Costantino and Maric v RTA

Costantino and Maric v RTA - [2006] NSWLEC 248 - NSWLEC 2006 case summary — Zoe

[14]

Planning issues 10 The Applicants relied on the expert planning evidence of Mr Gary Rhodes. The RTA relied on the expert planning evidence of Mr Harvey Sanders. 11 At the date of acquisition the acquired land was zoned Rural 1(e) - Future Urban. The Liverpool City Council Structure Plan for Future Release Areas (1989) ("the Structure Plan") identified Second Stage Release Area Precincts. The Structure Plan, which was adopted by the Council on 18 April 1989 divided the area into six residential precincts. The acquired land was within Precinct No 3 - Cecil Park, as identified in the Structure Plan. On 29 October 1992, the Council resolved to prepare a draft LEP for part of Precinct 3 (Aerodrome) to rezone this area for residential purposes. 12 The planners agreed that, but for the WSO proposal, the subject lands would have generally been included in a rezoning of precinct 3A in 1995/6 and would have been zoned Residential 2(e1) in 1997. Some land would have been reserved for drainage purposes although there is disagreement as to the location and width of any land so zoned. There is an intermittent watercourse across part of the land known as Middle Creek. It is agreed that the creek would be zoned Special Uses 5(a) - Drainage but there is disagreement about the location of the creek and the width of any riparian zone. 13 The three remaining issues between the planning experts were as follows: (i) What was the expected zoning of the Australian Noise Exposure Forecast ("ANEF") affected land? (ii) What was the likely width of the riparian zone location? (iii) What was the most appropriate building form on the land? (i) ANEF 20-25 contour land and ANEF 25-30 contour land 14 The subject land is located close to the Hoxton Park Airport and the provisions of cl 18(2) of the Liverpool Local Environmental Plan 1997 (as amended, 27 September 2002) ("the LEP") would therefore apply. 15 Clause 18(2) of the LEP states that: In regard to Hoxton Park Aerodrome: (a) a dwelling may be erected on land in the vicinity of the aerodrome where the Australian Noise Exposure Forecast (ANEF), as published by the Civil Aviation Authority, is between 20 and 25 only if the dwelling meets Australian Standard AS2021-1994 (Acoustics - Aircraft noise intrusion - Building Siting and Construction) regarding interior noise levels, and … (c) a dwelling must not be erected on land in the vicinity of the aerodrome where the Australian Noise Exposure Forecast (ANEF) as published by the Civil Aviation Authority exceeds 25.

[30]

Finding 49 The flooding experts have agreed that the extent of flooding would not affect the development potential of both sites. The margin of error in the flood contour maps is +/- 0.5m. It was agreed that a prudent hypothetical purchaser would not obtain a flood study before the purchase but would be aware of the need to do so in order to get development consent. To the extent there is conflicting advice from the experts, a prudent hypothetical purchaser would consider this issue in the context of how much should be allowed for filling costs. The documents available from the Council at the date of acquisition suggest that the majority of the lands are flood liable to some extent, despite the potential according to Mr Bewsher's advice for the prudent hypothetical purchaser to find out errors in the Council's flood maps. I consider such a purchaser would take into account some fill costs. 50 There are conflicting estimates of the cost of filling required as between the quantity surveyors based on the different amounts of fill they calculate are needed to meet the different scenarios posed by the flood experts. Mr Howie, quantity surveyor, estimated costs of $20,630 for 1,214m3 of fill at $17/m3 on the Costantino land and $21,420 for 1,260m3 of fill at $17/m3 on the Maric land. This was on the basis that a prudent hypothetical purchaser would be aware of the basic development costs of elevating the land to the 1% AEP flood level as required by the Council's Guidelines for the Development of Flood Liable Land. 51 A contrary view on the amount of fill needed was taken by another quantity surveyor, Mr Sanders. He considered that filling to the 1% AEP flood level would not be sufficient, based on Mr Rowbottom's report. He included costs for flood storage within the site, building platform formation, levee formation, drainage reserves and kerbing and guttering. He therefore estimated fill costs to be $254,973 for Maric and $71,758 for Costantino. 52 I do not consider a prudent hypothetical purchaser would consider all of the fill costs identified by Mr Rowbottom and Mr Saunders would need to be factored in at this stage but would make some allowance for the cost of filling the lands to the 1% AEP flood level. I will adopt the figures applied by Mr Howie as being the figures a prudent hypothetical purchaser would take into account.

[33]

56 Mr Bewsher believed that while some weight should be given to the natural alignment of Middle Creek, it would only be one of many considerations. The drainage reserve could be located along the southern boundary of the Costantino land and the northern boundary of the Maric land with the likely outlet towards the Hoxton Park Airport in order to minimise the impact on development. Finding 57 I must consider what a prudent hypothetical purchaser would be likely to do in light of the conflicting expert advice that may be proffered in this matter. I accept the views of the planning and flood experts that it is likely that the drainage reserve would not follow the path shown in the exhibited draft LEP. This was the most likely position having regard to the submissions to the draft LEP and the Council minutes of 22 November 1993 which concluded that: The location of these channels have been reviewed by the Council Officers with a view to alternative locations with less impact on land owners. 58 The planners agreed that by the acquisition date, the drainage works on surrounding land would have been implemented in accordance with the drainage scheme for the area. The flood experts agreed that due to the topography of the land and the nature of the intermittent watercourse the necessary drainage reserve would be able to be located in numerous locations. Given the planners' agreement that a regional drainage scheme would have been in place, I consider the prudent hypothetical purchaser would be likely to assume the drainage reserve would have been located along the path identified by Mr Bewsher so that the drainage path would pass along the southern boundary of the Costantino land and the northern boundary of the Maric land in accordance with the plans in exhibit 26. This route, while not following Middle Creek precisely, can accommodate it and minimises impact on development on the subject lands. Issue 3 - Required width of the riparian zone 59 As outlined above at par 26-29, the town planners disagreed on the issue of the likely width of the riparian zone. Mr Sanders considered that the land constrained by the drainage reserve would be the land 20m on either side of the unnamed watercourse as the watercourse located on the Maric land fell within the definition of "protected waters" under the RFI Act being the riparian zone on each side of the watercourse. Based on the advice of Mr Sanders, Mr Rowbottom considered that the width of the riparian zone would be 40m in total, being 20m on either side of the unnamed watercourse.

[37]

66 Mr Wood considered that while the land could be used for medium density development as at the date of acquisition there would have been no demand for medium density development in the locality at that time. Accordingly, the highest and best use of the land was for single dwelling sites on conventional lots. The examples of medium density development cited by Mr Large and Mr Neskovski are all of smaller sites located to the east of Cowpasture Road in built out localities. Mr Wood stated that in any case, the potential for medium density development would have been captured in the price paid for Residential 2(a) land as medium density development was a permitted use in that zoning. Finding 67 One issue I must decide is whether a prudent hypothetical purchaser would be prepared to pay $240/m2 for the Maric and Costantino lands because they were sufficiently certain that there would be demand for a large medium density development across both sites of 52 units in 2002, if I accept Mr Neskovski's evidence. Mr Large applied an higher yield for medium density development of approximately 90 units over both sites. 68 Mr Wood's evidence is that the most likely use of the site would be for lower density subdivision rather than medium density. This view is supported by the evidence of Mr Sanders set out above at par 34. If Mr Large or Mr Neskovski is correct the site would support medium density development, a view supported by Mr Rhodes at par 33. 69 While Mr Sanders argued (see par 32) that the flood prone nature of the land suggested it would not necessarily be developed by the date of acquisition, the extent of flooding is not serious. I consider the land was likely to be fully or partially developed by the date of acquisition. 70 Having viewed the relevant comparable sales in the surrounding areas, the nature of development in the area, and taking into account the views of the planners and valuers in this matter, I do not consider a prudent hypothetical purchaser would consider the demand for medium density development across both sites could be assumed. Even if surrounding land had been partly developed the certainty of demand for medium density development of 52 or more units in this location would not be assumed by a prudent hypothetical purchaser based on the comparable sales, in my view. 71 Even if part of the sites were developed for medium density should a rate greater than $180/m2 apply to that land? Mr Large relied principally on one sale of a medium density development property, 46 Wattle Road, Casula which sold in May 2002. It had development approval for 19 units on 4526m2. He agreed this was superior to the subject site and in an area with a different character to the subject sites had these been developed for residential purposes. The level of adjustment made by him to arrive at $240/m2 was significant, being 42 per cent due to the inferior location, greater noise impact from the airport and the low-lying nature of the subject land. Mr Neskovski relied on this sale as demonstrating $398/m2. I agree with Mr Wood that this sale was in a superior location and also required substantial adjustment when applied to the current site. 72 Mr Neskovski relied on four other sales he said were comparable, to arrive at a figure of $240/m2 as the value for medium density development on this site. I agree with Mr Wood that the comparable sales relied on by Mr Neskovski were in fully developed residential areas with generally superior locations and most were for much smaller parcels of land than the subject sites as follows: · 20, 22 Kensington Close, Cecil Hills, sold on 31 January 2002. The site was flood free and elevated land, fully developed with all services with an area of 2647m2 and DA approved for eight units demonstrating $295/m2 according to Mr Neskovski. This sale required substantial adjustment when applied to the current site. · 193 Wattle Road, Casula, sold on 30 June 2003, demonstrating $345/m2, according to Mr Neskovski. This sale of 4594m2 was well after the date of acquisition in a fully serviced established residential area. Once again substantial adjustment was needed in order to apply it to the subject lands · Lot 16 DP1045891 Coffs Harbour Avenue, Hoxton Park, with an area of 10,217m2, was sold in February 2004 and was in a fully roaded and serviced area, with development consent for 37 townhouses. Mr Wood considered the sale was not a reliable comparison given the location and an "overanxious" vendor. · Lot 1 DP505943 Ash Road, with an area of 22,240m2, located at corner Camden Valley Way, Prestons, was sold in January 2004. It was severely constrained in part by a transmission line easement 60m wide and also its proximity to the WSO to the east. I do not consider it to be of much assistance as a comparable sale. 73 It was not clear how the other sales referred to by Mr Neskovski, numbers 5, 7 and 8, were applicable to the subject sites and I understand that they were not ultimately relied on. The adjustment needed to apply the comparable sales to this site suggests $240/m2 is too high a valuation, even taking into account that the surrounding area and possibly the lands would have been developed by the date of acquisition but for the WSO. I do not consider a prudent hypothetical purchaser would consider a value greater than $180/m2 should apply to the land.

[39]

75 Mr Wood applied a value of $25/m2 for all of the land located within the creek bed and riparian corridor as the land had no residential potential at the date of acquisition. In reaching this figure, Mr Wood relied on six sales of constrained land set out at Appendix 2, of exhibit 2. He also relied on the 2001 s 94 Contributions Plan which provides for a unit cost of $10 indexed at 20 October 2002 by 1.9 to $19/m2, say $20/m2, for the purchase of land to be used for drainage purposes, such as a regional drainage scheme. Finding 76 The parties agreed the creek bed of 5m should be valued at $25/m2 and I am prepared to apply that amount. 77 Both parties and their valuers have relied on different sections of the 2001 s 94 contributions plan to justify their figures for the riparian zone. Mr Wood has also relied on sales of constrained land which he considers justify a figure of $25/m2 rather than $20/m2 payable for land for drainage purposes under the contributions plan. 78 In addition to Mr Large's valuation of $166.50/m2, the Applicants relied on the part of the contributions plan dealing with the provision of open space for the Southern Hoxton Park Aerodrome Release Area proximate to the subject lands. Such lands were valued on the basis of $50/m2 which must be increased by the index figure of 1.9 to approximately $100/m2. That part of the plan was prepared in light of the WSO of necessity and has to be disregarded for that reason. 79 The drainage scheme land the subject of the contributions plan does not apply to the area on which the subject sites are located because they are not in residential areas released because of the WSO. It is both valid and necessary to have regard to the provisions for the acquisition of drainage land on nearby land which is contained in the contributions plan to see what a prudent hypothetical purchaser was likely to consider would be likely to occur on the acquired land. 80 Given that it is accepted that a regional drainage scheme across the lands was likely to have been implemented by the date of acquisition so that land required for that scheme would have been purchased by the Council for that purpose and therefore that land was constrained from residential development, it must be valued on that basis. This is the case regardless of the underlying residential zoning. 81 As relied on by the RTA, in Baric v Roads and Traffic Authority of New South Wales [2004] NSWLEC 702, Bignold J considered the valuation of a trunk drainage strategy across land zoned for residential use. He considered the drainage land was constrained and applied a value significantly less than the residential value. In Lalic v Roads & Traffic Authority of New South Wales [2005] NSWLEC 430, McClellan J also adopted a similar approach at [62]. 82 It is therefore clear that the approach taken by Mr Wood is to be preferred as his constrained land sales suggest a value commensurate with the 2001 s 94 contributions plan. I consider a prudent hypothetical purchaser would value the land in the riparian zone at a rate of $25/m2. Issue 3 - Value of the ANEF affected land on Maric 83 Mr Large applied a value of $166.50/m2 to the ANEF affected land as the ANEF affected land could be utilised as recreation areas for residential development. This was the full residential value of $180 minus ten per cent.

[46]

93 The RTA argued that because the land had been assessed for market value at a higher value use than its current use, applying s61, additional compensation cannot be awarded under s 59(c) or (d). 94 Further, the RTA submitted that s 59 and s 61 both refer to "loss". Although subsections of s 59 refers to the word "costs", these subsections appear under the preamble to the section which refers to "loss" attributable to disturbance. There is no material difference between the two words in this context. The Applicants' claim for compensation has been assessed on the basis that the land had potential to be used for a more valuable purpose than its current use. Compensation is not payable in respect of any financial loss that would be incurred in realising that potential. In order to realise the potential upon which the Applicants' claim for market value is based, the land would have to be sold and the Applicants would have had to relocate. The Applicants cannot recover any compensation for "losses" because they have not incurred any "losses" as the land was assessed at its highest potential, which is not its current use. The RTA relied on Damjanovic and Anor v Roads and Traffic Authority of NSW (2) [2005] NSWLEC 371. 95 The Applicants submitted that s 61 does not apply here and does not limit the operation of s59. Section 59 is concerned with "loss attributable to disturbance". It is clear from the subparagraphs to that section that the loss to which this section refers is a "cost" that has been incurred as a consequence of the acquisition. In contrast, s 61 is not concerned with costs incurred as a consequence of the acquisition. Rather, s 61 prevents the recovery of any "financial advantage" and/or "financial loss" in the assessment of compensation. Here, the Applicants are entitled to payments under s59(c) and (d) because this disturbance claim is not "in respect of" a foregone financial advantage (or loss) in realising the land's potential. It is a disturbance claim that has to be incurred because of the acquisition.

[50]

100 In Walker the applicant claimed disturbance under s 59(f) for the costs of legal advice and fees paid to counsel, costs relating to valuing sites, and costs relating to attempts to obtain development consent and to the future development of the land for residential development.. The use of the land at the date of resumption was argued by the applicant to be as part of its land bank for future medium density residential development. The land was zoned for industrial use. Talbot J held that the actual use of the land was for industrial purposes, which was a different and less valuable use than the market value on which the land had been assessed. He applied s 61 and disallowed that disturbance claim because any cost incurred in seeking to obtain development consent was related to a more valuable use. That reasoning would appear applicable to the circumstances here. 101 Damjanovic and Croke have been followed in Woodbury & Ors v Wyong Shire Council [2006] NSWLEC 48 and Kirela Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (No 2) [2004] NSWLEC 68. 102 Section 55 of the Just Terms Act specifies those matters which must be considered in determining the amount of compensation payable, and includes any loss attributable to disturbance. Section 59 defines those costs which can be recovered as losses attributable to disturbance. Section 61 states that any financial loss incurred in realising potential where the market value of land is assessed on the basis of a use other than the current use is not claimable as compensation. The Costantinos are seeking compensation for their legal and stamp duty costs as they must move to a new residence as a result of the compulsory acquisition. They have obtained a market valuation of their land based on the highest and best use of residential subdivision. This valuation is based on a more valuable use than the current use of the land as a single house site. In order to realise the potential of the more valuable use, it would be necessary for the Costantinos to move from the land in any event. On the basis of Croke, Damjanovic, Kirela and Walker Corporation it is clear that their claim stamp duty under s 59(c) and (d) and for relocation costs are not recoverable because s 61 applies in this circumstance to preclude the disturbance claim on this basis. Section 55(e) solatium 103 The parties agreed that $19,665 was payable for solatium under s 55 (e). Rent paid under s 34 Just Terms Act 104 The Costantino land was acquired on 4 October 2002. The advance payment, in accordance with s34(1) of the Just Terms Act, of 90 per cent of the compensation was not made until 1 April 2003. The Applicants vacated the property on 22 April 2003. The Costantinos claimed $4200 in rent paid to the RTA during the first three months of their occupation of the acquired land on the basis that, under s34(2) of the Just Terms Act, they were entitled to a three month rent-free period. 105 The RTA had agreed to pay the Applicants the amount of $4200 for rent paid, the basis on which the matter was dealt with before me at the hearing. After the hearing, where I reserved my decision, the RTA's solicitor sent a letter to the Court stating that they now wished to dispute this matter. The Applicants' have objected to the issue of rent now being raised after the hearing of this case in this manner. I agree. The way this matter was raised by a letter from the RTA's solicitors sent after the close of hearing with no application made to reopen the case is unacceptable, and is contrary in any event to the way the matter was dealt with at the hearing. I will hand down a judgment which accords with the agreement of the parties as advised to the Court at the hearing. Maric land 106 Section 59(a) Legal Costs on Acquisition The parties agreed legal fees were payable in the sum of $13,204.02. Section 59(b) Valuation Fees 107 The parties agreed valuation fees were payable in the amount of $8,250. Section 59(d) and/or alternatively s 59(f) 108 Mr Maric claimed as disturbance under s 59(f), stamp duty for the purchase of a property which he argued was to replace the acquired property he had owned with the aim of developing it at some stage. The acquired property was held as a land "bank" for development purposes. He swore affidavits on 27 October 2005 and 9 December 2005 and gave oral evidence in support of his claim.

[51]

109 The first affidavit attests that Mr Maric is in the business of property development and had bought properties in St Mary's, Liverpool and Maroubra on which he built various residential developments. At par 5 he states: I purchased the Property in 1969 and lived there for almost fifteen years. In 1984 I was informed that Hinchinbrook Green Valley was being built up as a residential area. I was also aware that housing development to the north of Property [sic] was filling out and I had heard rumours that the Hoxton Park Airport would close. I therefore resolved to keep the Property for the purpose of developing it. I proposed to build townhouses on the Property, to obtain strata subdivision approval and to sell the townhouses. 110 In his second affidavit he states in relation to his previous affidavit that he and his wife had developed and subdivided four properties. He also states the properties are developed with his company Sydney Wide Construction and Roof Restoration Pty Ltd. 111 Reliance was placed by the Applicants' counsel on Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259 and Maggiotto v Roads and Traffic Authority [2006] NSWLEC 54. 112 The RTA submitted that the Applicants had failed to establish that they were in the business of property development and held the acquired land in a land bank. Consistent with the Court of Appeal decision in Blacktown Council, the Applicants were required to show that the acquired Maric land was part of their stock in trade constituting a land "bank". In his affidavit sworn 27 October 2005, Mr Maric stated that he is in the business of property development and has over a number of years acquired properties on which he has built townhouses, obtained strata subdivision approval and on-sold the townhouses. It is clear from the cross-examination of Mr Maric and from the financial records attached to his affidavit that these Applicants are unable to provide evidence of this and cannot be entitled to any compensation under s 59(d) of the Just Terms Act.

[53]

Finding 114 In Blacktown Council v Fitzpatrick Investments, there was no dispute that the acquired land was held for the purpose of "land banking". The Court of Appeal held that this was an actual use of land for the purposes of s 59(f) of the Just Terms Act. The RTA disputed in this case that the land was actually used for the purposes of a land bank. 115 Has Mr Maric justified his claim that the acquired land was in a land "bank" which he intended to develop? It was clear from the cross-examination of Mr Maric that he had not taken great care with the execution of his affidavits as there were a number of inaccuracies in these which became clear during cross-examination. For example, he claimed to own two houses in Neutral Bay which he was developing for onselling. Cross- examination revealed that he owned one property which he currently occupied and that he may sell some time in the future. He was unable to state in cross-examination whether that property was a personal or business asset. His position in relation to the Neutral Bay property would appear to be no different from any homeowner who can hypothetically decide to sell his or her home at any time having undertaken development on it. It also became clear under cross-examination that Mr Maric and his wife had jointly bought and jointly developed other properties with another unrelated company rather than in their own right. 116 Financial records of the Applicants' property development partnership were attached to Mr Maric's affidavit dated 9 December 2005. The acquired land is not listed as a partnership asset. The property was originally bought in 1969 and used as the Applicants' home for 15 years until about 1984 when Mr Maric said that he resolved to keep it for development purposes. I agree with the RTA's submissions that the Applicants have failed to establish that the acquired land was part of their stock in trade constituting a land bank for the purposes of Blacktown City Council v Fitzpatrick Investments.

At a glance

Court

Decision date

Before

Source

Judgment (57 paragraphs)

Parties

Cases Cited (10)

Cited By (4)