JUDGMENT
CORAM: HIS HONOUR
A. INTRODUCTION
1 These are two related objections pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 against the amount of compensation offered by the Respondent pursuant to s 42 of the Act in accordance with the Valuer-General's determination in respect of the Respondent's compulsory acquisition of each of the Applicants' lands situate at Eastern Creek, being part (some 20 percent) of an overall parcel of land known as No 339 Wallgrove Road by Notice of Compulsory Acquisition published in Government Gazette No 35 of 13 February 2004. (In hearing the objections, I have been assisted by Commissioner Tuor pursuant to the Land and Environment Court Act 1979, s 37(1)).
2 By consent, the two proceedings were heard together upon the basis that the Court would initially determine globally the compensation payable in respect of the aggregation of the compulsorily acquired lands (which are contiguous lands in the ownership of members of the same Damjanovic family) and thereafter, apportion out of that global amount the compensation payable to the respective Applicants.
3 In proceedings No 30579 of 2004, the compulsorily acquired land comprises lot 3 in Deposited Plan 234606 being a narrow strip 10 metres wide fronting Wallgrove Road for a distance of some 390 metres and containing an area of 3,971 m2.
4 The offer of compensation for this land as determined by the Valuer General was $123,200.
5 In related proceeding No 30580 of 2004, the compulsorily acquired land comprises lots 15 and 17 in Deposited Plan 1059698 comprising areas of 1.326 hectares and 5,888 m2 respectively. Those two lots abut upon the road frontage lot (the subject matter of the related objection) and are separated from each other for a distance of 20 metres by the interposition of lot 16 in Deposited Plan 1059698 in the nature of a right of carriageway.
6 The offer of compensation in respect of the compulsory acquisition of lots 15 and 17 as determined by the Valuer General was for the sum of $1,182,365 comprising the following compensable items in terms of s 55 of the Just Terms Act:
(i) market value $1,155,500
(ii) disturbance loss $ 7,200
(iii) solatium $ 19,665
7 Deposited Plan 1059698 which was registered on 15 October 2003 is a subdivision plan prepared on behalf of the Respondent showing lands to be acquired for the purposes of the Roads Act 1993 (including parts of the Applicants' lands). A copy of the Deposited Plan is annexed hereto and marked "A". (There is also shown on that plan abutting Wallgrove Road the narrow strip of land comprising lot 3 Deposited Plan 234606.)
8 The Notice of Compulsory Acquisition records that the lands therein described (which include the lands of the present claimants) had been acquired "for the purposes of the Roads Act 1993".
9 It is common ground that the particular purpose under the Roads Act for which the described lands were acquired was for the purposes of the Western Sydney Orbital (WSO) being a major road forming a connecting adjunct to the National Highway by linking it between the M5 Motorway situate at Prestons in the south and the M2 Motorway situate at Baulkham Hills in the north. (More recently this section of the road has been nominated as the M7 Westlink).
10 The aggregated area of the three related parcels of compulsorily acquired lands is 2.312 hectares and the compulsory acquisition had the effect of severing from the aggregation of lands collectively owned by the present Applicants a band of variable width ranging from some 50 m to 75 m fronting Wallgrove Road, creating a residue of 8.233 hectares now comprised in lot 1 Deposited Plan 1059698.
11 According to their second Amended Points of Claim filed in Court on 16 November 2004, the Applicants collectively claimed compensation for amounts within the following range based upon different planning assumptions concerning both the compulsorily acquired and retained lands -
(i) $3,907,963 plus relocation costs of $3,700,000 on the planning assumption that the zoning of the Applicants' land (being the acquired and the retained lands is Non Urban 1(a) under the Blacktown Local Environmental Plan 1988 (the LEP);
(ii) $7,958,318 on the planning assumption that there is an existing use entitlement under the Environmental Planning and Assessment Act 1979, to change the existing use of the lands (being the acquired retained lands) to another higher use; and
(iii) $14,352,555 on the planning assumption that the zoning of the Applicants' lands (being the acquired and the retained lands) is governed by State Environmental Planning Policy No 59 - Central Western Sydney Economic and Employment Area (SEPP 59).
12 At the end of the hearing, the Applicants' claim for compensation had been increased to $16,012,097 based upon the planning assumption that the zoning of the Applicants' lands were governed by Sydney Regional Environmental Plan No 31 - Regional Parklands" (SREP31)
13 At an early stage in the hearing, the parties invited the Court to adjudicate upon the question of the proper planning basis upon which the valuations of the Applicants' lands (both the acquired and retained lands) were to be based recognising that the different planning assumptions profoundly affected the value of the land by virtue of the differing uses for which the land might be developed, and hence the fundamental valuation concept of the "highest and best use" yielding the highest value.
14 In particular, the question was raised whether the fact that the Applicants' land was included in the lands to which SREP31 applied was required to be set aside (as it had been in the Applicants' Amended Points of Claim) in determining the market value of the compulsorily acquired land and the amount of compensation payable under the Just Terms Act pursuant to either (i) s 56(1)(a) of the Act; or (ii) the principle established by the High Court of Australia in Housing Commission of NSW v San Sebastian Pty Ltd (1978) 140 CLR 196. (SREP31 applies to some 5,400 hectares of land shown on sheet 1 of the relevant map, a copy of which is annexed hereto and marked "B").
15 After hearing argument on behalf of the Applicants to the effect that the fact that SREP31 applied to the Applicants' land should not be set aside in the task of determining market value and compensation payable in the present case, but rather should be regarded as providing the applicable planning controls (upon which argument the Respondent did not wish to be heard or to advance a contrary argument) I determined that the relevant planning assumption upon which the required determination of market value and any other compensation in the present case were to be based was that SREP31 applied to the Applicants' land (both the acquired and the retained lands). In so holding, I concluded that neither s 56(1)(a) of the Just Terms Act nor the "San Sebastian" principle required the setting aside of the actual planning controls applying to the land, since those controls (the express aims of which are stated in cl 3 of SREP31) were irrelevant to, and uninfluenced by either the WSO proposal or the compulsory acquisition for that public purpose - cf Rees v The Minister for Planning and Housing (1991) 76LGRA 167.
16 That adjudication was then given effect to by the parties requiring their respective Valuers, (Mr Dobrow for the Applicant and Mr Preston for the Respondent) to value the Applicants' land on the basis that SREP31 was the governing planning control (subject of course to any relevant existing use entitlement under the Environmental Planning and Assessment Act 1979 that might apply to the Applicants' land in respect of the use thereof for a continuous period of more than 40 years for poultry egg production, that being a use that was prohibited by SREP31.) Prior to that adjudication, the parties' valuers had not valued the Applicants' land upon that planning assumption.
17 However, their respective valuations of the compulsorily acquired land on the basis that SREP31 was the applicable planning control produced very disparate estimates as is reflected in their Joint Statement (Exhibit R) with Mr Dobrow's estimate being $10,882,000 and Mr Preston's estimate being $59,360. (As will appear each of these estimates was increased by each valuer before the hearing had concluded.)
18 Their Joint Statement (Exhibit R) also contains their respective alternate valuations of the compulsorily acquired land upon two different planning assumptions which were based upon the "existing use" entitlements conferred by the Environmental Planning and Assessment Act 1979 (Division 10 Part 4) and the Regulation made thereunder; namely (i) the unqualified right to continue the existing use of the Applicants' land for poultry egg production and (ii) the qualified right (ie requiring the grant of development consent) to change that existing use to another use being a higher (and more valuable) use than the existing use. These two different planning assumptions are consistent with my determination that SREP31 is the governing planning control applying to the Applicants' lands since the existing use entitlements under the Act are additional rights to rights conferred by SREP31.
19 Again, the Valuers' estimates based upon these different planning assumptions yielded grossly disparate results, namely:
(a) Existing Use Valuation
(i) Dobrow $ 8,808,000
(ii) Preston $1,008,150 and
(b) Change of Existing Use Valuation
(i) Dobrow $9,645,818
(ii) Preston $408,448
20 Thus according to the content of their Joint Statement (Exhibit R) which was confirmed by their concurrent evidence, Mr Dobrow's highest valuation of the compulsorily acquired land was $10,882,000 based upon SREP31 applying the relevant planning controls whereas Mr Preston's highest valuation was $1,008,150 based upon the existing use of poultry egg production.
21 As a result of Mr Dobrow's valuation based upon SREP31 applying the relevant planning controls yielding the highest value, the Applicants formally abandoned their reliance upon the valuation based upon the planning assumption of a change of use from the existing use. (The validity of this planning assumption had been progressively challenged by the Respondent throughout the hearing as part of its questioning whether any existing use entitlements relevantly applied to the Applicants' land with the Respondent ultimately submitting that no relevant existing use entitlements had been established by the Applicants, notwithstanding the continuous operation of the business for more than 40 years). Moreover, even if the Court were to have held that existing use entitlements were applicable, the parties and their town planning witnesses were in significant dispute as to the realistic prospects, in view of the content of SREP31, of development consent being granted under the Regulation for a change of use to a higher use than the existing use.
22 By virtue of the Applicants formally abandoning reliance upon the alternate valuation based upon the change of the existing use to a higher use, there was no need for the town planners to be called on this issue (they had each provided planning reports and had made several Joint Statements which had been received into evidence) and accordingly, there is no need for the Court to further consider this abandoned basis of valuation.
23 In the result, the competing valuation evidence ultimately presented by the parties was confined to the competing valuations based upon (i) the application of SREP31 (which yielded Mr Dobrow's highest estimate); and (ii) the existing use entitlement to continue the existing use of poultry egg production (which yielded Mr Preston's highest estimate).
24 However, in the course of the hearing, both valuers were given the opportunity to revise their respective valuations as set forth in their Joint Statement (Exhibit R) in the light of (i) traffic engineering evidence; and (ii) aerial photographic evidence showing the historical state of buildings erected on the Applicants' lands in connection with the use in poultry egg production at various dates in 1961, 1965, 1970, 1981, 1994 and 2000 and the evidence concerning the question whether consents authorising these buildings had been obtained - being in each case evidence that was adduced after the valuers had prepared their Joint Statement (Exhibit R) and had given their concurrent evidence. Each valuer took up that opportunity. Mr Dobrow in his "final statement" (Exhibit 37) revised his valuation based upon the application of SREP31 in the light of the traffic engineering evidence concerning the alternative access to be provided to the Applicants' retained land following the loss of existing direct accesses by virtue of the total loss of their frontage to Wallgrove Road. His revised valuation was for the sum of $16,023,097 compared with his original estimate of $10.88 million. (He did not revise his valuation based upon the planning assumption of the continuance of the existing use for poultry egg production.)
25 Mr Preston, in his supplementary Statement (Exhibit FF) reduced his existing use valuation of $1.08 million upon the basis of the later evidence concerning the planning history of the existing development with variable reductions reflecting his estimates of the depreciated value of each of the buildings that were erected on the Applicants' land subsequent to the commencement of the use in 1961 according to which, if any, of such buildings the Court were to hold had been erected without development consent. (Ultimately, the Respondent submitted that none of the existing buildings had been erected with the requisite development consent and that despite the fact that the poultry egg production use had continuously been carried out at the site for more than 40 years, it did not have the benefit of any existing use entitlement).
26 Mr Preston saw no reason in the traffic engineering evidence to revise his earlier valuation opinions.
27 At the very end of the hearing (which had been concluded except for the parties' final addresses which had been directed to be exchanged and filed in writing prior to supplementary oral addresses to be received on 13 December 2004), the Respondent sought to tender a further statement by Mr Preston (which was not admitted into evidence but was marked MFI "E").
28 In this Statement, Mr Preston said that in the Joint Statement (Exhibit R) he had omitted to apply a discount factor to the sales evidence that he had relied upon for his valuation based upon the application of SREP31 "to take into account the differences between those comparable sales and the subject land". He went on to say that he had "now considered the appropriate discount factor" to be applied and had determined that it should be 55 percent comprising 20 percent for land size difference and 35 percent for risk in achieving an industrial land value in any acquisition of the land pursuant to SREP31.
29 In the result, Mr Preston would now wish to apply to the compulsorily acquired lands the discounted rate of $70 per square metre yielding a value of $1,618,330 which paradoxically would far exceed his earlier estimate of $59,360 where he applied the undiscounted rate of $150 per square metre: vide Exhibit R. (The paradox is readily solved once it is appreciated that in his revised valuation, he does not attribute any enhancement value to the retained land by virtue of the WSO whereas in his original estimate, he had applied an enhancement factor of some 27 percent on his "before" value).
30 It is to be noted that this revised estimate of valuation also exceeds by more than 50 percent his previous highest valuation based upon the existing use as reflected in Exhibit R.
31 The Applicants strongly objected to the admission into evidence of Mr Preston's further statement for the reason that not only was the evidence far too belated, but that it involved a recanting of Mr Preston's evidence as contained in the Valuers' Joint Statement (Exhibit R), and that if the evidence were to be admitted, it would mean that the whole case would have to be substantially re-examined and possibly re-opened and that in particular the Applicants would need to reconsider their earlier position of abandoning their reliance upon the valuation based upon the planning assumption of a change of the existing use to a higher use (because that basis of valuation may have exceeded the value based upon the application of SREP31).
32 In pressing for its admission into evidence, the Respondent said that it was duty bound to bring to the Court's attention Mr Preston's revised opinion which had the practical effect of significantly increasing the value of the compulsorily acquired land from Mr Preston's (and hence the Respondent's) viewpoint based upon the application of SREP31.
33 In the event, I rejected the attempted tender of Mr Preston's further statement because I was satisfied that no prejudice would be caused to the Respondent's case by not admitting it into evidence but that on the other hand, prejudice would be caused to the Applicants' case if the evidence were admitted and that the likely consequence of its admission would be the serious dislocation of the hearing (which for all intents and purposes had virtually been concluded) and that serious prejudice would be caused to the efficient management and discharge of the Court's business if the deliberately abandoned issue of value based upon a change in existing use to another higher use had to be reopened. In short (and perhaps unusually) this was clearly not a case where the interests of justice in the admission of the belated evidence outweighed the object of the efficiency of judicial case management and of the fair and proper discharge of the Court's business (see State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146). On the contrary, the scales were entirely weighed in favour of efficiently concluding the almost concluded case by rejecting the tender of Mr Preston's revised opinion on account of the Applicants' valid and strenuous objection and the fact that the material did not significantly advance the Respondent's case . In respect of this last mentioned factor, it is to be noted that Mr Preston's Statement acknowledged the impact on his revised opinion of legal issues pertaining to SREP31, being a matter ultimately beyond his expertise. Moreover, it was a matter that could be legitimately raised by the Respondent in its final address (as indeed it was) without the need to rely upon valuation opinion evidence.
34 As will presently be seen, I am of the firm opinion that the key to first appreciating, and thence adjudicating upon, the grossly disparate competing valuations contained in the Valuer's Joint Statement (Exhibit R) lies in the true appreciation of the effect of the WSO upon the value of the Applicants' retained land.
35 Thus, in their competing valuations based upon the application of SREP31, Mr Dobrow, employing the before and after valuation method, estimates a decrease of 45 percent in the value of the retained land whereas Mr Preston estimates an increase or enhancement of 27 percent in the value of the retained land. The resultant differences in value of the retained land as reflected in the Valuers' respective "after" valuations are $8.141 million (Dobrow) and $15.624 million (Preston). (The radical differences in their "after" valuations may be contrasted with the similarity in their "before" valuations of $18.96 million (Dobrow) and $15.8 million (Preston).
36 In Mr Dobrow's revised valuation (Exhibit 37) prepared in the light of the traffic engineering evidence, he estimated a decrease of 80 percent in the value of the retained land resulting in a value of $2.94 million.
37 These radically competing views on the effect of the WSO on the value of the Applicants' retained land are to be evaluated not only as competing valuation opinions but in the light of the evidence concerning the WSO and the total loss of access by virtue of road frontage and its effect upon the Applicants' retained land, including the provision by the Respondent of the alternative access provided from Wallgrove Road under the WSO (which in this section is to be constructed on a raised embankment some 6 to 7 metres high). This evidence was principally given by the parties' traffic engineers (which I shall presently consider).
38 In its final submissions (both written and oral), the Respondent submitted that the Court should determine market value by reference to the fact that SREP31 applied to the Applicants' land and without regard to any existing use entitlement (because the Respondent, having put that entitlement in issue, the Applicants had failed to establish the facts necessary to found such an entitlement in terms of the Environmental Planning and Assessment Act 1979). Upon the basis of this submission, the Respondent urged the Court to adopt Mr Preston's valuation opinion in decided preference to Mr Dobrow's competing opinion as those opinions were outlined in the Valuers' Joint Statement (Exhibit R) and further explained in their concurrent evidence and further revised in their final Statements (being Exhibits 37 and FF respectively). Mr Preston's before and after valuation exercises yielded a difference between the two values of $59,360 and this amount simultaneously reflected and represented (i) the market value of the compulsorily acquired land; and (ii) the enhancement to the retained lands by virtue of the WSO.
39 In so submitting, Counsel for the Respondent advanced a sustained attack upon Mr Dobrow's competing valuation yielded by his before and after valuation exercise which in Exhibit R was for the sum of $10,822,050 but which was increased to $16,023,097 in Exhibit 37 by way of his revised valuation in response to the traffic engineering evidence.
40 The Respondent submitted that "Mr Dobrow's approach is wholly flawed in valuation law and methodology" (par 42 of the Respondent's written submissions). Although the Respondent conceded (par 59 of Respondent's written submissions) that Mr Preston's valuation "methodology was open to some of the same criticisms" that the Respondent had made in respect of Mr Dobrow's valuation methodology, the Respondent nonetheless submitted that the Court would accept Mr Preston's valuation opinion.
41 Before adjudicating upon these disputed valuation matters, it is first necessary to describe the Applicants' lands in their physical and planning contexts (including the effect of the WSO on the retained land).
B. THE APPLICANTS' LANDS IN THEIR PLANNING AND PHYSICAL CONTEXTS
(i) Planning Context
42 As I have already held, all of the Applicants' lands at the date of compulsory acquisition were subject to SREP31 (which came into force on 8 June 2001).
43 As earlier noted, SREP31 applies to some 5,400 hectares having a linear corridor dimension of some 26 kilometres measured from Quakers Hill in the north to Leppington in the south and spanning the local government areas of Blacktown, Fairfield and Liverpool. When it came into force, the accompanying explanatory material noted that more than 90 percent of the Western Sydney Regional Parklands were in public ownership. This means that some 540 hectares of privately owned lands were identified for "parkland" purposes.
44 That explanatory material included the following statement concerning the function of the parklands and of the SREP: -
The parklands are a major resource for Western Sydney as they provide a diverse range of recreational opportunities and play a major role in the conservation of natural systems. They are part of an extensive system of open space lands that have been, or are being, acquired by government. Other major open space corridors are located along South and Ropes Creeks and the Georges River.
SREP31 will promote recreation, biodiversity and heritage conservation and landscape protection as the primary roles for the Western Sydney Regional Parklands.
This SREP provides a framework within which all development proposals can be considered. It aims to streamline the planning process for the parklands by introducing a single environmental planning instrument with consistent controls. It incorporates criteria for development which will help the parklands meet the needs of residents for open space and recreational areas.
45 The express aims of SREP31 are stated in cl 3 as follows:
This plan aims:
(a) to promote the consistent planning and management of the Regional Parklands by replacing the existing planning controls with a single regional environmental plan, and
(b) to strengthen the perception of the Regional Parklands as a unit that is a focus for the conservation of natural systems and a diverse range of recreational uses in Western Sydney, and
(c) to enhance the ability of the Regional Parklands to meet the needs of the residents of Sydney for:
· High quality open space, and
· A range of recreational opportunities, and
· A visual and physical break between areas of urban development, and
(d) to maintain, enhance and rehabilitate the natural systems of the Regional Parklands, particularly those that include threatened species, populations or ecological communities, or their habitats, and
(e) to preserve, care for and manage the cultural assets of the Regional Parklands, and
(f) to improve management of the Regional Parklands by all those responsible for land within the Regional Parklands, and
(g) to protect the quality of the water in Prospect Reservoir, its Upper Canal and other bulk water supply infrastructure.
46 Clause 4 of SREP31 provides that a number of identified environmental planning instruments (including Blacktown Local Environmental Plan 1988) do not apply to the land to which SREP31 applies.
47 Clause 5 nominates as the relevant "consent authority" the council of the local government area in which the land to be developed is situated.
48 Clause 7 imposes development controls on land, the subject of SREP31. Subclause (1) identifies the following "objectives":-
(1) Objectives
The objectives for development in the Regional Parklands are to:
(a) support the aims of this plan, and
(b) implement development control plans providing more detailed provisions for land in the Regional Parklands, and
(c) conserve and enhance the biodiversity of the region through retention of remnant vegetation, restoration of vegetation and revegetation, and
(d) encourage ecologically sustainable development by ensuring that all development has minimal adverse environmental impact.
49 Subclause (2) specifies a limited range of development that may be carried out without development consent.
50 Subclause (3) specifies the following development that may be carried out with development consent:
(3) Development that requires consent
The following, if it is not allowed by subclause (2) to be carried out without consent, may be carried out only with consent:
Development for the purpose of the following:
Agriculture; clearing; community facilities; dams; detention basins; drains; dwelling-houses; grazing; home occupations; landfilling; landscaping; occasional community events; public utility undertakings; recreation areas; revegetation; roads.
51 Subclause (4) specifies as "prohibited development" "development that is not allowed by this clause to be carried out without consent or only with consent".
52 In relation to the permitted purpose of development "agriculture", it should be noted that the Dictionary to SREP31 defines that term (much more restrictively than is normally employed by planning instruments) as follows:
Agriculture means grazing, whether on improved or natural pastures, and cultivation of commercial crops of plants.
53 Clause 8 stipulates additional development that may be carried out on lands specified in Schedule 2 to SREP31 "despite clause 7".
54 Schedule 2 includes lands situate in very close proximity to the Applicants' land, namely the Eastern Creek Waste Management Centre off Wallgrove Road and the Austral Bricks site off Wallgrove Road "for extractive industry, brick making and ancillary public display and sales, waste facility".
55 Clause 12 enumerates a number of matters that are to be taken into consideration in deciding whether to grant consent.
56 Clause 14 confers a concurrence role upon the Director-General in the following terms:
Concurrence
(1) Consent may be granted for the following development only with the concurrence of the Director-General:
(a) development allowed to be carried out by clause 8 (additional uses of land),
(b) development of any land to which clause 19 (acquisition of land) applies.
(2) In deciding whether concurrence should be granted for consent for development allowed to be carried out by clause 8, the Director-General must take into consideration the aims of this plan set out in clause 3(b) and (c).
(3) In deciding whether concurrence should be granted for consent for any development of land to which clause 19 applies, the Director-General must take into consideration:
(a) the imminence of acquisition, and
(b) the effect of carrying out the proposed development on acquisition costs, and
(c) the effect of carrying out the proposed development on the natural systems of the regional Parklands, and
(d) the cost of restoring those systems after the development has been carried out.
(4) This clause does not require concurrence for consent granted by the Minister.
57 Finally, cl 19 contains provision for the acquisition by the Corporation (created by the Environmental Planning and Assessment Act, s 8(1)) of lands "identified by shading on Sheet 2 of the Map" (which includes the Applicants' lands (both acquired and retained)) by providing as follows:
Acquisition of land
(1) The owner of any land which is identified by shading on Sheet 2 of the map can, by notice in writing, require the Corporation to acquire the land.
(2) On receipt of such a notice, the Corporation must acquire the land to which the notice relates, subject to subclause (3).
(3) The Corporation is required to acquire land to which a notice under subclause (1) relates only when the land is included in a priority program for acquisition as determined by the Corporation or the Corporation is of the opinion that the owner of the land will suffer hardship if the land is not acquired.
(ii) Physical context
58 Immediately prior to the compulsory acquisition, the Applicants' lands comprised an aggregated area of 10.33 hectares rectangular in shape with a frontage to Wallgrove Road of some 390 metres and a depth ranging between some 260-280 metres. The aggregated area was used for the single purpose of poultry egg production, with the several poultry sheds/buildings set well back from Wallgrove Road. Situated within that set-back were two dwelling-houses occupied by various members of the Damjanovic family.
59 Wallgrove Road was a classified State Road providing the key north-south road link in the area with a daily traffic volume of some 31,400 vehicles (according to 2002 records) typically providing one traffic lane in each direction with additional traffic lanes provided at selected locations to accommodate vehicular turning movements.
60 In the vicinity of the Applicants' lands which are situate some 3 kilometres south of the M4 Motorway (and being one kilometre south of the former Wonderland Sydney Theme Park and 1-2 kilometres to the west of the Eastern Creek Raceway and Prospect Reservoir), the key traffic control features on Wallgrove Road included -
· an 80 kph speed limit;
· a channelised "seagull" type intersection providing access to the Eastern Creek Waste Management Centre situate immediately to the north of the Applicants' land;
· a "type C" intersection incorporating left and right turn lanes into the access road to the sites of Austral Bricks and Collex Waste Services which sites are situate immediately south of the Applicants' land (the southern boundary of which adjoins Sydney Water's main water supply line).
61 Situate immediately to the east of the Applicants' land is the "UR-3R" facility providing hi-tech waste recycling facilities. Situate further to the east is an exhausted open pit from which clay/slate were previously extracted, now operated by Collex for the receipt of land fill waste.
62 Immediately adjoining to the south and south-east is the Austral Brick and Tile establishment used for the extraction of clay/slate and the manufacture and sale of bricks etc.
63 Situate on the western side of Wallgrove Road immediately opposite the sites just described (which are all situated on the eastern side of the road) is an area of some 650 hectares located between the M4 Motorway and the Sydney Water water supply pipeline and in course of, or available for, being developed for industrial/employment uses pursuant to SEPP59.
64 The Applicants' lands are generally cleared of trees and vegetation and the landform is of gently sloping land with a high point of RL 60 along the southern boundary sloping to RL 56 at the northern boundary. There is also a gentle cross fall on the east/west axis.
65 Prior to the compulsory acquisition, the Applicants' lands enjoyed vehicular access direct to Wallgrove Road via three two-way driveways separated at evenly spaced intervals along the 390 m road frontage and intersecting with Wallgrove Road.
66 The physical effect of the compulsory acquisition on access to the Applicants' lands must now be noted. The most obvious effect is the entire loss of direct access between the retained land and the WSO by virtue of the physical fact that the WSO as it abuts the retained land is built on an elevated eastern embankment some 6 or 7 metres higher than the retained land.
67 Since the WSO constitutes the only road frontage of the retained lands, the result of the compulsory acquisition is to leave the retained land without any usable road frontage. However, the Respondent has provided alternative access to the retained land from Wallgrove Road during the construction process for the WSO which access the parties have jointly asked the Court to regard as providing the final and permanent alternative access arrangement for the retained land.
68 That access arrangement is shown on Figure 7 of Mr Varga's Statement (Exhibit 19), a copy of which is annexed hereto and marked "C".
69 It will be noted that the alternative access is the dog-leg configuration which utilises Austral Bricks' access road off Wallgrove Road and which underpasses the elevated WSO before traversing Sydney Water owned land adjoining the Applicants' land.
70 The dog-legged shaped access arrangement follows the configuration of the nearest poultry shed/building erected on the retained land (the outline of which is shown on figure 7 and which is, at its south-western corner virtually contiguous (with only 2 metre set back) with the WSO which at that point is elevated at a height slightly greater than the roof level of the shed/building.
71 It is obvious that the alternative access arrangement has been provided so that the existing poultry egg production business conducted on the Applicants' land might be continued during the construction phase of the WSO and after the WSO becomes an operational road (estimated for 2007 upon the completion of the entire project). The evidence concerning the future continuance of the poultry egg production business beyond the commencement of the operational use of the WSO suggests, at least from a present perspective, that future is very problematical upon two separate bases.
72 Firstly, there is the question whether the poultry egg/production business can be effectively continued once the WSO becomes an operational major road. This question was the subject of extensive expert veterinary evidence where the opinions differ on the viability of the business on account of its extreme proximity to the location of the WSO, when operating as a major road, particularly in terms of considerations of biosecurity (controlling the transmission of disease in the poultry).
73 The other problematical aspect for the future continuance of the existing poultry egg production business concerns the agreed fact (as reflected in the Joint Statement of the Veterinarian Experts Exhibit 12) that the existing layer cages in the poultry sheds do not comply with the relevant Minimum Acceptable Standards contained in the "Model Code of Practice for the Welfare of Animals Domestic Poultry" 4th ed (2001) (Exhibit M) which require by 1 January 2008 either decommissioning of the operation or modifications of the infrastructure to meet applicable standards. It is to be noted that these two problematical issues share a common sense of future timing or fulfilment - namely 2007/2008 - so that the existing business use may in the intervening period be continued by the Applicants (as it currently is). However, the Applicants consider that it will be necessary to relocate the business and to this end have purchased a larger property elsewhere.
74 However, as I have earlier noted, these disputed questions only require adjudication in the event that the existing use value of the compulsorily acquired land, together with loss attributable to disturbance, exceed the value based upon the application of SREP31. This is particularly so in the case of the disturbance loss incurred in the relocation to alternative premises of the poultry egg production business that has been claimed by the Applicants in the sum of $3.7 million because of the operation of the Just Terms Act, s 61 which provides as follows:
61 Special provision relating to market value assessed on potential of land
If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:
(a) any financial advantage that would necessarily have been forgone in realising that potential, and
(b) any financial loss that would necessarily have been incurred in realising that potential.
75 The effect of s 61 (including a comparison of its effect with the judicially developed law of "disturbance" compensation) was extensively considered and applied in my judgment in Peter Croke Holdings Pty Ltd v Roads and Traffic Authority (1998) 101 LGERA 30 at 34-46.
76 The foregoing digression concerning the existing poultry egg production use of the retained land has been prompted by my observation of the obvious fact that the alternative access provided to the Applicants' retained land was intended and was designed to facilitate the continuance on the retained land of the existing poultry egg production business conducted by the Applicants. In passing, I should note that in earlier negotiations between the parties, the purchase by the Respondent of all of the Applicants' lands was contemplated. (It was in that context that the Applicants decided to purchase the alternative property.)
77 But since the Applicants' highest claim to compensation is based not upon the continuance of the existing use, but upon the potentiality for a higher use, the question that arises in the context of the Applicants' claim to compensation for that higher amount is what is the effect of the alternative access arrangement on the value of the retained land, based not upon its existing use value, but upon a higher use.
78 In this respect Mr Varga's Statement (Exhibit 19) reflecting the planning advice obtained by the Applicants in this case, considers the effect of the alternative access arrangement upon the "potential future industrial uses" of the retained land and expresses the following opinions:
It is clear from these manoeuvring diagrams that the newly constructed access road to the Damjanovic family land is not suitable for potential future industrial uses which are likely to generate significantly higher truck traffic volumes than the current poultry farm operations.
The loss of direct street frontage to Wallgrove Road preclude the provision of a more suitable access road, such as the type of access road which has been provided for the Eastern Creek Waste Management Centre on the adjoining site to the north, or for the Collex Waste and Austral Bricks operations on the adjoining site to the south. In effect, the only form of vehicular access which could now be provided to service the Damjanovic family land constitutes a rear lane access, with no exposure to passing traffic on Wallgrove Road.
The loss of exposure to Wallgrove Road is important because:
· It is this road which potential customers will be using to visit future industrial premises on the site
· Direct exposure to an arterial route being used by potential customers (ie. Wallgrove Road, not the Motorway) has the potential to attract additional passing trade, thereby enhancing the value of the site
· The lack of exposure to an arterial route will limit the types of industrial uses which may be developed on the Damjanovic family land
· It will no longer be possible to make an entry statement in Wallgrove Road at the entrance to a potential future industrial estate on the site, as all access to the site is now restricted to a rear lane of access road which can only be approached via another access road being used by an unrelated property located to the south of the subject site.
79 Mr Varga's opinions on these matters were to some extent countered by opposing expert opinions adduced by the Respondent, but the areas in dispute were substantially resolved by the process of joint conferencing of the traffic engineering experts which yielded two Joint Statements (Exhibits 34 and 35).
80 Exhibit 34 is a joint statement prepared by Mr Varga and Mr Kevin Burke, the Respondent's Valuations and Acquisitions Manager who swore an affidavit (Exhibit T). In the Joint Statement, Mr Burke expresses the opinion that Mr Varga's consideration of "future industrial use" is hypothetical, "as the zoning of the owners' remaining land is for parkland and as such, the access needs to be considered as suitable or unsuitable for existing use as a rural holding".
81 Mr Burke's opinion was shared by Mr Butler, the Respondent's Project Manager for the WSO project when he makes the following comments in his affidavit (Exhibit X):
11. Mr Varga bases much of his arguments in all of his Affidavit on the traffic requirements for a future industrial development on this site. My understanding is that the current zoning does not permit future redevelopment of this type. The land is to be incorporated within the Western Sydney Regional Park.
12. Regarding potential use of the site as a service centre, my understanding is that the current zoning would not permit this land use. Even if the zoning had been favourable, there is not sufficient land available within the Damjanovic property to provide a motorway service centre at this location with the necessary deceleration and acceleration lanes. The claim, that the opportunity to provide a service centre has been lost as the Damjanovic property no longer has direct access to the M7, is not valid. At no stage did the M7 proposal include direct access to the Damjanovic property. Access to private properties is normally denied across motorway boundaries.
82 In the Joint Statement Exhibit 35 of Mr Varga, Mr Butler and Mr Sofrevski (an engineering consultant advising the Respondent on the M7 project), there is recorded agreement between Mr Varga and Mr Sofrevski on the following matters:
(i) the Type C non-signalised intersection (painted seagull arrangement) provided at the Wallgrove Road junction with the Austral Bricks access road provides a satisfactory form of vehicular access to serve a substantial industrial property generating more than 30 vehicle movements per hour.
(ii) the new intersection provided on the Austral Bricks access road to serve the Damjanovic property satisfies the Standards Australia requirements for providing vehicular access to a low usage driveway (ie generating less than 30 vehicle movements per hour).
(ii) the intersection of the Austral Brick access road and the new access road serving the Damjanovic land is not suited to potential future industrial uses which may generate more than 30 vehicle movements per hour (Paragraph 3.2.2 of AS2890.1) including articulated vehicles.
83 Notwithstanding these agreements in the Joint Statements, a number of subsidiary issues remained in dispute between the traffic experts concerning the proposed alternative access arrangement.
84 Firstly, there was the issue of comparing the alternative access arrangements with the existing access arrangements before the date of compulsory acquisition. Upon reflection, it appears to me to be clear that the competing opinions of Mr Butler and Mr Varga were addressing the access arrangements from the perspective of the continuation of the existing poultry egg production business. As such, the competing opinions (expressed in Exhibits X and 32 respectively) are not directly relevant to the question of the value of the Applicants' lands upon the basis that the lands may be developed for a higher use than the existing use of them. Viewed from the perspective of such a higher use of the Applicants' lands (for example an industrial use involving more than 30 vehicle movements per hour), there can be no meaningful comparison of previous and existing access arrangements since the alternative access arrangement is not physically capable of reasonably supporting such a development of the retained land. Nor was it designed and provided for that purpose. Thus, the relevant question is not one of comparing the access arrangements. Rather, it is whether a higher use of the Applicants' lands as they existed prior to the date of compulsory acquisition was feasible with direct access from Wallgrove Road. On this question, there is no dispute in the traffic engineering evidence, it being commonly accepted (on the assumption that such development was legally permissible) that a proper intersectional treatment would be required of the development site at its frontage with Wallgrove Road similar to the "seagull" type intersection that exists at the adjoining Eastern Creek Waste Management Centre.
85 Another disputed issue concerns the question of a comparison between exposure of the Applicants' land to passing traffic - on the one hand when it had frontage to Wallgrove Road and on the other after the WSO becomes operational. Mr Varga was of the opinion that the potential for increased exposure from the anticipated higher volume of traffic travelling on the elevated WSO (compared with the lesser volume of traffic travelling on Wallgrove Road prior to the date of compulsory acquisition) would be limited because of the complexity of the drivers' task caused by the close proximity to the Applicants' land of the provision on the WSO of on/off ramps to Wallgrove Road and the consequent merge/weave manoeuvres that would be required for vehicles travelling on the Motorway. He also considered that the proposed landscaping of the batter to the Motorway adjacent to the Applicants' retained lands would further reduce exposure. Mr Sofreski and Mr Butler did not disagree with Mr Vargas's opinion concerning the complexity of the driving task but thought that the increased traffic volumes on the WSO roadway (in comparison to traffic volumes previously experienced on Wallgrove Road) would result in a net increased exposure of the Applicants' lands to passing traffic.
86 However, again these disputed opinions (which are inherently conjectural) may not be directly relevant because of the absence of comparability in the development potential of the Applicants' lands in the "before" and "after" scenarios in view of the agreement between the traffic engineers that with the alternative access arrangement in place is physically inadequate and unsuitable for any industrial type development which generates more than 30 vehicle movements per hour.
87 Accordingly, what appeared to be differences of opinion on these subsidiary issues really are of little or no consequence in view of the agreement between the traffic engineers on the principal issue, namely that the alternative access arrangement was not designed for, and is not suitable for, any potential higher use of the Applicants' land other than for its existing use.
88 Having considered the planning and physical contexts of the Applicants' lands (both the compulsorily acquired and retained lands), it is now convenient to consider the competing valuation evidence and thereafter to determine the amount of compensation payable in the present case.
C. THE VALUATION EVIDENCE
89 I have earlier summarised the gist of the competing valuations that were proffered on the basis (as determined in the course of the hearing) that SREP31 was the governing planning control. It is now necessary to examine more closely these competing valuations, which, notwithstanding the vastly disparate results $16 million (Dobrow) and $59,000 (Preston) surprisingly have much in common.
90 Valuation matters in common include the following:
(i) the before and after valuation methodology is employed to capture the true measure of compensation (eg market value of the compulsorily acquired land and any increase or decrease in the value of the retained land);
(ii) the same two sales (in Trivet Street, Wetherill Park) are adopted as the most comparable sales and are similarly analysed and applied to the subject lands by direct comparison;
(iii) the before valuations adopt similar rates per square metre ($180 (Dobrow) and $150 (Preston) resulting in reasonably comparable " before valuations " - $18.96 million (Dobrow) and $15.8 million (Preston)).
91 But, as I have earlier indicated, the vast disparity in the valuations is created by their "after valuations" of $2.94 million (Dobrow) and $15.45 million (Preston).
92 The "after valuation" is intended to capture and reflect the value of the retained land following the compulsory acquisition and in recognition of the effect on value of the carrying out of the proposed public work, namely the WSO.
93 As earlier noted, Mr Dobrow considers that the WSO will radically decrease the value of the retained land because the alternative access arrangement "has removed any potential for the property to be used for industrial purposes" (Exhibit 37) thereby reducing the value of the land to that of "a rural use with limited access" (Exhibit 37).
94 His "before" and "after" valuations (as expressed in Exhibit 37) are as follows:
A. Land Value Before Acquisition
105, 349 square metres at $180 per
square metre $18,962,820
B. Land Value After Acquisition
8.223 hectares at $650,000 per hectare less 45
percent due to limited access and noise, fumes, dust,
risk in obtaining development consent,
visual effects etc $292.50 per hectare $2,939,723
Difference between "before"
and "after" Valuations $16,023.097
95 Mr Preston's competing opinion (as expressed in Exhibit Q and repeated in the Valuers' Joint Statement, Exhibit R) was that the retained land would have a higher value after the WSO was completed. In his final Report (Exhibit FF) in response to the Court's giving the opportunity for the Valuers to revise their valuation opinion in the light of the traffic engineering evidence, including the Joint Statements (Exhibits 34 and 35), Mr Preston, although having no reason, on the basis of the traffic engineers' evidence, to amend his opinion, proffered several comments which included the following:
I also note that Mr Varga and Mr Sofrevski consider that a potential future industrial usage, generating articulated vehicle traffic would require provision of an access arrangement as per Annexure G to their Joint Statement. Whether this may be accommodated within the proposed easement access lands or not is a matter for the Court. I also note that this comment would, in my opinion, only apply to valuation 3 required by the Court and not valuation 2 on an existing use basis or valuation 1 on an SREP31 basis. I do not believe that the poultry farm would generate more than 30 vehicle movements per hour.
…………….
Notwithstanding the comments within the Joint Traffic report, I strongly disagree with Mr Dobrow's assertions during these proceedings that the matter of access to the site would result in a diminution of value of the remaining lands in the after case by between 45% and 55% depending on the varying valuations undertaken by Mr Dobrow.
I believe those reductions in value were predicated upon the two dog legs that traverse the chicken shed should it remain. I re-iterate my comment that the impact of this is significantly reduced in a situation where the chicken shed is removed from the site along the access dog leg in any of the valuation scenarios or in any assessment of compensation.
96 As I have earlier noted, the Respondent's Counsel, in their final written submissions, severely criticised Mr Dobrow's valuation as being "wholly flawed in valuation principle and methodology" and I must presently consider these submissions. But for the present, I propose to evaluate the competing valuation opinions of Mr Dobrow and Mr Preston in the light of all other relevant evidence.
97 I have already noted that the fundamental difference is found in the Valuers' respective "after valuations" and the vast disparity in those valuations is explained by the Valuers' radically divergent opinions as to the effect on the Applicants' retained lands of the WSO and in particular, the loss to that land of usable road frontage to the WSO compared with the usable frontage to Wallgrove Road formerly enjoyed and exploited by the Applicants. In this respect, the "after valuations" are intended to capture the head of compensation enumerated in the Just Terms Act, s 55(f), namely:
(f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.
98 In my judgment and for the reasons which will presently be stated, Mr Dobrow's opinion that the Applicants' retained land has suffered a decrease in value by reason of the carrying out of the WSO is clearly to be preferred to Mr Preston's opinion that the value of the retained land has been increased by the carrying out of the WSO, given the common premise of their respective "before valuations", namely that the value of the land is to be estimated upon the assumption that an industrial type use is available as the highest and best use of the land.
99 The rationale for this fundamental assumption was explained by Mr Preston in the following terms in his Supplementary Statement (Exhibit Q) and which was incorporated in the Valuers' Joint Statement (Exhibit R):
To consider the value of the subject property before and after the acquisition based on the SREP31 Sales Evidence I have placed most reliance on the SREP31 sales that are based on a use similar to what I believe to be the Highest and Best Use would be for the subject land.
The sales, which I believe are most comparable, are that of the two sales in Trivet Street referenced as Sale Numbers 4 & 5 in the schedule above.
Other SREP31 sales appear to be based on other underlying uses.
I have been mindful of fact that if DIPNR were to acquire the subject property for purposes set out in SREP31 I believe that the price would be formulated on the basis of the underlying use of the land or the most likely alternative use as it considered within the provision of Part 2 - Control and Assessment of Development with SREP31. I therefore believe that it is inappropriate to adopt a figure to apply to the subject land from the available sales evidence, prices of which appear to have been formulated based of varying different uses.
I believe that the land would have a higher value after the M7 is completed and do not believe that the value should be reduced based on access.
In considering the valuation on this basis I have adopted an industrial type use as the highest and best use and assumed that barriers would not be constructed along the M7 so that exposure to the site would be maximised. I have also been mindful of the neighbouring uses and their impact on value of the subject both before and after the acquisition.
100 The two Trivet Street sales referred to by Mr Preston were sales to the statutory corporation created by the Environmental Planning and Assessment Act 1979, s 8 of adjoining lands situate at Wetherill Park that were governed by SREP31. The first of those sales (Nos 15-23) occurred on 10 December 2003 for a contract price of $2.75 million for 1.9 ha (showing an analysed rate of $141 per square metre and which adjusted for time for comparison with the subject property increases to $150 per square metre) and the second sale (Nos 5-13) occurred on 20 April 2004 for a contract price of $4 million for 2.43 hectares (showing an analysed rate of $161 per square metre). Both Valuers analysed each sale on the basis of an underlying zoning or use for industrial purposes. The second sale occurred soon after the date of compulsory acquisition of the Applicants' land and needs no adjustment for time for purposes of comparison.
101 The sale properties are located in close proximity to the existing industrial zone in the Wetherill Park Estate and are some 5 kilometres distant from the Applicants' lands.
102 The sale properties were both steeply sloping lands and according to engineering advice obtained by the Department of Infrastructure, Planning and Natural Resources (DIPNR) (Exhibit EE) a few months prior to the contract for the first sale (Nos 15-23 Trivet Street) an estimated development cost of $923,000 for earthworks would be required to achieve a useable site area of 14,500 square metres or an estimated development cost of $1.6 million would be required to render the whole of the area (1.9 hectares) fully useable for industrial development.
103 It may readily be inferred that this advice was taken into consideration by DIPNR in striking the price to purchase the sale property.
104 It is, I think, important to emphasise the fact that the purchase of these sale properties was for the purposes of SREP31 and not for the purpose of the purchaser developing the sale properties for industrial purposes. Nonetheless, industrial land values formed the basis of the purchase price for the two sale properties because an industrial type use or zoning was deemed to be the underlying zoning of the sale properties. The concept of "underlying zoning" was obviously adopted by the contracting parties because it was commonly recognised that the planning controls imposed by SREP31 were directly influenced by the express objective to bring into public ownership all privately owned lands identified by SREP31 as forming part of the proposed Regional Park. Resort to the concept of "underlying" zoning in such circumstances is conventionally undertaken to ensure that compensation for the acquisition of lands required for a public purpose reflects "market value" unaffected by the public purpose cf the following objects of the Just Terms Act enumerated in s 3(1) -
1) The objects of this Act are:
(a) to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and
(b) to ensure compensation on just terms for the owners of land that is acquired by an authority of the State when the land is not available for public sale, and
(c) to establish new procedures for the compulsory acquisition of land by authorities of the State to simplify and expedite the acquisition process, and
(d) to require an authority of the State to acquire land designated for acquisition for a public purpose where hardship is demonstrated, and
(e) to encourage the acquisition of land by agreement instead of compulsory process.
105 It is to be noted that in their Joint Report (Exhibit R), the Valuers presented and analysed 7 sales of lands governed by SREP31 and their analysis of each sale ascribed an underlying zoning to the sale property but it was only the two Trivet Street sales that were ascribed an underlying "industrial" zoning.
106 In my judgment, the major premise commonly adopted by the Valuers in their "before" valuations, namely that the Trivet Street sales were the most comparable of all the collected and analysed sales of lands governed by SREP31 and could be applied by direct comparison to the Applicants' land, is a sound valuation premise.
107 Implicit in that premise, is the Valuers' common recognition that the underlying zoning of the Applicants' lands that is achieved by setting aside the effect on value of SREP31 (for the conventional reasons referred to) would be for an industrial type zoning or use. Indeed, this recognition was expressly stated in the passage that I have quoted from Mr Preston's supplementary Statement (Exhibit Q). In my judgment, this too is a sound valuation premise on the facts of the present case which includes a discernible market value of lands governed by SREP31 even though the only realistic purchaser of such lands is the statutory corporation created by the EP& A Act, s 8 and even though the contract prices reflected different values depending upon the underlying zoning attributed to each of the sale properties.
108 So far as concerns the application of the sales evidence provided by the Trivet Street sales by way of direct comparison with the Applicants' land, I think Mr Dobrow's adjusted rate of $180 per square metre is more appropriate than Mr Preston's rate of $150 per square metre because it aptly reflects the superiority of the Applicants' land in terms of location, shape and topography compared with the Trivet Street sale properties (His adjusted rate also includes an unquantified adjustment for size differences between the Applicants' land and the sale properties).
109 His overall upwards adjustment of some 10 percent on the analysed rates per square metre derived from the comparable sales is modest and more than justifiable, given the locational, configuration and topographical advantages of the subject property over the sale properties. In particular, the topographical advantage of the subject property is very significant given the considerable development cost estimates obtained by DIPNR prior to purchasing Nos 15-23 Trivet Street for those steeply sloping lands to be rendered available for industrial development.
110 Accordingly, I would confidently adopt Mr Dobrow's "before valuation" estimate of $18.96 million in preference to Mr Preston's competing estimate of $15.8 million.
111 Having adopted the "Before Valuation" based upon an underlying zoning of the Applicants' lands for industrial purposes, the question of determining the "after valuation" is in my judgment crucially dependent upon a proper assessment of the effect of the WSO on the Applicants' retained lands.
112 I have already found (without attempting to quantify the degree or amount involved) that the effect of the WSO on the Applicants' retained land will be to appreciably decrease its value (as opined by Mr Dobrow) rather than to increase its value (as opined by Mr Preston).
113 Why is this so? Fundamentally, it is because of the entire loss by the retained lands of usable street frontage (by which I mean street frontage providing direct access between the land and its highest development potential and road) compared with the situation prior to the date of compulsory acquisition when the Applicants' lands enjoyed a usable street frontage of 390 metres to Wallgrove Road, including three separate driveways directly connecting the Applicants' land to Wallgrove Road. This entire loss of usable road frontage is created both by the physical and legal conditions of the WSO.
114 Physically, as it abuts the Applicants' retained land, the WSO is constructed on a raised embankment some 6 or 7 metres higher than the retained land so that direct access between the two is physically impossible. Legally, it can be expected that the status to be accorded to the WSO under the Roads Act 1993 will involve legal restrictions on access to it from adjacent lands: vide Part 5 of the Roads Act 1993.
115 Since the WSO constitutes the only road frontage to the retained land, it will be absolutely denied the direct road frontage access that was available to, and enjoyed by, the Applicants' lands immediately prior to the compulsory acquisition.
116 The result is that access to the retained land will only be available via the alternative access arrangement that has been provided by the Respondent, as I have earlier described it. The undisputed traffic engineering evidence is that this alternative access arrangement is not suited to any potential industrial use which generates more than 30 vehicle movements per hour.
117 Adopting this undisputed traffic engineering opinion, Mr Dobrow has concluded that by virtue of the limitations inherent in the alternative access arrangement, the retained land is not suited for industrial development and that in consequence of the absence of adequate access, the potential for industrial usage of the retained land is totally forfeited or destroyed. The alternative access arrangement is adequate for the existing use of the retained land or some other rural uses which have low traffic generation qualities (ie less than 30 vehicle movements per hour) and accordingly, Mr Dobrow's "after valuation" is based upon his existing use value (or some other rural use) of the retained land.
118 Mr Preston's competing opinion that the effect of the WSO would be to significantly enhance the value of the retained land was maintained in his final Statement (Exhibit FF) "notwithstanding" the Joint Statement of the Traffic Engineers. In that Statement, he made the observation that what the traffic engineers had agreed concerning potential future industrial uses was "not applicable" to the valuation based upon the application of SREP31.
119 This observation was not explained or amplified (the Valuers did not give further oral testimony after they had respectively prepared their "Final" Statements in the case) but in my opinion, it exposes a fundamental flaw in Mr Preston's "after" valuation. That valuation advances an enhanced value on his "before valuation" which was based upon an underlying industrial zoning of the Applicants' land, on the grounds that the WSO would render the Applicants' retained lands more accessible and exposed to greater volumes of vehicular traffic anticipated to be utilising the WSO. But that opinion of an enhanced value of the retained land must, both as a matter of logic and valuation principle, surely depend upon the continuance of the "underlying" industrial zoning of the retained land (that had been applied in his "before" valuation). Yet that is the very quality (reflecting potentiality for a higher use) that is totally absent from the retained land by virtue of the inadequacy of the alternative access arrangement that has been provided to it by the Respondent which access obviously was intended and designed to facilitate the continuance of the poultry egg production business conducted on the retained land and not some higher industrial use involving much greater traffic generating qualities. In other words, the fundamental flaw in Mr Preston's "after" valuation approach is his failure to appreciate that the industrial use potentiality of the Applicants' land attributed in the "before" valuation is entirely absent in the "after" valuation because of the incapacity of the alternative access arrangement to cater for industrial development generating more than 30 vehicle movements per hour. What is somewhat baffling in this respect is Mr Preston's opinion that the accepted inadequacy of the alternative access arrangement is "not applicable to" the valuation based upon SREP31.
120 In deference to Mr Preston's opinion that the traffic engineers agreed position concerning the incapacity of the alternative access arrangement to support potential industrial uses of the retained land was not applicable to the SREP31 valuation basis for the retained land, I have given anxious consideration as to how this opinion could be reasonably held. It would appear that he has assumed that the "underlying" industrial zoning attributed to the Applicants' land in the "before" valuation would continue to be attributed to the retained land in the "after" valuation, notwithstanding the radically changed access arrangements brought about by virtue of the WSO. It may be that he reasoned something along the following lines -
Since the underlying zoning concept is wholly hypothetical, having adopted the hypothesis of an " industrial " underlying zoning, in the "before" valuation, there is no reason (including the radical differences in access arrangements actually available to the land) for not sustaining that hypothesis into the " after " valuation.
121 But whatever be the reason for his opinion, in my judgment, the demonstrable flaw is his failure to recognise the effect of the WSO on the sustainability to the retained land of the underlying "industrial" zoning which was attributed to the Applicants' land in the "before" valuation by virtue of the inadequacy of the alternative access arrangement.
122 Although the concept of "underlying" zoning is a hypothetical concept, it is not devoid of a rational and reasonable basis which is neither speculative nor arbitrary. But what is hypothetical is the underlying zoning, not the actual physical condition of the land to which the hypothetical underlying zoning is attributed.
123 I have earlier quoted Mr Preston's own reasoning for attributing an underlying "industrial" zoning to the Applicants' land in his "before" valuation, which I have held to be sound and reasonable in terms of valuation principle. Whereas his reasoning does not single out the Wallgrove Road frontage of the Applicants' land as a key attribute or component of its potentiality for industrial development, the actual physical features and advantages of the land would necessarily have to be taken into consideration in the determination of the hypothetical underlying zoning of the land. It is just as obvious that the Wallgrove Street frontage of the Applicants' land is conducive of its potentiality for industrial development as it is obvious that the absence of such frontage is destructive of that potentiality. These observations of the "obvious" are entirely consistent with the traffic engineering evidence that I have earlier recited.
124 Accordingly, the fundamental flaw in Mr Preston's approach is first and foremost that he regards as irrelevant to the "after" valuation of the retained land (upon the basis of the application of SREP31 and its underlying zoning) the engineering evidence concerning the alternative access arrangement. That cardinal error is then compounded (albeit by logical extension) in his "after" valuation of the retained land where he applies an enhanced value (over and above the value in the "before" valuation based upon the attributed "underlying" industrial zoning) in circumstances where the actual and physical condition is that the retained land has entirely lost that potentiality by virtue of the inadequacy of the alternative access arrangement.
125 The problem with Mr Preston's approach can be exposed, and I think readily resolved, by considering the following illustration (which is not far removed from the facts of the present case) -
Let it be assumed that the WSO was implemented in the present case without any alternative access being provided to the Applicants' retained land. In such a situation, the retained land would be rendered landlocked land and any recognised or attributed potential that the land had for industrial use prior to the compulsory acquisition (albeit on the basis only of an underlying zoning for the purposes of SREP31) would clearly be destroyed with a consequent decrease in value of the retained land compared with its value prior to the compulsory acquisition reflecting that potentiality for industrial use.
126 What has happened in the present case is only a little different (by degree) from the gist of the illustration, since the effect of the WSO combined with the provision of the alternative access arrangement which is physically unsuitable for any relevant industrial use of the retained lands is to destroy that potentiality for industrial use while facilitating the continuance of its existing use - but deprived of that potentiality for a higher (industrial) use.
127 Recently in J L and M M Muir Properties Pty Ltd v Roads and Traffic Authority of NSW [2004] NSWLEC 621, I drew attention to the principle established by long standing case law concerning the recovery of compensation for injurious affection on account of the denial or restriction on road access that was previously available in respect of lands retained by the owner from whom other land had been expropriated. I cited the Article by Professor Todd "The Mystique of Injurious Affection in the Law of Expropriation" in 1967 the University of British Columbia Law Review 127 which discusses many of the older English and Canadian cases. Two older English cases provide instructive illustrations of the principle, namely The Queen v Brown (1867) 2 LRQB 630 and Duke of Buccleuch v Metropolitan Board of Works (1872) 5 LRHL 418 which are noted in Halsburys Laws of England (4th Ed) Vol 8 ("Compulsory Acquisition of Land") at par 319.
128 In The Queen v Brown the relevant facts were (i) the Railway Company acquired part of the plaintiff's lands under the Lands Clauses Consolidation Act 1845 resulting in some 10 acres being severed by the railway line and left without access; (ii) the land was then agricultural land but was favourably situate for building purposes; and (iii) the jury was instructed that if they valued the land as building land, they must treat the severed portion as deprived of all access and assess the damage for severance accordingly. The jury returned a verdict for 750 pounds for the land taken and 1250 pounds for the damage by severance.
129 The issue in the case was whether the jury ought to have been told that the claimant could have obtained "accommodation works" under the Railways Clauses Consolidation Act in circumstances where such works were those necessary for the purpose for which the land was currently used (ie agriculture) but in circumstances where any such works would have been ultimately useless for building land. In other words, such works would have been useful for the existing use of the land but useless for building land (the latter being its higher potentiality).
130 Chief Justice Cockburn at 632, having noted that the power to order accommodation works was limited to works recognising the present, but not the prospective use of the land, held that the question had been properly left to the jury that "if they thought the land valuable for building purposes, practically speaking they must look upon the land severed as shut out from all access whatsoever." In other words the building land potentiality of the land (giving it a higher value) was entirely lost in the severance.
131 The case, in my opinion, aptly demonstrates the somewhat obvious proposition that access to land for its existing use may be entirely unsuitable to enable the potentially higher use of that land to be achieved, and its corollary that absent such suitable access, the potentiality for a higher use may be destroyed or lost with a consequent decrease in the value of the affected land.
132 The facts of the Duke of Buccleuch case illustrate that compensation may be awarded for injurious affection for the "depreciation in value" of the retained residential property caused by the carrying out of the relevant public work (in that case the construction of an embankment to the Thames River to be used as a public highway) necessitating the loss by the claimant of his river frontage and of the use of an existing causeway over which he enjoyed an easement.
133 The significance and breadth of the concept of "injurious affection" in the law of compensation for the compulsory acquisition of land has recently been emphasised by the High Court of Australia in its unanimous decision in Marshall v Director General Department of Transport (2001) 205 CLR 603. The fact that in the present case the potentiality for higher and more valuation development arises only by virtue of the "underlying" zoning concept does not, in my judgment, affect the valuation principle that the loss of that potentiality caused by the compulsory acquisition is compensable, pursuant to s 55(f) of the Just Terms Act.
134 This leads to the question of quantification of the amount of the decrease in the value of the retained lands by reason of the carrying out of the public purpose for which the Applicants' land was acquired (s 55(f)). This is quintessentially a matter of valuation judgment. Mr Dobrow's quantification which derives from his "before and after" valuation exercise, is based upon his opinion that the retained land has entirely lost its potential for industrial development by virtue of (i) being totally deprived of usable road frontage (such as was enjoyed when the Applicants' land had a frontage of 390 metres to Wallgrove Road with direct access between that road and the land); and (ii) being serviced by the alternate access arrangement which was not suitable for any industrial development generating more than 30 vehicle movements per hour. As earlier noted, Mr Dobrow's opinion is entirely supported by the traffic engineers' evidence. Having entirely lost that potential, Mr Dobrow values the retained land upon the basis of the value of its existing use or some other low traffic generating rural use.
135 As a matter of valuation principle, Mr Dobrow's quantification of the decrease in value of the retained land is, in my judgment, entirely justified.
136 However, I must now postpone my findings on the compensation payable in the present case to consider the Respondent's sustained attack upon Mr Dobrow's valuation opinions upon the asserted ground that "his approach is wholly flawed in valuation law and methodology".
137 The Respondent's principal criticism of Mr Dobrow's valuation approach focuses upon his opinion (which was shared by Mr Preston) that the two Trivet Street sales were the most comparable of various sales of lands which were governed by SREP31 and that the evidence provided by those two sales could be applied by direct comparison with the Applicants' land.
138 The Respondent submitted (par 38 of the written submissions) that the fact that the two Trivet Street sales were transacted upon the basis of an underlying industrial zoning distinguished those sales from the subject property.
139 The Respondent further submitted in this behalf (par 39 of the written submissions) that "the Applicant has not sought to make a case, and the evidence does not support a finding that DIPNR would, in any future acquisition of the acquired land, have considered the subject land to have an underlying zoning for industrial uses….". The Respondent submitted (par 39) that the Court "could not make a finding to the effect that DIPNR would have regarded the underlying zoning of the subject land as industrial….without hearing from the planning experts on this topic….".
140 In my judgment, the Respondent's foregoing criticism of Mr Dobrow (which criticism equally applies to Mr Preston) does not demonstrate any "flaw in valuation law or methodology" on his part.
141 Both Valuers adopted the two Trivet Street sales as the most comparable sales. Both Valuers appreciated that the Trivet Street sales reflected the value of lands governed by SREP31 but with an "underlying" industrial zoning. Both Valuers utilised the sales evidence provided by the two Trivet Street sales by direct comparison with the Applicants' land, because it was their common opinion that the underlying zoning of the subject property, like the two sale lands, would be for an industrial type use.
142 These common features of Mr Dobrow's and Mr Preston's "before valuations" (ie (i) the analysis of the sales evidence to select the most comparable sales; and (ii) the direct comparison of the sale properties with the subject property) are conventional and standard tasks performed by land valuers. Their commonly held opinions did not depend upon enquiry being made of DIPNR as to its opinion of the "underlying" zoning of the Applicants' land. Nor was any such enquiry necessary. Any suggestion, express or implied, in the Respondent's submissions that enquiry of DIPNR as to the underlying zoning of the Applicants' land was a necessary step in the task of properly valuing the Applicants' land, is no more sound or plausible or compelling than would be the suggestion that in the case of any valuation that is required in law (eg the application of the "San Sebastian" principle) to be based upon the underlying zoning of land, requires consultation with the acquiring authority in order to establish that underlying zoning. Obviously in the case of any valuation of land based upon an underlying zoning, the public authority with responsibility for acquiring the land for a public purpose and paying compensation for the acquisition, can be expected to adopt a view on that underlying zoning question, but its view is simply that of one of the parties to the sale transaction and it is facile to suggest that the vendor in such a situation would simply adopt the view of the public authority. In the present case, neither valuer considered it necessary to consult DIPNR presumably because they had the evidence of 7 sales of lands governed by SREP31 to consider and analyse and to utilise in their task of valuing the Applicants' land. Additionally, they knew that another experienced valuer, Mr Hopcraft had valued the Applicants' land in April 2002 (Exhibit 17 pp 318/369) to assist the Respondent in its negotiations with the Applicants for the purchase of either all of the Applicants' land or the part of their land that was compulsorily acquired.
143 They were aware that Mr Hopcraft's valuations had also adopted as the underlying zoning a similar position (namely SEPP 59) to that which they had commonly adopted in their "before" valuations.
144 Similarly, there can be no criticism made of the Valuers for their undertaking these conventional valuation tasks of discovering and sifting the sales evidence to select the most comparable sales and comparing the sale properties with the subject property without their first seeking, or deferring to, the advice that may have been be obtainable from town planners consultants. The fact in the present case that the town planners could not agree upon an underlying zoning of the Applicants' land (at a stage in the proceedings before I had determined that the governing planning control was SREP31), does not preclude the Valuers from agreeing upon the question in the exercise of their professional valuation judgments. The concept of "underlying" zoning is as much the stock in trade of professional valuers as it is town planners.
145 It is important to note that par 40 of the Respondent's submissions readily accept that cl 19 of SREP31 enables an owner of land identified therein to require the corporation constituted by the EP&A Act, s 8 to acquire the land and that in acquiring the land, the purchase price will disregard the provisions of SREP31 (because they will be regarded as a step in the acquisition process) and instead will be based upon the underlying zoning. But the next step in the Respondent's submission is, in my opinion, flawed as a matter of valuation law when it states:
The question is, what would DIPNR regard the underlying zoning to be?
146 As I have earlier stated, the true and correct question concerning the underlying zoning of the relevant land upon which basis the purchase price (or compensation) for the acquired land will be determined, is what would the parties mutually agree to be the underlying zoning or (in the event of lack of agreement) what would be the underlying zoning upon which compensation is payable under the Just Terms Act.
147 As I have earlier held, the Valuers, in their "before" value were of the common opinion that the underlying zoning would be for some industrial type development and that opinion was a soundly based and justifiable exercise of valuation judgment which both valuers were competent to make.
148 Nothing so far considered in the Respondent's criticism of that valuation approach erodes or undermines that commonly held opinion by the Valuers in this case.
149 The Respondent's criticism of Mr Dobrow is not advanced by the making of the following submission at par 42:
The fact that Mr Dobrow's valuation of regional parklands is the same as it would have been the same as it would have been for industrial land is a badge of a serious flaw in his methodology, and his dramatically overstated valuation on this basis cannot be accepted.
because that submission is manifestly no more than an advocate's flourish.
150 The Respondent's next submission (par 43) seeks to invoke established valuation principle by referring to the necessity for the valuation to reflect planning restrictions applicable to the land being valued. However, the submission entirely overlooks the legitimacy of determining market value by disregarding planning restrictions if they are part of the resumption process and instead of those legitimately disregarded planning restrictions, by applying the concept of the underlying zoning. As was succinctly stated by the Court of Appeal in Griffith City Council v Polegato (1990) 71 LGRA 208 at 213:
The principles applied in Housing Commission of New South Wales require the land to be valued at the relevant date on the artificial, but just, assumption that such value has not been affected by the resumption process.
151 The Respondent next submitted (par 43) that where, as in the present case, the relevant task was "to value the chance of exploiting cl 19 of SREP so as to require DIPNR to acquire land, account must be taken of the risks associated with that process - that it will take time, that the basis on which DIPNR will acquire it will not reflect more than rural value and matters of that sort" it was formulating the relevant valuation task radically differently from the manner that the Valuers in this case had commonly undertaken their "before" and "after" valuations. Neither of them had assigned a value to the Applicant's lands (either in their "before" or "after" valuations) on the basis of "the value of the chance of exploiting cl 19 of SREP31".
152 In my opinion, it is clear why they did not so value the Applicant's lands. It was because they had recourse to available evidence of market sales of lands governed by SREP31 and they had utilised that sales evidence by commonly selecting the two Trivet Street sales as the most comparable of those sales (recognising that the two sale prices had reflected an underlying "industrial" zoning and being of the opinion that that same underlying zoning could properly, in their valuation judgment, be attributed to the Applicants' lands).
153 In view of the availability of this very relevant market evidence which was commonly utilised by the Valuers, the Respondent's suggestion that the proper valuation task in the present case was to value "the chance of exploiting cl 19 of SREP31" is entirely wide of the true mark.
154 The Respondent advanced a related submission that "the Court could not contemplate applying Mr Dobrow's approach without, at the very least, very substantial deductions to his valuation on account of the risks involved in the acquisition of the land by DIPNR pursuant to cl 19 of SREP31". The Respondent's submissions then proceed in pars 49, 53 and 54 to suggest the reasons for, and the extent of, the relevant deductions to be made.
155 The Respondent submitted (par 49) that the two Trivet Street sales should be discounted "for difference in underlying zoning attributed to those sales" and the Applicants' land.
156 But his submission simply flies in the face of the Valuers' commonly held position that the two Trivet Street sales were the most comparable of all of the sales of lands governed by SREP31 and they were capable of being applied to the Applicants' land by direct comparison. The Respondent' s submissions do not advance any sound or cogent reason for rejecting the Valuers' commonly held opinion on this matter. The Respondents suggestion that the Trivet Street sales should be discounted by 50 to 55 percent in any direct comparison with the Applicant's land is entirely contrary to all of the valuation evidence adduced in the case and is unsupported by any principle of valuation, or valuation law. In truth, the Respondent's submission is to the effect that the Trivet Street sales are not comparable sales at all. This is a bare and bald submission unsupported either by any evidence or relevant valuation principle or principle of law. I would unhesitatingly reject it as a groundless submission.
157 The alternative ground advanced in support of the Respondent's submission that there should be a significant deduction made to Mr Dobrow's valuation was to allow for the risk that DIPNR, upon any acquisition of the Applicant's land pursuant to cl 19 of SREP31, would not pay a price reflecting an underlying "industrial" zone.
158 Again, this submission is not supported by any valuation evidence, although if I had admitted into evidence Mr Preston's belated revision of his valuation opinions contained in the Valuers' Joint Statement (Exhibit R), that revision included an allowance of 35 percent for such a risk.
159 In the Respondent's supplementary written submissions (for the reception of which after the hearing had been concluded, I granted leave and provided the Applicants with the opportunity to reply), the Respondent relied upon the recent decision of Talbot J in Sebastian Cannavo and Anor v Roads and Traffic Authority of NSW [2004] NSWLEC 570 to support the Respondent's submission that an allowance for risk should be made in the present case.
160 In Cannavo, some 15,500 square metres of land situate at Prestons in the City of Liverpool was compulsorily acquired, some of which was zoned Residential and some of which was zoned 6(a) Recreation and some of which was zoned Special Uses 5(a) - Drainage.
161 In respect of the acquired land that was zoned 6(a) and 5(a), Talbot J said at par 3:
The whole of the land in the 6(a) and 5(a) zone has been acquired by the respondent. There is no issue that at the date of resumption the owners were entitled to require Liverpool City Council ("the Council") to acquire the 6(a) and 5(a) zoned land under the terms of the Liverpool Local Environment Plan 1997 ("LLEP 1997") and that compensation for that land would have been assessed on the basis that the underlying zone would have been Residential 2(a), but for the designated public purposes of public recreation and drainage.
162 In respect of the values to be determined in respect of the lands zoned 6(a) and 5(a), his Honour held as follows at pars 20-24 inclusive:
There is no question of any risk that the Council would not acquire the land. Both parties have assumed that the hypothetical purchaser would have delivered a notice pursuant to cll 55 and 62 of the LLEP requiring the Council to acquire the land immediately following the theoretical purchase on the acquisition date. It is readily acknowledged by both valuers that the market was increasing at the rate of 2% per month. The hypothetical purchaser would not be looking to make a significant profit out of the transaction. The primary purpose of purchasing the land would be to develop the land in the Residential 2(a) zone. The 5(a) and 6(a) land would have been purchased on the sole basis that the purchase money paid for that part of the site would be recovered in a short time.