yellow Bewsher lines would be conserved. At issue is whether filling above the yellow line, requiring removal of the EEC would be allowed. If held not, there would be a small area of Mesiti land above the solid yellow line that would have a lesser value.

[57]

125 Mr Fanning disagreed with Mr Richardson and the two previous independent studies (James and Biosis) and is the only expert who asserts that the EEC present across the subject lands has something less than a high conservation value. The PPK report prepared in 2001 also observed that while the EEC in the BRRA was in poor condition it had areas of high conservation value. The report recommended that, prior to any development, a targeted survey would need to be undertaken. The refusal of the Whitehart DA by the Council was based in part on the protected vegetation on the site. Mr Fanning failed to make adequate enquiries at the Council and did not know of the Whitehart DA. The prudent purchaser would be mindful that the Council's advice on the EEC is that it is of high conservation value even if he or she did obtain advice from a consultant such as Mr Fanning suggesting it was of low value. Mr Fanning's approach would be rejected. (ii) likelihood of development approval for Bewsher scheme on EEC 126 The existence of the EEC provides a significant reason why a prudent hypothetical purchaser would doubt any of the Applicants' lands could be utilised for significant development. The impact of the EEC on the Caruso and Mesiti lands extends to all the Applicants' lands so that none can be developed. A purchaser would be told that he or she could not unlock the development potential of their land without the whole Bewsher scheme being implemented and that cannot occur given the presence of EEC on the Caruso and Mesiti land. Further, implementation of the Bewsher scheme would lead to significant amounts of vegetation being lost. Mr Richardson's evidence indicates that development would result in the removal of "high conservation significance" vegetation in a manner not likely to be approved by the Council, or at least not without an offset for the loss. 127 The Bewsher scheme and Fanning proposal does not provide "like for like" as there is no guarantee that revegetation will be successful and will take many more years than Mr Fanning suggested to establish a functioning EEC. The scheme will produce a net environmental loss.

[60]

Finding on EEC 132 The written and oral evidence and submissions on EEC have been extensive. As identified already in relation to the Bewsher scheme, I am not determining whether development consent would be granted for a particular proposal. Rather I must determine what information a prudent hypothetical purchaser and vendor would be likely to obtain in relation to the presence of EEC on the Mesiti and Caruso lands as at the date of acquisition. I must then determine if in light of that information that purchaser would consider that the Bewsher scheme would be approved on those lands and therefore would be likely to add value for any development potential. The information I have before me, such as the ecologists' reports, is far more extensive and detailed than a prudent hypothetical purchaser would be likely to have, as the parties agreed. 133 The evidence of the ecologists is that at the date of acquisition there was no EEC left on the N Caruso lands, two degraded remnant patches of about 200m2 on the D and N Caruso land and a larger patch of degraded EEC canopy vegetation on the Mesiti land. 134 It would appear that the issues as explained by the Applicants are more confined than the extensive evidence and submissions presented suggests. As pointed out by the Applicants, any development of the Applicants' lands would require the riparian zone to be restored regardless of the presence of EEC. The Bewsher scheme proposes a riparian zone of 60-65m. The Applicants accept that the EEC in the riparian zone on the Mesiti land in particular will be retained and that the Bewsher scheme does not propose any removal of EEC within the solid yellow lines in figure 2. The Respondent's case appeared to be run on the assumption that all this EEC between the solid yellow lines would be removed but I accept the Applicants' submission that that is not their case. 135 I have already determined that a prudent hypothetical purchaser would consider the Bewsher scheme would be considered by the Council on an individual lot basis. I therefore consider the same purchaser would be considering the EEC on each individual lot also. An issue that requires consideration is whether the EEC outside the solid yellow lines in the Bewsher scheme but within the dashed yellow lines (development in isolation option) will be required to be regenerated and/or offset elsewhere, as that area will be filled, and whether there is substantial additional cost in doing so. Only the Mesiti land has EEC in such an area.

[61]

Advice/information known to prudent hypothetical purchaser on significance of vegetation 136 In relation to the significance of the vegetation, a purchaser would have access to both the Biosis and James reports. Those reports suggest that the EEC, while degraded, is of high conservation significance. I do not consider the Applicants' criticisms of Mr Richardson's evidence concerning the Biosis report undermines his opinion of significance. The advice from the relevant state government department, then the NPWS, would be that there must be no net loss of EEC. In terms of the Council's planning instrument, the DCP (No 3 - Residential) states that "[s]ignificant flora and fauna species, communities and ecological communities should be preserved" (exhibit C, tab 2.28 at p 9). The NPWS letter relied on by Mr Richardson provides mapping at a broad level of generality and, having been provided in black and white to the Court when it requires colour to interpret it, was not of much assistance in identifying clearly what the NPWS advice would be in relation to these specific areas of land. 137 It is also likely a purchaser would seek the advice of an ecologist to determine whether there is a possibility of obtaining development consent for the Bewsher scheme in areas which include EEC. In this case, as in many other valuation matters, the parties have provided conflicting evidence of their respective experts on what advice such a purchaser is likely to receive. Both experts agreed that the presence of EEC would not prohibit development, but disagreed whether the Bewsher scheme would be approved in light of its impact on the EEC on the Mesiti and Caruso lands in particular. As submitted by the Respondent, a prudent hypothetical purchaser would be aware that the advice to the Council based on the James and Biosis reports is that the EEC has conservation value, albeit that the areas are degraded. Even if the advice obtained from a consultant such as Mr Fanning was that removal of the EEC would be acceptable and could be dealt with by offsets, or the advice in his report that no revegetation would be necessary based on his experience in western Sydney, a prudent purchaser would be likely to assume that he or she would not be able to get consent for removal of the EEC on the Mesiti land located within the dashed yellow line in particular without being required to provide substantial offsets. 138 In relation to the Mesiti land, the advice the hypothetical purchaser is likely to receive is that the area of EEC above the yellow dashed line will have to be retained or replaced by an area of EEC as a substantial offset if its removal is allowed. While degraded and in poor condition, the EEC on the Mesiti land is part of a reasonably large area of EEC in that local area and a prudent hypothetical purchaser would not be likely to assume that it could be removed without an offset being required.

[62]

139 In relation to the N Caruso and D and N Caruso lands, while the Applicants argued that in light of the James report, which is a general description of EEC in the area, that the EEC was non-existent or highly degraded remnant vegetation, a prudent hypothetical purchaser is likely to consider that additional considerations concerning the regeneration of EEC would be required by the Council. The Applicants' case that any development of the Applicants' lands would be likely to require regeneration of the riparian zone, and that can include regenerated EEC vegetation in any event, suggests that is a matter which a prudent hypothetical purchaser would be well aware of. Likelihood of approval of Bewsher scheme 140 It follows from these findings that I do not accept the Respondent's submission that the EEC on the Mesiti and Caruso lands would prevent the rest of the Bewsher scheme being implemented as a whole (par 126) so that none of the Applicants' lands can be developed. There is simply no basis presented apart from the submissions of the Respondent suggesting that the EEC on the Mesiti land in particular must prevent development of any other land owned by the Applicants. There does not otherwise appear to be any reason why the presence of EEC would suggest to a prudent purchaser that the Bewsher scheme would not be considered by the Council. I do not consider the presence of EEC is a reason for a prudent hypothetical purchaser to assume that the Bewsher scheme would not gain development approval in some form on the Caruso and Mesiti lands. Offsets 141 Given the acceptance by the Applicants that any development of lands will give rise to the requirement to restore the riparian zone and my findings that the EEC on individual lots in the riparian zone will be required to be restored in situ, the issue of offsets does not arise to the extent canvassed in the evidence and submissions. The only area of EEC which will be potentially destroyed is that area of EEC on the Mesiti land between the solid yellow line and the dashed yellow line which will be filled if the Bewsher scheme is implemented on that land in the "development in isolation" option. I consider it is likely, given Mr Richardson's evidence on the significance of the vegetation and the government policy documents on offsets referred to in the evidence (par 110), that a prudent hypothetical purchaser would consider that some offset for the area of EEC to be destroyed would be required. There is no accepted ratio of the offset which should be applied as a matter of policy and practice given the evidence which emerged, from a low ratio of 2:1 contained in an RTA report up to a high ratio of 20:1 identified in Class 1 proceedings in this Court in Gerroa. 142 As Mr Fanning submitted, the appropriate amount of offset will depend on the nature, size and location of the vegetation in question. The Applicants' counsel submitted that a ratio of 6:1 was acceptable and I consider that should be adopted. On the evidence before me it is difficult to be definitive on how that would apply to the area of EEC under consideration on the Mesiti land. Some allowance for the additional cost of providing an offset for the EEC potentially lost in this area is likely to be made by a hypothetical purchaser of the land. Further advice from the parties on this matter is required before I determine the allowance a prudent purchaser would make in relation to the Mesiti land.

[66]

Planners' evidence 147 The planners prepared a joint report on the potential uses available in a rural zone (exhibit GG) in which they agreed there were a range of uses permissible in the rural zone under the LEP or State Environmental Planning Policy (Housing for Seniors or People with a Disability) 2004 (SEPPSL). SEPPSL applies only to land that "adjoins land zoned primarily for urban purposes". Mr Rowan believed some caution is necessary in relation to whether SEPPSL would apply to all the Applicants' lands, particularly Polito and Nati given their distance from a major road. Mr Grech considered that in the scenario that only the drainage lands remained zoned Rural 1(a) and the remainder of the BRRA is as currently zoned, SEPPSL would apply to all the subject sites. The major issues that could affect the likelihood of obtaining approval under SEPPSL or the LEP would be the ability to demonstrate that future urban development could proceed in an orderly manner. Assuming the BRRA DCP controls were in place these uncertainties could be more readily addressed. Mr Grech considered the availability of those controls could be assumed. Mr Rowan was more cautious about whether that level of detail would be known. He assumed that the timing of the release of the BRRA would be dependent on the knowledge of whether a private consortium was committed or not to providing the trunk drainage scheme in both areas. A purchaser would know that a trunk drainage scheme was to be implemented to achieve the urban zoning of the land. By 2003 a structure plan on exhibition for the BRRA provided some insight into future land use zoning that incorporated the Kinhill scheme. Access to Windsor Road would require vehicular access which would have to satisfy the RTA and the Council with consequent cost implications. This is a more difficult issue to address compared to the comparable sites. Flooding would require floor levels to be above the 1:100 year flood level with 0.5m freeboard which may require some site regrading.

[67]

Valuers' evidence - Comparable sales 148 Mr Large and Mr Phippen both relied on sales of property purchased for Seniors Living developments as follows: (i) 71-83 Samantha Riley Drive, Kellyville, which sold for $5.7 million on 31 May 2007 with an area of 20,200m2 showing a rate of $282.18/m2. Mr Large adjusted this sale to $275/m2 when applied to the Applicants' lands. He considered these were comparable Seniors Living sites in a Rural 1(a) zone. Further, the LEP allows a wide range of development on land zoned rural. Amalgamation of lots with adjoining owners was highly likely. This sale was similar to the subject sites having residential development opposite with shops and transport in close proximity. Mr Phippen also adjusted the sale upwards due to better location and position to derive a value of $324/m2. Mr Dempsey criticised reliance on this sale because in his view it took account of the public purpose as trunk drainage would have to be carried out by someone other than Sydney Water. There can be no assumption that the subject lands have the same potential in isolation or in amalgamation with adjoining owners in light of the risks of achieving development. All of the Applicants' lands are flood affected, unlike this sale. The planners' advice is that a purchaser would need to manage risks in order to achieve consent for a residential care facility. In the absence of a regional trunk drainage scheme and the risks of that being built, together with likely deferral of urban rezoning, appropriate Rural 1(a) values of $105/m2 on Windsor Road and $115/m2 on Arnold Avenue should apply. (ii) 57 Samantha Riley Drive, Kellyville, sold for $4.04 million on 6 June 2005 with an area of 20,200m2 showing a rate of $200.25/m2. Mr Large adjusted this to $275/m2 for the Applicants' lands. When compared to 71-83 Samantha Riley Drive, a 41 per cent increase in value between the sales is shown for very similar properties. Also considered to be a comparable Seniors Living site in a Rural 1(a) zone which enables a wide range of uses. Mr Phippen adjusted this sale upwards by 12.5 per cent because of better location and position but less than 71-83 Samantha Riley Drive because this sale had superior shape to derive $236/m2. Mr Dempsey criticised this sale also for the same reasons outlined above in relation to 71-83 Samantha Riley Drive. (iii) 812 Windsor Road, Rouse Hill, sold for $4.25 million on 17 May 2005 with an area of 20,400m2 showing a rate of $208.33/m2 adjusted to $275/m2. Mr Large relied on this sale. The sale was over three years ago and before the scope of the Rouse Hill regional shopping centre was so evident. Value has increased substantially since given that the site is in a release area. A similar time element should be applied as can be seen between 71-83 and 57 Samantha Riley Drive, Kellyville, of a 40 per cent increase ($208 x 140 per cent is $291/m2, say $275/m2). Mr Dempsey did not consider this sale was comparable due to its far superior location near the Rouse Hill regional shopping centre and adjoining retail land.

[68]

149 Mr Dempsey considered the Applicants' lands should be valued on the basis of a rural home site use. He relied on (i) 13 Hezlett Road, Kellyville, sold for $1.2 million on 15 November 2006 showing a rate of $116.96/m2. He considered this sale was superior in rural amenity and location compared to the subject lands. He did not consider any adjustment was necessary. The site is very close to the properties in Samantha Riley Drive relied on by the Applicants' valuers. Mr Large criticised this sale and considered that it should apply at an adjusted rate of $165/m2 to the Applicants' land. A house and shed requiring demolition was located on the land and a future half road reduces the already narrow width so that the available land is 8,208m2. Mr Phippen adjusted this sale upwards for location and shape and dimension as it was a narrow long block but considered that it had superior position and outlook and was flood free. Overall his adjustment up was 5 per cent to $126m2 when applied to the Applicants' lands. (ii) 2 Nelson Road, Box Hill, sold for $1.72 million on 3 April 2004 for an area of 17,080m2 showing a derived rate of $100.70. This is zoned Rural 1(a), is partly flood affected and has future potential zoning for industrial or commercial use. Adjusting for time this sale showed $79.50/m2 when applied to the Applicants' lands. Mr Large criticised this sale as he considered it too far removed in time (three yrs) and distance (10km) to be considered a reliable comparative sale. If applied he considered the adjusted rate should be $175/m2 as the Applicants' lands were superior. Mr Phippen also criticised this sale on the basis that it was substantially inferior in terms of location, position (low lying flood plain situated on busy road) in particular. He would adjust the sale upwards by 15 per cent to apply to the subject lands to derive a value of $124/m2 in the before scenario. Parties' submissions 150 Based on their respective valuers' evidence, the parties made the following submissions. The advice of the town planning experts is essentially that the land, if zoned rural, could be used for SEPPSL development. The Applicants argued that the approach of Mr Large and Mr Phippen in selecting local comparable sales with that development potential ought to be preferred. The most proximate Rural 1(a) sales to the subject lands and under the same LEP as the Applicants' lands are 71-83 Samantha Riley Drive, 57 Samantha Riley Drive and 13 Hezlett Road. They are market sales with a range of $120-$282/m2. It is clear that Hezlett Road is too low and 71 Samantha Riley Drive is too high. The planners' joint report (exhibit GG) provided to the valuers demonstrates that the Applicants' lands have significantly higher development potential than as a rural home site given the provisions of the LEP. The Nelson Road sale is irrelevant and Mr Dempsey's assessment of $95/m2 for flood free value is very low. The planners have agreed that land with no potential is worth $75/$85/m2. The sale of 812 Windsor Road at $209/m2 sets a minimum level on value albeit not truly comparable given that it is an old sale and more remote than other sales when compared to the subject site. 151 The rural sales are achieving rates similar to and in some cases higher than residential sales. Mr Large derives a rate of $275/m2. Mr Phippen is more conservative and caps the rate at $238/m2 being the agreed residential 2(b1) value. 152 The Respondent's counsel submitted that the Samantha Riley Drive properties are relied on because of their potential for further zoning proposals applicable at the time of acquisition. These sites are not comparable to the Applicants' lands because their future development potential at the sale date was enhanced by urban releases in the surrounding area. They are large entire parcels of land whereas the Applicants' lands are a much smaller partial acquisition of flood affected land. 153 These sales are not subject to flooding and there is no requirement for retention of any land for drainage corridor purposes. It is inconceivable that someone would pay the same as residential rates or greater for lands above the 1:100 yearr flood event where the whole of the land cannot be developed to these limits and there are restrictions on the whole site. The areas of land below the 1:100 year flood are for N Caruso - 80 per cent, D and N Caruso - 87 per cent and Mesiti - 37 per cent, based on Mr Dempsey's figures. Mr Dempsey's approach of valuing on the basis of a rural home site is correct and his valuation figures should be accepted.

[69]

Finding 154 The joint report of the planners does suggest that the development of the subject lands for SEPPSL development and other commercial developments permissible under the Rural 1(a) zone is advice that is likely to be obtained by a prudent, hypothetical purchaser and that is a valid basis on which to assess value. I consider that is the highest and best use by which the properties should be valued. While Mr Rowan was more cautious in his analysis, I consider the approach of Mr Grech is correct given the provisions of SEPPSL, the unusually generous development allowed with consent in the rural zone under the LEP and the location of the Applicants' lands in a release area. 155 The most comparable sales with an intended SEPPSL use in terms of timing and location were those located in Samantha Riley Drive. 71-83 Samantha Riley Drive was relied on by Mr Large to derive an amount of $275/m2. 71-83 Samantha Riley Drive was sold close to the acquisition date in March 2007. Given that site is not flood affected, was a sale of the entire (large) property and does not have to access such a busy road as Windsor Road, that value is too high for the subject sites which are flood affected of lesser elevation and only partially acquired. The rate of $238/m2 selected by Mr Phippen while less is also too high for that sale given that it is superior to the subject sites. 57 Samantha Riley Drive was sold in June 2005. Mr Phippen adjusted this sale by 5 per cent for time to derive the value of $236/m2. 156 Both Samantha Riley Drive properties are superior to the Applicants' lands, being generally larger, elevated and flood free. The sales were also of the whole lots. I consider the Applicants' lands, given their lesser size, partial acquisition only and flood liable location, should be valued at a significantly lesser amount than either Mr Phippen or Mr Large suggest. It is also relevant to take into account that a prudent hypothetical purchaser will consider there is uncertainty about whether the Bewsher scheme would gain development approval for any individual lot. I consider an appropriate amount is $190/m2.

[78]

169 The Respondent relied on Mr Dempsey's evidence that a 10 per cent reduction is warranted. Finding 170 There is residue land without road access owned by Mr Nati and Mr Polito as a result of the carrying out of the public purpose which has taken away any road access for the residue lands. Section 55(f) does apply to the residue land. 171 I agree with the views of the Applicants' valuers that the landlocked Nati and Polito lands are substantially less valuable as a result of being landlocked without road access. Their development depends on the pattern of development on neighbouring lands. It is too speculative to assume that they will be bought out by a developer as part of the overall development of the surrounding land for a price commensurate with the surrounding land as Mr Dempsey argued. The plans of the proposed display village tendered in evidence demonstrate that their land may not necessarily be incorporated into any large scale proposal considered in the general area. Whether they would be considered valuable because of their location, suggesting they are essential to development of the land in the general area, is not a matter that rises above speculation. It is necessary to determine the appropriate percentage which should be deducted. Mr Dempsey's figure of 10 per cent is too low. The other valuers have selected 70 - 75 per cent but the offer received by Mr Nati of $200/m2 suggests that percentage is too large. I will apply a reduction of 50 per cent in value for the landlocked residue land in relation to the s 55(f) claim of the two relevant Applicants. Disturbance and/or injurious affection claim under s 55(f) 172 A number of items of disturbance are agreed to be paid under s 55(d)/s 59 as follows: 1. N Caruso, matter no 07/30694 - disturbance under s 59: (a) Valuation fees - $13,200 (b) Legal fees: (i) Hunt & Hunt - $23,725.60 (ii) Bewsher Consulting Pty Limited - $24,253.11 (iii) Provincial Planning - $9,020.00 2. D and N Caruso, matter no 07/30692 - disturbance under s 59: (a) Valuation fees - $6,600.00 (b) Legal fees: (i) Hunt & Hunt - $8,752.86 (ii) Bewsher Consulting Pty Limited - $5,762.52 (iii) Provincial Planning - $4,510.00

Caruso and Ors v Sydney Water Corporation

At a glance

Court

Decision date

Before

Source

Judgment (89 paragraphs)

Parties

Cases Cited (8)

Cited By (8)