Hazcorp Pty Limited v The Roads and Traffic Authority of New South Wales

Environmental Planning and Assessment Act 1979 s 91, s 91A(3) LEGISLATION CITED: Land Acquisition (Just Terms Compensation) Act 1991 Rural Fires Act 1997 s 63, s 100B

Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259; Boland v Yates Property Corporation Pty Ltd and Another (1999) 167 ALR 575 ; Canberra Freeholds Ltd v Queanbeyan Municipal Council (1973) 27 LGRA 134; Cieslinski v Minister of Works (1978) 20 SASR 55; Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited and Others (1947) 74 CLR 358; De Ieso v Commissioner of Highways (1981) 27 SASR 248; E J Cooper & Son Pty Limited v Baulkham Hills Shire Council (2003) 131 LGERA 226; Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) (2000) 108 LGERA 417; CASES CITED: Flotilla Nominees Pty Ltd v Western Australian Land Authority and Anor (2003) 27 WAR 403; Koutsouras v State Rail Authority of New South Wales unreported; NSWCA, 29 November 1991; Maori Trustee v Ministry of Works [1958] 3 All ER 336; Minister Administering the Environmental Planning and Assessment Act 1979 v Bautovich (2005) 142 LGERA 331; Nelson and Another v Housing Commission of New South Wales (1962) 8 LGRA 408; Roads and Traffic Authority (NSW) v Muir Properties Pty Ltd (2005) 143 LGERA 192; Spencer v The Commonwealth of Australia (1907) 5 CLR 418; Tatmar Pastoral Company Pty Ltd and Anor v The Housing Commission of New South Wales, unreported, NSWLEC, No. 30115 of 1980, 17 March 1982; Woollams v The Minister (1957) 2 LGRA 338

DATES OF HEARING: 20/04/2006, 21/04/2006, 24/04/2006, 26/04/2006, 27/04/2006, 28/08/2006, 29/08/2006, 30/08/2006

APPLICANT Mr J Webster SC SOLICITORS Ebsworth & Ebsworth LEGAL REPRESENTATIVES: RESPONDENT Mr R Lancaster SOLICITORS Corrs Chambers Westgarth

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

30705 of 2005 30706 of 2005 30707 of 2005

THE ROADS AND TRAFFIC AUTHORITY OF NEW SOUTH WALES Respondent

JUDGMENT Jagot J: A. Introduction 1 Since the early 1990's Hazcorp has carried on business as a developer of residential subdivisions. It has released residential subdivisions in the Ulladulla and Milton areas since the late 1990's. Hazcorp has developed and sold over 300 residential lots in the Ulladulla and Milton area in five estates (known as Village Green Stages 1 to 7, Fairway Views stages 1 and 2, Fairmont Ridge stages 1 and 2, Royal Mantle stages 8 and 9, and Waratah Ridge).

2 On 18 February 2005, the RTA acquired by compulsory process part of Hazcorp's land in the Ulladulla area for the purpose of the Milton-Ulladulla by-pass corridor. The RTA acquired three lots from three parent lots owned by Hazcorp, leaving Hazcorp the residual land in each of those parent lots. On 6 June 2005, the RTA offered Hazcorp compensation for the compulsorily acquired land in the sum of $7,169,915 (market value of $6,700,000 and disturbance of $469,915). Hazcorp objected to this offer (s 66 of the Land Acquisition (Just Terms Compensation) Act 1991). Hazcorp claims compensation of $10,105,000, as well as compensation for loss attributable to disturbance (including not only out of pocket expenses, but also legal fees and stamp duty to replace the acquired land). The RTA says that Hazcorp is entitled to compensation of $7,352,240, as well as loss attributable to disturbance (Hazcorp's out of pocket expenses, but not legal fees and stamp duty to replace the acquired land).

3 Many issues were not in dispute. The planners agreed that the land was generally zoned for residential purposes prior to the acquisition, and had the benefit of development consents that enabled the residential subdivision of the parent lots. The valuers agreed that market value of the acquired land should be assessed using the before and after method, relying on comparable sales of other land in the same (or similar zoning). The valuers agreed that the comparable sales yielded values per residential lot capable of being reconciled to Hazcorp's land. They did so by reference to the number of lots removed and injuriously affected by the acquisition. Although the focus on the lots removed and injuriously affected does not readily accord with the conventional approach to the before and after method of valuation (see, for example, Roads and Traffic Authority (NSW) v Muir Properties Pty Ltd (2005) 143 LGERA 192 at [103]), both valuers proceeded on this basis in their initial statements, and the joint reports. Neither party submitted that this approach was inappropriate. Accordingly, I do not propose to depart from it.

4 My reasons deal with the issues in dispute, recognising the common ground between the parties and their experts. The competing evidence and submissions, supporting different assessments of Hazcorp's entitlement to compensation, related to the following principal issues: (1) Should the acquired land be valued as one parcel assuming a single hypothetical buyer before and after acquisition or as three parcels assuming three hypothetical buyers before and after acquisition? If the latter, what would the buyer of any one lot have assumed about the availability in the market of Hazcorp's other land at the acquisition date?

(2) What effect would the acquisition have had on the approach of the hypothetical buyer and seller to the development potential of the Royal Mantle land?

(3) What value per lot would the buyer and seller apply to the residential lots, having regard to the comparable sales and Hazcorp's land? This issue involved identifying and assessing comparable sales, and considering the development costs and other features of the comparable sales, the treatment of GST, and the use of the hypothetical development method of valuation.

(4) To what extent was Hazcorp entitled to compensation for injurious affection of its residue land?

(5) Was Hazcorp entitled to compensation for the costs it would incur (stamp duty and legal fees) in buying land to replace the acquired land as loss attributable to disturbance under s 59(f) of the Just Terms Act (which provides for compensation to be paid on account of "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")?

5 The evidence about these issues included alternative assumptions with respect to the determination of the principal issues, so the evidence - and the many potential outcomes to which it pointed - multiplied. My reasons do not address evidence and submissions about alternative outcomes dependent on assumptions inconsistent with my findings.

6 The Village Green land (stage 8), lot 600 in DP 1046454, comprised 4.188 hectares. The RTA acquired 1.591 hectares of that land (lot 31 in DP 1076006). Proceedings 30705 of 2005 relate to that land.

7 The Doctor's residence, lots 16 and 17 in DP 620019, comprised 3.718 hectares. The RTA acquired 1.791 hectares of that land (lot 1 in DP 1057528). Proceedings 30706 of 2005 relate to that land.

8 The Royal Mantle land, lot 99 in DP 1064504, comprised 18.49 hectares. The RTA acquired 5.59 hectares of that land (lot 2 in DP 1076005). Proceedings 30707 of 2005 relate to that land.

9 The three parcels are about 5 kilometres northwest of Ulladulla, in a residential area west of the Princes Highway. Prior to the making of Amendment No. 195 to the Shoalhaven Local Environmental Plan 1985, the parcels were either zoned Residential 2(c) (Residential "C" (Living Area) Zone) or (in the case of the Doctor's residence) were proposed to be so zoned, to facilitate residential subdivision. Amendment No. 195 rezoned part of the three parcels for the purpose of the by-pass corridor (5(d) (Special Uses "D" (Proposed Arterial Roads Reservation and Widening of Existing Arterial Roads Reservation) Zone) and Rural "B" (Arterial and Main Road Protection) Zone).

10 When the RTA acquired part of Hazcorp's land, Hazcorp had the benefit of various development consents for residential subdivision, including consents absent the by-pass corridor and consents anticipating the impact of the by-pass corridor. Without addressing the many complexities of the consent history, the position may be summarised as follows: (1) Hazcorp obtained development consent for residential subdivision of the Village Green land into 45 lots and one residual lot on 7 December 1999 (absent the by-pass corridor), and development consent for residential subdivision into 23 lots and one residual lot on 17 December 2002 (anticipating the by-pass corridor). That is, 22 residential lots were removed from the Village Green by the by-pass corridor.

(2) Hazcorp obtained development consent for residential subdivision of the Doctor's residence into 19 lots and one residual lot on 23 December 2003 (anticipating the by-pass corridor), when the parties agree that, absent the by-pass corridor, this land would have had the potential to be subdivided into 40 lots. That is, 21 residential lots were removed from the Doctor's residence by the by-pass corridor.

(3) Hazcorp had the benefit of development consent for residential subdivision of the Royal Mantle land (part of a more extensive consent granted 9 May 1990) yielding 129 residential lots (absent the by-pass corridor). Hazcorp then applied for consent for 74 lots (anticipating the by-pass corridor), but obtained consent in September 2003 for 54 lots (as the Council deferred 20 proposed lots due to bushfire hazard requirements which had arisen subsequent to the original consent). Hazcorp also obtained consent for two rural residential lots to the west of the by-pass corridor on 24 September 2004. Those two additional lots were created under an enabling clause. The parties did not agree the effect of the by-pass corridor on the Royal Mantle land, given the lots deferred by the consent.

11 Hazcorp called evidence from Mr Beasley (surveyor), Ms Rourke (town planner with experience in bushfire planning), Mr Waugh (valuer) and Mr Lean (former director of Hazcorp). The RTA called evidence from Mr Smith (surveyor), Ms Seiden (town planner), and Mr Austin (valuer). The Court appointed Mr Rose (bushfire consultant) as a Court appointed expert with respect to bushfire issues.

12 Mr Waugh and Mr Austin agreed that the appropriate valuation methodology was the before and after method. However, Mr Austin applied that methodology to the whole of the parent lots and residue as a single holding, whereas Mr Waugh applied that methodology to each of the parent lots and residue as three holdings. Mr Waugh and Mr Austin agreed that the market evidence disclosed that buyers pay more for smaller en globo residential parcels than larger en globo residential parcels (mainly due to the lower overall development risk). They agreed that, irrespective of their differences of opinion about the comparable sales, treating Hazcorp's land as three holdings sold to three hypothetical buyers yielded a materially greater value for the acquired land than treating it as single holding sold to one hypothetical buyer.

13 Mr Waugh observed that Hazcorp had acquired the three parent parcels as individual properties at different times (being land held in separate certificates of title), had obtained separate development consents over the properties, and was entitled to deal with the properties as separate parcels. Mr Austin noted that the three parcels are contiguous and affected by the same scheme of acquisition. He considered that a valuer could not (or should not) carry out a before and after valuation excluding part of the land affected by a single scheme of acquisition.

14 On behalf of the RTA, Mr Lancaster submitted that the issue involved a question of fact in the particular case, rather than a question of statutory construction. I think this submission must be correct. Although ss 55(a) and 56 of the Just Terms Act (as well as ss 37, 41(2) and 54(2)) refer to "the land" in a context which makes plain that the land is the acquired land, the statutory provisions do not preclude assessing compensation payable to an owner of multiple acquired parcels, assuming separate hypothetical buyers of each parcel. This approach is consistent with the decisions in Nelson and Another v Housing Commission of New South Wales (1962) 8 LGRA 408 at 411 and Canberra Freeholds Ltd v Queanbeyan Municipal Council (1973) 27 LGRA 134 at 136-137 (c.f. Cieslinski v Minister of Works (1978) 20 SASR 55 at 59-61). In Maori Trustee v Ministry of Works [1958] 3 All ER 336 at 340, the Privy Council accepted that a single hypothetical buyer was not an "inevitable assumption", and considered that multiple buyers could be assumed where the land was held in subdivided parts at the acquisition date and capable of separate sale.

15 Mr Lancaster submitted that there was no justification on the facts for departing from the usual approach of assessing market value assuming a single hypothetical buyer. He relied on Mr Austin's evidence, and also submitted that the common vendor, the vendor's dealings with the development of its land as one parcel and the acquisition of the land by the one acquisition notice supported the assumption of a single buyer.

16 I do not accept that the before and after valuation method required a single buyer to be assumed. The methodology was capable of application to each lot, assuming a different buyer. Determining the appropriate approach required a factual assessment at the acquisition date of Hazcorp's landholdings in the market for vacant land ripe for residential subdivision in the area. While neither valuer approached the issue in this way, Mr Waugh characterised the market for developed residential lots in the area as strong in the two to three years leading up to the acquisition, but with demand softening (and prices levelling out) since the commencement of 2004. I accept that evidence. Mr Lean said that he had been searching for en globo residential land of a comparable quality to the acquired land in the Milton-Ulladulla area for some time, but had not yet located available parcels of that character. I accept that evidence. Another developer purchased the main comparable sale (Springfield Farm), being land immediately adjacent to Hazcorp's land for the purpose of immediate residential subdivision, some 5 months prior to the acquisition date.

17 In these circumstances, I do not accept that the single acquisition notice, the common vendor and the contiguity of Hazcorp's lots warrant the assumption of a single buyer at the acquisition date. Hazcorp's three lots were capable of sale to separate buyers at the acquisition date. Each lot had the benefit of separate development consents for subdivision. I infer from Mr Lean's evidence and the comparable sales that vacant land ripe for residential subdivision was relatively scarce in the Milton-Ulladulla area. The market for developed residential lots was relatively strong. On these facts, sale to a single buyer is an inappropriate assumption.

Effect of this finding on Village Green and Doctor's residence

18 The valuers agreed that if separate buyers of each parcel were to be assumed, then the compensation with respect to the acquired land from the Village Green and the Doctor's residence was $2,050,000 and $1,950,000 respectively.

19 These amounts were calculated by the valuers based on the agreed position about the number of residential lots removed from those subdivisions because of the acquisition (22 from Village Green and 21 from the Doctor's residence), and a compromise by each valuer (albeit minor) about the value of each residential lot removed by the acquisition, and the extent of injurious affection.

20 I am satisfied that the position agreed between the valuers with respect to the Village Green and the Doctor's residence is appropriate and consistent with the requirements of the Just Terms Act. I thus accept the position agreed between the valuers. Accordingly, I do not consider that land further, other than for the purpose of determining the claims for loss attributable to disturbance. The issues with respect to Royal Mantle remain.

21 Mr Waugh considered that the correct valuation approach was to assume that the hypothetical buyer of Royal Mantle would anticipate that either the Village Green or the Doctor's residence (but not both) would be available in the market at the acquisition date. Mr Waugh thought that this approach was necessary having regard to the decision in Flotilla Nominees Pty Ltd v Western Australian Land Authority and Anor (2003) 27 WAR 403. Mr Austin considered that the correct valuation approach was to accept that all land formed part of the market at the acquisition date.

22 In Flotilla Nominees at [40], Pullin J said that that where more than one lot had been resumed, the comparable sales method of valuation required that "each lot must be valued by ignoring the effect of the hypothetical sales of the other resumed lots on the same day". I do not understand this conclusion to support Mr Waugh's approach. It does not suggest that any land may be disregarded when assessing market value. Moreover, any effect on the value of land at the acquisition date by reason of the availability of other land in the market is not a consequence of the public purpose (required to be disregarded under s 56(1)(a) of the Just Terms Act) or the hypothetical sale of land. It is a consequence of the existence of that other land, and the requirement that market value be assessed at the acquisition date.

23 It follows that, when considering the Royal Mantle land, an assessment must be made of the market conditions at the acquisition date, including all land within the market and all knowledge that would have been reasonably available to the participants in that market. Part of that market included the Village Green land and the Doctor's residence, both of which Hazcorp owned, with development consents for residential subdivision. In this context, and at its highest from Hazcorp's perspective, the requirement to disregard the carrying out of the public purpose in s 56(1)(a) might mean that when assessing the market value of any acquired lot, Hazcorp is to be assumed to control the other lots. If that were correct, what effect would it have on market value? Mr Lean said that Hazcorp did not release its residential estates until the lots in each earlier estate had been taken up (or mainly taken up). Mr Austin agreed that this strategy was apparent from Hazcorp's conduct. Would the hypothetical buyer's perception of the market have been affected by knowledge of that strategy (which I accept the hypothetical buyer would have had at the acquisition date)?

24 I am satisfied that a hypothetical willing but not anxious buyer of the Royal Mantle land, as posited by s 56(1)(a), would not place weight on Hazcorp's development and marketing strategy as a reason to pay more for land than the objective market circumstances would warrant. To attribute to the hypothetical buyer an expectation that Hazcorp's strategy would continue would be contrary to the notion of a buyer unwilling to "…overlook any ordinary business consideration" (Spencer v The Commonwealth of Australia (1907) 5 CLR 418 at 441 per Isaacs J). The hypothetical buyer, acting in accordance with ordinary business considerations, would have approached the issue of the market at the acquisition date with an appreciation of all competition in the market, including the capacity for the Village Green development and the Doctor's residence to be developed and released at any time.

25 It follows that, in assessing market value, I am satisfied that the hypothetical buyer would not pay more on an assumption that only one or other of Hazcorp's lots would be potential competition in the market. The buyer would accept that the land it proposed to acquire would be developed in the market of all available en globo residential land in the area at the acquisition date. This conclusion is relevant to the values assessed by Mr Waugh and Mr Austin by reference to the comparable sales. But first I must consider the effect of the acquisition on the Royal Mantle land.

26 The Royal Mantle development was part of a larger subdivision approved in 1990. Hazcorp acquired part of that land in 2002, containing 129 approved residential lots. After the by-pass corridor rezoning was exhibited (in draft Amendment No. 195), Hazcorp lodged a development application in December 2002 proposing 74 residential lots, one public reserve lot and one lot for the by-pass corridor. By then, however, the integrated development provisions of the Environmental Planning and Assessment Act 1979 had come into force. The development application proposed integrated development because s 100B of the Rural Fires Act 1997 required a bush fire safety authority to be obtained - as the development involved the subdivision of bushfire prone land. The Rural Fire Service was thus an approval authority for the development. The Council could only grant development consent to the development consistent with the general terms of the approval proposed to be granted by the Rural Fire Service in relation to the development (ss 91 and 91A(3) of the Environmental Planning and Assessment Act). The residential lots abutted the by-pass corridor lot, which Hazcorp no longer proposed to develop.

27 The Council sought general terms of approval for the subdivision from the Rural Fire Service. The Rural Fire Service responded by letter dated 11 July 2003 to the effect that they would grant a bush fire safety authority if they knew when the by-pass was likely to be constructed, and the interim measures to be put in place to ensure the maintenance of an asset protection zone for the residential lots within the footprint of the proposed by-pass. Alternatively, the Service would "support a deferred commencement condition in relation to lots 203 to 212 inclusive and lots 901 to 909 until commencement of construction of the proposed by-pass to the west of the subject land".

28 On 9 September 2003, the Council granted development consent SF 9275 for a 54 lot residential subdivision, deferring lots 901 to 909 and lots 203 to 212 and lot 301. The consent includes a note that "stage 2 - lots 203/212, 301, 901/909 are deferred pending the commencement of construction of the proposed by-pass to the west of the proposed lots".

29 It was common ground between the parties that the construction of the by-pass was a long-term proposition (in the order of 20 years or more).

30 The various experts took different approaches to this issue. (1) Mr Waugh carried out his own comparison of the before and after acquisition situations, and initially considered that there were 67 residential lots removed by the acquisition, including all of the deferred lots. He revised this to 75 lots, on the basis that the area occupied by the deferred lots should be treated as two potential en globo parcels with an unknown development horizon.

(2) Mr Austin relied on correspondence between Hazcorp and the RTA in which Hazcorp suggested that a redesign of part of the subdivision could be achieved with a loss of 4 residential lots from the deferred area, on the basis of a 20 metre asset protection zone outside the by-pass corridor. Mr Austin thus considered that there were 59 residential lots removed by the acquisition.

(3) Mr Beasley, surveyor and the author of the plan relied on by Mr Austin, said that plan had been prepared for the purpose of discussion only. He did not consider a 20 metre asset protection zone would be sufficient, and thought the Rural Fire Service would maintain its position as originally notified to the Council.

(4) Mr Lean thought that if a 40 metre asset protection zone was required, the subdivision could be redesigned so that 14 of the 20 deferred lots were removed by the acquisition. I infer that Mr Lean had not carried out any formal design consideration to reach this conclusion.

(5) Mr Beasley, Ms Seiden and Ms Rourke agreed that at least 53 residential lots had been removed by reason of the acquisition. However, Ms Rourke (the Council's former subdivision planner) considered that the 20 deferred lots would remain deferred until construction of the by-pass, and thus were also effectively removed by the acquisition (given the long-term nature of the by-pass construction). Ms Seiden, town planner, considered that a buyer would be aware of the 20 year program for construction of the by-pass and would not treat the deferred lots as removed. Ms Seiden thought the buyer would lodge a fresh development application to amend the subdivision and resolve the development potential of the deferred land.

(6) Ms Rourke expanded on her opinions in oral evidence. Ms Rourke had completed training with respect to planning for bushfire protection, and had experience in the assessment of development of bushfire prone land. Ms Rourke said that "Planning for Bushfire Protection" 2001 (the guidelines applied by councils and the Rural Fire Service) required a 40 metre asset protection zone, consistent with the treatment of a subdivision to the north of one of the comparable sales (Springfield Farm). To achieve a 40 metre asset protection zone, in Ms Rourke's opinion, would require a substantial redesign of much of the balance of the subdivision (which, I infer, Ms Rourke considered a hypothetical buyer would not contemplate). Ms Seiden could not comment about Ms Rourke's opinions, as she had no relevant bushfire experience.

31 The RTA applied for leave to call further evidence from a bushfire expert about the asset protection zone requirements that would have applied at the acquisition date. I granted leave, on the basis that the parties agree to the appointment of a Court appointed expert. The parties agreed to the appointment of Mr Rose. They prepared questions for Mr Rose to answer on agreed assumptions. They agreed that a hypothetical buyer, and any bushfire consultant to that buyer, would have been aware of the RTA's December 2003 response to Hazcorp's August 2003 inquiry about establishing an asset protection zone on the by-pass land - namely, that the RTA was not prepared to do so. They disagreed about the availability of information in a letter of 25 May 2006 from the RTA to Mr Rose to the effect that the RTA had established (on an unspecified date) a vacant land management system involving annual inspections for various hazards, including bushfire hazards. Further, that the by-pass corridor was subject to a mowing and maintenance contract. Finally, that the RTA would not be entering into a plan of management for the land.

32 Mr Rose is a bushfire expert, with extensive experience generally and in the South Coast area. In his report to the Court, Mr Rose dealt with two alternatives - the advice that he would have given to a hypothetical buyer at the acquisition date with and without knowledge of the information in the RTA's letter of 25 May 2006. Without knowledge of that information, Mr Rose said that he would have advised a buyer to expect a requirement to provide a 20 metre asset protection zone within the Hazcorp residue land if the RTA would commit to maintaining the vegetation on the by-pass corridor to a standard in accordance with the requirements for an inner protection area as set out in Planning for Bushfire Protection. This commitment would be through a plan of management or some other fuel management regime acceptable to the Rural Fire Service, ensuring also that there would be no future landscaping of the by-pass corridor so as to require a greater asset protection zone. Mr Rose would have so advised the buyer given s 63 of the Rural Fires Act 1997 and the cleared nature of the land.

33 Section 63 of the Rural Fires Act 1997 requires public authorities that own vacant land to take any notified steps or other practicable steps to prevent the occurrence of bushfires on, and to minimise the danger of the spread of a bushfire on or from, land the authority owns or controls.

34 Mr Rose indicated that there was some uncertainty about this outcome, as it depended on the position of the Rural Fire Service and negotiations with the RTA. If agreement with these bodies could not be reached, then Mr Rose considered that a 40 metre asset protection zone would be required.

35 If the information in the 25 May 2006 letter had also been available at the acquisition date, then Mr Rose considered that he would still have advised the buyer to negotiate with the Rural Fire Service to seek to achieve a 20 metre asset protection zone on the basis of the RTA's vacant land management system and mowing and maintenance contract. However, because the RTA had refused to enter into a plan of management, Mr Rose considered that a hypothetical prudent buyer may prefer to assume a 40 metre asset protection zone, whilst nevertheless exploring the higher yield option of a 20 metre zone.

36 In his oral evidence, Mr Rose agreed that he did not know when the RTA had implemented its vacant land management system or mowing regime. He considered the role of the expert was to advise the buyer of the possibilities, which he generally did in percentage terms, and then leave it to the buyer to assess their position. Taking into account the 25 May 2006 letter, he thought that there was about a 70% chance of managing to negotiate an agreement with the RTA and the Rural Fire Service enabling a 20 metre asset protection zone to be provided, but accepted that buyers might well prefer to base their purchase decision on a 40 metre zone. If the 25 May 2006 letter had not been available, he thought there was about an 80 to 90% chance of the 20 metre zone being negotiated successfully (because the RTA rejected the plan of management approach in its 25 May 2006 letter). He agreed that the Rural Fire Service had adopted a more conservative approach to development after August 2002 (when legislative amendments were made so that bushfire authorities became part of the integrated development provisions). He said that he would not place too much weight on s 63 in his advice to the buyer as, in his experience, the section could not be used to require an asset protection zone to be established or maintained.

37 Ms Rourke said that there were no notified steps with respect to the by-pass corridor under s 63. In her experience, s 63 did not result in hazard reduction works being carried out absent a specific requirement to do so. Given the requirements of Planning for Bushfire Protection, Ms Rourke maintained that she would have advised a buyer that any redesign of the subdivision would need to provide a 40 metre asset protection zone within their own land and could not rely on the by-pass corridor to provide that zone. She considered her advice appropriately cautious, but not unnecessarily so.

38 As a consequence of Mr Rose's report, the town planners, surveyors and valuers gave supplementary evidence.

39 Ms Rourke and Ms Seiden agreed that a 40 metre asset protection zone would require a redesign of the subdivision, resulting in application of the new bushfire requirements to the re-designed area. They agreed that a planner would advise the buyer to secure the existing development consent and limit any further development application to the land where the lots had been deferred from the Council's consent. However, a 40 metre asset protection zone would require a redesign of other parts of the subdivision given the existing road connections. A 20 metre asset protection zone would not have that effect on the balance of the subdivision.

40 Ms Smith and Mr Beasley, surveyors, each prepared plans of the subdivision designed to accommodate 20 metre and 40 metre asset protection zones.

41 Mr Austin and Mr Waugh prepared alternative calculations of the value of the acquired Royal Mantle land assuming either 20 metre or 40 metre asset protection zones. These calculations did not include any consideration of the costs of obtaining a further development consent or the risks involved in that process.

42 Mr Waugh, in oral evidence, observed that the 20 metre asset protection zone involved significant uncertainty. He would not base his valuation on the 20 metre asset protection zone. He considered that the 40 metre asset protection zone also involved uncertainty associated with the redesign, the making of the fresh development application, the costs associated with any such application and the delay, which made it a "line ball call". He agreed that if there was an unequivocal 90% or 70% chance of obtaining a 20 metre asset protection zone, then the land would be worth substantially more than the same land subject to a 40 metre asset protection zone. However, he did not understand Mr Rose's opinion to be unequivocal, and also had regard to Ms Rourke's opinions. Mr Austin considered that there was some element of risk in achieving a 20 metre asset protection zone, greater than with respect to the 40 metre asset protection zone (which he characterised as "risk free"). Mr Austin was not able to quantify the risk or its effect on value for the 20 metre asset protection zone.

Findings about effect of acquisition on Royal Mantle land

43 The relevant issue is the view of the hypothetical buyer and seller about the development potential of the land (E J Cooper & Son Pty Limited v Baulkham Hills Shire Council (2003) 131 LGERA 226 at [9], referred to as "the correct approach" in Minister Administering the Environmental Planning and Assessment Act 1979 v Bautovich (2005) 142 LGERA 331 at [20] per Handley JA, Tobias JA and Brownie AJA agreeing. See also De Ieso v Commissioner of Highways (1981) 27 SASR 248 at 252). Whether the hypothetical parties to the transaction would have obtained expert advice is a question of fact. If they would have obtained such advice, then the expert opinions are relevant "through the judgment of the hypothetical buyer and seller" (De Ieso at 252). I use the term hypothetical buyer throughout my reasons to refer to this meeting of minds between hypothetical buyer and seller.

44 I consider that, at the acquisition date, the hypothetical buyer would have obtained expert advice from planners, bushfire experts and surveyors before purchasing the Royal Mantle land. Such a buyer would have known that the Council deferred 20 lots from the September 2003 consent because of bushfire considerations arising from the undeveloped by-pass corridor, and would have seen those considerations as important to an assessment of the highest and best use potential of the deferred land.

45 Ms Rourke and Ms Seiden debated whether the September 2003 consent approved "in principle" the 20 deferred lots or not. The consent referred to those lots as "Stage 2 - deferred". I am satisfied that the hypothetical buyer would have considered that those lots were not the subject of the consent and that any residential subdivision of that land would require a fresh development application. The buyer would not have considered those lots "approved in principle". Accordingly, they would not have expected to be able to subdivide those lots through an application under s 96 to modify the development consent. As Mr Beasley discovered when he attempted this course on Hazcorp's behalf on 22 March 2004, the Council gave him short shrift, and he asked for the application to be returned on 25 March 2004. I consider Mr Beasley's experience consistent with the terms of the September 2003 consent.

46 I am satisfied that Ms Rourke and Ms Seiden were correct in concluding that a planner would advise a hypothetical buyer that they must secure the September 2003 consent or risk the new bushfire requirements applying to a greater area than the deferred land. I consider that a hypothetical buyer would have accepted that advice. I also consider that the buyer would have assessed the advice it obtained from its bushfire and planning consultants against the objective of commencing and securing the September 2003 development consent. While that requirement would not have precluded the buyer from considering the potential to regain residential lots in the deferred area, the buyer would have recognised that it constrained its options. I do not accept the RTA's submission that a buyer would have approached the question of price on the assumption that it could commence the existing consent (to secure it), and then obtain consent (over such land as required) for a subdivision incorporating a 20 metre asset protection zone. Even if the buyer was satisfied that it could negotiate a 20 metre asset protection zone, the buyer would recognise that the new development application would expose all land to which that application related to the then current bushfire requirements and other planning requirements (such as s 94 contributions and the like). Those factors would have operated to ensure that the buyer scrutinised with some care its real prospects of being able to obtain a consent incorporating a 20 metre asset protection zone within a reasonable time.

47 I am satisfied that the hypothetical buyer would have made inquiries of the RTA, just as Hazcorp did, about managing bushfire risk on the by-pass corridor prior to acquisition. I consider that, through discussions with the RTA, the hypothetical buyer would have become aware that the RTA would not establish an asset protection zone on its land, and would not enter into a plan of management binding itself to manage its land in any particular manner. I am satisfied that the hypothetical buyer would not have been informed at the acquisition date that the RTA had established (or would establish) a vacant land management system or a contract for mowing and maintenance of the by-pass corridor. The RTA's letter of 25 May 2006 does not disclose the date on which the RTA took these steps, and Hazcorp was not in fact so informed about the RTA's position when it made specific inquires about bushfire issues in August 2003, or at any time thereafter (until 25 May 2006). I also indicated that I expected that the RTA would disclose those dates if it wished to submit that such information would have been available to the hypothetical buyer at the acquisition date. The RTA did not do so.

48 While Mr Rose did not consider this particular position with respect to the available information, I infer that it is likely that he would have advised the buyer that a 40 metre asset protection zone would be required, unless negotiations could achieve an agreement with the RTA to maintain the by-pass land to inner protection area standard (even if the agreement could not be styled a plan of management), and the Rural Fire Service would accept that agreement. Mr Rose would have advised the buyer not to place too much reliance on s 63 of the Rural Fires Act, but would have indicated that he thought he had about a 70% chance of succeeding in that negotiation, in which event the buyer could lodge a development application over the deferred land proposing a 20 metre asset protection zone.

49 I accept that a hypothetical buyer, equally, may have received more cautious advice from a bushfire consultant (or a planner with bushfire expertise, such as Ms Rourke). That advice would have been to the effect that the Planning for Bushfire Protection guidelines required a 40 metre asset protection zone contained within land owned by or under the control of the hypothetical buyer, and that the buyer should not assume that any agreement allowing a lesser asset protection zone could be negotiated with the RTA, or would be accepted by the Rural Fire Service. Accordingly, the buyer should secure the existing consent, and proceed on that basis, because regaining the 20 lots through a new application could only be seen as a very long-term (indeed, remote) proposition.

50 Given the RTA's response in December 2003 to Hazcorp's specific request, I consider that the hypothetical buyer would have treated Mr Rose's opinions about the prospects of reaching agreement on a 20 metre asset protection zone (70%) as unduly optimistic. The buyer would also have appreciated that Mr Rose's advice could not be considered in isolation from the planning advice, and the need to secure the existing consent. The RTA characterised Ms Rourke's opinions as inappropriately conservative. I disagree. First, I am satisfied that Ms Rourke's evidence reflected an appropriate integration of the bushfire issues with the overall subdivision issues, which the hypothetical buyer would have seen as critical. Secondly, the circumstances at the acquisition date (the RTA's position, and the Rural Fire Service's position with respect to the land to the north) support Ms Rourke's approach of placing greater weight on the need for strict compliance with the Planning for Bushfire Protection guidelines than Mr Rose had done, and also would have been seen by the hypothetical buyer as important. Given the information that I accept would have been available to the hypothetical buyer at the acquisition (that is, the RTA would not establish an asset protection zone on, and would not enter into a plan of management for, the by-pass corridor), Ms Rourke's conclusions are persuasive, and I accept them.

51 I also consider Ms Rourke's approach consistent with the requirement that the hypothetical parties be "…willing to trade, but neither of them so anxious to do so that [they] would overlook any ordinary business consideration", and both being "perfectly acquainted with the land, and cognizant of all circumstances which might affect … [its] value" (Spencer v The Commonwealth of Australia (1907) 5 CLR 418 at 441 per Isaacs J). In this case, a range of ordinary business considerations point to the soundness of Ms Rourke's opinions. In particular, the information that would have been available to a hypothetical buyer about the RTA's position prior to acquisition would not have been seen as consistent with any real chance of agreeing a binding regime for bushfire management sufficient to persuade the Rural Fire Service to reduce the ordinary requirements of the Planning for Bushfire Protection guidelines.

52 Mr Lancaster also referred to Ms Seiden's opinion that no more than 59 lots had been lost from Royal Mantle by reason of the acquisition. That evidence was based on a modification of the plan attached to Mr Lean's letter to the RTA of 19 April 2004. That plan incorporated a 20 metre asset protection zone. My conclusions above apply.

53 Accordingly, I consider that the hypothetical buyer would have approached the Royal Mantle land in the after situation on the basis that it had the benefit of the September 2003 consent for 54 lots, and would need to lodge a fresh development application to obtain consent to subdivide the land excised from that consent. The buyer would consider that, to obtain further subdivision consent, it would need to provide a 40 metre asset protection zone within its land, which could not be accommodated absent significant redesign of the subdivision, where the redesign would impact on its capacity to implement the September 2003 consent for 54 lots.

54 I consider Mr Waugh's approach reflects a realistic appraisal of the views the buyer would reach - namely, that an attempt to exploit the development potential of the deferred land before the by-pass construction on the basis of a 40 metre asset protection zone would be seen as counter-productive and pointless. The prospect of exploiting that potential would thus depend on achieving agreement about a 20 metre asset protection zone. However, at the acquisition date, the buyer would have been confronted by significant uncertainty about the capacity to achieve a 20 metre asset protection zone at any time, as well as costs and delay in obtaining consent if that significant uncertainty could be resolved and a 20 metre asset protection zone agreed with the Rural Fire Service.

55 Mr Waugh and Mr Austin did not quantify the potential impact on value of the range of risks associated with the asset protection zone, or the costs and delay associated with obtaining a fresh consent over the deferred land. Mr Waugh considered that, in all the circumstances, the buyer would proceed on the basis of the September 2003 development consent, treating the deferred land as two potential en globo parcels only, with an unknown development horizon. For the reasons given above, I accept Mr Waugh's opinions that the buyer would approach the Royal Mantle residue on this basis. I consider that the hypothetical buyer would characterise the chance of obtaining a fresh consent with a 20 metre asset protection zone as such a speculative and long-term proposition, that it would not pay more for that chance. This approach is also consistent with the principle that any genuine doubt as to value ought to be "resolved in favour of a more liberal estimate" (Boland v Yates Property Corporation Pty Ltd and Another (1999) 167 ALR 575 at [356], citing Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited and Others (1947) 74 CLR 358 at 373 - 374).

56 It follows that I accept the final opinions of Ms Rourke and Mr Waugh about the effect of the acquisition on the Royal Mantle land - the acquisition resulted in the excision of 75 residential lots (129 residential lots before acquisition and 54 lots after acquisition). As Mr Waugh's calculations disclosed, allowance must be made for the deferred land as two potential en globo parcels, with an unknown development horizon. Allowance must also be made for the two rural residential lots that were granted consent on 24 September 2004 by reason of the enabling clause.

57 Given this conclusion, I need not deal with the competing 20 and 40 metre asset protection zone subdivision plans prepared by Mr Beasley and Mr Smith or the evidence of Mr Waugh and Mr Austin about those plans. My conclusion is also inconsistent with any potential for injurious affection of the residue of Royal Mantle (because any such impact was absorbed by the deferred land).

58 Given my conclusion above about assuming a buyer of each lot on the acquisition date (not one buyer of all three lots), I do not accept Mr Austin's primary opinion that the comparable sales supported the application of $72,500 per undeveloped residential lot. Mr Austin's evidence disclosed that this figure assumed a sale of all three lots to one buyer, and that buyers of en globo residential land paid more for smaller parcels.

59 Mr Austin's alternative opinion, based on the sale of each lot to a separate buyer, was that the comparable sales supported a value of $77,500 per residential lot for the Royal Mantle land, assuming that all land in the market at the acquisition date was available and in competition, including the other two lots owned by Hazcorp. Mr Waugh considered that the comparable sales supported a value of $87,500 per residential lot for the Royal Mantle land, on the same basis. Before dealing with their analysis of the comparable sales, I must consider the surveyors' evidence about development costs.

60 Mr Beasley (the surveyor who advised Hazcorp about its residential subdivisions) and Mr Smith (surveyor) gave evidence about development costs likely to be incurred with respect to the Hazcorp land, compared to the comparable sales (particularly Springfield Farm).

61 The question of development costs is relevant insofar as the hypothetical buyer would have taken those costs into account. I accept that the buyer would have obtained advice from experts such as Mr Beasley and Mr Smith about likely development costs of the Hazcorp land. I do not accept that the buyer would have painstakingly compared those anticipated costs with actual or likely development costs on the comparable sales, and made a dollar for dollar adjustment for the difference. The buyer would have dealt with relative development costs in a general and qualitative manner. With this in mind, I make the following findings.

62 Mr Beasley had worked for the applicant on its residential subdivisions for about seven or eight years, and had also given advice to the purchaser of Springfield Farm. Mr Smith also had extensive experience in land development.

63 I consider that the hypothetical buyer of the Royal Mantle land would have seen Mr Beasley's approach of using information available from the earlier subdivision stages as reasonable and useful. I do not accept Mr Smith's opinions to the contrary. In particular, I accept Mr Beasley's opinions that the various uncertainties associated with ground conditions, creeks and the like were satisfactorily accounted for in the actual costs associated with the earlier stages. I also accept Mr Beasley's opinions that Mr Smith's 25% contingency was excessive. It follows that I consider that a hypothetical buyer would have recognised at the acquisition date that the development costs for Springfield Farm would have been materially greater than for Royal Mantle (in the order of about $10,000 per lot more), by reason of the location of Springfield Farm abutting the Highway, the need for intersection treatment, the need to address the works to the creek within that site, and the like. There was no issue between the parties that the development costs for certain of the other comparables also exceeded those of the subject properties.

64 Mr Waugh and Mr Austin agreed that the best comparable sale was Springfield Farm. Having seen all the comparable sales, I agree. Springfield Farm adjoins the Royal Mantle property to the north and fronts the Princes Highway. The Springfield Farm sale, in fact, involved two sales (Young and Bentley) to the same buyer, for the purpose of residential subdivision into 102 lots under a development consent granted in August 2004. The sale was completed in October 2004. The valuers debated the adjustment required for the existing dwelling on one lot, an option, the certainty of the development consent at the time the price was fixed, pre-sales, development costs and overall comparability.

65 Mr Waugh concluded that the Young sale showed $76,300 per lot and the Bentley sale $75,000 per lot. Mr Austin concluded that the Young sale showed $73,125 per lot and the Bentley sale $75,000 per lot. The difference between the valuers on the Young sale reflected their treatment of the existing dwelling on that land. Mr Waugh allowed about $280,000 for the existing dwelling and associated land and Mr Austin about $450,000. Mr Waugh's approach treated the existing dwelling as subject to the same or similar profit and risk factors as the undeveloped lots. Mr Austin's approach treated the existing dwelling as similar to a single lot residential sale. I consider that the sale of the Bentley property provides the most appropriate guidance to the allowance in fact made by the buyer for the existing dwelling. On that basis, an allowance for the dwelling within the range set by Mr Waugh and Mr Austin ($375,000) would achieve consistency between the two properties which, after all, were bought by the one buyer for an overall residential development (that is, $75,000 per lot).

66 Mr Waugh considered the Springfield Farm sale materially inferior to Royal Mantle. In particular, he emphasised the absence of development consent at exchange, the long frontage to the Highway, the need for substantial intersection treatment and internal works (both creek and road related), the more extreme topography, the higher development costs, and the fact that the Springfield Farm development would be a "greenfields" development, without the established amenity, ambience and market reputation of the Hazcorp residential estates. Mr Austin accepted that the Springfield Farm development had higher expected development costs than Royal Mantle, but emphasised the strong pre-sales and good prices being achieved for lots within the Springfield Farm subdivision. He also considered Springfield Farm a superior location, being closer to the Mollymook Golf Club and beach, and a similar distance from the Ulladulla CBD.

67 I consider the location and overall amenity of Springfield Farm, particularly given its relationship to the Highway and its topography, materially inferior to the Royal Mantle land. I also consider that the price per undeveloped lot for Springfield Farm would have been affected by the relatively high development costs associated with that subdivision, which I accept would have been readily apparent. Otherwise, I do not consider the factors relied on by Mr Waugh and Mr Austin material to the reconciliation of Springfield Farm to the Royal Mantle land (as I accept Mr Austin's general position on the development consent issue, and Mr Waugh's general position on the pre-sales issue).

68 This was a sale to the RTA, used by Mr Austin, but not Mr Waugh. Mr Austin considered that the sale showed a value of $65,000 per lot. Mr Austin described the Cramb property on the view as generally inferior to the Hazcorp land. He also emphasised that the sale had to be treated with caution, not only because the sale was to the RTA but also because of complications with improvements, the residue and the fact that part of the land in the after situation was in a rural zone. Mr Waugh did not consider the seller fully informed. Mr Waugh also noted that the property sold without the benefit of development consent.

69 I accept that this sale must be treated with caution, as a sale to the acquiring authority (Koutsouras v State Rail Authority of New South Wales unreported; NSWCA, 29 November 1991, Woollams v The Minister (1957) 2 LGRA 338 at 347, Tatmar Pastoral Company Pty Ltd and Anor v The Housing Commission of New South Wales, unreported, NSWLEC, No. 30115 of 1980, 17 March 1982, per Cripps J at 39 - 41). I also consider its location and qualities substantially inferior to the Royal Mantle land.

70 This was a sale to the RTA, used by Mr Austin, but not Mr Waugh. The sale included a 20-year-old garage, residence and workshop. Mr Austin considered that the sale showed a value of $68,000 per lot. On the view, he pointed out that the problem with the sale was that it was quite close to the recycling depot and for that reason inferior to the subject properties. Mr Waugh agreed, and also noted the proximity to the road leading to the waste depot and the potential for traffic noise, and the absence of development consent. Mr Waugh disagreed with Mr Austin's allowance ($550,000) for the improvements. His analysis of the sale showed $80,000 per lot (assigning less value to the improvements). Mr Austin accepted that his allowance was the equivalent of retail value, when the purchaser would have to buy the whole and subdivide the land on which the improvements were located to be able to sell that land. I consider that significant, as it supports Mr Waugh's analysis of this sale. Mr Austin accepted that this sale also had to be used with caution. I agree. I also consider the location and quality of this land substantially inferior to the Royal Mantle land, for the reasons given by both valuers.

71 Mr Waugh used the two sales at Corks Lane, Milton and the sale at Croobyar Road as primary comparable sales. Mr Austin used the two Corks Lane sales as secondary comparable sales. Mr Waugh analysed the 124 Croobyar Road sale as showing $112,000 per lot, the 14 Corks Lane sale as showing $96,000 per lot and the 4 Corks Lane sale as showing $85,000 per lot. Mr Austin analysed the 14 Corks Lane sale as showing $95,000 per lot, and the three sales together as showing the three sales showed a rate of $92,857 per lot.

72 Mr Waugh described the general location as good, with a good outlook, but with a showground opposite which could get quite busy. Mr Austin observed that the Milton area was more "boutique" than Ulladulla, and that the parcels were smaller than the Hazcorp land and not readily comparable for that reason. He also thought that the entire holding superior to the Hazcorp land.

73 I consider the location of these sales somewhat superior to the Royal Mantle land. I also accept Mr Austin's observations about the size of these parcels compared to the size of Royal Mantle.

74 Mr Waugh used four properties at Valley View Close, Milton as secondary comparable sales. Mr Austin analysed two of those sales, but said that they were so small that he did not consider them of any assistance.

75 Mr Waugh analysed the 13 Valley View Close sale as showing $68,000 per lot, and Mr Austin as showing $65,900 per lot (the difference related to the allowance for an existing dwelling). Mr Waugh analysed the 3 Valley View Close sale as showing $68,000 per lot, and Mr Austin as showing $66,000 per lot. Mr Waugh analysed the 9 Valley View Close sale as showing $73,000 per lot, and the 14A Valley View Close sale as showing $97,222 per lot.

76 I agree with Mr Austin that the latter two sales are so small as to be non-comparable. The sales are also of land with a markedly different topography from the Hazcorp land.

77 This was a post acquisition sale, but both valuers considered it relevant, given the consistent market conditions. The property was sold on 1 June 2005 with development consent for 196 residential lots. It has an area of 29.65 hectares. The sale shows $76,530 per lot.

78 Mr Waugh did not consider the location comparable to the Hazcorp land, which adjoined an established metropolitan location with services and amenities not available in Sussex Inlet. Mr Waugh also characterised the site as a "greenfields" site without the established residential profile of the Hazcorp land, and a more isolated parcel, with anticipated higher development costs than the Hazcorp land. Mr Austin considered the sale materially larger than the Hazcorp land, on the fringe of town like the Hazcorp land, with good frontage but no real views, and of a generally flat and uninteresting aspect, but with little market competition.

79 I generally accept the observations of Mr Waugh and Mr Austin about this sale. Overall, I consider this sale substantially inferior to the Royal Mantle land.

80 Having regard to the evidence and the view, I consider Mr Waugh's approach to the comparable sales reasonable and appropriate. In particular, I am satisfied that the Royal Mantle land overall was markedly superior to the most useful comparable sales (Springfield Farm and Sussex Inlet), and that Mr Waugh's assessment of $87,500 per lot appropriately reflects that superiority whereas Mr Austin's $77,500 per lot does not. Accordingly, I consider that $87,500 per lot should be applied to the Royal Mantle land.

81 An issue arose during the latter part of the hearing about the valuers applying a single value per undeveloped residential lot before and after acquisition (leaving aside the redesigned subdivision plans based on 20 and 40 metre asset protection zones). Both valuers described their method of valuation as the before and after method (although, as I have said above, their focus on the value of lots removed was not conventional). Mr Austin explained that his assessment of value per lot in fact involved an undisclosed higher rate in the after situation because of the reduced parcel size, with his disclosed rates representing a "blended" rate. That is, he deducted the after value at a higher rate per lot from the before value at a lower rate per lot, then divided the result by the number of lots to reach a blended lot rate, but had shown only the latter rate in order to simplify his work.

82 Mr Webster SC, appearing for Hazcorp, trenchantly criticised Mr Austin for belatedly disclosing these matters, which he submitted were inconsistent with the earlier evidence that Mr Austin had given and a concoction (propositions that Mr Austin rejected). I do not accept these submissions. I accept that Mr Austin presented a blended rate in an attempt to simplify the presentation of his work, believing (albeit mistakenly) that would assist the Court.

83 Mr Waugh did not apply different before and after rates in his primary opinions. He considered that different rates were appropriate if the subdivision had to be redesigned (see above), but not otherwise. I accept Mr Waugh's evidence.

84 In his primary valuation report, Mr Austin identified some of the comparable sales on which he relied as GST inclusive or exclusive. He deducted part of his assessed value on the basis that, on a "normal" sale, Hazcorp would have had to pay GST and ought not to be better off merely because its land had been compulsorily acquired. Mr Waugh did not make any equivalent adjustment. He considered that it was incorrect to "attempt to deduct GST from the subject property after the sales have been analysed exclusive of GST". In cross-examination, Mr Austin accepted that payment of GST would depend upon the personal tax situation of the seller.

85 On the facts of this case, any deduction for an assumed GST liability on the part of the seller is unjustified, because the comparable sales were GST free. I am also satisfied that there is no foundation in the Just Terms Act for the deduction of GST as proposed by Mr Austin.

86 Mr Austin and Mr Waugh both relied on comparable sales. However, Mr Waugh considered the hypothetical development method a "strong" check, whereas Mr Austin considered it a secondary check only, subject to considerable uncertainty.

87 I am not satisfied on the evidence that the hypothetical development analyses of either Mr Waugh or Mr Austin were sufficiently robust to rely upon. The rationale underlying their competing assumptions about sales rates and profit and risk (which significantly affected the outcomes of the analyses) were not persuasive. Accordingly, I do not consider it appropriate to base any conclusions on their evidence using this methodology.

88 I have observed above that the claims for injurious affection have been absorbed into the compensation agreed between the valuers for the Village Green land and the Doctor's residence (which I accept as appropriate), and my conclusion about the development potential of the Royal Mantle land in the after situation.

89 The parties agreed that the two new rural residential lots Hazcorp obtained had to be taken into account. Mr Austin and Mr Waugh agreed that these two lots were worth $150,000 each. Subsequently, it emerged that the lots might also be adversely affected by bushfire considerations, constraining their future development to some extent. The basis for this was a letter from the Rural Fire Service of 23 May 2006.

90 Given my approach to the 25 May 2006 letter above, I do not consider any adjustment on this account warranted. I adopt $150,000 per lot for the rural residential lots, as initially agreed between the valuers.

91 In his revised calculations, Mr Waugh allowed $445,000 for the deferred land within the Royal Mantle subdivision as two en globo parcels with an unknown development horizon. This is consistent with the fact the deferred land remains in Hazcorp's ownership, and has that long-term potential. Mr Austin did not contend that Mr Waugh's value (assuming that potential of the land) was inappropriate. Given my findings above, I consider that this allowance must be made, and I accept Mr Waugh's figure as reasonable.

92 Compensation for loss attributable to disturbance was agreed other than in respect of stamp duty and legal fees to which Hazcorp claimed entitlement in accordance with s 59(f) of the Just Terms Act. Hazcorp submitted that it would incur these financial costs in acquiring replacement land for the land acquired relating to its actual use of the acquired land for the purpose of its residential subdivision business, as a direct and natural consequence of the acquisition. Hazcorp submitted that the facts in this matter were indistinguishable from those Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) (2000) 108 LGERA 417 (affirmed on appeal in Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259), other than that it had not yet acquired the replacement land.

93 Section 59(f) involves questions as follows: (1) What was the actual use of the acquired land, if any, at the acquisition date?

(2) If the acquired land was actually used at the acquisition date, have financial costs been reasonably incurred (or might such costs reasonably be incurred) relating to that actual use, as a direct and natural consequence of the acquisition?

94 Based on Mr Lean's evidence, the development consents and other evidence relating to Hazcorp's activities, I am satisfied that Hazcorp was and is in the business of ongoing residential subdivision and sale. It acquired the Village Green land, the Doctor's residence and the Royal Mantle land as part of that ongoing residential subdivision business. It held the land at the date of acquisition for that purpose. Consistent with the reasoning in Fitzpatrick, that constituted an actual use of the acquired land as part of its stock-in-trade.

95 Although Hazcorp has not yet incurred financial costs in buying land to replace the acquired land, Mr Lean's evidence discloses that Hazcorp has been and is seeking to replace the acquired land and intends to use its compensation for that purpose. Because it wishes to maintain its reputation as a developer of residential subdivisions in the area, and comparable land of the requisite quality has not been available since 2003, Hazcorp has not yet found any comparable parcels on the market in the area. I accept Mr Lean's evidence.

96 Section 59(f) contemplates that a person in Hazcorp's position can claim compensation for such financial costs that "might reasonably be incurred". In Fitzpatrick, Lloyd J deferred the question of compensation for this aspect of disturbance until after the owner had acquired the replacement land. Hazcorp submitted that if the only issue of concern was that it had not yet incurred the costs, then I should adopt the same course.

97 I am satisfied that the financial costs represented by legal fees and stamp duty on the purchase of replacement land will be a direct and natural consequence of the acquisition. The acquisition deprived Hazcorp of part of its stock-in-trade. The "need and the occasion" for the purchase of the replacement will relate to Hazcorp's business (Fitzpatrick at [28] per Brownie AJA). To continue its business of residential subdivision in the Milton-Ulladulla area, Hazcorp will need to replace its stock-in-trade and subdivide and resell that land. It has not in fact done so, but Mr Lean's evidence adequately explains why that is so.

98 Accordingly, Hazcorp's claim for compensation for stamp duties and legal fees is consistent with s 59(f) of the Just Terms Act. I do not accept the RTA's submissions to the contrary. In particular, I do not accept that the compensation for market value on the basis of the value of each lot by reference to its residential lot yield already incorporates this aspect of compensation contemplated by s 59(f). Hazcorp's land, prior to the acquisition date, was held in subdivision and ready for development as residential lots and subsequent sale for profit. The market value reflected the actual use of Hazcorp's land at the acquisition date, not some higher and better use. Section 59(f) has a separate function in the statutory scheme, which is capable of being applied to the facts of this case. That compensation cannot be properly characterised as "seed money" for the next instalment in the business - to continue its business, Hazcorp will need to acquire land to subdivide and sell to replace the acquired land.

99 The remaining issues are the amount representing that aspect of disturbance and the fact that Hazcorp has not yet acquired its replacement land. The amount must reflect my findings above. I consider it appropriate for the parties to have the opportunity to address on the question whether compensation under s 59(f) should be deferred to enable Hazcorp to acquire the replacement land (in which event liberty to apply would need to be granted), having regard to my findings above. I deal with that by directions.

100 The conclusions that I have reached above lead to the following determinations of compensation in accordance with the Just Terms Act. Village Green acquired land Compensation other than disturbance $2,050,000 Agreed disturbance $33,278.54 Replacement land financial costs To be calculated Doctor's residence acquired land Compensation other than disturbance $1,950,000 Agreed disturbance $7,278.54 Replacement land financial costs To be calculated Royal Mantle land 75 lots @ $87,500 per lot $6,562,500 Less 2 rural residential lots $300,000 Less 2 potential parcels from deferred land $445,000 Sub-total for compensation other than disturbance $5,817,500 Agreed disturbance $194,557.08 Replacement land financial costs To be calculated

101 I direct the parties to approach the Registrar within 7 days to obtain a hearing before me within a further 7 days thereafter (to commence at 9.00am) if they wish to be heard on the question of deferral of the grant of compensation under s 59(f) and/or costs. If they do not wish to be heard about those matters, I direct the parties to file within 7 days agreed determinations of compensation in all proceedings reflecting the conclusions in my principal decision and this decision (including the entitlement to compensation under s 59(f)). If agreement cannot be reached as to the form of the determinations within those 7 days, the parties are also directed forthwith to approach the Registrar to list the matter before me at 9.00am within a further 7 days thereafter.

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