City of Parramatta Council v Sydney Metro

Background

1. The Acquired Land is located in the centre of the Parramatta CBD and was compulsorily acquired for the purposes of the Transport Administration Act 1988 (NSW), and more specifically, for the development of a new train station as part of the Sydney Metro West project.
2. The Acquired Land is bounded by George Street to the north, Smith Street to the east, Macquarie Street to the south, and Church Street, Parramatta to the west. It comprises an area of 9,984.6m² with Lot 100 having an area of 9,729m² and Lot 2 having an area of 255.6m². As such, the Acquired Land is often referred to as 'Lot 100'.
3. The Acquired Land is irregularly shaped with several limbs including frontages of 16.87m to George Street, 21.335m and 6.37m to Macquarie Street, and 15.655m to Smith Street. The Acquired Land also has a number of buildings built to their boundaries on some lots adjoining the site to the north, east and west.
4. At the date of acquisition, the Acquired Land contained a multilevel carpark with 772 spaces ('Horwood Place Carpark'), several retail tenancies, and accessways around Horwood Place Carpark, namely Macquarie Lane and Horwood Place, which connect the carpark with George, Smith and Macquarie Streets.
5. The Acquired Land also includes an area off Macquarie Lane of approximatively 592m² which was used at the date of acquisition for at grade carparking containing 26 spaces ('Macquarie Lane Land'). The northwest corner of the Acquired Land comprises a horseshoe-shaped area of 342m², being part of both Lot 100 and Lot 2 ('Horseshoe Land'). As will be seen, despite certain agreed facts, there were some differences in the respective land areas in the various expert reports such that one expert retained by Sydney Metro considered the Macquarie Lane Land to be 563m² and the Horseshoe Land to be 256m².
6. Pedestrian access was provided on the Acquired Land via Batman Walk, a walkway between 68 and 70 Macquarie Street, Parramatta, the Horwood Place Carpark, and the Horseshoe Land.
7. In addition to the Acquired Land, as at the date of acquisition, Council also owned Lot E in DP 607789, being 70 Macquarie Street, Parramatta ('70 Macquarie Street'), which adjoins Lot 100 and has an area of 461.6m² and has a frontage of 15.1m to Macquarie Street. On 31 March 2022, Sydney Metro compulsorily acquired 70 Macquarie Street and compensation was agreed in May 2022 in the amount of $11,565,000.
8. The Acquired Land (being Lot 100 and Lot 2) is considered in some of the evidence together with 70 Macquarie Street and referred to as the "Parent Parcel" on the basis that these parcels were all in the ownership of Council at the date of acquisition. The Parent Parcel has a combined area of 10,446.2m². Seen in this way, as at the date of acquisition, the Parent Parcel had an extended frontage of 43.195m (up from 16.87m as part of Lot 100) to Macquarie Street. The expression "Development Land" is also used in the evidence and the submissions to refer to the Acquired Land less the Macquarie Lane Land and the Horseshoe Land (being an area of 9,050m²). As will be seen, this area was, for valuation purposes, considered as available for certain hypothetical development scenarios.
9. Below is an aerial photograph showing the Acquired Land and Lot E (70 Macquarie Street):

Planning controls

1. The planning controls applicable at the relevant date were as follows: 1. Parramatta Local Environmental Plan 2011 (NSW) ('LEP'); 2. Parramatta Development Control Plan 2011 (NSW) ('Parramatta DCP'); 3. Civic Link Framework Plan (2017) ('Framework Plan'); 4. Draft Civic Link Precinct Development Control Plan (2019) ('Draft Civic Link DCP'); and 5. Parramatta CBD Development Contributions Plan 2007 - Amendment No 5 ('Contributions Plan').
2. The LEP was the primary environmental planning instrument applying to the Acquired Land as at the date of acquisition. However, Council had also endorsed a Draft Parramatta CBD Planning Proposal ('Planning Proposal') which had been publicly exhibited between 21 September 2020 and 2 November 2020, the application of which is agreed to have been certain and imminent as at the date of acquisition. It is uncontroversial that the hypothetical transaction would have proceeded by reference, inter alia, to the controls in the Planning Proposal.
3. Pursuant to both the LEP and the Planning Proposal, the Acquired Land as at the date of acquisition was zoned B3 Commercial Core and had no maximum building height limit in metres however was subject to sun access plane controls (which sought to protect solar access to Parramatta Square to the south), which in effect limited the height of buildings achievable on the Acquired Land. Furthermore, the Land Reservation Acquisition Map in the LEP indicated that no part of the Acquired Land had been reserved for public purposes.
4. While the LEP imposed a maximum floor space ratio ('FSR') of 10:1 for the northern part of the Acquired Land and 6:1 for the southern part, the Planning Proposal sought to increase the FSR limit across the whole of the Acquired Land to 10:1, with the exception of office premises where the FSR would be unlimited. The LEP and the Planning Proposal provided for a design excellence FSR bonus of up to 15%.
5. The Contributions Plan pursuant to s 7.12 of the Environmental Planning and Assessment Act 1979 (NSW) ('EPA Act') imposed a levy of 3% on the costs of any development and provided Council with discretion to accept dedication of land or the provision of a material public benefit or works-in-kind in part or full satisfaction of a monetary contribution.
6. The Acquired Land is located on an alignment identified in various documents as the "Civic Link" which Council had envisioned since the 1990s as a pedestrianised public space providing a connection between River Square (adjacent to the Parramatta River) to the north of the Acquired Land and Parramatta Square to the south.
7. To facilitate this objective, as at the date of acquisition, Council had acquired privately-owned parcels of land, including 70 Macquarie Street in 2011, and 34 Phillip Street, Parramatta (a heritage item north of the Acquired Land and near to the Parramatta River known as "Willow Grove") in 2015. Following these acquisitions, Council owned a continuous corridor of land from Parramatta Square to the Parramatta River.
8. A number of the planning controls applicable to the Acquired Land relate to the delivery of the Civic Link, including the Framework Plan endorsed in principle by Council on 10 July 2017, and the Draft Civic Link DCP endorsed on 25 February 2019.
9. The Civic Link, as envisaged by these instruments, is around 490m long and of variable width, but generally 20m wide with parts extending to 27m on the Acquired Land. The Civic Link extends across four city blocks. For clarity, an extract from the Draft Civic Link DCP showing the location and extent of the proposed Civic Link (on which the Acquired Land has been later overlaid) is annexed to this judgment and marked "A". The Acquired Land is within Block 2 - the objectives of which are described as follows: "In Block 2 Civic Link extends along a new north-south public space from Macquarie Street through the Horwood Place Car Park site and along the widened and pedestrianised eastern Horwood Place. Transport access and interchange between light rail and future metro will be facilitated. New streets and public spaces will enable vehicle and service access to properties and pedestrian permeability. Civic Link in Block 2 will support the Parramatta CBD commercial core and emerging educational uses with complementary flexible places to meet, work, share and learn. Adjacent to the Roxy in the heart of the Civic Link, Block 2 includes areas for social and creative gathering places to support cultural events and attractors in adjacent building."
10. The Framework Plan observed that facilitation of the Civic Link would require "redevelopment of the above-ground Council-owned Horwood Place car park" and that Council ownership of the Acquired Land and 70 Macquarie Street was "critical to the realisation of the Link". The significance of the Acquired Land to the realisation of the Civic Link is reflected in the various maps in the Draft Civic Link DCP. The Framework Plan also identifies land for future acquisition to maintain the Civic Link alignment, such as 68 Macquarie Street, Parramatta.
11. The Draft Civic Link DCP, as far as it relates to the Acquired Land, was not progressed by Council because of the announcement that there would be a Sydney Metro station in Block 2.

Summary of issues for determination

1. While the parties agree that compensation for the acquisition of the Acquired Land is to be determined in accordance with the Just Terms Act, and that at the date of acquisition the highest and best use of the Acquired Land was as a redevelopment site, they disagree on a number of (somewhat cascading) issues which impact the resulting amount of compensation to which Council is entitled.
2. The first issue relates to the likely development yield that would receive development approval over the Acquired Land in the minds of the hypothetical parties in striking a purchase price which requires consideration of the planning controls. A question also arises as to whether the Acquired Land should be considered for valuation purposes as one parcel or considered as two or three separate parts.
3. Although it is agreed that at the date of acquisition the highest and best use of Lot 100 was as a redevelopment site, there is disagreement between the parties as to the form and scale of the hypothetical development (and consequential development yield) that would likely have received development consent. On the primary approach ultimately adopted by the parties, the resolution of this dispute determines the gross floor area ('GFA') likely to be achieved for the land as a whole (or for separate parcels thereof), which becomes a key integer in the calculation of the market value of the Acquired Land.
4. As will be seen, although there were a number of different development "scenarios" (and various permutations thereof) considered in the extensive expert evidence, at the end of the hearing there were two primary scenarios considered by the parties' town planning, urban design and valuation experts, being "Revised Scenario 2" (to avoid confusion given the number of scenarios, herein referred to as 'Scenario 2') and "Alternative Scenario 3" (herein referred to as 'Scenario 3').
5. Further sub-issues arise in relation to the likelihood of particular features of each development scenario being achievable given the applicable planning controls. In relation to Scenario 2, this involves the likelihood of various components of that scenario, including basement retail and a cantilever structure (with floorspace above) being approved by a consent authority; and, further, the adequacy of the proposed vehicular and pedestrian access to neighbouring properties having regard to possible existing equitable easements. In relation to Scenario 3, this involves the likelihood of basement retail and a 3m wide cantilever (with floorspace above) over Horwood Place being approved.
6. Determination of the appropriate development scenario for the Development Land in turn raises issues in relation to the separate development yield of the Macquarie Lane Land and the Horseshoe Land. Council contends that, under either scenario, each site would be sold separately to an adjoining landholder for amalgamation and redevelopment. Sydney Metro disagrees and contends that should Scenario 2 prevail, it would involve substantial development on both sites, such that the suggested amalgamations would not be achievable. The parties further disagree on whether the suggested amalgamations need to proceed upon the assumption that the Draft Civic Link DCP needs to be substantially complied with.
7. Irrespective of which development scenario (or variation thereof) is preferred by the Court, the market value of the Acquired Land with that potential for development requires determination. There is dispute between the parties as to the appropriate valuation methodology to be adopted in relation to Lot 100 (but not the Macquarie Lane Land and the Horseshoe Land). Council contends that the direct comparison approach ('DCA') method is the most appropriate valuation methodology to be used and Sydney Metro contends that both the DCA method and the residual land value ('RLV') method is appropriate. In relation to the DCA method, there is dispute between the parties as to the adjustments to be made in relation to certain identified comparable sales and, in relation to the RLV method, the parties disagree in relation to a significant number of the required inputs and assumptions to be adopted.
8. A question arises that if the planning controls require dedication of part of the Acquired Land, whether the hypothetical parties would receive an offset in local infrastructure contributions payable under s 7.12 of the EPA Act.
9. The Court will also be required to determine whether an adjoining owner premium is payable, and if so in what amount. And, in the event that the Court assesses the development yield of the Acquired Land by reference to Scenario 3, Council makes a claim for special value under s 57 of the Just Terms Act.
10. On the final day of the hearing, the Court was informed that Council's claim for disturbance loss pursuant to s 55(d) of the Just Terms Act was agreed between the parties in the sum of $323,577.16.

Evidence

1. In a hearing proceeding over nine days, the Court received extensive documentary and oral expert evidence in the fields of town planning, urban design, land economics, quantity surveying and valuation. Council relied upon the town planning evidence of Robert Chambers; the urban design evidence of Michael Harrison; the land economics evidence of Martin Hill; the quantity surveying evidence of David Madden; and the valuation evidence of Michael Dyson. Sydney Metro relied upon the town planning evidence of Helen Deegan; the urban design evidence of Steven Kennedy; the land economics evidence of Gavin Duane; the quantity surveying evidence of Barry McBeth; and the valuation evidence of Esther Cheong.
2. Council read the affidavits of Jennifer Concato sworn 29 September 2022; Brian Hynes sworn 30 September 2022 and 15 December 2022; Patrick Ibbotson sworn 15 December 2022; and Alessandro Cowley sworn 22 January 2023. To the extent that these affidavits are material, their content is considered in relevant parts of this judgment.
3. The Court also received an extensive statement of agreed facts in relation to the characteristics of the Acquired Land including relevant present and historical town planning matters relating to key planning controls and Council's "vision" for the future development of the Parramatta CBD.
4. The Court undertook a site view of the Acquired Land and the surrounding area, including the location of various comparable sales relied upon by the valuation experts, including 81 - 83 and 87 - 89 George Street, Parramatta; 2 - 6 Hassall Street, Parramatta; and 41 - 43 Hunter Street, Parramatta.

Legal principles

1. The relevant statutory provisions and the legal principles governing the assessment of compensation for the compulsory acquisition of land which I am to apply are well-known and can be briefly summarised.

Statutory framework: Just Terms Act

1. The amount of compensation to which a person whose land has been compulsorily acquired is entitled is set out in s 54 of the Just Terms Act, as follows: 54 Entitlement to just compensation (1) The amount of compensation to which a person is entitled under this Part is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land. …
2. Section 54 directs attention to the loss which the dispossessed owner suffers as a result of the compulsory acquisition. In determining such amount, s 55 of the Just Terms Act relevantly provides: In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division) - (a) the market value of the land on the date of its acquisition, (b) any special value of the land to the person on the date of its acquisition, … (d) any loss attributable to disturbance, …
3. The expression "market value" is defined in s 56(1) of the Just Terms Act to mean "the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer" excluding, inter alia, any increase in value caused by the carrying out of the public purpose for which the land was acquired. The market value of land is determined by forming an opinion as to what a willing purchaser would pay and what a not unwilling vendor would receive for the land: Leichhardt Council v Roads & Traffic Authority of NSW [2006] NSWCA 353; (2006) 149 LGERA 439 at [51].
4. When assessing the market value, the Court is to consider the "highest and best use" of the land at the date of acquisition: Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7 ('Turner').
5. It is agreed that the highest and best use of the Acquired Land is for redevelopment generally in accordance with various development scenarios proffered by the town planning and urban design experts.

Statutory valuation task: the Court as a judicial valuer

1. The statutory framework indicates that, when acting as "judicial valuer", the Court's focus must be on determining the terms of a hypothetical transaction that would occur between a purchaser and a vendor of the Acquired Land as at the date of acquisition, rather than on assessing its objective market value: Apokis v Transport for NSW (2020) 101 NSWLR 844; [2020] NSWCA 39 at [36]-[44].
2. In doing so, the Court is not confined to accepting the case of either party and may use the evidence adduced in the proceedings to make its own assessment of the compensation payable: Roads and Traffic Authority of New South Wales v Blacktown City Council [2007] NSWCA 20 at [6], [39], [47]-[48]; Sydney Water Corporation v Caruso [2009] NSWCA 391; (2009) 170 LGERA 298 ('Caruso') at [3], [146], [150].
3. As a general principle, in determining compensation, doubts should be resolved in favour of a more liberal estimate for the dispossessed owner, although that principle does not detract from the need to engage with and evaluate evidence and competing witnesses: Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited (1947) 74 CLR 358 at 373-374; [1947] HCA 10; Caruso at [3], [99]-[100].

Constraint imposed by the provision for the Civic Link

Weight to be given to the Draft Civic Link DCP

1. As referred to at [21]-[24] above, a number of the planning controls applicable to the Acquired Land relate to the delivery of the Civic Link. An overarching issue in these proceedings relates to the effect of the controls in the Draft Civic Link DCP on the development yield of the Acquired Land, and consequently the degree and extent to which those controls should be taken into account in assessing the Acquired Land's market value.
2. I note the parties' agreement that the Draft Civic Link DCP was imminent as at the date of acquisition and I find that the instrument reflects Council's longstanding vision for a north-south pedestrian link and consider that its objectives would be given weight in the hypothetical transaction (or, as the case may be, various transactions) and thereby informs my assessment of the likely development yield of the Acquired Land. However, as will be clear, such finding is predicated upon the flexible approach mandated by s 4.15(3A) of the EPA Act and in particular subs (b) which requires a consent authority to be flexible and allow reasonable alternative solutions when there is noncompliance with a development control plan standard relating to an aspect of a development.
3. To that extent, while I remain mindful of the dimensional and other controls in the instrument (including, the width of the proposed Civic Link, the width of the lanes, and the amount of public domain), as will be seen, I do not apply them strictly in my consideration of the highest and best use of the Acquired Land.
4. The parties agreed that the Draft Civic Link DCP reflected Council's ownership of the Parent Parcel and other land along the alignment of the proposed Civic Link. It also identified an area of 6,800m² as public open space. Moreover, the Property and Amalgamation and Land Dedication Map in the Draft Civic Link DCP provided for thin strips of a limited number of non-Council owned properties along the length of the Civic Link to be acquired.

Development yield of the Acquired Land

1. As noted above, in assessing the development yield of the Acquired Land, the parties' urban design experts provided a number of hypothetical development scenarios that (but for some components of Scenario 2) excluded the Macquarie Lane Land and the Horseshoe Land from the remainder of the Acquired Land on the basis that the Macquarie Lane Land would likely be sold to Mirvac Properties Pty Ltd ('Mirvac'), being the owner of the adjoining 75 George Street site ('Mirvac Site'), or to Niltil Holdings Pty Ltd ('Niltil'), being the owner of the adjoining 73 George Street site ('Niltil Site'), for amalgamation and redevelopment; and the Horseshoe Land would likely be sold to Holdmark Property Group Pty Ltd ('Holdmark'), being the owner of the adjoining 41 - 59 George Street site ('Holdmark Site'), also for amalgamation and redevelopment.
2. The various scenarios formed the basis of the valuation experts' evidence. As the parties disagreed as to the form and scale of the hypothetical development that would likely have received development consent, it is necessary firstly to consider the two remaining scenarios of the highest and best use put forward by the parties.

Overview

1. Scenario 2 involves the development of two commercial towers (of 27 and 29 levels), over a single combined basement with three levels. It encompasses the whole site, including some development on the Horseshoe Land and the Macquarie Lane Land.
2. The towers are proposed to have marketable floorplates of 2,200m² and 1,111m² net lettable areas respectively. The first and second levels of the basement propose retail and the remaining level provides for servicing and 124 car parking spaces.
3. The development yield of Scenario 2 is 101,556m² of GFA comprising: 1. 15,696m² of retail GFA with 1,760m² on the ground level of the western tower, 1,129m² on the ground level of the eastern tower, and 12,807m² on the first and second levels of the basement; and 2. 85,860m² of office GFA with 55,700m² in the western tower and 30,160m² in the eastern tower.
4. Scenario 2 provides a 16m to 20m wide north-south pedestrian link, roughly in the location envisaged by the Draft Civic Link DCP, generally open to the sky with an 8m wide east-west pedestrian link. The scheme includes a 4m wide cantilever (with floor space above) on the eastern tower over the proposed Civic Link. The cantilever commences from and above level 4 and protrudes 4m over the otherwise open-to-the-sky pedestrian link.

Council's position

1. In considering the development potential of the Acquired Land, Council submits that the hypothetical vendor would have approached the question by reference to the controls in the imminent Planning Proposal rather than the LEP and would have transacted on the basis of the development potential shown in Scenario 2 (albeit with some amendment).
2. On the basis that the Development Land has an area of approximately 9,050m² (that area derived by subtracting the area of the Macquarie Lane Land (592m²) and the Horseshoe Land (342m²) from that of the Acquired Land (9,984m²)), Council submits that the 10:1 FSR control would allow 90,500m² of GFA. In addition, Council submits that it may have been possible to increase the FSR control to 11.5:1 with a design excellence bonus, which equates to 104,075m² of GFA. Council further notes that, for office premises, the FSR control for the Acquired Land was unlimited except for the solar access planes which limit the height of the potential development to 27 or 29 storeys.
3. Based on its reading of the applicable controls, Council contends for a development yield of the Development Land with a view to maximising the allowable FSR to achieve a GFA of at least 90,500m².
4. Council submits that s 4.15(3A)(b) of the EPA Act mandates a flexible approach to compliance with standards set by an applicable development control plan, such that the Court is not required to adopt a scenario that strictly adheres to the controls of the Draft Civic Link DCP and would be open to allow reasonable alternative solutions to achieve the objects of the provisions.
5. In light of the above, and the further oral evidence at the hearing, Council submits that a hypothetical purchaser would base its valuation on a variation of Scenario 2 which provides for only one level of basement retail with the remaining two levels of the basement for carparking. Council submits that this form, now pressed by Council, would result in a development yield of 95,156m² of GFA, a value Council arrives at by taking from the 101,556m² of GFA one half of the original basement retail allocation (being, 12,807m²).
6. Although conceding that Scenario 2 does not strictly adhere to a number of the controls of the Draft Civic Link DCP, Council submits that the "obvious differences" identified by Sydney Metro (noted below) between the Draft Civic Link DCP and Scenario 2 are not material when taking a "flexible" approach to the implementation of the controls in the Draft Civic Link DCP. In this regard, Council places weight on the opinion of Mr Harrison, its urban design expert, and Mr Chambers, its town planning expert, that Scenario 2 constitutes a "reasonable alternative solution" that achieves the objects of the Draft Civic Link DCP for the purpose of s 4.15(3A)(b) of the EPA Act.
7. Council submits that while the width of the central pedestrian link in Scenario 2 is narrower than provided for in the Draft Civic Link DCP (being 16m to 20m, as opposed to 20m to 27m), the primary consideration is whether the Civic Link nevertheless accommodates a "high level of pedestrian amenity" and whether it provides a "weather protected pedestrian route", being two of the objectives of the controls in the Draft Civic Link DCP. Council again points to the evidence of Mr Harrison and Mr Chambers that Scenario 2 provides adequate pedestrian amenity.
8. Council submits that, insofar as Scenario 2 fails to provide laneways at Macquarie Lane and Horwood Place because these existing laneways are not retained (but rather, built on), equivalent access is provided below ground level for vehicles, and at ground level for pedestrians, and that such arrangements achieve the objectives of the Draft Civic Link DCP. Further, Council interprets Figure 5 of the Draft Civic Link DCP as indicating that the existing accessways are not retained on the Acquired Land.
9. The provision of vehicular access via the proposed basements on the Acquired Land (although not reflective of the Draft Civic Link DCP) is appropriate in Council's view, noting that it is similar to the traffic, parking and servicing arrangements otherwise available in Parramatta Square.
10. Council submits that, in circumstances where the existing accessways on the Acquired Land are not public roads and there is no registered easement on the title of the Acquired Land, the failure to provide for the laneways contemplated in the Draft Civic Link DCP is not prohibitive.

Sydney Metro's position

1. Sydney Metro submits that in striking a purchase price the hypothetical purchaser would not proceed on the assumption that Scenario 2 would be approved as it poses a high level of planning risk, primarily because of the inconsistencies between the scenario and Council's vision for the Civic Link as embodied in the Draft Civic Link DCP. As such, if Scenario 2 is nevertheless used as a basis for valuation, Sydney Metro submits that a significant discount should be applied to that valuation to account for the risks incurred in delivering the scenario.
2. Sydney Metro submits that Scenario 2 does not achieve Council's vision for the Civic Link because, first, it does not meet the objective of providing a legible and efficient street network and, in particular, it does not provide an open-to-the-sky Civic Link and ignores the public domain and laneway network aspects of the Draft Civic Link DCP; second, it does not provide for the (equitable) access presently enjoyed by adjoining properties and also fails to accommodate for the need to provide vehicular access to neighbouring land; and third, it provides for active uses in basement levels which are unlikely to be approved given the site's flood risk.
3. Sydney Metro emphasises that although Scenario 2 includes an open-to-the-sky Civic Link (which was not provided in Council's earlier proffered development scenarios), the width of the Civic Link component between the two proposed towers at ground level is 16m, which is narrower than that required by the Draft Civic Link DCP and is further reduced to 12m by the inclusion of the protruding cantilever from and above level 4 of the eastern tower. The scheme also involves basement development beneath the proposed Civic Link component.
4. Given the emphasis in the Draft Civic Link DCP on providing for a 20m to 27m wide Civic Link with a 6m setback, Sydney Metro submits that a 4m wide and 16m long cantilever over the Civic Link would not be supported by a consent authority. The GFA created by this intrusion amounts to approximatively 2,323m² which should be discounted if Scenario 2 is to be adopted.
5. Sydney Metro submits that a hypothetical purchaser would not value the Acquired Land on the expectation that it could achieve any basement GFA at all due to both flood risk and (retail) market issues and, as such, would not expect (and transact on the basis) that 12,807m² of basement GFA would be achievable (as noted above at [62], a position now partly accepted in final submissions by Council who now contends for only one level of basement (at 6,404m²)).
6. If, contrary to Sydney Metro's position, Scenario 2 is to be used as a basis for valuation, Sydney Metro submits that the development yield should be assumed to be 86,426m² of GFA (calculated by taking from 101,556m² of GFA 12,807m² of basement GFA and 2,323m² of cantilever GFA).

Consideration

1. I consider that there is a high degree of risk attaching to Scenario 2 such that the hypothetical parties would not transact on the basis that Scenario 2 is reasonably achievable. My reasons follow.
2. First, the Draft Civic Link DCP and the Framework Plan would be at the forefront of any hypothetical transaction. These two documents clearly inform the likely built form outcomes that would drive any development yield and the parties accepted that both documents had been publicly exhibited and endorsed by Council.
3. As noted above, the key feature of the Draft Civic Link DCP is the provision of the Civic Link (between Parramatta Square and Parramatta River) including, relevantly, the provision of laneways and public spaces. I find that, given the endorsement of Council and the public exhibition (and accepting that the Draft Civic Link DCP as it relates to the Acquired Land had not been progressed obviously because of the announcement that there would be a metro station in Block 2), the provision of the Civic Link and the instruments containing proposed controls for facilitating the delivery of the Framework Plan including the Civic Link would be at the centre of the hypothetical transaction.
4. Secondly, the objectives and controls in the Draft Civic Link DCP noted above (at [21]-[22]), specifically seek to create a "new linear open public space linking Parramatta Square to Parramatta River foreshore", a "legible and efficient street network", a "people - place", a "public space amenity", and "cultural uses and activity day and night". In particular, Block 2, being the area bounded by Smith, Church, Macquarie and George Streets, Parramatta as shown in annexure "A" to this judgment, contains part of a "new north-south public space" to enable vehicle and service access to properties as well as pedestrian permeability. Block 2 also includes areas for social and creative gathering spaces and provides specific controls to address these.
5. Preferring the urban design evidence of Mr Kennedy and the town planning evidence of Ms Deegan called by Sydney Metro, I find that Scenario 2 is inconsistent with Council's vision for the proposed Civic Link because it makes little provision for laneways and public spaces particularly at Macquarie Lane and Horwood Place and, as such, does not create a "legible and efficient street network which supports local access".
6. Thirdly, Scenario 2 does not provide legible and effective "service access" to neighbouring land particularly in circumstances where existing laneways and accessways are removed and mostly built upon. Although Council's urban design expert, Mr Harrison, suggested various options to address this concern by utilising loading zones, service corridors, and lift access, I accept Sydney Metro's position that these arrangements have not been resolved, and therefore there is (and would be) doubt as to whether they are in fact achievable, and in any event, because of their nature, there would be the need for consultation with neighbours and the relevant consent authority. This would involve additional risk and time. In these circumstances, I am not satisfied that the hypothetical parties would transact on this basis.
7. Fourthly, although Council accepted in final submissions that it is likely that only one level of basement retail would likely be achievable, this concession still faces concerns relating to flood risk and (retail) market risk, as considered further below.
8. Fifthly, I find that the 4m wide cantilever protruding from the western side of the eastern tower would not be acceptable to a consent authority as it protrudes over the required central pedestrian link. Although the cantilever commences at level 4, I accept Sydney Metro's submission that this presents as a greater intrusion than the cantilever (considered further below) proposed in Scenario 3 and, as such, the provision of this cantilever would receive little support from a consent authority.
9. For the above reasons, due to what I consider to be sufficient and significant noncompliance with the endorsed instruments and Council's "vision", I find that the hypothetical parties would not transact on the basis of Scenario 2 and that the changes to that scenario suggested on behalf of Council and embodied in Mr Harrison's evidence, do not address my concerns recorded above. As such, I consider that it is unlikely that a consent authority would approve Scenario 2 and that this advice would be given to the hypothetical parties.
10. For completeness, and although not determinative in my findings above, I accept Sydney Metro's submission that it is also unlikely that the hypothetical transaction would be approached on the basis of Scenario 2 and that the Horseshoe Land and the Macquarie Lane Land could be sold separately in circumstances where Scenario 2 utilises those portions. Council maintains, and I accept, that Scenario 2 clearly provides for development on the Horseshoe Land (including access to a carpark) and on the Macquarie Lane Land (including a substantial portion of retail offering on the ground level and provides for carparking and plant rooms on the basement levels).
11. Although Council submitted that those elements could be relocated and/or deleted, I consider that this is difficult without further redesigning the scenario. This supports my conclusion that Scenario 2 would not be the basis upon which the hypothetical parties would transact.

Overview

1. Scenario 3 was prepared by Mr Harrison, Council's urban design expert, to respond to commentary by Ms Deegan, Sydney Metro's town planning expert, and Mr Kennedy, Sydney Metro's urban design expert, in relation to concerns regarding earlier proffered development scenarios, including, servicing arrangements; provision of laneways; access to, and interfaces with, adjoining properties, as well as the evidence of the land economics experts. It comprises two commercial towers (of 29 and 27 storeys) over three levels of basement, and a 20m wide open-to-the-sky Civic Link at ground level. It provides laneways around the tower buildings and includes a 3m wide cantilever on the western side of the western tower rising from four levels above Horwood Place, which accommodates approximatively 2,000m² of GFA. The cantilever narrows the width four levels above the laneway from 11m to 8m.
2. The first and second levels of the basement propose retail, and the remaining level provides for servicing and 147 car parking spaces.
3. The development yield of Scenario 3 is 90,547m² of GFA comprising: 1. 14,253m² of retail GFA with 924m² on the ground level of the western tower, 521m² on the ground level of the eastern tower and 12,807m² on the first and second levels of a single combined basement; and 2. 76,294m² of office GFA with 47,819m² in the western tower and 28,475m² in the eastern tower.
4. Scenario 3 does not involve any development on the Macquarie Lane Land and the Horseshoe Land.

Council's position

1. Council relies on the opinion of both Ms Deegan, Sydney Metro's town planning expert, and Mr Kennedy, Sydney Metro's urban design expert, that a consent authority would be likely to support Scenario 3 if the cantilever over Horwood Place (supporting 2,000m² of GFA) and the basement retail (supporting 12,807m² of GFA) were to be removed, resulting in 75,740m² of GFA. As such and noting that Scenario 3 represents development well below the applicable FSR limit, Council submits that 75,740m² of GFA should constitute a "starting point" for the Court's assessment of the GFA potential of the Development Land, as the scenario is free from any material planning or development risks.
2. Council submits that a 3m wide cantilever from and above level four over Horwood Place represents a "reasonable alternative" to strict compliance with the Draft Civic Link DCP. Council points to the fact that despite the controls in the Draft Civic Link DCP, a cantilever over the Civic Link from the neighbouring building at 3 Parramatta Square had been approved. Furthermore, relying on Ms Deegan's concession that the Draft Civic Link DCP places a greater weight on the realisation of the central pedestrian link than other laneways and access points in the Parramatta Square location, Council submits that a consent authority would be more likely to approve a cantilever over Horwood Place than a cantilever over the Civic Link.
3. Furthermore, in circumstances where control C.7 of the Draft Civic Link DCP requires the provision of continuous awnings at ground level with a minimum depth of 2m along Horwood Place, Council submits that a 3m wide cantilever is inconsequential from an urban design perspective and, noting the emphasis in the Draft Civic Link DCP on providing public open spaces in the form of a central pedestrian link and adjacent laneways, a consent authority would likely accept such a minor encroachment over Horwood Place.
4. Council further submits that 6,400m² of basement retail would be achieved on the first level of the basement (with some design refinements) and rejects Sydney Metro's contention that concerns regarding either economic feasibility and/or flood risk would completely prevent below ground development of the Development Land.
5. In relation to market demand for basement retail, Council concedes in light of the evidence of the land economics experts, that only one level of basement retail would likely be achievable. In this regard, it emphasises that Mr Duane, Sydney Metro's land economics expert, accepted that the existing demand for retail could be met by putting retail on the first level of the basement which could be designed in a way that would make it visible from the Civic Link and laneways and thereby increase exposure.
6. As to Sydney Metro's suggestion that flood risk may prevent below ground development on the Acquired Land, Council points to the approval of developments involving active (below ground) uses in similarly flood-affected sites in proximity to the Acquired Land. Furthermore, the public purpose for which the land has been acquired in fact involves a subterranean train station being constructed with retail activities being provided in a concourse below the ground. Council submits that the Court should therefore infer that any flood risk is evidently manageable. This position is also supported by Mr Kennedy's concession in cross-examination that the flood affectation of the Acquired Land shown on the Floodplain Risk Management Map in the Planning Proposal does not constitute a limitation to its development and that the flood risk could be managed with a floodgate similar to the one observed during the site inspection.
7. In any event, Council submits that the Court should not accept Ms Deegan's and Mr Kennedy's evidence that basement retail may not be allowed by reason of flood risk in the absence of hydrological evidence substantiating those concerns.
8. As such, although importing some level of planning risk, Council submits that the hypothetical transaction would nevertheless proceed upon the basis that there is a cantilever over Horwood Place, that 6,400m² of retail GFA on the first level of the basement would be achieved and now presses a total development yield of 84,147m² of GFA (being 90,547m² of GFA less 6,400m² of retail GFA).

Sydney Metro's position

1. Sydney Metro accepts that Scenario 3 is capable of approval as a reasonable alternative which achieves a number of the objectives of the Draft Civic Link DCP except for the inclusion of a cantilever over Horwood Place and the provision of any active uses in the basement levels.
2. With respect to the cantilever, Sydney Metro submits that while the provisions of the Draft Civic Link DCP may be applied flexibly to accommodate a narrower Horwood Place, the instrument nevertheless requires above podium setbacks adjacent to laneways and clearly anticipates laneways that are open to the sky. Further, Ms Deegan and Mr Kennedy gave evidence that a 3m encroachment would neither achieve the intent of the Draft Civic Link DCP nor provide an appropriate urban design response. They considered that the upper stories of the western tower building should not step out beyond the line of the lower podium building and opined that a "flush" tower in line with the lower storeys constitutes an acceptable accommodation of the Draft Civic Link DCP.
3. As to the likelihood of basement GFA being achievable, Sydney Metro submits that the flood planning controls and lack of economic viability of basement retail would mean that the hypothetical purchaser would not transact on the basis of any basement GFA.
4. Sydney Metro points to the conventional flood planning controls in the Parramatta DCP, which require habitable floor levels to be located above the (100-year Average Recurrence Interval) flood planning level ('FPL'). However, Sydney Metro also notes that Council, as consent authority, nevertheless retains a discretion to permit some types of commercial and retail development within a basement of a building below the FPL under the Draft Parramatta City Centre DCP (which was publicly exhibited after the date of acquisition). Sydney Metro endorses Mr Kennedy's advice to the hypothetical purchaser that, in light of these provisions, at best 5,000m² (equating to one basement level of active but not retail) basement space would be permitted however, this figure should be considered as a "bonus" and not form part of an expected development yield.
5. Sydney Metro relies on the opinion of Mr Duane, its land economics expert, who advises against providing any basement retail. While Mr Duane and Mr Hill, Council's land economics expert, disagree on both the quantum of demand for retail and non-retail commercial use on the Acquired Land and the achievable distribution of retail floor space across basement levels, Sydney Metro emphasises Mr Duane's evidence that the second level of the basement would likely be used for carparking and vehicle access while the first level of the basement would be used for a large gymnasium or public car park but not for supermarket or entertainment use. Sydney Metro further notes that Mr Hill conceded that non-retail shopfronts (such as medical or finance institutions) are not typically found in basements, and that the capture rate for food retail is dependent on a site attracting a supermarket, the viability of which would, in turn, depend on access. Sydney Metro submits that direct access from the street to the supermarket would be required for the viability of the supermarket, and that such direct access is lacking in Scenario 3.
6. Sydney Metro submits that a hypothetical purchaser would value the land on the basis that there would be no basement GFA at all. However, should the Court be minded to include basement GFA in the valuation determination, Sydney Metro submits that it should be limited to (Mr Kennedy's) 5,000m² (referred to at [100] above) and with a significant discount being further applied for planning and market risk.

Consideration

1. Taking into account my findings at [74]-[84] above regarding Scenario 2, I find that Scenario 3 (with the deletion of one level of basement retail being 6,400m² of GFA) would be the basis upon which the hypothetical transaction would proceed. My reasons may be briefly stated.
2. First, given its general concurrence with the Draft Civic Link DCP, it is likely that Scenario 3 would receive the approval of a consent authority with a variation involving the reduction of the equivalent of one level of basement retail. In this regard, I accept the urban design evidence of Mr Harrison on behalf of Council and the town planning evidence of Ms Deegan on behalf of Sydney Metro, first, that with variations (including the reduction in basement area GFA and the suggested deletion of the cantilever over Horwood Place), Scenario 3 presents a "reasonable alternative" to strict compliance with the Draft Civic Link DCP. Moreover, subject to my comments to follow in relation to the cantilever, I consider that Scenario 3 (as varied) is not otherwise exposed to unusual or material planning or development risks.
3. Secondly, in relation to the cantilever over Horwood Place, while Sydney Metro submits that the presence of the cantilever does not advance the intent of the Draft Civic Link DCP or provide an appropriate urban design response, I prefer the evidence of Mr Harrison (and, to a lesser extent, the town planning evidence of Mr Chambers on behalf of Council) on this issue, such that I consider that a consent authority would have less concern with a cantilever over Horwood Place as opposed to more serious concerns involving a cantilever over the proposed central pedestrian link (as proposed in Scenario 2). In reaching this view, while I am conscious of Ms Deegan's opinion that the acceptability of Scenario 3 depends upon the deletion of the cantilever (and one level of basement retail) and the incorporation of further sensitive design elements, and that the proposed width of Horwood Lane in Scenario 3 is 11m in circumstances where the Draft Civic Link DCP provided for up to 18m, I do not find this determinative in circumstances where other aspects (more particularly the central pedestrian link and laneways around the commercial towers) address the desire for the provision of the central pedestrian link and a "legible and efficient street network". I also accept the evidence that the use of a cantilever, as shown in a number of recent building developments in the Parramatta CBD, can be sensitively incorporated into the proposed western commercial building.
4. Thirdly, Scenario 3 is also more consistent with the Draft Civic Link DCP because it is less likely to raise potentially complex issues regarding access arrangements with immediate neighbouring properties. I accept Council's position that it more thoughtfully addresses the provision, or retention, of laneways and accessways both through the central pedestrian link and otherwise around the proposed multilevel buildings.
5. Fourthly, while Sydney Metro maintains in submissions that the hypothetical transaction would not proceed on the assumption that any basement GFA would be achievable because of both a lack of viability of retail in such areas and as a result of a discrete concern in relation to flood risk, I do not accept this position.
6. In relation to retail, I accept the evidence of Mr Hill that there is (or would be) sufficient retail demand for Scenario 3 as now suggested by Council. Although I have some concern that the amount of basement retail remains in excess of the demand as opined by Sydney Metro's land economics expert, Mr Duane, and while I accept Mr Duane's concerns regarding the importance of features such as (the lack of) direct street access and the evidence of Ms Cheong (which I note later in this judgment at [143]), on balance, I consider that the variation by the deletion of one level of basement retail, as conceded by Council, is an appropriate response to the expert evidence marshalled by Sydney Metro (referred to as 'Scenario 3 (including the basement variation)' from hereon).
7. In relation to flood risk, although the Acquired Land is within the Floodplain Risk Management Plan as provided in the Planning Proposal, I am not satisfied that the flooding risk would be determinative. Apart from accepting Council's submission that there is no expert hydrological evidence, it is clear from the evidence (and the site view undertaken) that other developments in the vicinity had adopted a floodgate mechanism to attend to similar flooding concerns. While I consider that the hypothetical purchaser/vendor would understand that a consent authority may have some concern in relation to flood risk, this is not a concern that would be of particular significance. I also note Mr Kennedy's advice (at [100] above) that one level of active (but not retail) basement space would be permitted, and the fact that Scenario 3 (as presently pressed by Council) involves a reduction of one level of basement retail. I also take into account that the Draft Parramatta City Centre DCP (although not exhibited at the date of acquisition) is indicative of Council retaining a discretion to permit some types of commercial and retail use below the FPL.
8. In the above circumstances, I determine that in relation to potential development, the hypothetical transaction would proceed on the basis that Council is likely to approve development generally in accordance with Scenario 3 with a reduction of 6,404m² (being 50% of 12,807m²) of retail GFA on the first level of the basement (and that the cantilever over Horwood Place would be achievable) such that a development yield of 84,143m² of GFA would be achieved.

Valuation methodologies

1. While there was some variation in relation to discrete site areas, the valuation experts agreed that the Acquired Land is to be valued in three separate parts comprising the main portion, the Macquarie Lane Land and the Horseshoe Land. Mr Dyson initially approached the valuation task using the Parent Parcel (which includes 70 Macquarie Street) based on Mr Harrison's earlier scenarios, and Ms Cheong considered the value of the "main" portion (an area she considered to be of 9,166m² being the Acquired Land (at 9,984m²) less the Macquarie Lane Land (at 562m² not 592m²) and the Horseshoe Land (at 256m² not 342m²)) on the basis that the valuation of the main portion of the Acquired Land based upon its development potential does not include 70 Macquarie Street (and is to be considered separately to the Macquarie Lane Land and the Horseshoe Land).
2. As the evidence progressed, the valuation experts effectively considered (and valued) the various development scenarios proffered by the urban design experts which for the purpose of valuing the main portion included 70 Macquarie Street and required separate consideration of the Macquarie Lane Land and the Horseshoe Land.
3. The valuation experts considered two different valuation methodologies when undertaking their valuation assessments being the DCA method and the RLV method and had differing views as to both the appropriateness of using those methodologies and their application. In their primary evidence, Mr Dyson, Council's valuation expert, used the DCA method with the RLV method used as a "check", and Ms Cheong, Sydney Metro's valuation expert, used both the RLV method and the DCA method and sought to "reconcile" the different values delivered. While there was some debate between the valuation experts on the valuation methodology to adopt, in final submissions there appeared to be a consensus in favour of the DCA method. Despite this, before considering whether one or both methods (or a combination thereof) should be adopted, and to provide context to the material differences between the valuation experts, some understanding of the respective methods is appropriate.
4. The DCA method, also known as the comparable sales approach, is well-known, and is based on evidence of sales of properties with a comparable highest and best use of the land being valued to determine land value. In the present circumstances, it primarily involves analysing the rate per square metre of realisable GFA (or a rate per square metre of site area) of selected comparable sales, and then making adjustments to the rates for comparability to the land being valued. In this method, each comparable sale is adjusted to the land being valued for various differing factors such as market movement, location, size, scale, shape, heritage, and development potential of the land.
5. The RLV method, also known as the hypothetical development approach, assesses the value of a hypothetical completed property development (with the characteristics of the highest and best use) on the land being valued, being its gross realisation, and then working backwards through various deductions including costs of construction and other costs associated with the development that are required to complete the development, to arrive at the price that would be paid for the unimproved land, being the land value. In the present circumstances, the RLV method has been undertaken using the ARGUS EstateMaster 'development feasibility' program ('EstateMaster'), a cash flow model designed for property development feasibility analysis, which calculates investment returns including, relevantly, residual land value, development profit, internal rate of return, and net present value based upon a relatively large set of assumptions and inputs.
6. There has been much judicial consideration of both the DCA and the RLV methods, and the circumstances in which it is appropriate to use each valuation methodology. It is generally accepted that, insofar as there are comparable properties available, the conventional valuation methodology is the DCA: River Bank Pty Ltd v Commonwealth of Australia; Rumble v Commonwealth of Australia (1974) 4 ALR 651 at 652-653; Graham Trilby Pty Ltd v Valuer-General [2011] NSWLEC 68 at [24]; Redeam Pty Ltd v South Australian Land Commission (1977) 17 SASR 508 at 513.
7. While there is a general judicial preference for the DCA method, this is dependent upon a factual finding that the comparable sales sought to be relied upon are truly comparable, and consideration as to whether there is an orthodox alternative valuation methodology. For the reasons that follow, I find that in the present circumstances, valuation using the DCA method is to be preferred.
8. First, a large number of the primary inputs into the EstateMaster program used specifically for the RLV method were not agreed between the valuation (and other) experts. These included the market rents for the completed buildings; the capitalisation rate for the completed buildings; the use of the discounted cash flow ('DCF') method for the assessment of market value of the completed buildings; the costs of construction; the time taken for the hypothetical development to be completed; the statutory fees and charges; the selling costs; the internal rate of return ('IRR') and the profit and risk return; and whether there would be a discount for "development contributions" if proposed laneways were to be dedicated to Council.
9. Given the nature and sensitivity of the RLV method using the EstateMaster program, the evidence clearly showed that certain disputed inputs made a significant difference to the determined residual land value. The differences in relation to the inputs, particularly the capitalisation rate and various costs, were the subject of extensive disputed evidence of both the valuation experts and the quantity surveying experts. For example, in relation to construction costs, the quantity surveying experts (Mr Madden, the expert for Council, and Mr McBeth, the expert for Sydney Metro) each adopted a different primary approach to the determination of construction costs which led to significant differences in their figures in circumstances where Mr Dyson relied upon the costs determined by Mr Madden and Ms Cheong relied upon the costs determined by Mr McBeth.
10. By way of further example, there was significant disagreement in relation to the appropriate market rents for completed buildings (leaving aside the fact that it was Ms Cheong's view that a different capitalisation rate was to be applied to the various scenarios she was considering). As noted above, there was also disagreement as to the use of the DCF method for the assessment of market value with Ms Cheong maintaining that the DCF is a method used by the market in conjunction with the capitalisation of income method for the sale of development otherwise hypothesised.
11. Further disagreement related to the time taken for completion of the hypothetical development, referred to as the "project timing", as well as disagreement in relation to statutory fees and charges, selling costs, and as noted above, the IRR (which affects determination of a profit and risk return).
12. Accordingly, due to the large number of primary inputs utilised for the RLV method through the EstateMaster program that were not agreed to (and varied widely) between the parties, I consider that calculation through the RLV method is, in the present circumstances, problematic.
13. Secondly, my decision not to utilise the RLV method, and therefore my preference for the DCA method in the circumstances, is supported by the fact that there was agreement between the valuation experts as to first, the availability and appropriateness of sufficient comparable sales for use in the DCA method; second, that certain adjustments (although the degree of which remains in dispute) were able to be agreed; and third, that the Court was presented with clearly articulated evidence of the differences between the valuation experts.
14. Thirdly, while the DCA method was Mr Dyson's primary valuation methodology, Ms Cheong (in her primary report) notes that due to the "unique characteristics" of some of the earlier scenarios, the DCA is less suitable as the primary valuation methodology, in final submissions, senior counsel for both parties submitted that the DCA method was the valuation experts "preferred" approach.
15. In summary, I find that the need to determine numerous disputed inputs - many of which generate significantly different outcomes in circumstances where there are material differences between the experts and where there is readily available and agreed alternative methodology, in my view, militates against the use of the RLV method in favour of the DCA method.
16. In their joint report the valuation experts provided valuation assessments for each of 10 (further) variations (or permutations) of Scenario 3 provided by the town planning and urban design experts in the "Supplementary Joint Planning and Urban Design Experts' Report".
17. At the completion of the evidence, the essential differences between the valuation experts in relation to the DCA method were clear and were primarily based upon differing adjustments to the otherwise agreed comparable sales. As such, an understanding of their primary positions, and thereafter their positions as they relate to my findings above in relation to Scenario 3 (including the basement variation) and my preference for the DCA method, is appropriate to give context to the submissions made by the parties.

Council's evidence

1. In his final evidence, Mr Dyson considered the highest and best use of the Acquired Land involved the sale of the Macquarie Lane Land and the Horseshoe Land, and the redevelopment of the remaining land along with 70 Macquarie Street which was in Council's ownership at the date of acquisition.
2. Mr Dyson had earlier considered the town planning, urban design and land economics expert reports prepared by both parties with emphasis upon the later report and development scenarios proposed by Mr Harrison. He considered the property market and the economy of Parramatta before and at the date of acquisition including the office vacancy rates and similar measures. He considered the most appropriate method of valuation methodology was the DCA and he used the RLV method to "check" the DCA results.
3. Using the DCA method, Mr Dyson (similarly to Ms Cheong) analysed four comparable sales which are considered later in this judgment. He determined that the market value rate per square metre of potential GFA to be in the range of $2,500/m² to $2,600/m² and that the market value rate per square metre of land to be in the range of $28,605/m² to $30,476/m² was generally appropriate. He initially applied his derived GFA rate of $2,550/m² to the GFA generated by the various development scenarios, noting that Scenario 3 delivers total GFA of 90,547m² and the "Revised Reference Design" (an earlier development scenario proffered by Council's urban design expert, Mr Harrison, and incorporating development on the Macquarie Lane Land and the Horseshoe Land) delivers total GFA of 103,754m². He concluded that the market value of the Acquired Land was $286,000,000 based upon his consideration of the Revised Reference Design which generated 100,596m² of potential GFA (after the GFA attributable to 70 Macquarie Street, the Macquarie Lane Land and the Horseshoe Land was deducted), to which he attributed his derived $2,550/m² (giving $256,519,800), to which he added his separate valuations of the Macquarie Lane Land (at $22,173,525) and the Horseshoe Land (at $7,498,275).
4. Using the RLV method as a "check" method, Mr Dyson considered various inputs utilised in the EstateMaster program to determine market value including assessing market value of the completed commercial buildings of the type to be developed in the Revised Reference Design by the capitalisation of potential income based upon rental evidence of similar commercial buildings.
5. Having determined allowances for selling costs, marketing and legal costs, costs of construction including contingency, design costs, professional fees, development management, and statutory costs, as well as further landholding costs, using the EstateMaster program, Mr Dyson determined the residual land value was $250,000,000.
6. In his consideration of Scenario 3 (assuming the acceptability of both the cantilever over Horwood Place and two levels of basement retail), using the DCA method, Mr Dyson deducted the GFA attributable to 70 Macquarie Street under Scenario 3 (being 632m², determined by Mr Harrison, Council's urban design expert) from the determined potential 90,574m² (which may have more accurately been 90,547m² based upon Mr Harrison's determined potential GFA figure for Scenario 3) of GFA (which included the 2,000m² of GFA above the cantilever over Horwood Place and 12,807m² of GFA of basement retail) and applied his derived GFA rate of $2,550/m² to 89,942m² of GFA giving $229,352,100 to which he added his determined values noted above for the Macquarie Lane Land (17,391m² of GFA at a rate of $1,275/m² rounded to $22,500,000) and the Horseshoe Land (5,881m² of GFA at a rate of $1,275/m² rounded to $7,500,000) giving a rounded total of $259,000,000 for Scenario 3.
7. More relevantly, on the basis that the Court found that the hypothetical transaction would proceed on the assumption of one level of basement retail (6,404m² of GFA), two levels of basement carparking, and with the cantilever over Horwood Place, Mr Dyson determined market value of the Acquired Land at $243,500,000 comprising $213,827,700 (determined by applying his derived rate of $2,550/m² of GFA to 83,854m² - being 84,170m² (which may properly have been 84,143m² being 90,547m² less 6,404m²) of GFA less 316m² of GFA attributable to 70 Macquarie Street) and adding his determined values for the Macquarie Lane Land and the Horseshoe Land. Mr Dyson's subtraction of 316m² (which may have more accurately been 331m²) of GFA reflects Mr Harrison's evidence (in his "addendum to the supplementary urban design report") that the "amount of development contained within the 70 Macquarie Street portion of" Scenario 3 was 662m² of GFA attributed to "basement 1 and 2 - retail and other".
8. Mr Dyson considered that Council, as the owner of the adjoining site (and the majority of the other sites that comprise the proposed Civic Link) would likely be a prospective purchaser (if Council did not already own the property), and as such an adjoining owner premium may be attributable as a result of adjoining owner influence. Mr Dyson considered that, as a "rule of thumb" or best practice, a sum 10% above the general market was an acceptable adjoining owner premium, which if determined to be applicable by the Court, would be added to the market value which was otherwise assessed.

Sydney Metro's evidence

1. Ms Cheong assessed the value of the Acquired Land under various hypothetical development scenarios proffered by the urban design experts and noted that, because of the "unique characteristics" of some of the scenarios, she approached the valuation assessment using both the DCA and the RLV methods and then sought to "reconcile" the respective site values delivered by each method.
2. In relation to Scenario 3 (which is variously referred to in Ms Cheong's evidence as "Alternative Scenario" or "laneway scenario"), Ms Cheong opined that while Scenario 3 would carry less development risk compared to earlier considered scenarios, it still carried risks primarily in relation to the quantum (and nature) of the proposed basement retail space and she expressed doubts whether the retail floor space proposed in Scenario 2 or Scenario 3 would be viable. She accepted the evidence of Mr Duane, Sydney Metro's land economics expert, that the proposed basement retail is unlikely to be successful because, first, other local shopping centres already provide a full suite of tenants including department stores, supermarkets and the like; second, the proposed carparking is located below the basement retail; and third, there are no direct connections to train stations and/or other centres.
3. Ms Cheong also noted the evidence of Mr McBeth, Sydney Metro's quantity surveying expert, in relation to the higher cost of basement construction in the Parramatta CBD and other areas and the potential high water table with additional costs of dewatering during construction as well as potential flood risk. In summary, she had concerns in relation to the viability of basement retail due to market risk, construction risk and planning risk.
4. Although Ms Cheong undertook valuations based upon the RLV method, I do not record her evidence in relation to that approach in further detail given the extensive commentary by the valuation experts in the joint report in relation to their DCA approach. Although Ms Cheong's primary evidence appeared to favour the RLV method in relation to a number of the proffered scenarios, for the reasons I have earlier given, I prefer (and adopt) the DCA method.
5. In her primary report, when adopting the DCA method, Ms Cheong adjusted the four comparable sales based on the characteristics and "uniqueness" of the Acquired Land and each proposed development scenario. In considering Scenario 3, her various adjustments to the comparable sales (considered later in this judgment) resulted in a derived land value range of $1,018/m² to $1,404/m² of potential GFA and she initially adopted a "midpoint" at $1,100/m² of GFA which she applied to the development yield of Scenario 3 (90,546m² of GFA) giving a value of $99,600,600 before adjusting for the contribution of 70 Macquarie Street.
6. On the basis that the hypothetical parties would transact on the basis of Scenario 3 with the prospect of only one level of basement retail and two levels of basement carparking achieving 84,143m² of GFA (generally as I have found above), Ms Cheong varied her adjustments to the comparable sales and adopted a rate of $1,400/m² of GFA. After deducting an amount proportional to the site area of 70 Macquarie Street and using a 'blended' approach, taking into account both her DCA and RLV assessments, she arrived at a value of $114,100,000 for the main portion.
7. As considered later in this judgment, using the DCA method, Ms Cheong separately valued the Macquarie Lane Land at $10,400,000 and the Horseshoe Land at $1,300,000 on the basis that compliance with the Draft Civic Link DCP was required, or $27,000,000 and $13,400,000 respectively, if compliance with the Draft Civic Link DCP was not required.
8. In summary, if Scenario 3 (including the basement variation) was the basis of the hypothetical transaction, Ms Cheong determined the value of the main portion (comprising an area of 9,166m²) to be $114,100,000 and concluded that the market value of the Acquired Land was $125,800,000 on the basis of compliance with the controls in the Draft Civic Link DCP (including her assessments of the Macquarie Lane Land at $10,400,000 and the Horseshoe Land at $1,300,000). On the basis of "No Civic Link", Ms Cheong's assessment of the Acquired Land was $150,900,000 (including her assessment of the Macquarie Lane Land at $27,000,000 and the Horseshoe Land at $13,400,000).

Comparable sales - adjustment

1. In relation to their application of the DCA method, Mr Dyson and Ms Cheong agreed that there were four appropriate comparable sales of development sites (some being "assembled") being, first, 87 - 89 George Street and 91 George Street, Parramatta ('87 - 89 George'); second, 81 George Street, 83 George Street and 1 Barrack Lane, Parramatta ('81 - 83 George'); third, 41 - 43 Hunter Street, Parramatta ('Hunter Street'); and fourth, 2 - 4 and 6 Hassall Street, Parramatta ('Hassall Street').
2. On the basis that the Court would find that the hypothetical parties would transact in accordance with Scenario 3 (including the basement variation), the valuation experts provided their discrete adjustments to the generally agreed GFA rates for each of the comparable sales applicable to that development scenario. Mr Dyson made adjustments for location, size, shape, heritage and date of sale (time). Ms Cheong made adjustments for market movement, location, heritage, size/scale, development attributes and adjoining owner premium.
3. As Mr Dyson derived a rate of $2,550/m² of GFA and Ms Cheong derived a rate of $1,414/m² (rounded to $1,400/m²) of GFA, leading to a significant difference in their resulting valuations of the Development Land (or the main portion) of over $95,000,000, the Court is required to consider (and determine) the various adjustments.
4. Although there was overlap in the nomenclature of some adjustment factors, the following adjustments to the generally agreed GFA rate arising from each comparable sale were agreed between the valuation experts: 1. 87 - 89 George: 5% for market movement; 10% for location; and 10% for heritage; 2. 81 - 83 George: 0% for market movement; 10% for location; and 10% for heritage; 3. Hassall Street: 80% for market movement; 20% for location; and 0% for heritage; and 4. Hunter Street: 5% for location.
5. The disagreement between the valuation experts related to the following adjustments: 1. 87 - 89 George: Mr Dyson applies a −5% adjustment for size and a −5% adjustment for shape, whereas Ms Cheong applies a −25% adjustment for size/scale; and in relation to what she describes as "development attributes" (an adjustment which Ms Cheong uses in relation to each sale to encompass separate sub-adjustments being street presence, building efficiency, market-supported retail, and risk), she applies a downward adjustment of −27.5% (comprising market risk relating to dispersed retail layout, the revenue/cost relationship of basement retail, and planning risk). Ms Cheong's reference to market-supported retail was said to apply in circumstances where the amount of retail provided in a development scheme exceeds the amount advised by the land economics experts. 2. 81 - 83 George: Mr Dyson applies a −5% adjustment for size and a −5% adjustment for shape, whereas Ms Cheong applies a −25% adjustment for size/scale; and in relation to development attributes, Ms Cheong applies a downward adjustment of −27.5% (comprising market risk relating to dispersed retail layout, the revenue/cost relationship of basement retail, and planning risk). Ms Cheong also applies a downward adjustment of −20% for adjoining owner premium. 3. Hassall Street: Mr Dyson applies a −5% adjustment for size and a −5% adjustment for shape, whereas Ms Cheong applies a −30% adjustment for size/scale; and in relation to development attributes, Ms Cheong applies a downward adjustment of −32.5% (comprising market risk relating to dispersed retail layout, the revenue/cost relationship of basement retail, and planning risk). 4. Hunter Street: In relation to market movement, Mr Dyson applies a 10% adjustment, whereas Ms Cheong applies a 5% adjustment; in relation to heritage, Mr Dyson applies a 10% adjustment whereas Ms Cheong applies a 5% adjustment; Mr Dyson applies a −10% adjustment for size and a −5% adjustment for shape, whereas Ms Cheong applies a −35% adjustment for size/scale; and in relation to development attributes, Ms Cheong applies a downward adjustment of −27.5% (comprising market risk relating to dispersed retail layout, the revenue/cost relationship of basement retail, and planning risk).
6. A table showing the respective positions is annexure "B" to this judgment and noting again that while there were some slight differences in the base GFA in relation to 87 - 89 George and 81 - 83 George, the primary differences for each of the comparable sales relate to adjustments for size and shape (adjusted separately by Mr Dyson); and "size/scale" and "development attributes" (adjusted separately by Ms Cheong).
7. Before considering the discrete adjustments and forming my own view, I note a number of preliminary matters which I take into account when considering the differences between the valuation experts' various adjustments.
8. First, as I have noted above, having heard their evidence, I find that there is some overlap between, first, the separate adjustments made for size and shape by Mr Dyson and the adjustments for size/scale made by Ms Cheong; and, second, the discrete (sub)elements of Ms Cheong's "development attributes" adjustment, and I keep this in mind when making findings in relation to the various adjustments. I also note that Ms Cheong's adjustment for development attributes incorporates a risk element in circumstances where Mr Dyson does not specifically address planning risk.
9. Secondly, the differences in adjustments are considered in light of my understanding of all the present evidence (including the evidence dealing with the experts' use of the RLV method and a number of the computer-generated images of Scenario 3 which assist in my consideration of adjustments that incorporate matters such as street presence) and, to a lesser extent, observations made on the site inspection of the comparable properties. Further, I am conscious that the valuation experts are agreed on primary matters such as market movement and location (noting that there was a difference between the valuation experts in the primary $/m² of GFA arising from the sale of 81 - 83 George).
10. Thirdly, I consider the adjustments for size/scale and shape on the basis that it is common ground that, other things being equal, a large development site is worth less on a rate per square metre (both of area and GFA potential) than a smaller site, albeit that larger developments take longer to secure pre-commitments and take a longer time to complete as well as require more capital, and in many cases, carry more risk (matters which are more relevant to the RLV method). In this regard, I note that the comparable sales have the following site areas: 87 - 89 George: 2,871m²; 81 - 83 George: 3,071m²; Hunter Street: 1,477m²; and Hassall Street: 2,647m².
11. Fourthly, because the Acquired Land is irregularly shaped with "limbs" that extend to front George Street, Smith Street and Macquarie Street and there is some distance from the central portion to the secondary streets, any development may not be immediately visible at the respective frontages and therefore may have little "street presence". I note this because Ms Cheong maintains that each of the comparable sales sites exhibits what she describes as different "development attributes" in which descriptor, as noted earlier, she includes street presence and a lesser risk profile. In any event, I consider that, even taking into account that the Draft Civic Link DCP seeks to provide a form of centralised pedestrian link that may provide something akin to a street presence, the main portion of the Acquired Land does not have, and would not have, the street presence of the comparable sales sites.
12. Fifthly, in relation to 87 - 89 George and 81 - 83 George, the Court received detailed evidence as to the circumstances surrounding those two sales, referred to in the evidence as the "GPT sales", which involved the sequential purchase of two "assembled" development sites by GPT Funds Management Ltd ('GPT') in April 2020 and December 2021 for $74,600,000 and $90,000,000 respectively. The Court also received two valuations prepared for GPT - one prepared by Knight Frank Ltd dated 30 September 2021 for 81 - 83 George Street, and one prepared by Jones Lang Lasalle dated 10 February 2020 for 87 - 89 George Street. These valuation reports appear to support purchase prices already struck. While the Knight Frank Ltd valuation was prepared after the date of acquisition, it recorded a potential of 52,358m² of GFA (not 35,317m² of GFA as apparently relied upon by Mr Dyson and Ms Cheong) which, at a determined value of $90,000,000, represents $1,724/m² of GFA and $29,393/m² of land. The Jones Lang Lasalle valuation analysed the 87 - 89 George Street GFA rate at $2,321/m². Further material produced under subpoena, revealed that the purchaser of 81 - 83 George made the decision to purchase based on an expectation of 52,358m² of GFA.
13. Sixthly, there was a further comparable sale (at 5 - 7 Charles Street, Parramatta) that was considered and analysed by Mr Dyson in his primary report (from which Mr Dyson derived $2,980/m² of GFA) and was later abandoned in circumstances where, as Sydney Metro submits, Mr Dyson does not appear to have revised his earlier derived $/m² GFA rate.
14. Seventhly, Ms Cheong makes a more significant adjustment than Mr Dyson to each of the comparable sales on the basis of size/scale of the hypothetical development on the Development Land (or main portion) as she considers, and I accept, that the subject land is inferior particularly in relation to 87 - 89 George and 81 - 83 George.

87 - 89 George and 81 - 83 George

1. Although the evidence indicates that 81 - 83 George may have been purchased at a time when the purchaser believed that a much higher GFA outcome was possible, I find that the adjustment for size/scale - which overlaps with Mr Dyson's scale adjustment, and noting that I find that the shape of the subject land was clearly not as regular as any of the other comparable sales, and I accept that adjustment for size is the same irrespective of whether it is based on GFA or site area for 81 - 83 George, should be −20%. In relation to 87 - 89 George, the differences in adjustment are similar to 81 - 83 George and for similar reasons, I also adopt an adjustment for size/scale and shape at −20% (given a not dissimilar site area and achievable GFA as 81 - 83 George).
2. Further in relation to 81 - 83 George, Ms Cheong makes a −20% adjustment for adjoining owner premium as she opines that such premiums are not uncommon where a developer has already secured part of a development block (noting that the purchaser, GPT, had earlier acquired 87 - 89 George). In cross-examination it was suggested to Ms Cheong that GPT was not "competing" with any other purchaser at the time and as such her −20% was unwarranted. While there is substance in the criticism of her adjustment, given the evidence (more particularly by Mr Dyson that a 10% adjoining owner premium is not uncommon), having considered the evidence in relation to the background to this sale, I find that there should be a −10% adjoining owner premium to account for the position of GPT being the purchaser of 81 - 83 George after it had earlier purchased 87 - 89 George.
3. In relation to both 81 - 83 George and 87 - 89 George, I again note the irregularly shaped Development Land when considering the development attributes adjustment of Ms Cheong (accepting that it has some relationship with street presence), and in the circumstances, I consider that some downward adjustment should be made for the lack of a prominent street presence, and even where my finding that Scenario 3 (including the basement variation) presents less planning risk, I consider that there is still some concern, as expressed by Ms Cheong, regarding the basement space, including the remaining "dispersed" retail layout. Therefore, some planning risk remains and, as further opined by Ms Cheong, these concerns could be subject to "consent authority resistance". As such, I think there is weight in Ms Cheong's development attributes adjustment, and I adopt −10% in relation to both 81 - 83 George and 87 - 89 George.

Hassall Street

1. In relation to Hassall Street, the primary adjustment difference is in relation to size/scale (as per Ms Cheong), and size and shape (as per Mr Dyson), as well as development attributes. As noted above, Hassall Street is approximately 2,647m², with a GFA potential of 30,439m² in circumstances where the relevant scenario is approximately 84,000m² of GFA. As such, I find that Mr Dyson's adjustments of −5% for size and −5% for shape each underestimate the differences between Hassall Street and the subject development scenario, however I consider that Ms Cheong's adjustment of −30% is excessive and not justified. Given the differences in size/scale and shape, I consider that −20% is an appropriate adjustment.
2. Further in relation to Hassall Street, Ms Cheong makes a −32.5% adjustment for development attributes (a percentage which she has reduced from her −45% analysis of the earlier scenarios because of the lower planning risk) which she justifies on the basis that the subject site is irregularly shaped and lacks a prominent street presence, and she again takes into account market risk, development risk, and planning risk. Given my findings in relation to the likely acceptability of one level of basement retail and accepting that there may be some slight risk in relation to basement development, I do not consider that there is significant development or planning risk and although I accept there is some concern (albeit possibly not "risk") in relation to the "dispersed" nature of the basement retail floor space, I do not consider that a −32.5% adjustment for development attributes is warranted. Again, noting my view that there is some slight overlap between development attributes and size/scale and shape adjustments, and, doing the best I can on the evidence, I find that −20% is an appropriate adjustment.

Hunter Street

1. In relation to Hunter Street, there are differences between Ms Cheong and Mr Dyson relating to market movement, heritage, size/scale and development attributes (as per Ms Cheong), and size and shape (as per Mr Dyson). Hunter Street is zoned B4 Mixed Use, a more flexible zone than B3 Commercial Core (the zoning of the other comparable sites).
2. The site area of Hunter Street is 1,477m², with a GFA potential of 16,980m². It comprises the sale of 41 Hunter Street, a two-story dwelling being a local heritage item, and 43 Hunter Street, a four-storey office building, that occurred in July 2020. Noting that the date of the acquisition is 19 March 2021, I accept Ms Cheong's evidence that the value of development sites in the Parramatta CBD grew modestly over 2020 (in the vicinity of 5%) before softening in 2021, and accordingly, her adjustment for market movement of 5% is appropriate.
3. In relation to heritage, Ms Cheong originally applied an adjustment of 5% as Hunter Street contained a local heritage item. This is in contrast to the 10% heritage adjustment Ms Cheong made to 87 - 89 George and 81 - 83 George due to the presence of State listed heritage items. Ms Cheong ultimately accepted, in oral evidence, that her 5% adjustment may be insufficient given that the State heritage items on 87 - 89 George and 81 - 83 George were not treated as part of the subject sites whereas the local heritage item on Hunter Street is integrated with the development scenario. In such circumstances, I adopt Mr Dyson's adjustment of 10%.
4. In relation to size/scale and shape, as noted above, Hunter Street is the smallest comparable sale by a significant amount. In circumstances where I accept that this sale is of a significantly smaller site and that the subject land is an unusual shape, I find that a greater downward adjustment is required than Mr Dyson's −10% for size and −5% for shape, and that Ms Cheong's −35% is unwarranted. As such, I consider an adjustment of −25% is appropriate.
5. Ms Cheong makes a significant (−27.5%) downward adjustment for development attributes. Noting again that the subject land is an irregularly shaped parcel with "limbs", and accepting that a downward adjustment is appropriate for lack of prominent street presence (as noted above, a component of Ms Cheong's development attributes adjustment) and that there may be some market, development and planning risk even with the removal of one level of basement retail (in my adopted Scenario 3 (including the basement variation)), and again noting that the mere existence of the basement space may, as Ms Cheong opines, be "subject to consent authority resistance", I do not consider that these attributes are as significant as provided for in Ms Cheong's analysis and adjustment. Although I again note that this descriptor is not an adjustment made by Mr Dyson (who retains separate size and shape adjustments), and Ms Cheong's use of the descriptor was criticised in Council's submissions, in circumstances where Ms Cheong uses both size and scale (in this case, −35%) as well as development attributes (again, −27.5%), I consider that, taking into account market risk, development risk and planning risk (as Ms Cheong combines in her development attributes adjustment), the appropriate adjustment for these factors is −15%.
6. A table recording my findings above which led to my adopted rate of $2,067/m² of GFA is attached to this judgment as annexure "C".
7. Applying my adopted rate to my findings above in relation to potential GFA achieved, Scenario 3 (including the basement variation) will arrive at $173,923,581 (being 84,143m² of GFA at $2,067/m²). This amount includes the value of 70 Macquarie Street, which although included in the development scheme does not form part of the Acquired Land and therefore, the contribution of 70 Macquarie Street must now be considered.
8. There was disagreement between Mr Dyson and Ms Cheong as to the approach to apportioning the value (in the sense of the contribution) of 70 Macquarie Street given the inclusion of that property in Scenario 3. As noted above at [134], Mr Dyson deducts the GFA attributed to (or contributed by) 70 Macquarie Street (which he determines to be 316m² of GFA in relation to Scenario 3 (including the basement variation)) from 84,170m² of achievable GFA and multiplying the resulting 83,854m² by his determined $2,550/m² GFA rate.
9. Ms Cheong undertook an analysis of how the market prices component (that is individual) sites in amalgamation or assembled sites. She observes from her analysis of the composite sales assembled for each of the comparable sales (in particular 87 - 89 George and Hassall Street), and five further (composite) sales in the Sydney CBD, that in circumstances where the highest and best use of combined properties is as development sites, the prices paid are proportional to the site area of the component properties. Ms Cheong considers that the contribution of 70 Macquarie Street to the amalgamated development is more than simply the GFA attributable to it and that a hypothetical purchaser acquiring both the Acquired Land and 70 Macquarie Street is therefore likely to consider them as component properties of a development site and pay prices proportional to the site area. She considers that the market would not isolate the GFA that "falls" within a component property and then pay a price attributable to the GFA for that component site as suggested by Mr Dyson. She accepts that even though 70 Macquarie Street on its own does not have the same degree of development potential as the main portion of the Acquired Land, it contributes to improving primary street access by widening the "limb" to Macquarie Street.
10. Mr Dyson also agrees that 70 Macquarie Street improves the primary street access and as such to exclude this factor from the valuation would be to the disadvantage of the dispossessed owner (being Council) as it had the benefit of 70 Macquarie Street at the date of acquisition.
11. In response to Mr Dyson's concerns about Council (as dispossessed owner) being "disadvantaged", Ms Cheong observes that 70 Macquarie Street was in fact acquired by Sydney Metro for $11,540,000 and this is higher than the value Mr Dyson attributes to 70 Macquarie Street (now being 632m² of GFA or 316m² of land multiplied by (Mr Dyson's) derived GFA rate of $2,550/m² being (rounded to) $1,600,000 (or $800,000)).
12. In final submissions Sydney Metro suggested the Court would adopt a "before and after" approach and that $11,500,000 should be deducted to reflect the earlier agreed market value when the land was acquired by Sydney Metro.
13. I consider the determination of the contribution (in a sense of apportionment) of 70 Macquarie Street raises matters of some nicety. Doing the best I can, I consider that the approach of Ms Cheong is preferable for the following reasons.
14. First, I accept her analysis and evidence regarding the manner in which a purchaser acquiring both the Acquired Land and 70 Macquarie Street is likely to consider them as component properties of a development site and pay prices proportional to the site area. I find that Mr Dyson's approach, as submitted by Sydney Metro, simply does not reflect or account for the significant increase in value of Scenario 3 brought by the inclusion of 70 Macquarie Street which significantly improved the primary street access through widening the "limb" to Macquarie Street.
15. Secondly, Mr Dyson's approach effectively values 70 Macquarie Street as either $1,600,000 (or $800,000) as noted at [173] above, where 70 Macquarie Street was in fact acquired by Sydney Metro for $11,540,000 in circumstances where, as I find below, calculated on a proportional basis, adopting as well as I can Ms Cheong's approach, a value of approximately $8,400,000 is attributable to 70 Macquarie Street.
16. Thirdly, even adopting, as suggested in Sydney Metro's submissions, a land value rate of $28,000/m² of land (as otherwise considered in Mr Dyson's primary report and by Ms Cheong in the joint report), would achieve a value for 70 Macquarie Street of approximately $12,000,000.
17. Adopting a "proportionate" approach as advocated by Ms Cheong (noting that 70 Macquarie Street is 461m² and the relevant land in Scenario 3 is 9,511m²) and relying upon my conclusion that Scenario 3 achieves $173,923,581 for an area of 9,511m² - being the Acquired Land (9,984m²) less the Macquarie Lane Land (592m²) and the Horseshoe Land (342m²) and including 70 Macquarie Street (at 461m²) - equates to $18,286.57/m² of land such that the proportionate area contributed by 70 Macquarie Street (461m²) achieves $8,430,109 (being effectively 4.84% of $173,923,581).
18. Given my findings above, I determine that the value of the main portion of the Acquired Land (being 9,511m²) is $165,493,472 (being $173,923,581 minus $8,430,109).

Other land

1. In circumstances where Scenario 3 does not provide for the potential development and sale of the Macquarie Lane Land and the Horseshoe Land, and given my finding that the hypothetical transaction would proceed on the basis that development consent would be obtained for development generally in accordance with Scenario 3 (including the basement variation), leading to my conclusion that the achievable GFA would be 84,143m², I now consider the Macquarie Lane Land and the Horseshoe Land.

Macquarie Lane Land

1. The urban design experts, Mr Harrison for Council and Mr Kennedy for Sydney Metro, considered the amalgamation of the Macquarie Lane Land with 73 George Street (Niltil Site) and 75 George Street (Mirvac Site) and the amalgamation of the Horseshoe Land with 41 - 59 George Street (Holdmark Site) and provided different determinations in each case of the additional GFA available from each amalgamation. Mr Harrison's figures were prepared on the basis that the controls in the Draft Civic Link DCP would not be strictly complied with and Mr Kennedy's figures were prepared on the basis of both strict and non-strict compliance with the planning controls including the Draft Civic Link DCP.
2. In relation to the Macquarie Lane Land, the essential difference between whether or not the controls of the Draft Civic Link DCP are imposed relates to the requirement under the Draft Civic Link DCP for the provision of a laneway (or service lane) between the Roxy Theatre and the Niltil Site.
3. Although based upon the likely amalgamation of the Macquarie Lane Land with 73 and 75 George Street (the Niltil and Mirvac Sites), and using the DCA method (however, relying on different GFA uplift figures) the parties' valuation experts approached the determination of the market value of the Macquarie Lane Land differently.
4. Mr Dyson, Council's valuation expert, considered that the market value of the Macquarie Lane Land (and, as will be seen, the Horseshoe Land) should be assessed on the potential "uplift" in achievable GFA that would result from the amalgamation, being 17,391m² of GFA determined on the basis of Mr Harrison's amalgamation scenario providing for no Draft Civic Link DCP obligations, with the amalgamated site (being the Macquarie Lane Land and 73 and 75 George Street) achieving 63,643m² of GFA as opposed to the standalone potential of 73 and 75 George Street achieving only 46,252m² of GFA. Mr Dyson multiplied this GFA uplift figure (17,391m²) by his derived rate of $1,275/m² of GFA, effectively one half of his rate of $2,550/m² of GFA derived from his analysis of the comparable sales, to account for an equal split between the two owners, to arrive at $22,173,525, rounded to $22,200,000, as the market value of the Macquarie Lane Land.
5. Ms Cheong's primary approach in relation to the Macquarie Lane Land was based on the premise that an adjoining property owner will pay a price for a neighbouring property depending upon, first, the perceived added value that the neighbouring property "brings" to the amalgamation; and second, the parties' respective bargaining positions, such that it is not always solely based on added value of additional GFA. Simply stated, the value 'brought' by the Macquarie Lane Land to an amalgamation with 73 and 75 George Street depends on the individual property values and the cost to consolidate/amalgamate the development site.
6. Ms Cheong adopted the evidence of Mr Kennedy that the amalgamation of 73 and 75 George Street (without the Macquarie Lane Land) would achieve 39,264m² of GFA, and the amalgamation of the Macquarie Lane Land with 73 and 75 George Street would achieve 49,880m² of GFA resulting in an added 10,616m² of GFA. And, if the Draft Civic Link DCP controls are not strictly applied, the respective amalgamations would achieve 42,056m² of GFA and 57,439m² of GFA resulting in an added 15,383m² of GFA.
7. However, Ms Cheong considered that the standalone redevelopment of 73 George Street (Niltil Site) and 75 George Street (Mirvac Site), projected by Mr Kennedy to achieve 39,264m² of GFA, is not commercially feasible because of her assessment of the cost to acquire 73 and 75 George Street. She considered that a potential of at least 45,120m² of GFA would be required for a feasible development of 73 and 75 George Street. This is because she valued 73 and 75 George Street as a development site at $98,200,000 (being 39,264m² of GFA multiplied by $2,500/m² - a rate derived from her analysis of the comparable sales), which is lower than her assessment of the actual cost at $112,800,000, to acquire and consolidate 73 and 75 George Street based on her estimate of the discrete values of 75 George Street at $87,000,000, and 73 George Street at $7,000,000 (giving $94,000,000), to which she applied a 20% premium to "displace" the existing use.
8. As such, Ms Cheong maintained that it is only when the Macquarie Lane Land and 73 and 75 George Street are amalgamated (and the site is "squared" by the inclusion of the Macquarie Lane Land), giving a potential for 57,439m² of GFA (again adopting Mr Kennedy's figure), that any "added value" can be determined.
9. Thus, to value the Macquarie Lane Land on the basis that the Draft Civic Link DCP controls are not strictly applied, Ms Cheong multiplied the (combined) 57,439m² of GFA by her derived $2,500/m² rate to arrive at an amalgamated site value of $143,597,000 from which she subtracted her determination of the existing value of 73 and 75 George Street in the sum of $112,800,000 (being the cost to acquire), giving $30,797,000 which amount she reduced by 14% for what she determined is "amalgamation risk", giving a (rounded) value to the Macquarie Lane Land of $27,000,000.
10. On the basis that the Draft Civic Link controls are strictly applied, Ms Cheong again valued the Macquarie Lane Land as part of an amalgamated development with 73 and 75 George Street by first determining the site value of the fully amalgamated site at $124,700,000 (adopting Mr Kennedy's amalgamated development potential of 49,800m² of GFA applied at her rate of $2,500/m²). From this, she deducted the cost of acquiring 73 and 75 George Street which she again valued at $112,800,000 (including the 20% premium required to displace the existing use), giving the remaining site value to the Macquarie Lane Land of $11,900,000. Ms Cheong then again applied a discount of 14% because she maintained that there is no guarantee that the landowners of 73 and 75 George Street would sell to a developer even with the 20% premium applied to displace the existing use, resulting in a value of $10,400,000.
11. Ms Cheong acknowledged that her value of $27,000,000 for the Macquarie Lane Land assuming no compliance with the Draft Civic Link DCP, was higher than Mr Dyson's valuation. However, she noted that if she adopted Mr Dyson's approach (as noted above), and used Mr Kennedy's figure for the additional GFA achieved by the inclusion of Macquarie Lane Land (being 15,383m²), multiplied by $1,250/m² (one half of her derived GFA rate of $2,500/m² to reflect an equal sharing between owners of the increase in a manner similar to Mr Dyson's approach), she would arrive at a value of $19,200,000. Despite this, she maintained that this does not "entirely" reflect value added again because of her view that at a potential of 39,264m² of GFA, the standalone development of 71 and 73 George Street, is not feasible.

Finding

1. Despite the fact that my preference for Scenario 3 is based upon my finding that there was sufficient compliance with the key objectives of the Draft Civic Link DCP, primarily because there was provision for both a centralised pedestrian link in the location as envisaged in the Draft Civic Link DCP, as well as associated laneways and passageways, and that Scenario 3 (including the basement variation) addressed what I consider to be the anticipated concerns of a consent authority, I find that in relation to the Macquarie Lane Land (and its amalgamation with 73 and 75 George Street), that the hypothetical parties would not transact on the basis that strict compliance with the Draft Civic Link DCP would be required. My reasons can be briefly stated.
2. First, although the label "Civic Link" is used throughout the Draft Civic Link DCP and associated historical material, a reasonable consideration of the objectives, plans and figures indicates clearly that the exhibited Draft Civic Link DCP prioritises the provision of a centralised pedestrian link (and, to a lesser extent, various associated laneways and passageways), it is clear from annexure "A" to this judgment that the primary link is not located near the Macquarie Lane Land (nor the Niltil Site or the Mirvac Site). As such, I find that the subject amalgamation would be seen by a consent authority as not detracting from, or preventing the achievement of, the core objectives of the Draft Civic Link DCP including to provide a "new linear public space linking Parramatta Square to the Parramatta River foreshore"; to create a "legible and efficient street network"; to "spatially define the public domain including the Civic Link…"; and, in relation to Blocks 1 and 2, "to define land parcels that enable efficient use of land and support the Parramatta commercial core". I find that those objectives are generally directed to the provision of the centralised Civic Link.
3. Secondly, although there is provision in the Draft Civic Link DCP for a 7m wide space which appears to be for a future laneway, I consider that this particular space would not be a matter of priority and this "control" (to use a loose word) in the Draft Civic Link DCP in this specific circumstance would be applied flexibly by a consent authority. This is so particularly where 73 and 75 George Street, on their own or in amalgamation with the Macquarie Lane Land, would present an appropriate opportunity for a development with significant street frontages (to the north to George Street and to the east to Smith Street). Further, it would appear that there is another laneway proposed in the Draft Civic Link DCP, south of the amalgamated block, which would likely be provided on land separate from the amalgamation of 73 and 75 George Street and the Macquarie Lane Land, for example, as was depicted in the plans (in the evidence of the urban design experts including 3D views and axonometric depictions) evidencing Scenario 3. Furthermore, I accept that if required, some form of passageway could be provided through thoughtful design such as by way of arcade or colonnade.
4. Having found that in relation to the Macquarie Lane Land, the parties would transact on the basis that the controls in the Draft Civic Link DCP would not be strictly imposed, there remains a not insignificant difference between the GFA uplift achieved by the amalgamation between Mr Harrison (at 17,391m² of GFA) and Mr Kennedy (at 15,383m² of GFA) and the approaches of the valuation experts.
5. In circumstances where both the urban design experts were briefed with various "packages" containing detailed planning assumptions and instructions, and where I have considered the manner in which each expert explained his calculations and gave evidence, I am unable to discern any material difference apart from design (and arithmetic) between them. As such, where I consider that the amalgamation scenarios suggested by each expert are available, I adopt the uplift determined by Mr Harrison's figures (as accepted by Mr Dyson) by way of adopting an interpretation favourable to the dispossessed owner. In this regard, I note that although there was criticism of Mr Dyson's reliance on the figure of 17,391m² of GFA (in circumstances where he had on occasion referred to the figure of 15,497m² of GFA) in Sydney Metro's final submissions, I am satisfied, as clarified in Council's final submissions, that Mr Dyson properly extracted the figure of 17,391m² from Mr Harrison's evidence.
6. As noted above, there remains a material difference in the valuation experts' primary approaches. In final submissions, Council criticised Ms Cheong's approach, more particularly that her basis for deriving the existing value of 73 and 75 George Street, by adding a premium of 20% to her determined value of both sites ($94,000,000) to displace the existing use, giving $112,800,000, was mistaken. Council submitted that Ms Cheong's error was due to the fact that her 20% "premium to sell" only needed to be added to the value of the Niltil Site (and not the Mirvac Site) which would have the effect of reducing its acquisition value from $112,800,000 to $95,400,000. Thus, if the existing value of the combined Mirvac Site and Niltil Site was determined using Ms Cheong's approach with the added premium of 20% added only to the Niltil Site (taking its cost from $7,000,000 to $8,400,000), her valuation of the Macquarie Lane Land would be approximately $49,000,000 (being $143,597,000 less $95,400,000, not $112,800,000), and, with her 14% "risk adjustment", would be similar to Mr Dyson's valuation of $43,000,000 (before his "split" for sharing between owners). As such, Council submitted that Ms Cheong's approach is unreliable.
7. I consider that there is weight in Council's criticism of Ms Cheong's approach and it is clear that the suggested adjustment (or any similar adjustment) has a material effect upon her valuation of the Macquarie Lane Land. As such, I prefer the approach of Mr Dyson although I accept that Ms Cheong's valuation (on the basis of no Civic Link and adopting Mr Kennedy's figures) in fact returns a higher valuation, being $27,000,000 (as opposed to $22,200,000 determined by Mr Dyson). Despite this, in addition to Council's criticism of, and my concern with, Ms Cheong's methodology, I adopt Mr Dyson's approach for the following reasons.
8. First, although there is a difference in the urban design experts' evidence of GFA potential, and although Sydney Metro submits that there was no criticism in the joint report of Mr Kennedy's calculations regarding the development potential, as recorded earlier, I find that there is no reason not to adopt Mr Harrison's figures.
9. Secondly, although Ms Cheong did not agree with Mr Dyson's methodology, when she considered his approach, she adopted 50% of her $2,500/m² GFA rate otherwise determined (being $1,250/m² of GFA), where Mr Dyson also effectively adopted a rate of $1,275/m² of GFA (being 50% of his adopted GFA rate of $2,550/m²) to reflect a "split" between owners. As will be seen, this was an approach she adopted in relation to her consideration of the Horseshoe Land (albeit in response to the relative bargaining strengths of the owners of the unamalgamated lots).
10. Despite the valuation experts' approach (more particularly that of Mr Dyson) to effectively halve the full rate of potential GFA (or in Ms Cheong's evidence adopting one half of her determined GFA rate when considering Mr Dyson's approach), with each effectively "splitting" the added value between the owners of the unamalgamated lots, Council submits that, contrary to the position of its valuation expert, Mr Dyson, there is no "principled justification" for splitting the GFA uplift potential arising from the amalgamation with the Macquarie Lane Land when neither the Mirvac Site nor the Niltil Site can be redeveloped without the Macquarie Lane Land. In the circumstances, Council submits that the Court should accept Mr Dyson's unapportioned figure of $43,477,500. I do not accept this submission.
11. Where two experienced valuers have been tasked with determining the market value of land at a particular date and, although adopting different approaches, effectively opine on an appropriate manner for determining the methodology for valuation of an amalgamated site involves the splitting of the uplift value between owners (albeit not the primary methodology of Ms Cheong who, in any event, determined a higher value using a different approach which, for the reasons above, I do not accept), I consider their approach is acceptable. Further, finding, as I do, that the valuation experts have a proper understanding of the real property market at the date of acquisition, and accepting that this matter proceeds in the hypothetical sale scenario, I find that the approach of Mr Dyson in determining the value (by apportioning one half of the uplift to each contributing property) is otherwise sound and is not indicative of material or methodological error. As such, I adopt the position (and methodology) of Mr Dyson to "split" the GFA uplift potential between the owners of the amalgamated lots.
12. Although noting that Ms Cheong determined a higher market value (at $27,000,000), I find that the market value of the Macquarie Lane Land at the date of acquisition is to be determined in accordance with Mr Dyson's evidence at $22,200,000.

Horseshoe Land

1. Similar to his approach regarding the amalgamation of the Macquarie Lane Land with 73 and 75 George Street, Mr Harrison, Council's urban design expert, only considered the uplift in GFA development potential of the amalgamation of the Horseshoe Land with 41 - 59 George Street (Holdmark Site) on the assumption that the Draft Civic Link DCP need not be complied with, and determined that the additional GFA achievable is 5,881m². Mr Kennedy, Sydney Metro's urban design expert, considered that most of the Horseshoe Land is identified as a "laneway" under the Draft Civic Link DCP and that if compliance with the Draft Civic Link DCP was required, the GFA achievable would only increase by 982m² and, if compliance with the Draft Civic Link DCP was not required, the additional GFA achievable is 10,494m² (from 34,424m² to 44,918m² of GFA).
2. Mr Dyson adopted a similar approach to the Horseshoe Land and its purchase by Holdmark for amalgamation with 41 - 59 George Street as he adopted in relation to the Macquarie Lane Land. Accepting that 41 - 59 George Street was a feasible development site on its own without the Horseshoe Land, Mr Dyson again considered that market value should be determined on the basis of the additional GFA added to 41 - 59 George Street which is 5,881m² of GFA (adopting Mr Harrison's uplift determined on the basis that compliance with the controls in the Draft Civic Link DCP is not required) which he multiplied by his derived rate of $2,550/m² of GFA, giving $14,996,500, which is then again halved to account for the equal split between the two owners to arrive at $7,498,275 (rounded to $7,500,000).
3. Ms Cheong's approach to the Horseshoe Land was different to her approach to the Macquarie Lane Land where she discounted the "value add" (or "value brought") by the Macquarie Lane Land to 73 and 75 George Street by 14% to reflect the "amalgamation risk". In relation to the "value add" of the Horseshoe Land to 41 - 59 George Street, she discounted the value add by 50% to reflect her view of the respective bidding positions of the parties to the hypothetical transaction - such that the position of Holdmark as landowner of 41 - 59 George Street, which was already a feasible development site on its own, is stronger than Council as landowner of the Horseshoe Land, which she considered was not developable on its own. In simple terms, Ms Cheong considered that the Macquarie Lane Land adds more "value" to 73 and 75 George Street than the Horseshoe Land adds to 41 - 59 George Street.
4. On the basis that the hypothetical sale would proceed on the assumption that compliance with the Draft Civic Link DCP was required, Ms Cheong made adjustments to her comparable sales evidence to determine a rate to assess the value of an amalgamation of the Horseshoe Land and 41 - 59 George Street. She adopted a rate of $2,550/m² of GFA which she applied, first, to 41 - 59 George Street as a standalone development (without the Horseshoe Land); and second, to 41 - 59 George Street (amalgamated with the Horseshoe Land) and arrived at site values of $105,925,500 (standalone) and $108,456,600 (amalgamated with the Horseshoe Land). This gave a "value add" in the sum of $2,504,100 (effectively, adopting Mr Kennedy's uplift of 982m² of GFA at $2,550/m²), which she then discounted by 50% as the owner of 41 - 59 George Street did not "need" the Horseshoe Land, which she rounded to $1,300,000.
5. On the basis that compliance with the Draft Civic Link DCP was not required, and adopting Mr Kennedy's figures for achievable GFA, Ms Cheong applied her derived rate of $2,550/m² of GFA to the achievable 34,424m² of GFA, giving a site value of 41 - 59 George Street (without the Horseshoe Land) of $87,781,200 and applied the same rate to the 44,918m² of GFA achievable by the amalgamation with 41 - 59 George Street and the Horseshoe Land, giving a site value of $114,540,900. As such, she calculated the "value add" in the sum of $26,759,700, which she discounted by 50%, achieving $13,379,850 (again, effectively, 10,494m² of GFA at $2,550/m²), which she rounded to $13,400,000 for the Horseshoe Land (assuming the Civic Link was set aside).

Finding

1. For reasons similar to my analysis at [194]-[195], I again find that the core objectives of the Draft Civic Link DCP would not be deleteriously affected by the amalgamated development and therefore there would not be any significant concern to a consent authority, and I find that the hypothetical parties would transact on the basis that strict compliance with the Draft Civic Link DCP would not be required. I consider the evidence of the GFA uplift of the urban design experts, Mr Harrison and Mr Kennedy, with these findings in mind.
2. Where there is no requirement for strict compliance with the Draft Civic Link DCP, Ms Cheong and Mr Dyson each effectively applied their derived $/m² GFA rate to the amount of uplift determined by each of the urban design experts - being 10,494m² of GFA (as per Mr Kennedy and adopted by Ms Cheong), and 5,881m² of GFA (as per Mr Harrison and adopted by Mr Dyson), and, as noted above, each valuer (applying the same $/m² GFA rate) thereafter reduced the achieved amount by 50% to arrive at respective valuations of $13,500,000 (Ms Cheong) and $7,500,000 (Mr Dyson).
3. Looked at in this way, the Court is again left with the competing GFA uplift figures determined by the urban design experts and, unlike the consideration of the Macquarie Lane Land, there is little difference in the method of valuation adopted by the valuation experts.
4. There is a question of nicety as to the reason for the differences in the GFA uplift figures between the urban design experts for the non-Civic Link scenario (being, 10,494m² of GFA (Sydney Metro) and 5,881m² of GFA (Council)) that was not canvassed at length either in the written or oral evidence nor in the parties' submissions. Having reconsidered the reports of the urban design experts and their oral evidence and having attempted to discern differences in each expert's reasoning, I consider neither has taken into account irrelevant considerations and no other errors otherwise appeared. Although Mr Kennedy adopted different site areas for each of the Macquarie Lane Land (at 563m² not 592m²) and the Horseshoe Land (256m² not 342m²), I cannot discern a reason for the difference in the uplift figures. Doing the best I can, and not without some concern, and conscious of the limits to the principle that doubts should be resolved in favour of a more liberal estimate for the dispossessed owner, I find that it is appropriate to adopt the evidence of Mr Kennedy and, therefore the calculations of Ms Cheong, and I find that the market value of the Horseshoe Land at the date of acquisition is $13,400,000.

"Full compensation"

1. Given that the Court determined that the hypothetical transaction would proceed on the basis of the development yield as envisaged in Scenario 3, Council makes a further claim under the rubric "full compensation".
2. Council submits that Scenario 3, with its deference to the Draft Civic Link DCP, contemplates the preservation of certain portions of the streets, lanes and open spaces (which Council collectively refers to as "open space land"), some of which are otherwise depicted in the Property Amalgamation and Land Dedication map in the Draft Civic Link DCP and Council maintains that, as this area is not incorporated in the determination of value based upon the rate per square metre of GFA method (that is, Council submits that the open space land per square metre is not part of the calculation to determine the value of the GFA), the Court is required to consider what value, if any, the hypothetical parties would ascribe to the open space land.
3. Council further submits that there are some further areas of the open space land that were not "marked for dedication" in the mapping because that land was already in Council ownership at the time the Draft Civic Link DCP was prepared. Council points to Exhibit W which seeks to identify the open space land based on Scenario 3, and shows a combined area of approximately 5,400m² that Council submits would be required to be dedicated.
4. Accepting that the Draft Civic Link DCP is silent on whether the suggested dedication is intended to be free, in exchange for payment, or an offset for development contributions (accepting that it is agreed between the parties that there is no contributions plan under s 7.11 of the EPA Act in place at the date of acquisition), Council submits that the effect is that the Draft Civic Link DCP contemplates either that a developer would dedicate that land or that Council would acquire it.
5. Council therefore submits that the hypothetical parties would treat the open space land as land to be dedicated to Council and would transact on the basis that, if Council as consent authority, wished to realise its vision for the Civic Link, it would either need to reach a negotiated agreement for the dedication of the open space land with the hypothetical purchaser or acquire the land at market value. In either case, Council submits that the hypothetical purchaser would receive value for the open space land such that that value would be factored into the hypothetical parties' assessment of the market value of the Acquired Land and would not treat the open space land as "sterilised" and of no value. In these circumstances, Council submits that the hypothetical purchaser would receive either an offset against development contributions in exchange for the dedication of the open space land (as Council maintains is contemplated by the Draft Civic Link DCP) or that some additional amount would be paid to account for the value of the open space land over and above the contributions offset.
6. In relation to what Council submits would be a development contributions offset, and although the Contributions Plan that applied to the Acquired Land at the date of acquisition (being a plan made under s 7.12 of the EPA Act (noted at [14] and [18] above)) would have imposed a flat 3% contribution, with an alternative that Council may accept the dedication or provision of a "material public benefit", Council submits that the delivery of the pedestrian connections, lanes and the like provided in Scenario 3, would be considered as a "material public benefit". As such, the hypothetical transaction would proceed on the assumption that the purchaser would likely dedicate the open space land in exchange for any monetary development contribution that would otherwise be payable.
7. Council submits that the Court is able to assess the likely development contributions by reference to the quantity surveyors' evidence of the development costs of Scenario 3 and concludes that the contributions payable would be $13,700,000 based on Mr Madden's estimated development costs (3% of $457,340,494), or $16,100,000 based upon Mr McBeth's estimated development costs (3% of $536,981,942).
8. In considering these figures, Council then submits that the "value" of the open space land itself (which it identifies as approximately 4,790.5m², being those areas depicted on the Property Amalgamation and Land Dedication map in the Draft Civic Link DCP which are part of the Acquired Land) significantly surpasses the value of any development contributions payable and which "must be accounted for in its market value". Further, using the evidence before the Court that the rate per square metre of land in Parramatta CBD can be valued at approximately $25,000/m² of land, Council submits that the sterilised land can be valued at $119,762,500 (being 4,790.5m² at $25,000/m²).
9. Given what Council submits is a significant disparity between the value of the open space land to be dedicated and the contributions offset payable by a developer (based on either Mr Madden's or Mr McBeth's cost estimations), the Court should infer that a developer would not be prepared to dedicate the sterilised land without additional compensation. With this in mind, in final submissions, Council suggests that a reasonable sum to reflect this "gap" would be in the order of $50,000,000.

Sydney Metro's response

1. Sydney Metro does not accept that the "so-called" open space land should be treated as land to be dedicated such that Council should be separately compensated in addition to the market value of the Acquired Land. Sydney Metro does not accept that this land does not contribute to the GFA of the land and so has not been ascribed and valued using the "rate per square metre of GFA" method.
2. Sydney Metro submits that the value of the open space land has in fact been captured in Scenario 3 (and was also captured in Scenario 2 if the Court chose to adopt that scenario) and that the development potential of the whole of the site would be greatly reduced from Scenario 3 if it were the fact that the open space land was truly "sterilised" from development.
3. Sydney Metro notes that Council's submission initially claims a "contributions offset" between $15,000,000 to $80,000,000, and thereafter concludes that the Court would simply assume that the hypothetical purchaser would negotiate to receive payment in the order of half the suggested value of the supposedly sterilised land having subtracted what it calls a "contributions offset", ending up in its final submissions with a claim for $50,000,000, which Council considers to be a "reasonable" outcome based upon Council's purported valuation of the open space land in Scenario 3.
4. Sydney Metro repeats that the value of the open space land is captured in the valuation based upon Scenario 3 and, moreover, submits that the Court simply does not have evidence to make findings in relation to "sums of $50,000,000" otherwise contended for by Council in final submissions. Sydney Metro further submits that there is no evidence that a consent authority would waive development contributions, and in any event, Council wrongly submits that the hypothetical purchaser would pay $50,000,000 on the basis that it would, as a developer, comply with the planning controls. Sydney Metro suggests that the submission is effectively saying that a purchaser should be compensated for having to comply with planning controls.

Consideration

1. As I understand Council's position, it suggests that a consent authority would agree to developer contributions being offset as "quid pro quo" for the dedication of the open space land and that the hypothetical parties would add the full value of the development contributions payable by the hypothetical purchaser to the market value of the Acquired Land. In addition, and as noted above, Council submits that some additional amount would be paid for the open space land which is valued (at $25,000/m² of land) well above what would otherwise be the development contributions offset.
2. I have closely considered Council's submissions in relation to offsets for development contributions and the suggested valuation of what Council describes as the open space land as shown in Exhibit W. I have also reconsidered the evidence of the town planning experts and valuation experts. I accept Sydney Metro's submission that there is no compelling evidence that would allow the Court properly to consider the claim made in final submissions and I consider that there is no expert evidence that would justify the approach otherwise articulated in Council's submissions.
3. Even accepting that the planning controls place constraints over a not insignificant part of the Acquired Land and that, at least on the surface of the land, the Draft Civic Link DCP makes provision for streets, lanes and the like, it does not necessarily follow that the land is otherwise sterilised for the reasons submitted by Sydney Metro. At the least, there is certainly some development undertaken (comprising GFA) under what would otherwise be regarded as common or public areas (or open space land) and, in some circumstances (such as the cantilever), above areas which may otherwise be considered public areas or open space land. As such, I accept Sydney Metro's submission that the development yield of other parts of the land is supported (if not facilitated) by non-GFA development on and beneath those areas including basement retail, carparking, plant rooms, and access to the site and adjoining properties. Even if some such areas do not directly contribute to the calculation of the achievable GFA (a matter about which I have significant doubt) such that it is necessary for the Court to consider what, and if any, value that the hypothetical parties would ascribe to the open space land, I find that there is no evidence that supports this approach.
4. In any event, my finding that the assessments of value - including the amalgamations concerning both the Macquarie Lane Land and the Horseshoe Land - would proceed (and have been valued) on the basis that there would not be strict compliance with the Draft Civic Link DCP, effectively addresses the suggestion that certain otherwise 'open space land' was not incorporated into the valuation consideration.
5. Moreover, I do not accept that the suggested open space land would be treated as land to be dedicated. Although there was acceptance that the parties would transact on the basis that the controls in the Draft Civic Link DCP would be given some weight (again depending upon the nature of the development), I note the evidence in cross-examination by Ms Deegan, Sydney Metro's town planning expert, that the clauses relied upon relating to dedication of land to Council are in a development control plan (and not required under a local environmental plan). And even accepting, as I have done, that the hypothetical transaction would progress on the basis of the application of compliance with some of the controls in the Draft Civic Link DCP (particularly in relation to the main portion of the Acquired Land), I am not satisfied absent clear evidence to the contrary, that the open space land should (or would) be treated in the hypothetical transaction as land to be dedicated. Further, although not determinative in my view, I consider that a flexible application of the Draft Civic Link DCP would be anticipated such that it would not necessarily require any dedication and I am also conscious that the Draft Civic Link DCP was part of other planning controls including the Planning Proposal which itself resulted in a significant uplift in potential GFA.
6. Further, the valuation experts disagreed that there would be a "local contributions offset for land provided as the Civic Link and where laneways are dedicated to Council". Ms Cheong stated, and I find, that at the date of acquisition there was no mechanism available for offsetting contributions and the Contributions Plan did not identify the Civic Link in the "infrastructure works" schedule, and provided that land dedication that is offset against local contributions was only at the discretion of Council.
7. Contrary to Council's submissions, I do not accept that Ms Deegan or Ms Cheong gave evidence that would support Council's submission. Moreover, I find that apart from some oblique references in Mr Dyson's evidence, there is no compelling evidence that the hypothetical parties would transact on the assumption that Council would agree to grant the hypothetical purchaser an offset for development contributions payable under the Contributions Plan in exchange for the dedication of the suggested open space land. Moreover, Ms Cheong stated that it was certainly not uncommon (indeed, she had "seen it many times") for land that was otherwise sought to be "dedicated" in planning instruments to be dedicated free of cost. Although she further stated that a consent authority may be "amenable" to offsetting contributions in circumstances where there was GFA associated with the land to be dedicated, I find that that is not the case here.
8. At its highest, the evidence is that the advice that Ms Cheong would give to a hypothetical purchaser in relation to whether an offset against local contributions should be reflected in the price paid for land, would be that it was "possible" (noting that the same advice would be different after October 2022 when there was a change in the applicable instruments). I also accept the evidence of Ms Cheong that in relation to the internal laneways and the like, she did not consider that offsetting local contributions would be reasonable given that the requirement for internal roads and associated circulation are part of the development process (although accepting that this is ultimately a "planning" issue).
9. Although Mr Dyson, in the valuers' joint report, stated that should a consent authority "expect that land to be dedicated at no cost as Public Land, either for Public Recreation or Road", an offset would be provided, there is no evidence before the Court that would allow a view to be formed.
10. Given my findings above, and the evidence of the town planning experts and valuation experts, I do not accept Council's submission that the Court is (or would be) in a position to assess the hypothetical development contributions under the Contributions Plan by reference to the quantity surveyors' evidence (which was primarily directed to the RLV approach).
11. Further, even though there was evidence that in relation to a number of the comparable sales (which were not analysed in any way in relation to offsets for development contributions and the like) that land in the Parramatta CBD was transacting for in excess of $25,000/m², I consider that this evidence cannot simply be applied to the suggested sterilised or open space land in the way Council seeks to do in final submissions. As such, absent evidence of discrete consideration given to this aspect, I do not find that the hypothetical parties would add the "full value of the development contributions" to the market value of the Acquired Land, and I make no provision for this in my assessment of compensation.

Adjoining owner premium

1. Council submits that in addition to market value, it is entitled to an adjoining owner premium. Noting that adjoining owners are likely to pay more than the market value due to added benefits that land may bring to their existing adjoining landholding, Council notes that at the date of acquisition, the owners of land adjoining the Acquired Land included Council itself, as well as various "private developers" including Dyldam Developments Pty Ltd, Mirvac, Holdmark, and Niltil.
2. Council submits that taking into account, first, that at the date of acquisition Council owned land adjacent to Lot 100 including land to the north (separated by George Street) and land to the south, being 70 Macquarie Street and 151 Macquarie Street; and second, Council's long-term plan for the Civic Link (including Council's conduct in adopting a strategy to deliver the Civic Link by acquiring other properties), in considering the hypothetical transaction, the Court should find that it was likely that Council as adjoining landowner would have been willing to purchase the Acquired Land and pay a premium to realise its Civic Link vision.
3. In addition, Council submits that each of the private developers would be interested in bidding because the Acquired Land offers a "rare opportunity" to develop a large Parramatta CBD precinct, such that in addition to Council itself, there were four sophisticated developers' sites adjacent to the Acquired Land and, as such, there would be "nothing short of a bidding frenzy".
4. In these circumstances, while Council points to Mr Dyson's evidence that as a "rule of thumb", a 10% sum above the general market is appropriate for an adjoining owner premium, given Council's own "special need", Council submits that a higher rate of between 10% and 20% should be paid and concludes that a 15% adjoining owner premium should be adopted by the Court.
5. Sydney Metro submits that an adjoining owner premium should not be applied for four reasons. First, there is no evidence that Council would pay a premium to purchase land for a public purpose, particularly in circumstances where Council could compulsorily acquire any such land. Second, there is no evidence that any of the suggested adjoining owners have an interest in acquiring the whole of the Acquired Land in circumstances where the only evidence before the Court related to unsolicited offers made in relation to part of the Acquired Land. Third, neither valuation expert expressed an opinion that an adjoining owner premium should be paid (or made allowances for such a premium in their assessment of market value). Fourth, there is no evidence before the Court for applying an adjoining owner premium to the market value of the Acquired Land.

Consideration

1. I find that an adjoining owner premium should not be applied to the market value of the land otherwise determined. My reasons may be shortly stated.
2. First, having considered the evidence of the valuation experts, neither expert maintains that in the present circumstances an adjoining owner premium is payable. Although Mr Dyson speaks of a "rule of thumb or practice amongst valuers" that a 10% sum above the general market to be an acceptable adjoining owner premium, he does not state that such a premium is applicable in the present circumstances. At most he states by reference to authority in this court, "a premium could be attributable as a result of adjoining owner influence". Moreover, Mr Dyson does not identify any basis upon which the Court could find that an adjoining premium is applicable in the present circumstances. And, I do not accept the fact that simply because Council owned land adjacent to the Acquired Land (or that there were a number of adjoining owners who were "developers") supports Council's submission. As such, I am not satisfied that there is compelling evidence that any of the adjoining landowners would in the present circumstances be prepared to pay a premium. Despite this finding, I note that earlier in these reasons I allowed based upon the available evidence, an adjustment made by Ms Cheong for an adjoining owner premium in relation to one of the GPT sales.
3. Secondly, as Sydney Metro submits, it is unclear as to why a Council would pay a premium in circumstances where it was able to compulsorily acquire the land in circumstances where it would pay market value and no more.
4. Thirdly, despite the detailed evidence in relation to past conduct, there is no evidence that any of the named developers had in fact sought to purchase the Acquired Land.

Special value

1. Pleaded as an alternative claim, Council submits that if the Court finds that the hypothetical transaction would proceed on the basis of Scenario 3, and rejects its submissions in relation to its entitlement to receive value for "full compensation" (including any development contributions offset) which would have had the effect of assigning value to what Council calls the sterilised (or open space) land, Council then submits that the controls in the Draft Civic Link DCP, and the Civic Link it purports to deliver, have the effect of reducing the Acquired Land's market value, and as such Council is entitled to compensation for special value pursuant to s 57 of the Just Terms Act above and over the Acquired Land's market value.
2. Council submits that its ownership of what it describes as the "sterilised" land (which, Council maintains is not compensated for by the Court's market value assessment based on Scenario 3), carried a financial advantage resulting from Council's use of that land for the purpose of enabling the development and dedication of the Civic Link as a pedestrian link, and its use of much of that land as a thoroughfare open to the public. Council maintains that this is an "added value" which is not compensated in the market value assessment. Relatedly, Council emphasises that its purchase of various properties including 70 Macquarie Street in 2011 and Willow Grove at 34 Phillip Street, Parramatta in 2015, in addition to Council's preparation and exhibition of the Framework Plan and the Draft Civic Link DCP, all constitute actions which were incidental to its use of the sterilised land in the sense relevant to s 57 of the Just Terms Act from which Council derived a financial interest.
3. Sydney Metro submits that the statutory requirements for entitlement to compensation for special value are not met by Council for two reasons. First, the "advantage" must be incidental to a person's use of land where, in the present circumstances, Council had no 'use' - only a plan for future use. Relying on Pain J's findings in relation to special value in Denshire v Roads and Maritime Services [2017] NSWLEC 181; (2017) 229 LGERA 118 ('Denshire') at [97]-[98], Sydney Metro highlights that any advantages which may arise from the use of the Acquired Land for purposes related to the delivery of the Civic Link relate to a future use of the land and are therefore not related to Council's use of the land within the meaning of s 57 of the Just Terms Act.
4. Second, in any event, s 57 requires "an advantage, in addition to market value", and in circumstances where the use of the Acquired Land for the Civic Link has the effect of reducing its market value, Sydney Metro submits that it can hardly constitute an advantage.

Consideration

1. As noted above at [41], in determining the amount of compensation to which a dispossessed owner is entitled, s 55(b) of the Just Terms Act requires regard to be had to "any special value of the lands to the person on the date of its acquisition". Special value is defined in s 57 to mean the "financial value of any advantage, in addition to market value, to the person entitled to compensation which is incidental to the person's use of the land". It is clear that the statutory language of s 57 is wide.
2. Although not determinative in my consideration, the concept of 'special value' enshrined in the Just Terms Act finds its roots in Pastoral Finance Association Ltd v Minister [1914] AC 1083, where the Privy Council emphasised that the value to be established for the purpose of a compensation claim is the value of the land to the dispossessed owner. The principle was applied on the basis that, in some instances, market value alone is not sufficient to compensate the dispossessed owner fairly or adequately because some attribute of the land, some use made or to be made of it, or advantage derived or to be derived from it, is peculiar to the dispossessed owner and would not exist in the case of the abstract hypothetical purchaser. These statements must be treated with caution as they predate the enactment of the Just Terms Act and encompassed within the concept of special value any loss attributable to disturbance, whereas under the present statutory regime, special value, determined as at the date of acquisition, is a separate basis of compensation, distinct from other losses attributable to disturbance which must, by reason of their very nature, arise post-acquisition.
3. Special value under the Just Terms Act has been considered on various occasions and, in relation to Council's submissions, I note three matters.
4. First, where there is no difference between the value of the land in general, and its value to the owner, there is no special value: Turner at 291; Mir Bros Unit Constructions Pty Ltd v Roads & Traffic Authority of New South Wales [2006] NSWCA 314 at [84]. As such, special value, where it exists, usually relates to a special factor or attribute relating to the land and which the dispossessed owner is in a unique position to exploit.
5. Secondly, the purported "advantage" must be "in addition to market value" such that where the claim only relates to an inherent characteristic of the land, the value of which is captured in the land's market value, special value compensation will not be available: Denshire at [89]-[93]; Monti v Roads and Maritime Services (No 4) [2019] NSWLEC 11 at [155].
6. Thirdly, the purported "advantage" which special value seeks to compensate must be financial in nature.
7. As I understand Council's position, the special quality submitted to give rise to special value is that the Acquired Land is located on a continuum which Council has been acquiring for the purpose of providing the Civic Link at some stage in the future. For the reasons that follow, I do not accept Council's submission.
8. First, I do not consider that the carrying out of a public purpose such as a pedestrian link contributes a financial advantage in any relevant sense and as such cannot constitute special value as defined in the Just Terms Act. The financial advantage, if it be so called, is not related to any special quality of the Acquired Land.
9. Secondly, as Sydney Metro submits, the "advantage" must be in some way incidental to a person's use of the land. Council had no current "use", only a plan for future use.
10. Thirdly, as the use of the land was intended for a future Civic Link - which use has a lower value than a use for a commercial development in the absence of the Civic Link, and the claim for special value appears to be on the basis that this has the effect of reducing the market value - I consider that Council's use of the Acquired Land is not an advantage at all, indeed it is the opposite in financial terms.

Conclusion on market value

1. For the reasons above, I find that the market value of the Acquired Land is $201,093,472 comprising $22,200,000 for the Macquarie Lane Land, $13,400,000 for the Horseshoe Land, and $165,493,472 for the remainder of the Acquired Land.

Disturbance loss

1. In determining the amount of compensation pursuant to s 55(d) of the Just Terms Act, regard must be had to any loss attributable to disturbance.
2. While an issue arose in relation to Council's claim for the recovery of legal costs in connection with the compulsory acquisition of the Acquired Land under s 59(1)(a) of the Just Terms Act, it was resolved during the hearing and, as agreed between the parties, I find that Council is entitled to disturbance loss in the sum of $323,577.

Conclusion

1. I find that Council is entitled to compensation in the sum of $201,417,049.

Orders

1. The orders of the Court are: 1. Compensation is determined in the sum of $201,417,049 comprising: 1. Market value under s 55(a) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) of $201,093,472; and 2. Loss attributable to disturbance under s 55(d) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) of $323,577. 1. Sydney Metro is to pay the costs of City of Parramatta Council.

Annexure A (376906, pdf) Annexure B (152419, pdf) Annexure C (142551, pdf) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 March 2024