HIS HONOUR: By notification in the New South Wales Government Gazette dated 24th July, 1987, the Minister for Education resumed land for public school purposes pursuant to the provisions of the Public Works Act 1912 (as amended). The dispossessed owners were M.I. and R.J. Hieronymus.

The resumed land was described as being part of Lot 3, D.P.735012, Parish of Brunswick, County of Rous, Shire of Byron, having an area of 6,668m2, and was originally part of Lot 2 D.P. 706054, which was a dairy farm having an area of 57.15ha. The land is subject to an easement for drainage 3.05m wide. The dairy farm adjoins the Brunswick River and has a long boundary adjacent to the township of Mullumbimby.

The parties cannot agree on the amount of compensation, and application is made to determine the dispute.

At the date of resumption the resumed land was zoned Non-Urban "A", pursuant to the provisions of Interim Development Order No.1, Municipality of Mullumbimby, and Residential 2(a) under the provisions of the Byron Shire Draft Local Environmental Plan ("Draft L.E.P.") which had been exhibited on 18th June, 1986.

The resumed land is a parallelogram with no frontage to a public road. It immediately adjoins an existing public school, and abuts residential allotments and an access driveway to the dwelling on the residue of the applicants' land. A shallow, narrow drainage line within an easement cuts through the land which is subject to some inundation (up to half a metre) during a 1:100 year storm. Water, sewer, electricity and telephone services are all available to the subject land, and there are no structural improvements thereon.

Mr B.A. Hunt, valuer on behalf of the applicants, assessed compensation in the sum of $73,000, to which he added $3,500 for what he described as "severance".

Mr T.H. Armstrong, valuer on behalf of the resuming authority, assessed compensation in the sum of $5,000.

The significant difference between the assessment of compensation by the two valuers is the adoption of a valuation by Mr Hunt based upon sales of comparable land to adjoining owners, and, on the other hand, the use of a "before and after" valuation of the dairy farm by Mr Armstrong. Mr Armstrong gave no weight to the evidence of sales of parts of non-urban land to adjoining owners in the locality. After the exchange of reports, Mr Armstrong made a supplementary valuation based upon the sales evidence relied upon by Mr Hunt and, whilst rejecting it as the appropriate method, assessed compensation in the sum of $13,000.

It is common ground that at the date of resumption the market for land generally in the Mullumbimby area was characterised by a low volume turnover. That situtation had existed for some years and at least from the date of acquisition of the dairy by the dispossessed

Prior to resumption of the subject land, the dairy had exhausted its rural subdivision potential pursuant to the Interim Development Order.

In his determination of the appropriate basis for valuation, Mr Hunt gave consideration to the application of the well known "before and after" method, and rejected it as being inappropriate for the subject property. Mr Hunt relied upon two sales of land in the locality. Sale 1 was a sale by the former owner of the subject dairy to the Jehovahs Witnesses N.S.W. Congregation on 24th February, 1984. The purchase price was $8,000, and the land had an area of approximately 725m2. The land sold was a land-locked parcel of vacant land at the rear of two normal sized residential allotments which had frontages to Queen Street. The land sold was zoned Non-Urban 1(a) and was purchased to be used in conjunction with adjoining land, which was then zoned "Village" and used for the purpose of a church. The purpose of the acquisition was to provide car parking spaces which were required by the Council in connection with the development of the church property. The analysed price of that sale was $11 per sq.m.

Sale 2 was a sale by W.E. and F.D. Arthur to the Mullumbimby Rural Co-operative Society Limited on 27th August, 1985 for the price of $38,100. That land had an area of 1,524m2 and was zoned Non-Urban 1(a). However, that land did have an access corridor and frontage to a public road. Similarly, it was purchased by an adjoining owner and its purpose was for use in conjunction with a rural co-operative warehouse. Analysis shows that land sold at $25 per sq.m.

Mr Hunt said that whilst the two sales were of land which was not as large as the subject land and therefore not directly comparable, they do indicate an "opportunity market" which can arise to sell part of a holding to an adjoining owner by way of boundary adjustment. Mr Hunt's main adjustments to the sale prices were for size, location and the strength of the use to which the land was to be put. In his opinion, the value of the subject land is less than Sale 1 due to the size difference, but greater due to the location and strength of the use. The rate should also be less than Sale 2 due to size, location, strength of use and also for the likelihood of flood. He considered the value of the subject land to be in the range of $10-12 per sq.m. and he thereby deduced the sum of $73,000.

The severance claim made by Mr Hunt is said to take into account that the residue prior to resumption enjoys views across open farm land to Mt Chinchogan, which is a prominent landmark. He considered that the taking of the subject land and the possibility of buildings erected thereon would eliminate that view. In his opinion, in voluntary bargaining the vendor would seek to provide for such loss and to obtain a higher price. For those reasons he said that the price would be increased by $3,500.

Mr Armstrong is a very experienced valuer and has twenty-two years' experience at Murwillumbah as Senior Valuer. In his opinion, the most appropriate basis for valuation is the "before and after" method because it would provide for all compensation to which the owner would be entitled. In his opinion, the subject land lying to the east of the township of Mullumbimby is not in the locality promoted for expansion by the Council, and is also unlikely to be developed in the foreseeable future owing to the low nature of the land and its possible flooding. At the date of resumption there had been little movement in the rural real estate market since its fall from the 1981-82 peak. The subject land had been a dairy farm for many years and its purchase by the applicants for that purpose in 1984 indicated the market value of rural lands with proximity to a township. In his opinion, the claim for severance is not justified because the existing dwelling was not designed to benefit from its aspect and, in any event, development of the existing school would eliminate the views claimed by the applicants.

To determine the "before" valuation, Mr Armstrong had reference to the sale to the applicants on 25th October, 1984 for $260,000. It was a term of the contract for sale that the parties would share any compensation received on resumption of the subject land. He considered two other non-urban sales which he said confirmed the appropriateness of adopting the sale price of the subject property as the value for rural land at date of resumption.

The dairy farm prior to resumption had an area of 57.15ha, and Mr Armstrong considered that 5ha thereof along its perimeter adjoining the township had |CF2.|PSI"limited and distant potential for higher use"|CF1.|PSO.

The land resumed was within the 5ha having the distant potential, so the "after" values assigned were:

Whilst Mr Armstrong regarded the "piecemeal" method of valuation adopted by Mr Hunt as being inappropriate, he prepared a supplementary report to provide a valuation on that method. He adopted the analysis of Sales 1 and 2 as made by Mr Hunt, and considered that the two sales did not relate to each other. In his opinion, Sale 2 was the least comparable and should be rejected, whilst Sale 1 was comparable to the subject land, except for its size.

The supplementary valuation was then based upon Sale 1, but he reduced the deduced rate of $11 per sq.m. by forty per cent for difference in size, less forty per cent for what he called the risk of realizing sale price based upon "unreliable evidence". He therefore adjusted the $11.00 per sq.m. to $2 per sq.m. and applied that to the 6,668m2, arriving at a figure of $13,000.

In Mr Armstrong's opinion, at the date of resumption the value of an average parcel of land zoned for residential purposes within the town area adjoining the subject land, and having an area of something in the order of 700m2, was $20,000. In his opinion, the resumed land, even it was zoned residential, because of its size and problems in relation to access and flooding, would not command a value in excess of $23,000.

Having considered the evidence and the valuation approach by each valuer, I prefer the opinions of Mr Hunt. His method of valuation derives a value which, in my opinion, reflects the marketability and highest and best use of the subject parcel. I reject both Mr Armstrong's method of valuation and the rates adopted by him for that purpose. I am persuaded that in the present circumstances the application of the "before and after" method, and in particular in the manner applied by Mr Armstrong, would not properly assess compensation and would result in an injustice to the dispossessed owner. The "before and after" method is merely a tool to be employed by the valuer as one way to endeavour to take into account all elements of compensation to which the dispossessed owner is entitled. It is normally the most appropriate method of valuation when the excised parcel is of unusual size or shape, or if other reasons make it likely to be difficult to sell or even unmarketable. It is particularly appropriate, and assists in avoiding the double counting of damages, where questions of enhancement or severance arise.

However, the "before and after" method is not necessarily appropriate in all circumstances. The prime objective must be to ensure, if possible, that the dispossessed owner is placed in the same position in money terms after, as he was prior to the resumption. I reject Mr Armstrong's approach because, when properly analysed, it is not really an application of the "before and after" method which has any utility. This is because prior to resumption he assigns a rate to five hectares of the dairy, of which the resumed land forms part and which is said to have "distant potential", and merely assigns the same rate to the balance of the 5ha after resumption. The carrying out of a "before and after" exercise in this manner could not possibly have a different result to merely assigning the said rate per hectare to the resumed land itself.

I am also unpersuaded as to the appropriateness of the adoption of the rates per hectare by Mr Armstrong in that valuation. The $3,000 per ha for the bulk of the dairy farm was derived from the price paid on acquisition of the land by the owners in 1984. However, the appropriateness of that figure has no relevance to his assessment of compensation. To that figure Mr Armstrong added the arbitrary figure of $4,000 per ha to derive a rate for the 5ha said to have "limited and distant potential for higher use". The extent of that additional sum is not supported by any evidence apart from Mr Armstrong's opinion. Mr Armstrong conceded that the rate he considered appropriate for the 5ha, on his approach would not only be assigned to the resumed land having an area of 6,668m2, but the same rate would be applied even if it was half the size of the resumed land, or even if it was only a tenth of that size.

In other words, on his approach it must follow that a comparable parcel of 667m2 has a value of $500. This valuation should be compared with the actual price obtained in Sale 1, i.e. $8,000 for a comparable parcel of land out of the same dairy, and having an area of 725m2. In my opinion, Mr Armstrong's rate per hectare for land with what he calls "potential" is arbitrary, unsupported by sales evidence and unacceptable. The same comment, of course, should be made with respect to his arbitrary adjustment of values deduced from Sale 1 for the purpose of his supplementary valuation. There is, in my opinion, no justification for the two adjustments of forty per cent to reduce the analysed figure of $11 per sq.m. to $2 per sq.m., and I also reject that rate and his assessment.

The two valuers were initially in dispute as to the relevance of two factors, i.e.:

1. The registration of a Deposited Plan for the amalgamation of the subject land with the school site some six months prior to resumption; and

2. The zoning of the subject land at date of resumption as Residential 2(a) in the Draft L.E.P.

As I understand the submissions of the parties, ultimately there was no dispute as to the correct approach to these matters.

The excision of the subject land and its consolidation with the lands owned by the Education Department as shown in D.P.706054 preceded the resumption of the land. In normal circumstances, subdivided land would be expected to command a higher price than that with merely a potential or approval for subdivision. However, compensation must be assessed without any regard to alteration in value arising from the proposed establishment of the public work for which the land is resumed. This applies to all steps in the resumption process which have a nexus therewith; see Housing Commission of N.S.W. v. San Sebastian Pty Ltd [1978] HCA 28; (1978) 37 LGRA 214. It is clear that the registration of D.P.706054 was for the purpose of and only for the purpose of such resumption, and was therefore a step in the process of compulsory acquisition. It is common ground that any effect upon value as a consequence thereof must be disregarded for the purpose of the assessment of compensation.

The most usual step in a resumption process which must be excluded from the assessment of compensation is the change in the provisions of an environmental planning instrument for that purpose. Statutory effect to such principles enunciated in San Sebastian's case (supra) has been enacted in s.116 of the Environmental Planning and Assessment Act, 1979 ("the E.P.& A. Act"). There could be strong inference because of the location, shape, lack of frontage and poor access, that the re-zoning of the subject land in the Draft L.E.P. would be influenced by the need for the school to expand. However, the zoning of the subject land under the deemed environmental planning instrument was Non-Urban 1(a), and the use of that land for the purpose of a school was already permissible therein. A re-zoning was therefore not required for the use of the land for the purpose for which it was to be resumed. Further, the Draft L.E.P. did not zone the subject land for any public purpose, e.g. Special Uses (School). In fact, the school site itself is zoned Residential 2(a). It is common ground, and I agree, that the effect of the provisions of the Draft L.E.P. upon value by the zoning of the subject land as Residential 2(a) should not be ignored in the assessment of compensation.

For the purpose of the assessment of compensation to a dispossessed owner, the Court is obliged to assume a hypothetical sale of the land. I am persuaded on the evidence that, whilst there may be more than one purchaser of the subject land, owing to its location, size and access the most likely purchaser would be the Department of Education. The price it would be prepared to pay must be ascertained without reference to its power of compulsory acquisition; see Spencer v. The Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418.

However, even if there was only one likely buyer, and that buyer is the respondent, it does not follow that the price would be determined by one bid at a hypothetical auction, or that it would be nominal; see Raja Vyricherla Narayana Gajapatiraju v. The Revenue Divisional Officer, Vizagapatam [1939] AC 302, and City of Brighton v. Road Construction Authority [1986] VicRp 27; (1985) 59 LGRA 262, at 271.

The respondent concedes that it may be assumed that the Education Department had decided to expand its present holdings, and for that purpose it is appropriate to acquire the subject land. If the Education Department is regarded as a possible buyer of the subject property, it should also be determined whether as an adjoining owner it may be prepared to pay similar prices to those paid by other adjoining owners in similar circumstances. At the date of resumption the subject land was an unsubdivided portion of the applicants' property. I am satisfied, however that consent to subdivision for a voluntary sale to the Education Department would be readily forthcoming.

The difficulty in the adoption of evidence of sales of land to adjoining owners is the fact that they are almost certain to be influenced by elements of special value to the purchaser. The factors influencing the purchaser of a particular parcel of adjoining land might have no relevance to the acquisition of the parcel under consideration. For these reasons, whilst such sales need not be rejected they must be carefully analysed.

Whilst I accept Mr Hunt's basis of valuation, it does not follow that I accept his analysis of sales or the compensation that he assesses. The two sales relied upon are sales to owners of adjoining land, and the unreliability of the use of such sales without careful analysis has been long recognised. However, in this matter I am persuaded that not only can such sales be used to determine the value of the subject land, but they demonstrate the nature of the market for the land. I am persuaded that the two sales, and particularly Sale 1 which was of an area of land formerly part of the dairy farm, establish that there is a market in this locality for the acquisition of land zoned for non-urban purposes to be used in conjunction with adjoining land zoned for village or residential purposes. The sales confirm to my satisfaction that it is proper to consider the Department of Education as an adjoining owner in the marketplace, likely to be a purchaser of the subject land.

I am satisfied that Sale 1 is the best evidence of the value of the subject land at the date of resumption. In order to determine the price for that land a prudent purchaser would give consideration to the circumstances and the price paid by the Jehovahs Witnesses Congregation in Sale 1. It would therefore expect to pay for the subject land a price in excess of that which reflects merely grazing value, but that the price paid would be reasonable in all of the circumstances; see Geita Sebea & Ors v. The Territory of Papua [1941] HCA 37; (1941) 67 CLR 544, at 557-558. I have no doubt that, in any event, the vendor of the subject parcel would reject any offer based solely upon grazing value of non-urban land, and would place weight upon the price paid for Sale 1. Both parties would consider it relevant that the alternative available to the Jehovahs Witnesses Congregation to acquiring non-urban land was to acquire residential land. An identical parcel of land zoned "Residential" would have cost the Congregation something in the order of $20,000. It appears, in those circumstances, it could not be seen to be imprudent for the Congregation to pay the sum of $8,000 for an identical parcel of land of the same size, but being land-locked and zoned non-urban.

The sale price analyses at $11 per sq.m. and is of a parcel subdivided from the original dairy farm by a former owner. The resumed land is ten times the size of the land sold and would require some filling, but on the other hand is zoned Residential 2(a) in the Draft L.E.P. Sale 2 is a subdivided parcel with road frontage and is similarly zoned, but is larger than Sale 1. It is in a different locality and its price appears out of line and unreliable. In my judgment, it would be inappropriate to apply the rate derived from Sale 1 directly to the subject land. However, there is no way in which the evidence enables me to precisely quantify the adjustments I should make for the above matters.

The analysis and application of prices paid for comparable sales involve matters of judgment and, doing the best I can, I believe that a purchaser wishing to buy and a not-unwilling vendor, each of whom is fully in possession of all relevant information, would agree to a purchase price for the subject land as an unsubdivided parcel at the date of resumption in the sum of $55,000.00.

I make no addition to that sum for any so called claim for severance. In my opinion, in this regard the applicants' claim is misconceived. The hypothetical purchaser can only obtain the purchase price that I have determined if it is sold for the purpose of development. The vendor would, or should, know that if developed for any purpose other than grazing it may have an adverse impact upon views from the residue. In such circumstances, such loss of views would be an element in the determination of the market value of the land and would not be a matter properly described as severance. The amount of compensation that I have assessed for the acquisition of the subject property takes into account the impact upon the residue of the obstruction of views therefrom.

1. Compensation assessed at fifty-five thousand dollars ($55,000).

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