In July/August 2007 the " sub-prime " crisis was emerging, and some developments were being suspended, indicating some likely difficulties in the market, eventually felt in early 2008. The residential market at that time and location was variously described in evidence as " stable ", " improving ", " firming ", etc (see, eg. T29.7.09, p38), and the general market for commercial space as " strong " (T8.12.08, p75). While perhaps not " flooded ", the residential market, certainly rental, was seen to be possibly " oversupplied ", but " still relevantly strong and moving forward " (T8.12.08, p9): 1,407 residential units were under construction in 2007, compared with 2,800 completions in 2005 and little more than 1,000 (including 537 in Green Square) in 2006. The 2007 figure was said to show an " intense level of construction in Green Square ", and to indicate a high level of supply, cf demand (T29.7.09, pp27-28), but no " flooding ". Any " fall off " was in completed stock, not pre-sales (T27.7.09, p36).
172 The valuers generally agreed that the market conditions were adequately reflected in their agreement on $740 per m2 GFA, but it must be borne in mind that this is a figure arrived at in a particular planning scenario, and is not a valuation of an actual unit of land.
173 Should the applicant's town planning case not be accepted by the court, the experts' agreement on valuation issues evaporates.
174 The valuers having agreed that "on a direct comparison basis the value of the acquired land would not be significant" (Exhibit A13, par 23), Mr Wotton arrived at his "fallback" figure of $3,086,910 (Exhibit A25), which he testified met the definition "not significant", when compared with $8,678,720 (T29.7.09, p60).
175 The applicant's $3M figure relies on the acquired land retaining a FSR of 1.5:1 in the "after", and attracting the $740 per m2 GFA, so that the calculation is 2,781 x 1.5 x 740 = 3,086,910.
176 On the other hand, the RTA submits (Exhibit R10, par 35) that the acquired land, on its own, has zero development potential and has to be assessed without factoring in either the 1.5 or the 740, on the basis that it is simply a "separate parcel" (see Carson).
177 Essentially, the RTA's case is that the acquired land, being a highly impractical shape, with zero potential and significant contamination, the highest and best use of which would be for road, is worth at most a "nominal" sum (or a "fairly nominal", "rather nominal" or "relatively nominal" sum - see T2.12.08, p18, LL20-23; p21, L36; and p21, L45).
178 Mr Dempsey suggests that the nominal sum should be $200,000, or, on the basis of an arbitrary rent loss calculation, $445,000 (Exhibit R2, pars 92-100). Mr Dempsey then says that any "positive" value attributed to the acquired land must be reduced by the remediation cost the applicant was saved, namely $263,584 (Exhibit A36; see also [32] above).
179 Mr Dempsey did, however, appear to concede in cross-examination that the acquired land retained an entitlement to a FSR of 1.5:1 (T30.7.09, p21, LL15-32).
180 The RTA also submits that the acquisition saved the applicant likely PDI costs of approximately $1.67M, which should also be taken into account, in the interests of justice, in determining compensation.
J. Consideration
181 The applicant's claim for more than $8M is dependent on its town planning case. As the RTA submitted (T4.8.09, p10, LL4-10), the court "… has to be satisfied for the applicant to succeed that the marketplace would be convinced that in the before scenario you could've got 2.5:1 on the parent parcel … and your Honour has to then be satisfied that the actually approved master plan represented the absolute maximum that could ever be achieved by anybody on the balance of probabilities in terms of FSR on the residue site".
182 Sydney Gate site has been described (by Colliers in Exhibit A35, par 3.3) as a "premium address with unique advantages".
183 That description is apt in both the "before" and the "after", but the evidence clearly satisfies the court that orderly development of the residue land to its maximum potential is prejudiced to some degree by the loss of the acquired land, which would have added 2,781m2 of low-constraint land area, and greater design flexibility, to the optimised development of the Sydney Gate site.
184 In both the "before" and the "after", a high concentration of appropriate development is best located on the most northern area of the site, Block 'A', from which the acquired land was excised. That excision results in a "rounding" of the site's prime north-west corner, and loss of highly developable land, upon which relatively higher buildings than elsewhere on the site would be acceptable in planning terms.
185 Clearly, fitting the same amount of floor space on 92.5% of the original parent land area, bringing the most intense development south of the acquired land, and closer to the most constrained parts of the site, would require (1) some innovative and determined approaches, (2) probably some concessions from Council and/or the CSPC, and, (3) most likely, some additional project costs.
186 On the other hand, as the RTA submits, working on a smaller land area may well involve some savings on the applicant's part (e.g. in remediation costs and PDI contributions).
187 It is not the role of these proceedings to assess and award some form of "damages" for the loss of profit or development potential sustained by the dispossessed owner (c.f. Abbey Orchard), but to determine appropriate compensation according to the regime of the JTC Act. As earlier noted (in [51]), the "just compensation override", embodied in s 54 of that Act, may come into play when the code in the Act has been followed to its limit.
188 No masterplan was prepared for the parent land, in the "before", but the evidence clearly shows that its development could easily have been designed so as to attract the full 1:1 floor space bonus, enabling it to be developed to a FSR of 2.5:1, provided the developer and Council also agreed on a "sufficient" PDI package (as valued pursuant to Council's guidelines) and on the mix of uses.
189 The key dispute in this case concerns whether the residue land could achieve the same result in the "after" as the parent could in the "before", and whether a hypothetical purchaser would be so advised.
190 The applicant argues that the highest and best use of the residue land is what was approved in the masterplan (2.12:1), and the RTA appears to put its case on alternative bases - it argues that whether only 2.12:1 is achieved or 2.5:1 is found possible, the development potential of the applicant's land is the same in the "before" and the "after".
191 The applicant's position is that two years of Council negotiations by its advisers gave it a "realistic picture of the achievable" in respect of the residue land, and that it responded accordingly in its November 2004 masterplan DA. It describes the RTA's evidence that something more was achievable in the "after", as abstract speculation.
192 Approval of a masterplan does not guarantee the feasibility of the development, but viability is different from feasibility, and one has to allow for the risk that a project may not receive development approval, a different concept again. Prudent hypothetical parties would be aware of the risk that 2.5:1 might not be achieved in this case, in either the "before" or the "after", but all risks were factored into the agreed valuation of $740 per m2 GFA.
193 At the same time, contrary to the position taken by the applicant, the masterplan is properly to be regarded as just one possible development scheme for the site. The LEP envisages that it can be changed, so long as individual DAs for the site accord with the approved masterplan of the time. A hypothetical purchaser could seek to better that masterplan approval, and/or to increase yield on individual components, just as Mr Catalfamo has done on Becton's behalf.
194 The evidence is clear: Council has never excluded the prospect of (1) a redesign of the masterplan achieving the additional floor space, and/or (2) its ultimately approving a mix with more or less than 25% non-residential, and/or (3) sufficient refinement or reassessment of the applicant's PDI intentions meeting with Council's approval.
195 Council in the 13 July letter simply did not accept some elements of the PDI package offered, or the values the applicant attached to that package. It was not the "last word" on those matters, and the applicant did not strongly pursue its opportunities to do better.
196 I have come to the view that 2.5:1 was achievable in both the "before" and the "after", and that the town planning case run by the applicant must, therefore, fail.
197 In that regard, I generally prefer and accept the evidence of Messrs Sanders and Dickson, over that led from Messrs Lake and Harrison. The credibility of the RTA's experts was greatly enhanced by concessions made by the applicant's witnesses in cross-examination, and by the evidence of Mr Catalfamo and the three independent local government witnesses.
198 I am satisfied that the maximum floor space bonus was not in fact achieved in the "after" as a result of a combination of the chosen mix of uses, the structure and valuation of the PDI package, and some Council design concerns not adequately addressed by the applicant.
199 Mr Sanders was confident that a suitable and feasible urban outcome could be designed for the residue to achieve the maximum bonus, and Mr Dickson's task was to illustrate for the court how that might be accomplished. The court appreciates the speculative element of such arguments, and it is certainly true, as the applicant states, that Council has never been asked to assess or determine Dickson's higher-density scheme(s) for the residue land.
200 However, these cases always concern potentialities, and the evidence of those who failed in the task of maximising the bonus on this site has not convinced the court on this occasion that maximisation was not possible. I am satisfied, on all the evidence, that the applicant gave up its fight with Council too easily and/or too early.
201 I have, accordingly, concluded that the development potential of the Sydney Gate site in both the "before" and "after" are the same.
202 As a result of that finding, the applicant cannot succeed in its $8M market value claim, nor its alternative injurious affection claim.
203 As the "before and after" method yields a NIL market valuation result, the court now has to decide whether or not to adopt that NIL result. Otherwise, in searching for a "more liberal estimate" ([52] above) the court must wrestle with how to value the acquired land as a single lot.
204 Mr Wotton agreed that in the scenario in which the court now finds itself the value of the acquired land would not be "significant". He acknowledged (Exhibit A11, par 53) that the shape of the acquired land "does not readily lend itself to conventional residential or commercial development", yet when he came to ascribe an actual value to it, he attributed to it a development potential (1.5:1), which I have found to be already transferred to the residue land, and he applied the agreed $740 per m2 to arrive at his $3M "fallback" valuation.
205 I have already noted (in [179]) the applicant's submission that Mr Dempsey had agreed, in his evidence, that the acquired land retained a FSR potential of 1.5:1, but, reading that evidence in its context (T30.7.09, circa p21), I do not accept that the submission fairly represents Mr Dempsey's view.
206 The acquired land must be valued on the basis of its having no remaining development potential. In any event, there is ample evidence to suggest that, because of its physical features, the acquired land was not "developable in its own right" (Exhibit A24, p9, Q12, and [15] above).
207 The applicant's fallback position must, therefore, also fail.
208 A NIL result can be a just result, e.g. in a case of proven "betterment" (e.g. AMP v TIDC). Somewhat unusually, the NIL result in this case flows directly from the Council's policy/practice of allowing the development potential of the acquired land to be included with that of the residue land when calculating the FSR for the site overall, notwithstanding that the actual physical development would take place only on the residue land.
209 As so much of this matter concerns and deals with "potentialities" rather than "actualities" (such as "betterment"?), I am not convinced that a NIL result is a just result here. It would mean that a significant public authority could acquire private land to carry out a public work, however worthy, and completely escape payment of compensation, in the absence of proven "betterment", simply because of a policy approach taken by the relevant local government authority.
210 As Hodgson JA said, in the Court of Appeal's decision in AMP v TIDC, at [62]-[63]:
62. In my opinion, s 3(a) of the Just Terms Act is important here. One object of the Just Terms Act is to guarantee that compensation be not less than the market value of the acquired land (unaffected by the proposal), that is, the element of compensation provided by s 55(a). Section 10(1)(a) authorises the giving of a notice, stating that the Just Terms Act does guarantee this. Although this notice is not given in connection with actual negotiations for compensation or proceedings in which compensation is assessed, and although it cannot give rise to a civil cause of action (s 10(3)), it is plainly intended that the notice be truthful and not misleading. In my opinion, these provisions disclose a clear legislative intention that compensation be no less than that provided by s 55(a), even if there is "betterment" under s 55(f) that exceeds the other elements in s 55.
63. I see this as consistent with and supported by s 54(1). Where land is compulsorily acquired, it seems to me just that the acquiring authority pay at least the market value of that land (unaffected by the proposal), even if the person from whom the land is acquired owns adjoining land which is increased in value by the proposal, and even if this increase is greater than the market value of the acquired land. Other persons owning land in the area may benefit equally or more from the proposal; so it seems to me unjust that the acquiring authority should get the acquired land for nothing, and that the person whose land is acquired should get nothing for it, just because of a benefit that may be shared by others. Thus a lower limit of the market value (unaffected by the proposal) seems just; and this is what s 3(a)and s 10 indicate is to be guaranteed."
211 I do not accept that NIL market value is a just result in this case.
212 Accordingly, the court must return to the "just compensation override" in s 54 (see [49], [51], and [187]), as the JTC Act code simply does not assist in the valuation of the acquired land.
213 No evidence has been presented of the outcome of any situation similar to this case, but the RTA submits that a hypothetical purchaser of the acquired land as a single lot would be told that its "development rights have been exhausted", with the result that it "has little value because of the Council's practice" (T4.8.09, p36, LL11-21 - emphasis mine).
214 Having before me no precedent situation, and no information about any property regarded by a party or a witness to be "comparable" with the acquired land for "direct comparison" purposes, I turned my attention to all the properties about which there is some evidence, and to other possible indicators of value among the evidence ([34]-[35]), to endeavour to establish what that "little value" might actually be.
215 The valuers directly engaged in the case agreed on six comparable sales. Four of those six had earlier been assessed by FPV among seven upon which they reported (Exhibit A4, tab 36). The agreed six sales, and the additional three FPV sales, were not among the 13 sales assessed by Mr Healy (Exhibit A4, tab 35). The Wotton, Dempsey and FPV valuations were based on the "before and after" method, but the Healy valuation was simply "direct comparison" and, despite its appearance as a valuation of actual land and not floor space (see 34(i) and [35] above), all of those sales were assessed by Healy on the basis of the land's development potential.
216 As Mr Dempsey says (in Exhibit A26, par 31): "The market will only pay for realisable potential". All the development potential of the acquired land, not just its potential for attracting "bonus floor space", was exhausted when it was notionally "added back" to the residue land. I simply cannot accept the applicant's submission (par 78) that this "transfer" of development potential is irrelevant to the court's task.
217 As a consequence of that "transfer" the acquired land's highest and best use now is for road, its actual zoning at the date of acquisition. If the road widening project were not to proceed, the court would expect the land to lie dormant as an irregular area of passive open space adjacent to two busy roads.
218 On the other hand, failure to develop it to its "highest and best use" as road is a "potentiality", as much as failure to optimise development on the residue land remains a "potentiality". Potentialities are to be valued as such, and not as "actualities". (See [56]-[57]).
219 If the court is to agree with the submission that it settle on a figure to order by way of what Mr Dempsey and Mr Tomasetti call "nominal" compensation ([177]), it is to be noted that there is no science underpinning Mr Dempsey's $200,000, whereas there is a basis given for his $445,000 (see Exhibit R2, and [32] and [178] above), albeit that that basis is unrelated to what I have found to be the realities of the situation before the court.
220 The court must find a "just" rather than a "nominal" figure, bearing in mind that justice cannot be for one side alone, and remembering also Hodgson JA's advice (in Collex - see [64] above) that judicial valuers should apply "commonsense reality checks" to emerging conclusions.
221 Applying the commonsense approach, I do not think it "just" that the agreed nett cost of remediation of the acquired land should be deducted from any value the court arrives at. On the available evidence, (1) the court is not convinced that the late discovery of some asbestos among earlier-identified contamination of other types is of such moment that it deserves special attention in this "secondary" valuation exercise, and (2) the likelihood is that relatively inexpensive action by the roadbuilder will see it safely isolated and stored under the new traffic lane in Lachlan Street.
222 The RTA submits that the applicant's alleged savings resulting from the acquisition (in remediation expenses and PDI contributions) should be considered in determining "just" compensation, despite the fact that this is clearly not a case of "betterment". By the same token, the difficulties and costs exposures that the applicant will encounter in developing the residue to the same extent as the parent land should, in the limited ongoing scope for the court to apply Abbey Orchard, also be considered in the interests of a "just" outcome.