Dan Wei Zheng v Roads and Maritime Services

A: Introduction

1. The Applicant in these proceedings, Dan Wei Zheng ("Zheng") was the registered proprietor of 269 Parramatta Road, Haberfield, comprising Lots 63 and 64 in DP 4612 ("the Land"), immediately prior to its acquisition by the Respondent acquiring authority, Roads and Maritime Services ("RMS") on 18 December 2015 ("the acquisition date").
2. The two lots are contiguous and have been used as a consolidated site for many years. The Land was a corner site, with two street frontages, to Parramatta Road and Wolseley Street, and is acknowledged to be (still) well serviced by an extensive road network including arterial roads such as Parramatta Road, Homebush Bay Drive and the M4 Motorway, providing efficient access to parts of the Sydney metropolitan area and a link to other major roads, all of which are high volume flow roads at most times..
3. RMS compulsorily acquired the Land on the acquisition date under the Roads Act 1993 for road purposes, they being the construction of Stage 1(b) of the NSW Government's WestConnex Motorway M4 East Project, involving the extension and widening of the M4 Motorway from Parramatta to Haberfield.
4. As at the acquisition date, the Land, owned by Zheng, was zoned 'B6 Enterprise Corridor' under the Ashfield Local Environmental Plan 2013 ("the LEP"). The Land, with a total site area of 1,353.2m² contained buildings that were originally constructed around 1970 for use as a service station, but were in use as a warehouse and display area for the sale of stone products such as bench tops, statues and garden features.
5. Those improvements spanned the two lots, and were considered to be in reasonable condition. They were positioned such as to maximise use of the site to display such items. The development included a loading dock, toilet facilities, and customer car parking, but enjoyed also ample car parking off-site.
6. As at the date of acquisition, the whole of the Land was leased by Zheng, informally, to "Dawa Stone Australia Pty Limited" ("Dawa"), a company of which Zheng and his wife, Xiao Ling Li, are the only shareholders and directors. Dawa used the Land to conduct its family stone products business, which employed a number of Zheng's relatives. Zheng's sister, Danielle Zheng, played a key role in the business and in these proceedings. (She describes herself, in her affidavit of 3 August 2016, par 1, as a "shareholder of the former tenant", but annexes an ASIC search to the contrary. I accept that she had an interest in Dawa's business on the Land, but played no official part in Dawa itself.)
7. The compensation determined by RMS on Valuer General advice was in the sum of $3,845,711, which comprised: 1. $3,635,000 for market value; and 2. $210,711 for disturbance (including stamp duty).
8. Zheng objected to this offer of compensation, and commenced these proceedings, under s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 ("the Just Terms Act") on 17 February 2016.
9. At the hearing, Zheng was represented by Mr M Hall SC, and RMS by Mr M Astill of counsel.
10. Relevantly, the competing positions of the parties to these proceedings, and that of the Valuer-General, in respect of valuation and compensation, were usefully set out in table format in the Respondent's submissions (at 5.1): Head of compensation Applicant Valuer-General Respondent Market value Section 55(a) $4,560,000 $3,635,000 $3,755,000 Disturbance Section 59(a) Legal fees: $8,700 Legal fees: $8,700 Legal fees: $5,500 Section 59(b) Valuation fees: $10,896 Valuation fees: $10,896 Valuation fees: $10,896 Section 59(c) Due diligence on replacement property: $6,000 Legal and valuation costs on replacement property: $3,300 Nil Legal costs on acquisition on comparable replacement property: $10,670 Due diligence on replacement property: $1,400 Section 59(d) Stamp duty: $236,290 Stamp duty: $185,415 Nil Section 59(e) Finance and mortgage costs associated with purchase of replacement property: $23,818.30 Finance and mortgage costs associated with purchase of replacement property: $1,000 Nil TOTAL $4,856,374.30 $3,845,711 $3,771,396

1. RMS denies any entitlement of Zheng to a claim for disturbance under ss 59(c), 59(d), and 59(e) (see [14] below). It submitted (par 6.4) that these claims should be determined as a legal question, based on the construction and application of the relevant provisions in the Just Terms Act. RMS submitted that, in circumstances where a tenant occupied the Land, the acquisition did not cause the Applicant to be relocated, nor was he involved in any actual use of the property to which the claimed costs could relate.
2. Dawa's claim on RMS, based on this acquisition, has been separately resolved, on a relocation basis.

B: The Relevant Legislation

1. The issues in this case must be considered under the following relevant provisions of the Just Terms Act: 3 Objects of Act (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. (2) Nothing in this section gives rise to, or can be taken into account in, any civil cause of action. 4 Definitions (1) In this Act: acquisition of land means an acquisition of land or of any interest in land. ... interest in land means: (a) a legal or equitable estate or interest in the land, or (b) an easement, right, charge, power or privilege over, or in connection with, the land. land includes any interest in land. ... owner of land means any person who has an interest in the land. ... 10 Statement of guaranteed acquisition at market value (1) When, on request by or on behalf of an owner or prospective purchaser of land, an authority of the State gives a person written notice to the effect that the land is affected by a proposal for acquisition by the authority, the notice must contain the following: (a) a statement that the Land Acquisition (Just Terms Compensation) Act 1991 guarantees that, if and when the land is acquired by (insert name of authority) under that Act, the amount of compensation will not be less than market value (assessed under that Act) unaffected by the proposal, (b) such other information as the regulations may require. (2) This section does not apply to a proposal to acquire an easement, or right to use land, under the surface for the construction and maintenance of works. (3) Nothing in this section or in a statement made in a notice pursuant to this section gives rise to, or can be taken into account in, any civil cause of action. ... 20 Effect of acquisition notice (1) On the date of publication in the Gazette of an acquisition notice, the land described in the notice is, by force of this Act: (a) vested in the authority of the State acquiring the land, and (b) freed and discharged from all estates, interests, trusts, restrictions, dedications, reservations, easements, rights, charges, rates and contracts in, over or in connection with the land. ... 37 Right to compensation if land compulsorily acquired An owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part by the authority of the State which acquired the land. ...
2. The crucial sections of the Just Terms Act for the present claim are: 54 Entitlement to just compensation (1) The amount of compensation to which a person is entitled under this Part is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land. (2) If the compensation that is payable under this Part to a person from whom native title rights and interests in relation to land have been acquired does not amount to compensation on just terms within the meaning of the Commonwealth Native Title Act, the person concerned is entitled to such additional compensation as is necessary to ensure that the compensation is paid on that basis. 55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division): (a) the market value of the land on the date of its acquisition, (b) any special value of the land to the person on the date of its acquisition, (c) any loss attributable to severance, (d) any loss attributable to disturbance, (e) solatium, (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. 56 Market value (1) In this Act: market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid): (a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and (b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and (c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law. (2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition. 57 Special Value In this Act: special value of land means the financial value of any advantage, in addition to market value, to the person entitled to compensation which is incidental to the person's use of the land. ... 59 Loss attributable to disturbance In this Act: loss attributable to disturbance of land means any of the following: (a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land, (b) valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land, (c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs), (d) stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired), (e) financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage), (f) any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition. (emphasis added) ... 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.
3. The following provisions of the Land and Environment Court Act 1979 ("the Court Act") are also relevant: 24 Claim for compensation in compulsory acquisition cases (1) If: (a) a claim is made for compensation because of the compulsory acquisition of land in accordance with the Land Acquisition (Just Terms Compensation) Act 1991, Division 2 of Part 12 of the Roads Act 1993 or any other Act, and (b) no agreement is reached between the claimant and the authority required to pay the compensation, the claim is (subject to any such Act) to be heard and disposed of by the Court and not otherwise. (2) The Court shall, for the purpose of determining any such claim, give effect to any relevant provisions of any Acts that prescribe a basis for, or matters to be considered in, the assessment of compensation. (3) (Repealed) 25 Determination of estate, interest and amount (1) In hearing and disposing of any claim referred to in section 24, the Court shall have jurisdiction to determine the nature of the estate or interest of the claimant in the subject land and the amount of compensation (if any) to which the claimant is entitled. (2) In the exercise of its jurisdiction under subsection (1), the Court may order that any other person who claims to have had or who may have had an interest in the subject land at the date of acquisition or taking be joined as a party to the proceedings and may then proceed to determine the nature of the estate or interest of that person and the amount of compensation (if any) to which the person is entitled. (3) (Repealed).

C: Relevant authority

1. The applicable valuation principles were summarised by Mr Hall, in his written submissions (pars 17 - 21), as follows: Valuation principles 17. The Court is acting as the judicial valuer: Sydney Water Corporation v Caruso (2009) 170 LGERA 298 at [3], [35], [37], [146] and [150] and Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156. 18. As a general principle, in determining compensation doubts should be resolved in favour of a more liberal estimate (Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Ltd (1947) 74 CLR 358 at 374). 19. The market value of land under s 55(a) of the Just Terms Act must be assessed according to its 'highest and best use' (Turner v Minister of Public Instruction (1956) 95 CLR 245; Spicer v Valuer-General (1963) 10 LGRA 319). 20. The Court will therefore approach the task of determining compensation by determining what was the 'most profitable potential use' of the Subject Land (Vilro Pty Ltd (In Voluntary Liquidation) v Roads and Traffic Authority NSW [2010] NSWLEC 234 at [17]). 21. Further: a. The parties to the hypothetical sale are assumed to be "fully informed" and to make "all proper inquiries" (Everest Project Developments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 & The Roads and Traffic Authority of New South Wales [2010] NSWLEC 88 at [58]); and b. The land must be valued at the relevant date in its existing condition with all its potentialities (Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156 at 175-176; 73 LGRA 47 at 65-66 citing Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officers, Vizagapatam [1939] AC 302 at 313 and Turner v Minister for Public Instruction [1956] HCA 7; (1956) 95 CLR 245 at 268-289); c. The valuation exercise must assume that both parties (to the hypothetical transaction) are 'perfectly acquainted with the land, and cognizant of all circumstances which might affect… [its] value' (Spencer v the Commonwealth of Australia [("Spencer")] (1907) 5 CLR 418 at 441 per Isaacs J; Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 at [49]- [50] per McHugh J, specifically adopted by the High Court in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259).
2. RMS did not demur from these principles, only their application to the present case.

D: The Issues Before The Court

1. The main issues in the proceedings were identified by Mr Hall (subs pars 10 - 13), as follows: 10. The parties agree that: a. The comparable sales method of valuation is an available method that can and should be adopted in this case; b. The highest and best use of the land was redevelopment for any of the wide variety of commercial uses permitted in the B6 Enterprise Corridor zoning; c. Redevelopment would have been achievable consistent with the applicable planning controls, to achieve the full permitted FSA; and d. The existing use could have continued, providing family income and employment, until the time was ripe to begin redevelopment. … 13. It is anticipated that the issues in these proceedings will be relatively narrow and will principally concern: a. The appropriate valuation method; b. The selection of the appropriate comparable sales. While the valuers analyse common sales, they also each contend for several which the other would discount as less useful; c. The adjustments, and more particularly the extent of the adjustments, necessary to make the other sales directly comparable. These are agreed to include adjustment for time, for corner vs non-corner lots (a factor particularly relevant to vehicle access), prominence of position, and ease of development. d. What use is to be made of capitalisation of net rental income as an alternative valuation method, and to the extent it is adopted what should be adopted as the appropriate: i. Market rent per annum; and ii. Capitalisation rate; e. The Applicant's entitlement to stamp duty and other costs (conveyancing, due diligence and mortgage costs) which will arise from his acquisition of a replacement property to continue the activities formerly conducted on the Subject Land.
2. The differences between the parties were summarised by Mr Astill (subs par 6), as follows: 6. Differences Between the Parties 6.1 The differences between the parties relate to the following: (a) What approach should be taken to determine the market value of the Property under s55 (a) and what results flow from the (each) approach; and (b) Whether costs which may be incurred during the acquisition of a replacement property including stamp duty may be claimed as disturbance under s59(1)(c) or (1)(f). 6.2 The market value issue must be resolved by reference to the evidence and particularly that of the valuers. 6.3 The valuers have both used two methods to determine the market value being - (a) The direct comparison method, and (b) The capitalisation of income method. 6.4 The disturbance issue will be determined as a legal question based on the application to the circumstances of the provisions in the Act relied on. The Respondent says that in circumstances where a tenant occupied the Subject Property the acquisition did not cause the applicant to be relocated, nor was he involved in any actual use of the property to which the claimed costs could relate.
3. What follows is relevantly placed under the following headings: E: The Subject Land in more detail R: The Expert Town Planning evidence G: The Valuation evidence generally H: Applicant's valuation evidence I: RMS's valuation evidence J: CONSIDERATION - MARKET VALUE K: CONSIDERATION - DISTURBANCE L: Conclusion and Orders

The Land

1. The characteristics of the two lots comprising the Land were usefully set out in table format by Mr Astill in his submissions (at 2.2): Property Area Frontage(s) Pre-acquisition Access Lot 63 DP 4612 676.64m2 Parramatta Road, 15.24m Pedestrian, Parramatta Road Lot 64 DP 4612 676.64m2 Parramatta Road, 15.24m Pedestrian, Parramatta Road and Wolseley Street. Wolseley Street 44.36m Vehicular, Wolseley Street. Total 1,353.28m2

1. In his written submissions (at 2.4), Mr Astill acknowledged that the Land was previously used in its entirety as a service station. As such, there is obvious potential for there to be some contamination on the Land, but there does not appear to have been any investigation of it, for the purpose of these proceedings or otherwise, and Mr Sanidas, the Applicant's valuer, has assumed there is no contamination that would affect its use or value.
2. In his oral submissions for the Applicant, Mr Hall addressed the possibility of contamination from the former service station use as a "furphy", and considered that it should play no part in the Court's determination. In support of this, he acknowledged that both valuers had agreed that no adjustment to the value was necessary to allow for any past contamination, and no evidence was led to the contrary.
3. Further, a development application by the current owners in 2000 was not subject to a condition of development approval requiring any investigation, or remediation, of the land, inferring that the consent authority was satisfied that development could proceed without remediation.
4. Ultimately, the contamination question played no part in the Court's consideration.
5. At the date of acquisition, the improvements on the Land were structurally sound and functional, comprising: 1. Retail showroom complex (open plan retail showroom, reception area, 2 storerooms, male and female toilets); 2. Purpose built attached warehouse/storage unit with 5.5m internal clearance; 3. Loading dock area accessible from 2 driveway access points from Wolseley Street; 4. Hardstand area partly covered by an overhead canopy; 5. Customer car parking for 8 cars.

Location factors

1. The Land enjoyed a prominent, high exposure location on the northern side of Parramatta Road, a short distance (one block) from its intersection with Frederick Street and Wattle Street, where a major Bunnings store is located in what was, historically, the "Peek Freans" biscuit factory.
2. Good access and egress for pedestrians from Wolseley Street distinguished the property from many of its neighbours which enjoyed Parramatta Road frontage only. The property benefitted from "ample" on and off street car parking.
3. The parties' respective valuers, Messrs John Sanidas (Applicant) and David Lunney (RMS), identified the "Bunnings precinct" as a prime retail hub for, particularly, industrial and construction goods. That hub benefitted from exposure to very heavy passing traffic, but there were competing views as to how far from the Bunnings corner the precinct extended to the east and the west. Mr Hall noted (subs par 24): The first feature of the valuation evidence to emerge clearly (and to attract a degree of agreement between the experts) was that the premium location for businesses that benefitted from exposure to passing traffic is the "Bunnings Precinct". Factors supporting that included that Bunnings warehouse was itself a "destination" to which shoppers would make a special trip, T70 1 31 The highest volume of traffic was agreed to be the block west of the Wattle Street intersection, much traffic entering Parramatta Road from Wattle or Frederick Street, and much city bound traffic exiting at that point (T70-71). It is a stretch which is between light controlled junctions so that traffic tends to move slowly and be stationery at times. In particular traffic queuing to turn left from Parramatta Road into Wattle Street will frequently be stopped outside the subject property and the comparables in that precinct. It was agreed that the precinct extends westwards to the Great Northern Road. There was a limited disagreement between the experts as to how far east it extends: Mr Sanidas said "a little way east of Wattle Street, perhaps about 300 metres" (T44). Mr Lunney would have had the precinct extend as far as the intersection of Bland Street. It is unlikely that very much turns on that: at most one property that has been analysed, 244-246 Parramatta Road, is in or out of the precinct on the basis of that distinction. That is not a property which has loomed large in the analysis. But to the extent that the dispute must be resolved, Mr Sanidas' position should be preferred. Mr Lunney accepted that the high volume of traffic leaves the road to enter Wattle Street or has not entered Parramatta Road until after the Wattle Street junction. It was plainly apparent during the site inspections that traffic volumes were much lower to the east of the Wattle Street intersection, and that this phenomenon increased in intensity as one went further east. By the time one reached Property 12 (124 and 126 Parramatta Road) the diminution in intensity of road use was very marked. The precinct should be found to extend only very slightly east of Bunnings warehouse itself.
4. Mr Hall further noted, in oral submissions, that the Land was exposed to 90,000 passing vehicle movements per day (Tp3, LL14 - 21), and that the Bunnings corner was perhaps the busiest corner of the entire Parramatta Road precinct (Tp3, LL23 - 26).

Permissible uses of the subject property

1. Under the LEP the applicable Floor Space Ratio ("FSR") was 1.5:1, and the Height Limit on any development was 10m. The maximum potential floor space area of the site was 2,029.9m².
2. A wide range of uses is permissible in the zone. The Respondent's position was that the highest and best use of the Land, as at the date of acquisition, was either: 1. Continued use in its pre-acquisition physical state for its then current garden display showroom, or some other commercial/retail use permitted in the B6 zone; or, 2. Redevelopment for other uses permissible in the B6 zone, to achieve a density up to 1.5:1 FSR and a height of 10m.
3. The Land was also subject to the Ashfield Interim Development Policy, which relevantly imposed a minimum requirement of 25m frontage to Parramatta Road to permit redevelopment.

The Dawa/Zheng operation

1. At the time of his purchase of the Land in 2000, Zheng had been a business associate of the former owners, and took the opportunity to buy the Land and accompanying garden art business upon their retirement.
2. Danielle Zheng deposed to the family's purported intention to operate the Dawa Stone business on the Land until it was rezoned and ready for re-development. She also outlined the family's discussions with the neighbouring land owner, Mr Bill Hatzivasiliou, who owned 257 - 261 Parramatta Road, as to the increased value of any sale of the Land if his and the Zheng properties were consolidated, and brought to the market as a combined site, when the Land was rezoned, and "the time was right".

F: The Expert Town Planning Evidence

1. The Applicant relied on a Statement of Evidence given by David Haskew (Court Book ("CB") Vol 2, tab 1), and RMS on one by Anthony Rowan (CB Vol 2, tab 2). The Court also has the benefit of a joint town planning report by those experts (CB Vol 2, tab 3).
2. There was general agreement between the expert planners on a large number of the town planning issues with the Land, namely the planning documents (the LEP and the Ashfield Interim Development Assessment Policy), and the fact that the Land was also subject to the NSW Government's Parramatta Road Urban Transformation Strategy. That was, however, agreed to have no planning implications for the Land. Land between precincts but fronting Parramatta Road was identified in the Strategy as a "Frame Area".
3. Notably, the expert planners agreed that the maximum gross floor area permitted in compliance with the LEP development standard is 2029.9m², that the individual lots comprising the Land could not be redeveloped for B6 purposes in isolation, and that it is not practically possible to achieve 3 full levels of non-residential development on the subject land in compliance with the 10m Height restriction, but that this does not preclude the attainment of 1.5:1 FSR for a two-storey building.
4. It was further agreed that part of the site may accommodate a three storey building, albeit not at 4.3m floor to floor heights for all floors. Haskew drew attention to the partially three storey building at 257 - 261 Parramatta Road as a practical example of a three storey development within the subject B6 - Enterprise Corridor zone.
5. The site was also acknowledged to be in excess of the minimum frontage requirement of 25m to enable its redevelopment for B6 permissible land uses.
6. The planners noted that a development with a height above 10m would be non-compliant, and a development that was non-compliant to this extent would be required to satisfy the provisions of cl 4.6 of the LEP, to justify departure from this development standard. It was considered that a possible amalgamation with adjacent land in the B6 zone would not increase the development potential of the subject land, nor would it increase the separation of the subject land from the adjacent conservation area.
7. The planners disagreed in relation to the risks associated with obtaining development consent for a compliant development. Rowan saw little to no risk with a development application complying with all of the relevant planning controls for the B6 zone. Haskew cautioned that there were significantly more issues relevant to the assessment and determination of a development application than compliance with the relevant standards. In Mr Haskew's opinion, the likelihood of a development application being approved is dependent on numerous factors, including "the nature of the use proposed; its hours of operation; the potential for parking impacts to occur off site; traffic generation; noise emissions; and social impacts."

G: The Valuation evidence generally

1. I have already set out Mr Hall's useful summary of the established principles relevant to valuation (see [16] above).
2. Expert valuers Sanidas and Lunney, each prepared individual valuation reports (CB Vol 2, tabs 4 and 5, respectively), and then a joint report (CB Vol 2, tab 6).
3. RMS, through the submissions of its counsel, Mr Astill, identified what it saw as a series of errors on Mr Sanidas's part (see subs pars 7.57 to 7.70).

Valuation method

1. A primary issue between the parties was the approach to be taken to determine the market value of the Subject Land, under s 55(a) of the Just Terms Act.
2. The valuers employed two methods to determining the market value of the Subject Land, being: 1. The direct comparison method, and 2. The capitalisation of income method.
3. Both valuers were of the opinion that the direct comparison method should be the primary valuation method, whilst the capitalisation of (notional) net rental income should be used as a secondary (or check) method. There was said to be evidence of sales of relevantly comparable properties in the B6 zone purchased for the redevelopment purpose.
4. In New South Wales Cremation Company Pty Limited v Valuer General ("Cremation Company") [2016] NSWLEC 135, Robson J said in relation to the direct comparison method (at [84] - [88]): 84 It is generally accepted that, insofar as there are comparable properties available, the conventional valuation method is the comparable sales approach: River Bank Pty Ltd v Commonwealth; Rumble v Commonwealth (1974) 4 ALR 651 at 653 (Stephen J); Graham Trilby Pty Ltd v Valuer-General [2011] NSWLEC 68 at [24] (Biscoe J); Redeam Pty Ltd v South Australian Land Commission (1977) 17 SASR 508 at 513 (Jacobs J). 85 Whilst the comparative sales methodology may be the conventional approach, other methodologies can be acceptable where appropriate. As noted by Wells J in Bronzel v State Planning Authority (1979) 21 SASR 513 ('Bronzel') at 516: …it seems to me that if [Spencer] is to keep its practical worth in this jurisdiction, this Court should be slow to reject any method that, in expert hands, is capable of yielding a result within bounds that are not unreasonable. The limitations of every method must, of course, always be kept clearly in mind. I am of the opinion that the approach likely to result in the most direct and reliable resolution of the outstanding differences between the valuations is to consider the particular features of each valuation that are capable of yielding to adverse criticism. 86 In Graham Trilby Pty Ltd v Valuer-General [2008] NSWLEC 217, Jagot J considered competing residual land value approaches, noting the caution expressed by Wells J in Bronzel, and stated at [27]: …it is well recognised that, if comparable sales are available, direct comparison has repeatedly been identified as the "conventional valuation technique". The basis for this preference is obvious - if comparable sales are available then they represent direct evidence of the market's evaluation of all of the variables that a valuer must otherwise account for by a subjective opinionative process in the residual or hypothetical development approach. This proposition underscores why the fact that developers buying en globo parcels may routinely use a residual analysis to determine land value is an insufficient reason (at least considered in isolation) to disregard or place little, if any, weight on comparable sales. [references excluded] 87 Further, it is also recognised that the residual approach is not the preferred method for the valuation of land where the more conventional comparable sales are available. As noted by Cripps J in Gwynvill Properties Pty Ltd v Commissioner for Main Roads (1983) 50 LGRA 322 at 326 ('Gwynvill'): It has been said that because many estimates and assumptions must be made the hypothetical development method ought not be used where some use can be made of a comparable sale. 88 I also note that the use of the comparable sales approach was previously adopted by Lloyd J for the purpose of determining the unimproved value of the subject land in New South Wales Cremation Company Pty Limited v Valuer General [2006] NSWLEC 393 at [11].
5. Mr Hall submitted that the "highest and best use" of the Land informs the approach to the assessment of value, including, relevantly, the identification of appropriate comparable sales evidence.
6. The valuers relied on a range of different properties to support their valuation analysis, consistent with the direct comparison approach.
7. There was general agreement between the valuers regarding what constituted the highest and best use of the land as it existed at the date of acquisition.
8. Mr Sanidas opined that as at the acquisition date, the highest and best use of the Subject Land was its existing use, pending redevelopment in the relatively short term to achieve its full potential. It was submitted that after redevelopment it could be put to any of the wide variety of commercial uses permitted in the B6 zone.
9. Mr Sanidas further opined (par 22) that the Land had the further advantage of being able to continue indefinitely in a profitable use or be subject to immediate redevelopment without the requirement of fulfilling a lease until expiration, or alternatively compensating a lessee for early termination, because of the existence of the informal lease arrangement with Dawa, a family business. As such, the site was regarded by the Applicant as a prime site to be sold/purchased for its development potential.
10. Mr Lunney opined in his Report (pars 38 - 39) that the improvements to the site at the date of acquisition represent a significant underdevelopment, which were at the end of their economic and functional life; albeit nevertheless capable of ongoing use. He maintained that the highest and best use of the Land would be as a redevelopment site.

Direct comparison approach

1. Mr Sanidas preferred the direct market sales evidence approach to determining the underlying value of the land, comparing genuinely comparable land sales analysed on a rate per square metre ("psm", "per m²", or "/m²") of land area, and also on a rate psm "FSR" (sic? - "FSA").
2. He assessed the s 55(a) market value of the Land at $4,560,000, using a direct comparison approach, reflecting (section 20.00 of CB Vol 2, tab 4, at fol 130) direct comparisons of (a) "site area (improved)" - $3,370 per m² and (b) "FSR"(sic?) - $2,250 per m².
3. Mr Sanidas's investigations of the market, and inquiries made with local commercial agents familiar with the area, were said to indicate very strong demand for commercial accommodation, on the part of both owner-occupiers and property investors. In his opinion, taking into account the established nature of the business and the Land's long history of use, the site would appeal to both segments of the market. He also noted that the stone and garden outlet operating from the site appeared to be performing well.
4. Mr Sanidas considered 9 "comparable sales", but ultimately relied upon only 5 of them. All were close to the Land - on the southern side of Parramatta Road (Ashfield), and on the northern side (Haberfield). However, not all of these sites were within the "Bunnings Precinct", however it is defined. Mr Sanidas also considered RMS sales evidence, although it was relied upon only as "secondary" evidence.
5. Mr Sanidas drew the following conclusions in respect of the properties he considered: Address Site Area FSR Control Agreed Value $/m2 site area Adjusted $/m2 FSA 57-61 Parramatta Road, Haberfield 740m2 1.5:1 $3,000 $1,930 113 Dobroyd Avenue, Haberfield 1,324m2 1.5:1 $3,169 $2,062 163-165 Parramatta Road, Haberfield 1,144m2 1.5:1 $3,551 $2,018 536 Parramatta Road, Haberfield 442.60m2 1.5:1 $3,965 $2,513 530 Parramatta Road Haberfield 442.60m2 1.5:1 $2,824 $1,907

1. I shall now set out some notes on how Mr Sanidas arrived, in each case, at those valuations, and will add relevant comments from Mr Lunney.

57 - 61 Parramatta Road, Haberfield

1. This is a future development site with the required frontage (25m). Improvements on the site were valued at $100,000. It is located outside the Bunnings Precinct.
2. Mr Sanidas made a 15% adjustment on the basis of location, ultimately valued at $1,930/m² FSA, incorporating a further adjustment for time, given its sale date of November 2015.
3. Mr Lunney noted that this site was smaller, but with a disproportionately large frontage, and, as such, he considered the required adjustment would be downward, rather than upward.

113 Dobroyd Avenue, Haberfield

1. This was a future development site with the required frontage (25m). The site is physically proximate to the Land and is of a similar size and shape and offers a closely similar building envelope. It was sold in November 2016. Improvements on the site were valued by Mr Sanidas at $100,000. The property was located one property removed from Parramatta Road.
2. Mr Sanidas acknowledged that this site did not enjoy a corner advantage. He made an upward adjustment of 10% - with which I agree - for the main road advantage enjoyed by the Land. He also made a downward price adjustment on the basis of a sale post the acquisition date, being 1.5% x 10.72 months. Ultimately, he valued the site at a rate of $2,062/m² FSA.
3. Mr Lunney contended that, as the sale of this site was transacted nearly 12 months after the date of acquisition of the Land, in a market which has changed, adjustment by 1.5% per calendar month for market movement is not adequate.
4. Mr Sanidas (in par 15.02 at fols 110 - 114) analysed a series of sales, the latest of which, 245 Parramatta Road, Ashfield, took place on 16 December 2015, closely coinciding with the acquisition date. Those sales showed that the monthly uplift in value of the two properties involved (245 and 536 Parramatta Road) was generally between 1% and 1.89% per month, although there was a rogue figure in respect of 245 Parramatta Road between April 2003 and June 2009.
5. Mr Lunney came to accept 1.5%.

163 - 165 Parramatta Road, Haberfield

1. This service station workshop site, with improvements valued by Mr Sanidas at $200,000, was sold in October 2016 for $5,000,000, but was subject to a downward adjustment by Mr Sanidas. He also made an upward adjustment of 10% for location. Taking into account adjustment for time at a rate of 1.5%, he arrived at a value of $2,018/m² FSA.
2. Mr Lunney considered that as this was not a redevelopment site sale, analysis on a $/m² FSA basis would necessarily yield an incorrect result, subject to a lease and option to Metro Petrol.

536 Parramatta Road

1. This property was contended to be a future development site, with the required frontage (25m), and improvements valued by Mr Sanidas at $175,000. The rate given by Mr Sanidas of $2,513/m² FSA was said to be cognisant of the corner advantage enjoyed by this site.
2. Mr Lunney considered that, as this was a very small site, with an area of only 442.6m², it would appeal to a different market than the Land. Further, he considered that this was not a redevelopment site, and, as such, analysis on a $/m² FSA basis would necessarily yield an incorrect result.

530 Parramatta Road, Ashfield

1. This car detailing site, not on a corner, and with improvements valued by Mr Sanidas at $100,000, was sold in May 2015. Mr Sanidas adjusted upwards by 15% for the lack of a corner advantage and arrived at a rate of $1,907/m² FSA.
2. Mr Lunney again considered that, as this was a site with a small area of only 442.6m², it would appeal to a market different from that for the Land. Further, as this was not a redevelopment site, analysis on a $/m² FSA basis would necessarily yield an incorrect result.

RMS sales

1. Mr Sanidas relied on RMS sales as secondary evidence (par 18.00, fol 118). His analysis of those sales on a Site Area (Improved) basis varied between $3,140/m² to $3,896/m² Site Area (Improved).
2. Both valuers regarded the evidence of RMS sales as secondary evidence, and acknowledged difficulties in the use of sales evidence where the seller and purchaser of land could not be characterised as "willing but not anxious", I have not given them much emphasis.

Conclusion on Market Value - Applicant

1. Mr Sanidas concluded an underlying land value of $1,900 per square metre FSA.
2. Considering the two distinguishing features of the Land - the high volume of east bound traffic heading towards Sydney via the CityWestLink, associating with a branding advantage, and the corner advantage, Mr Sanidas assessed the market value of the Land according to the following schedule (CB, Vol 2, fol 117): Lot Land Area m2 $m2 FSR 500 m2 inside lot Plus Corner Premium Adjusted Rate FSR Plus Location Premium Adjusted Rate FSR FSR Land Value Rate Overall Land Value $m2 Lot 64 676.64 $1,900 15.00% $2,185 10.00% $2,404 1.5 $3,605 2,439,456.36 Lot 63 676.64 $1,900 0.00% $1,900 10.00% $2,090 1.5 $3,138 2,123,356.40 1,353.28 $4,562,813

Investment income capitalisation approach

1. I turn, then, to Mr Sanidas's "check method", an investment income capitalisation approach, which led him to a market value of $4,260,000.
2. This approach was said to be based on the following three inputs: 1. Determining the market rent per annum for the Land; 2. Determining the appropriate capitalisation rate to be applied; and 3. Dividing the net market rent per annum by the capitalisation rate, to derive the market value of the Land.
3. A number of properties were identified by Mr Sanidas as having similar features as the Land, as at the acquisition date: 1. 150 Parramatta Road, Haberfield: $187/m² gross; $150/m² net; 2. 163 - 165 Parramatta Road, Haberfield: $302/m² gross; $252/m² net; 3. 32 - 34 Parramatta Road, Croydon: $170/m² gross; $141/m² net.
4. Mr Sanidas adopted a gross rate of $200/m² Site Area (Improved). The rates were said to vary on the basis of differences in the quality of vehicular access, onsite parking, location, site and building area, and exposure to traffic. Applying this rate ($200/m²) to the area of the Land (1,353.2m²) produces a gross rent of $270,640. For capitalisation purposes, Mr Sanidas adopted a net annual market rent of $234,696 ($173/m²) after allowing $35,944 in outgoings ($19,558 per month or $234,696 per annum net). Alternatively, $200/m² gross across the total 1,353.2m² Site Area (Improved) which equates to $22,553 per month ($270,640 per annum gross).
5. In consideration of the determination of the notional capitalisation rate to be adopted in respect of the Land, Mr Sanidas identified the following sales as relevant: 1. 57 - 61 Parramatta Road, Haberfield (cap rate of 3.86%); 2. 502 - 506 Parramatta Road and 164 Frederick Street, Ashfield (cap rate of 4.05%); 3. 244, 244A and 244B Parramatta Road, Ashfield (cap rate of 4.35%); 4. 163 - 165 Parramatta Road, Haberfield (cap rate of 6%); 5. 97 - 99 Majors Bay Road, Concord (cap rate of 4.59%); 6. 6/1042 Great Western Highway, Minchinbury (cap rate of 5.95%); 7. 198 Parramatta Road, Camperdown (cap rate of 4.72%).
6. Accordingly, Mr Sanidas assessed the appropriate capitalisation rate at 5.5%, having particular regard to multinational tenants in (e) and (g). 5.5% was contended to be the midpoint in a capitalisation sensitivity analysis, in which a 5.25% net yield would reflect a net value of $4,470,000, and a 5.75% net yield would reflect a net value of $4,081,670.
7. When the annual net rent of $234,696 Site Area (Improved) is capitalised by 5.5% yield, it reflects a capital value of $4,267,000.

I: RMS's valuation evidence

1. Having noted above some of Mr Lunney's responses to Mr Sanidas's evidence, I now turn to his own expert valuation evidence.
2. Mr Lunney considered that the value of the Land was slightly underestimated by the Valuer-General's Report, which attributed a market value to the Land of $3,635,000, and he arrived at a figure of $3,755,000.
3. In undertaking his valuation, Mr Lunney acknowledged the benefit of the street frontage and exposure of the Land to Parramatta Road, albeit restricted to "left in" and "left out" movements at this location, and acknowledged also the benefit of the Land's proximity to the City West Link intersection.
4. The 1970s service station improvements were adapted for a warehouse/showroom oriented to the Parramatta Road frontage. Those improvements, covered an area of 505m², including 165m² of canopy/awning. He considered the building to be sound, but dated, and at the end of its economic life.
5. Accordingly, he suggested that the "highest and best use" of the Land, as at the date of acquisition, would be for redevelopment, if it was offered for sale with vacant possession.

Direct comparison approach

1. Mr Lunney relied on none of Mr Sanidas's sales as truly comparable. Instead he relied on the following four sales to assess the market value of the Land: 1. 244 - 246 Parramatta Road; 2. 124 - 126 Parramatta Road; 3. 167 Parramatta Road; 4. 502 - 506 Parramatta Road.
2. All four have the same B6 planning controls as the Land, with the exception that two of the sales have an FSR of 2:1, compared to the Land's 5:1. Further, they constitute business premises and shops, which are permissible uses in the B6 zone. It was, therefore, assumed that any property in the B6 zone had the opportunity to amalgamate and obtain development consent to develop aggregated land for a commercial use.
3. The sales were analysed on a potential value per square metre of floor space basis ($/potential FSA), and were said to show a consistent, unadjusted result. He opined that the market in the Land's locality typically looks to developing land in a manner which maximises its FSR potential.
4. Like Mr Sanidas, Mr Lunney relied on some negotiated RMS acquisitions, but in only a secondary way. He adjusted them upwards by 20%, in consideration of the superiority of the Land, due to its frontage and corner location. Mr Lunney found a consistent $/potential FSA rate for these sales.
5. Ultimately, he adopted a rate of $1,850/m² FSA for the Land, to derive his value of $3,755,000. The figure for which Mr Sanidas contended, namely $4,560,000, derived from $2,250/m² was submitted to be inconsistent with all of the sales identified by Mr Lunney.
6. The following table details Lunney's evidence in relation to the $/m² potential FSA without adjustments (CB, Vol 2, fol 168): Address Sale Date Sale Price Site Area FSR Control Potential Floor Space Area (FSA) $/m² potential FSA unadjusted 244-246 Parramatta Road, Ashfield 29/6/15 $4,568,888 1,387m2 2:1 $1,645 2,774m² 124-126 Parramatta Road, Ashfield 9/9/15 $5,500,000 1,846m2 2:1 $1,490 3,692m² 167 Parramatta Road, Haberfield 27/2/15 $3,900,000 1,638m2 1.5:1 $1,587 2,457m² 502-506 Parramatta Road and 164 Frederick Street, Ashfield 9/2/16 $4,030,000 1,445m2 1.5:1 $1,859 2,167.5m²

1. Mr Lunney acknowledged that his sales required adjustment on the basis of a number of individual and general factors. Generally, he adjusted each of the sales properties for market movement at the rate of 1.5% per calendar month, on the basis of market evidence. Lunney's adjusted market evidence was depicted in the following table (CB, Vol 2, fol 170): Address Sale Date FSR Control Potential Floor Space Area (FSA) $/m² potential FSA unadjusted $/m² potential FSA adjusted 244-246 Parramatta Road, Ashfield 29/6/15 2:1 $1,645 $1,706 2,774m² 124-126 Parramatta Road, Ashfield 9/9/15 2:1 $1,490 $1,613 3,692m² 167 Parramatta Road, Haberfield 27/2/15 1.5:1 $1,587 $1,844 2,457m² 502-506 Parramatta Road and 164 Frederick Street, Ashfield 9/2/16 1.5:1 $1,859 $1,805 2,167.5m²

1. The range of adjusted values was narrow, the average being $1,742/m² FSA.
2. I turn now to examine each of Mr Lunney's four preferred sales, including some commentary from Mr Sanidas.

244 - 246 Parramatta Road, Ashfield

1. As this sale was transacted on delayed settlement terms (12 months), Mr Lunney considered that, if adjusted to reflect a "cash equivalent", the sale would reflect a rate of $1,565/m² FSA.
2. If further adjusted for market movement at the rate of 1.5%pcm, the sale would reflect a rate of $1,706/m² in December 2015.
3. As this site also had a corner location, Mr Lunney considered that no adjustment was required in that respect.
4. The sale was acknowledged to be of little use, because the purchaser defaulted and the vendor rescinded the sale, and the experts agreed, in their joint report (CB Vol 2, tab 6), to delete this sale (CB Vol 2, tab 6, par 23).

124 - 126 Parramatta Road, Ashfield

1. This sale was also transacted on delayed settlement terms (14 months), and reflects a "cash equivalent" rate of $1,403/m²
2. An adjustment for market movement was said to reflect a sale rate of $1,466/m² FSA as at December 2015.
3. As the site was not a corner location, Mr Lunney adjusted the sale up by 10%, achieving an adjusted value of $1,613/m² FSA.
4. Mr Sanidas suggested that this sale was of limited assistance to the Court on the basis that Mr Lunney excluded the adjoining sale of 8 Tideswell Street, Ashfield from his analysis of the total FSA. That site was acquired by the same purchaser with a settlement date 7 days after that for 124 - 126 Parramatta Road, Ashfield.
5. It was suggested by Mr Sanidas that 8 Tideswell Street, Ashfield, was required in order to develop the 124 - 126 Parramatta Road, Ashfield, site, and the Court's site inspection confirmed the utility of residential land at 8 Tideswell Street to the development of B6 land at 124 - 126.
6. Relying solely on only part of the potential development site must reduce the usefulness of this sale. Mr Hall submitted (par 31), that these properties are "so interwoven ... that separate analysis of 124 Parramatta Rd cannot be undertaken safely", but the respondent treats them "as entirely separate". 124 -126 and No 8 were purchased by the same party, seven days apart.
7. There can be no doubt that these properties are well outside any precinct based on Bunnings. Mr Hall speaks of (par 64) the area's residential "feel", and notes its isolation from the heritage conservation area.

167 Parramatta Road, Haberfield

1. This site was also transacted on delayed settlement terms (8 months), thereby reflecting a "cash equivalent" rate of $1,527/m².
2. When adjusted for market movement, the sale reflects a rate of $1,756/m².
3. Similar to the Land, this site enjoyed two street frontages, but it is not a corner site, and, therefore, requires adjustment. It was adjusted upwards by 5% by Mr Lunney, to take into account the superior corner location of the Land. Such adjustment gives the Court a rate of $1,844/m² FSA.
4. Mr Sanidas suggested that consideration of this site was of little assistance to the Court because Mr Lunney did not consider (a) potential remediation costs associated with offsite migration of contaminants relative to 163 - 165 Parramatta Road, Ashfield; (the Metro Petrol site), and (b) the planning impacts of LPG underground tanks (CB Vol 2, tab 6, par 29). Further, the challenging lot configuration, and the fact that the site adjoined a heritage conservation area were said to constitute inherent disadvantages, and demonstrate a flaw in Mr Lunney's FSA analysis.
5. Mr Lunney countered that there was no evidence of any contamination by reason of the site's proximity to the Metro Petrol site. He noted that the Land was also formerly a petrol station, and adjoined Haberfield heritage conservation area at its rear. I accept Mr Lunney's response, and am therefore, content to have regard to this sale.

502-506 Parramatta Road; 164 Frederick Street, Ashfield

1. This site was not adjusted for location by Mr Lunney, due to its prominent location and exposure, said to offset its inferior shape and configuration.
2. The sale of this site was transacted after the Date of Acquisition, in February 2016, requiring adjustment for market movement, producing an adjusted value of $1,805/m² of FSA.
3. Mr Sanidas considered that this sale was of little assistance to the Court because its FSA was based, in fact, on two sales - the property is dissected by a public laneway known as "Access Road". There is also an RMS road reservation on Frederick Street, flood issues, and a subsurface acquisition potentially affecting the development potential of the site (disclosed in the contract for the sale). If the sales were to be treated separately, the Parramatta Road lot would achieve $2,600/m² of FSA. The approach taken by Mr Lunney, in averaging the FSA values, was said to lack any valuation basis and rationale.

RMS sales

1. The following RMS sales were considered by Mr Lunney, with caution, and adjusted by 10% for each of the corner location and street frontage advantages enjoyed by the Land (CB, Vol 2, fol 172): Address Site Area FSR Control Agreed Value $/m² site area Unadjusted $/m² FSA Adjusted $/m² FSA 170 Parramatta Road, Ashfield 1,043m² 2:1 $3,100 $1,550 $1,860 168 Parramatta Road, Ashfield 924.2m² 2:1 $3,200 $1,600 $1,920 166 Parramatta Road, Ashfield 929m² 2:1 $3,200 $1,600 $1,920 164 Parramatta Road, Ashfield 1,132m² 2:1 $3,200 $1,600 $1,920 162 Parramatta Road, Ashfield 1,227m² 2:1 $3,250 $1,625 $1,950 152 Parramatta Road, Ashfield 929m² 2:1 $3,200 $1,600 $1,920

1. As already noted, I have not given these secondary sales much emphasis.

Investment income capitalisation approach

1. Mr Lunney did not provide, in chief, any income capitalisation calculations, as a "check method". Nonetheless, due to his involvement in other acquisition matters in the immediate locality, he believed himself to be familiar with rental values and investment yields there.
2. In the Joint Expert Report (CB Vol 2, tab 6, par 96), not his original report, Mr Lunney set out calculations he would have undertaken if he were to determine the market value of the Land on a capitalisation of income basis as follows: Potential rental Value 1,353.2m² x $120/m² p.a. net $162,384 p.a. Capitalised in perpetuity @ 6.5% $2,500,000 (rounded)
3. This was said to be significantly lower than the redevelopment value of the Land as determined by the analysis, adjustment, and application of comparable redevelopment site sales ($3,755,000), and confirmed Mr Lunney's opinion that the "highest and best" use of the Land was redevelopment.
4. The joint report observed (CB Vol 2, tab 6, par 98) that the assessment of rental value or the appropriate capitalisation rate is unlikely to result in a valuation on a "capitalisation of income" basis which would exceed a valuation on a "redevelopment site" basis.

The Court's conclusion on the Valuation Evidence

1. In general terms, I prefer Mr Sanidas's evidence to Mr Lunney's, but I need now to explain my reasons.

The direct comparison approach

1. In Cremation Company ([49] above), Robson J said, in relation to the comparable sales methodology (at [97] - [105]): 97 There has been much judicial consideration of the correct approach when undertaking a valuation using the comparable sales methodology. 98 In Crompton v Commissioner of Highways (1973) 5 SASR 301, Wells J stated at 317: …ideally, the valuer should, in the first instance, look at the sales of land over a wide geographical and temporal range, and from these select those that appear potentially useful as a basis for comparison. Those selected should then be carefully analysed by reference to an extensive list of characteristics of land sales the compilation and assessment of which fall clearly within the province of the experts. Whether or not one or more of those sales is, and how it or they ought, to be compared with the subject land becomes then a matter of degree, and a final decision is reached, often by those same experts drawing a series of nice distinctions. Obviously, no two sales of land will be found to be the same, or even similar in all respects. Those that bear a close similarity to the assumed sale of the subject land will be more reliable than those whose similarity is less proximate and in respect of which adjustments or allowances must be made before they can be safely introduced into the valuation process. At a particular point it will be found that, in respect of the remaining available sales, the adjustments and allowances that would need to be made are of such a magnitude that it ceases to be safe or sound to treat them as sufficiently similar to the assumed sale of the subject land, and they must thenceforward be rejected. 99 It has been accepted that a generally valid method of conducting a comparable sales approach is to undertake it in the four steps of accumulation, analysis, adjustment and application: Constantine v Blacktown City Council (No 2) [2016] NSWLEC 81 at [100] (Moore J); Hoy v Coffs Harbour City Council [2015] NSWLEC 128 at [83] (Pain J) (leave to appeal this judgment was refused in Hoy v Coffs Harbour City Council [2016] NSWCA 257 at [61] (Bathurst CJ, with Simpson and Payne JJA agreeing)); Allandale Blue Metal Pty Ltd v Roads and Maritime Services (No 6) [2015] NSWLEC 18 at [344] (Pain J); Marroun v Roads and Maritime Services [2012] NSWLEC 199 at [197] (Sheahan J and Parker AC) ('Marroun') (affirmed on appeal in Marroun v Roads and Maritime Services [2013] NSWCA 358 at [75] (Tobias AJA, with Basten and Gleeson JJA agreeing). 100 First, the valuer, judicial or otherwise, should accumulate comparable properties. In undertaking this process, the "sales to be treated as comparable sales need to be truly comparable", although the Court should not be "unreasonably selective" of its comparable properties in any event: Maurici v Chief Commissioner of State Revenue [("Maurici")] (2003) 212 CLR 111 at [18] (McHugh, Gummow, Kirby, Hayne and Callinan JJ). 101 As stated by Pain J in Trust Co Ltd v Minister Administering the Crown Lands Act 1989 (2012) 211 LGERA 158; [2012] NSWLEC 73 at [110]: While all comparable sales evidence may be considered relevant and so cannot be disregarded, the level of relevance of different comparable sales to the property may vary leading to the valuer attributing differing weight to different comparable sales. In Brewarrana Pty Ltd v Commissioner of Highways (1973) 6 SASR 541 at 551, Wells J observed: … there is no hard and fast rule by the application of which a valuer may, whatever the circumstances, draw the line that clearly separates the sales that are comparable from those that are not. 102 Second, the valuer should analyse those comparable sales. This often involves converting the value of those sales into another measurement that can be easily compared: Marroun at [201] (Sheahan J and Parker AC). Examples of this process include converting those sales into unitary rates, such as a psm rate. 103 Third, the valuer should adjust those properties it considers comparable to create equivalence with the unimproved subject land. As stated by Biscoe J in Holcim (Aust) Pty Ltd v Valuer-General [2009] NSWLEC 225 at [31]: The basis for the valuers' valuation assessments is the sales comparison method. Accepted valuation practice permits adjustments for differences, such as in location, area and time to enable valuers to have comparable values which, following adjustment, account for the various differences with the subject property. Such adjustments are generally based on a reasoning process drawing on the skill and experience of the valuer and are undertaken to derive an opinion of value through a deductive process. Because properties are rarely identical, adjustments for differences are obviously necessary but caution is required through making as few adjustments as possible, in a consistent manner, to ensure the reliability of the comparable sale when related to the subject property. Too many adjustments potentially render the comparable sale unsafe to rely upon. Caution is therefore required where large adjustments are to be made. Reflecting the significant roles of skill, experience and personal assessment in the adjustment process, the scope for differences in the quantum and direction of adjustment between valuers can be considerable. Third, the Court should then apply these adjusted values to the subject property. The purpose of this is to determine, based on comparable sales and as best it can, what value the subject property would obtain if it were to be sold on the market. 104 Fourth, the valuer should apply the comparable sales to determine a value of the subject land based on the adjusted values of the comparable properties.
2. I adopt His Honour's approach to the process required when undertaking the comparable sales methodology.
3. In Toveno v RMS [2014] NSWLEC 1266 at [65] and [94], the Court held, citing Maurici, that even one sale, if properly adjusted, analysed and then applied, is a sufficient foundation for utilising the comparable sales method.
4. I consider that there are, in fact, four sales which are appropriately seen as comparable to the Land: 1. 167 Parramatta Road, Haberfield (Lunney); 2. 502 - 506 Parramatta Road; 164 Frederick Street, Ashfield (Lunney); 3. 57 - 61 Parramatta Road, Haberfield (Sanidas); and 4. 113 Dobroyd Avenue, Haberfield (Sanidas).
5. Mr Lunney approached the valuation on the basis that the improvements on the Land were at the end of their economic and functional life, whereas Mr Sanidas noted that, as at the date of acquisition, Dawa was actively trading on the Land, as a commercial facility leased by the Applicant.
6. Mr Astill submitted (at 7.61), that Mr Sanidas's adjustment for the improvements is erroneous. Despite the heading "added value of improvements", Mr Sanidas explained (Tp40, L50 - p50, L10) that this in fact related to the cost of removing the improvements to render the site ready for redevelopment. Mr Astill, therefore, contended that such a cost should have been added to any sale price, rather than deducted. Mr Astill also submitted that Mr Sanidas's costs of such decommissioning were not founded on evidence beyond guesswork, and, in at least one case, the likely cost to remove all improvements was significantly underestimated.
7. I agree with Mr Astill's comments in this respect. The site should be considered in terms of its highest and best use, for redevelopment, on an unimproved basis, and any comparable sites adjusted appropriately in recognition of this fact.
8. I turn, therefore, to consider the various adjustments made by the valuers.

Bunnings Precinct

1. Both emphasised the importance of location within the "Bunnings Precinct", a premium location for businesses benefitting from exposure to passing traffic. They agreed that the precinct would extend as far west as Great North Road, but they did not agree on how far it extended to the east - Mr Sanidas contended it should extend "a little way east of Wattle Street, perhaps about 300 metres", whilst Mr Lunney considered it should extend as far east as Parramatta Road's intersection with Bland Street.
2. It was plain on the Court's site inspection that traffic volumes were significantly lower to the east of the Wattle Street intersection, with the diminution in intensity of road use very marked at 124 - 126 Parramatta Road. I consider that the "Bunnings Precinct" extends only very slightly to the east of the actual Bunnings Warehouse site.
3. Bunnings itself constitutes a "destination", to which shoppers would travel "with intention" (Tp70, L131). The heart of the precinct is an intersection heavily controlled by traffic lights, such that traffic generally moves slowly and is stationary for lengthy periods at times. Relevantly, traffic queuing to turn left from the easterly flow in Parramatta Road into Wattle Street would frequently be stopped outside the Land and other comparables in that vicinity. I agree with Mr Hall that the Bunnings Precinct is a significant location advantage for the Land.
4. The adjustment to comparable properties, on account of the locational advantage of the Bunnings Precinct to the Land, should be 10%.

Corner Premium

1. The valuers were also in agreement regarding the advantage, in value terms, of corner lots, when compared with "inside lots". Nonetheless, there was a disparity between the valuers regarding the adjustment figure necessary to allow for that advantage, with Mr Sanidas preferring a 15% adjustment, while Mr Lunney would apply only 10%.
2. Mr Lunney accepted that the best way to quantify this advantage would be to consider paired sales, where one site enjoyed the corner advantage, whilst the other did not. He undertook no such analysis - his 10% was an expert estimation, whereas the Applicant's team examined pairings such as 530 and 536 Parramatta Road (see CB, Vol 2, p201 and Tp83 - 84). Mr Lunney preferred to pair/compare the more widely separated 124 and 244 Parramatta Road, from which he derived (or conceded) a corner premium of 14% (Applicant's subs at 31, accepted by Lunney at Tp84, L130).
3. On balance, the Court accepts that an adjustment of 10% is appropriate.

Time

1. The valuers agreed in the Joint Report that for sales which were transacted during 2015 and early 2016, an appropriate adjustment for time (market movement) is 1.5% per calendar month net.

Conclusion on Market Value

1. The application of the adjustments to the Court's four preferred comparables are shown in the following table: Address Location Corner Parramatta Rd Frontage Time Total adjustment Land value (psm) Adjusted land value (psm) Adjusted land value (psm FSR of 1.5:1) 167 Parramatta Road, Haberfield 10% 10% 0% 15% 35% $2,2381 $3,214 $2,143 502-506 Parramatta Road Ashfield; 164 Frederick Street, Ashfield 0% 0% 0% -3% -3% $2,789 $2,705 $1,804 57-61 Parramatta Road, Haberfield 10% 0% 0% 1.035% 11.035% $3,000 $3,331 $2,221 113 Dobroyd Avenue, Haberfield 0% 10% 10% 16.80% 36.08% $3,169 $4,312 $2,875 Averages: $3,390.51 $2,260.75

1. Applying the adjusted value of $3,390.51 to the Land's area of 1,353.28m², the subject property has a market value of $4,588,309.37, rounded up to $4,590,000, generally in line with the Applicant's final claim ($4,560,000).
2. Given the disparity between the valuer's applications of their secondary/check method - capitalisation of (notional) rent - I do not consider it necessary or useful to go into detail, beyond noting that the figure arrived at by Mr Sanidas, when employing this method ($4,267,000) is reasonably comparable to the value at which I have arrived after my analysis of the valuation evidence.

K: CONSIDERATION - DISTURBANCE

1. The relevant statutory provisions regarding disturbance claims (ss 55 and 59) were set out above (at [14]).
2. After the conclusion of the hearing, and at the direction of the Court, the parties summarized their positions on the disturbance claims in the following table: Item No. SECTION PARTICULARS APPLICANT'S CLAIMED AMOUNT RMS REPLY AMOUNT REFERENCE

3.    s59(1)(a)  Legal Fees                                                                                                 $8,700.00                   $5,500.00         CB V1, Tab 7, p.64#
                 • Allars Mottee Hannaford Solicitors.
   

4.    s59(1)(b)  Valuation fees.                                                                                            $10,896.00                  $10,896.00        CB V1, Tab 7, p.65-66
                 • Statewide Valuations.
                 Due diligence costs on replacement property*, Including:
   

5.    s59(1)(c)  • Pest inspection and report ($3,000).                                                                     $6,000.00                   $0.00             CB V1, Tab 7, p.67
                 • Survey ($3,000).
   

6.               Legal costs associated with acquisition of comparable replacement property (including disbursements).*     $10,670.00                  $0.00             CB V1, Tab 7, p.68-72
   

7.    s59(1)(d)  Stamp duty (based on market value of $4,560,000).*                                                         $236,290.00                 $0.00             CB V1, Tab 7, p.73#
                 Finance and mortgage costs associated with the purchase of a comparable replacement property*, including:
   

8.    s59(1)(e)  • Loan application ($18,682).                                                                              $23,818.30.                 $0.00             CB V1, Tab 7, p.74-76
                 • Valuation ($5,000).
                 • Registration of mortgage fee ($136.30).
                 TOTAL                                                                                                      $296,374.30                 $16,396.00
   

• In the alternative, the claim is made under s59(f) # These were the replacement documents handed up on Day 4 of the hearing

1. The Court also had the advantage of the unchallenged affidavit evidence provided by Danielle Zheng.

Applicant's submissions

1. Mr Hall submitted that the Court "would accept" all the Applicant's disturbance claim, noting that "all of the amounts were reasonably incurred": McDonald v Roads & Traffic Authority (NSW) (2009) 169 LGERA 352.
2. The Applicant's primary submission (par 66) is that a combination of ss 54(d), 59(c), 59(d) and 59(f) of the Just Terms Act, entitles the Applicant to compensation for stamp duty and other costs "reasonably incurred, or that 'might reasonably be incurred' in the future by him in relation to the relocation of any person entitled to compensation or the purchase of land for relocation". Any cost awarded under s 59(f), must relate to the actual use of the land.
3. The "persons" entitled to compensation in this case are Zheng and his family company, Dawa. Their intention to relocate is clear - Danielle deposes (at par 23) to their intention to replicate the business arrangements they had on the Land by "relocating the business to land that [her] brother will purchase", but the compensation offered for the Land would not cover the purchase of "anything similar in the area".
4. The Respondent accepted Dawa's "disturbance claim on the relocation basis" (subs par 69), but refused the Applicant's relocation claims, on the basis that the facts of his case are analogous to those in Speter v Roads & Maritime Services ("Speter") [2016] NSWLEC 128, described by the Applicant as a "passive investment case". The Applicant submitted that he was not relocating his "business of investing", but his business of selling stone, which he secures from China, and that he will reasonably incur the costs involved in locating and purchasing a new site.
5. Zheng is an active director of Dawa; he participates in its business decisions, and he travels frequently between China and Australia in connection with the business (par 72).
6. Mr Hall submitted (Tp18, LL33 - 35) that "the evidence of the integration of the land ownership with the business ownership and operation is extremely strong", and further (Tp18, LL46 - 48) that land ownership and operation of the business were treated as part of the same process by all members of the family. It is well established and accepted that s 59(f) does not require that a person be physically relocated, provided that the costs incurred arise from an actual use of land and are sufficiently causally connected - sub section (f) does not require actual use by the Applicant, provided he reasonably incurs the costs as a direct and natural consequence of the acquisition, and in connection with the actual use (see also subs pars 73 and 74): Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) (2000) 108 LGERA 417; [2000] NSWLEC 139, per Lloyd J, at [20].

Respondent's submissions

1. Mr Astill's written submissions in respect of such costs (at 9.3 - 9.7) were: 9.3 It is the Respondent's submission that these claims are not compensable because they are not in relation to any relocation and are not costs incurred in relation to the applicant's actual use of the land as a direct and natural consequence of the acquisition. That is for the simple factual reason that the applicant did not have any actual use of the Subject Property. 9.4 The only arguably relevant evidence is the affidavit of Ms Zheng sworn 3 August 2016. That affidavit confirms the Applicant to be the owner but the business run by DAWA. 9.5 The tenant (DAWA) has had its actual use disturbed. However the applicant being the owner of a leased property was not relocated nor did he have any actual use on which any claim for consequential costs may legally be based. 9.6 Where purchase of a replacement property is not a "relocation" for the purposes of s59(1)(c), (d) and (e), costs associated with the purchase of the replacement property must be claimed under s 59(1)(f). 9.7 For such costs to be recoverable under s59(1)(f) all of the following must be established: (a) at the date of acquisition there must be an actual use of the acquired land by the applicant; (b) the financial costs, reasonably incurred and relating to that actual use, must be incurred as a direct and natural consequence of the acquisition; and (c) whether there is any evidence of the purchase of an alternative property in respect of which stamp duty has been paid, or that such a purchase relating to the actual use of the subject land is likely to occur.
2. In his opening oral submission Mr Astill said (Tp8, LL3 - 6, and p19, LL34 - 45): ... Dawa Stone, the corporate entity, has had its interests acquired by RMS separately and has been paid and accepted the compensation that was agreed between RMS and the lessee. ... ... There is a corporate veil. The applicant and his corporate entity have chosen a particular structure in which to run his business. They have made their bed and, with respect, they must lie in it. The applicant here is the owner of the land. How they informally run their family business is, with respect, not of relevance to that. We have an owner making a claim. My friend says it is not consistent with us now denying he is (sic) the owner's claim for a replacement property when a settlement of the business claim included relocation of the business. With respect, I adopt that as part of my submission, that the disturbance claim for the business was wrapped up and settled and is the subject of no litigation. The moving of the business was paid for. ...
3. Mr Astill cited (at 9.8) some nine cases, culminating in Speter, to support his submissions. He submitted that the circumstances of the Applicant in the present case are indistinguishable from the circumstances of the Applicant in Speter (particularly on [84] - [94]).
4. In both cases the Applicant fundamentally fails to satisfy the requirement of actual use. The only difference Mr Astill could identify between the facts of Speter and those in relation to the Land, was that in this case there is a lease to a related corporation, rather than to an unrelated party, as was the case in Speter (see Tp243, LL32 - 37).
5. In his final oral submissions, Mr Astill said (Tp244, LL6 - 39): ... here obviously there was a business being carried out on the subject land. That use and business was that of Dawa Stone. It made a disturbance claim to relocate that business. As my friend said, that business Dawa Stone made a claim, had it's (sic) claim valued on the basis that it would relocate its business. It was made a statutory offer in respect of the claim to relocate the business and was paid that sum and no proceedings were instituted. So it's in my submission crystal clear that the actual use for which any claim for disturbance under 59(1)(c) or 59(1)(f) is to be made by the person who is being relocated - 59(1)(c) - or whose actual use has been disturbed occasioning costs which must be reimbursed under 59(1)(f). It's not enough to say, "There was an actual use by someone and I, Mr Zheng, have incurred expenses because that actual use has been disturbed." It's clear enough - in fact, crystal clear that the actual use occasioning the costs must be that of the claimant. Whether Mr Zheng was a director, whether he worked in the business, whether his sister-in-law, wife and some certain other relatives did or didn't work in the business is completely irrelevant. My friend is effectively saying, "Look, there's a corporate veil here but just push it to one side here. Really this is a family business. They had a structure but don't worry about that. It's all part of the same thing so it's him who is running it. It's a family business. It needs to be relocated so he has to get the costs of it." That is incorrect on a proper interpretation of the statute. There is no difference between Mr Zheng here and Mr Speter in the case which I've handed up, apart from the fact that the corporate entity that was there the lessee was unrelated to the owner, whereas here the owner is a director. I made a comment in the opening that he has adopted this structure for whatever reason, and I don't criticise it. There may be a tax reason. Who knows what the reason is. But there is a structure that the applicant has adopted. He is the owner. He is not registered for GST. He's not carrying out a business. Dawa Stone is carrying out a business. It has a lease. It was running a business. It got disturbed. It made a relocation claim. It got paid. It was happy. Your Honour, that's the end of it. Speter is totally indistinguishable.
6. Various cases have considered what constitutes "actual use", beyond use as an owner and occupier, including, for example, where an Applicant's business was holding land to be developed for residential subdivision (Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259), and land banking, i.e. holding land as "stock in trade" (Macarbell Pty Limited v RTA, Michael Nasser v RTA (2006) 149 LGERA 217; [2006] NSWLEC 651).
7. On the other hand, cases where uses were not considered to constitute "actual use" include: where land was leased solely for the purpose of rent income, i.e. not in actual use by the lessor, but rather held as a passive investment property: (Cannavo v Roads and Traffic Authority of New South Wales [2004] NSWLEC 570; G. Suonaf Holdings Pty Ltd v Roads and Maritime Services [2016] NSWLEC 116; Johnston v Roads and Traffic Authority [2000] NSWLEC 111, and Speter), or where "use" is really only a potential or proposed use of land (Kirela Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (No 2) (2004) 132 LGERA 90 and Bezzina Developers Pty Ltd v Leichhardt Municipal Council (2006) 146 LGERA 249; [2006] NSWLEC 175 at [112]-[116]).
8. In conclusion on this point, it is useful to quote what Robson J said in Speter (at [88] - [89]): 88 However, if I am wrong on this point, I also find that to the extent that the applicants operated a business, it has not been relocated. When a business sells a land asset, compulsorily or otherwise, it is not forced to relocate unless it was physically operating from that land asset. The applicants, who had leased out the entire property to the NSW Health Administration, did not operate any business from the subject property. Rather, if it were considered that the applicants were engaged in business, that business would be operated from another location which had invested in the subject property. As such, the applicants' business would not have been relocated in any event. 89 The applicants' secondary submission on this point was that relocation is not limited to persons or businesses, but can be expanded to the relocation of anything. I also do not accept this submission. When an investment property is resumed, the property is acquired and the money invested in that property returned to the investor. That investor may then invest that money how they wish. Investing this money in another property is not a relocation of the original investment, but rather a reinvestment of the money paid for the original investment. Nothing has been physically moved to another place. Reinvestment is therefore conceptually different to the relocation of a person or a business from a resumed property to another property.

Conclusion on Disturbance

1. I am content to adopt, and apply to the present case, Robson J's reasoning in Speter, and I, therefore, disallow those of the Applicant's disturbance claims which were disputed/rejected by the Respondent.
2. The claim for valuation fees has been agreed at $10,896.00, but the Respondent disputes some of the legal fees claimed, allowing only $5,500 out of the claimed $8,700.
3. In the absence of any probative evidence from the Respondent as to why the full amount contended for ($8,700) should not be paid to the Applicant, apart from some confusion in respect of invoices, I am prepared to allow in full the amount claimed for legal fees.
4. That results in a determination in favour of the Applicant, in respect of disturbance, in the amount of $19,596.00.

L: Conclusion and Orders

1. The Court orders that: 1. The Applicant's claim for market value under s 55(a) of the Land Acquisition (Just Terms Compensation) Act 1991 is determined the amount of $4,590,000, and his claim for disturbance costs under s 55(d) of the said Act, in the amount of $19,596. 2. The total amount of compensation payable to the Applicant for the acquisition of the land comprising Lot 63 and Lot 64 in Deposited Plan 4612, known as 269 Parramatta Road, Haberfield, is determined in the amount of $4,609,596. 3. All questions of the costs of the proceedings are reserved. 4. The Exhibits and the Court Book are returned to the Respondent.

Amendments 04 August 2017 - Date of decision and date of orders - 28 June 2017 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 August 2017