Leichhardt Council v Roads and Traffic Authority of New South Wales

4 Both parties engaged experienced valuers to advise them and to give evidence. It is immediately apparent that the gap between them is so great that one's initial reaction was to wonder whether they looked at the same property! Upon reflection, however, it seemed that they were displaying a disturbing trend which appears to be emerging in many compensation cases in this Court: that is, that the claimant makes what might be described as an "ambit claim", aiming for an unrealistic sum, so that anything short of that is still a bonus; whereas the acquiring authority offers a pittance. This makes the judicial valuer question what reliance, if any, can be placed on the opinions of the parties' valuers, whether those valuers' opinions have been influenced by the parties' lawyers, and thus whether in such cases the appointment of a single court expert would be more appropriate. Since that has not occurred in this case, I must undertake that role after taking into account the disparate opinions of the parties' valuers.

The issues 5 The issues, refined by the parties during the hearing, may be stated as follows:

(1) What is the market value of the acquired land? An associated question is whether any discount should be made for the restrictions which apply to the land by dint of its zoning as open space and by its classification as community land under the Local Government Act 1993 ("the LG Act").

(2) Whether the residue land is injuriously affected by reason of the carrying out of the RTA's road works (being the purpose for which the land was acquired); and if so, to what extent.

Agreed facts 6 A number of facts are undisputed. At the date of acquisition, the Council was the registered proprietor of the acquired land and at present remains the registered proprietor of the residue land. Both the acquired land and the residue land were maintained and used by the Council as parkland. There were two cricket practice pitches, duly fenced, in the middle of the land. A number of trees were planted along one side of it. Both the acquired land and the residue land adjoin a large park used for active recreation known as Blackmore Park, and although separated from it by a concrete water channel, functioned as part of, or as an adjunct to, Blackmore Park. The acquired land was unzoned at the date of acquisition but was acquired for the purpose of constructing a road. The residue land is and was zoned open space under the Leichhardt Local Environmental Plan. The parties have agreed that, the underlying zoning of the unzoned land was the same as the residue land, namely open space. The whole parcel comprising both the acquired land and the residue land was classified as community land and categorised as a public park, and was subject to the restrictions imposed by Cl 6(2)(a) of Part 2 of Schedule 7 of the LG Act, which included restrictions upon use, leasing and sale. The parties agree that the highest and best use of the land at the date of acquisition was its existing use as parkland.

7 At the date of acquisition the Council had adopted a policy to provide at least 22 square metres of open space per person within its area. Under this policy, there was a shortage of open space land within the Council's area of about 2.3 square metres per person. The Council's policy included buying residential or industrial land for conversion to open space by demolishing improvements thereon, remediating and embellishing the land. The Council has identified such land for purchase when funds became available.

8 The potential purchasers of land for open space purposes included, not only the Council, but also schools, colleges, sporting organisations, the government and property developers. The Council was willing to sell or swap land zoned or reserved for open space purposes or land classified as community land under the LG Act, so as to fund the purchase of other land in better locations or to augment existing parkland: and the Council would ensure that restrictions on the use and disposal of such land were removed before any sale or transfer.

Market value 9 Section 56(1) of the Land Acquisition (Just Terms Compensation) Act 1991 ("the Just Terms Act") contains the following definition: market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding any increase or decrease in the value of the land caused by the carrying our, or the proposal to carry out, the public purpose for which the land was acquired. 10 The parties' respective valuers have agreed that the best evidence of market value is to be derived from sales of other properties within the Council's area, which had been bought for the purpose of open space. I had the benefit of a view of each property relied upon with the representatives of the parties, including their valuers. With the benefit of the view and the valuers comments thereon, I make the following observations and conclusions about each sale.

Nos. 26 to 28 Myrtle Street, Leichhardt 11 This property was sold to the Council on 10 July 2003 for $3,250,000. Although subdivided into residential lots, it was occupied by an aged warehouse building. It was zoned open space and purchased for that purpose. The sale shows a rate per square metre of $1,680. After deducting the added value of the improvements of $650,000 the rate per square metre is $1,344. This figure clearly includes the existing use potential. The valuer called by the RTA, Mr P Dempsey, stated that the englobo value of this site is 40 per cent of the developed land value representing an amount in the order of $538 per square metre. However, the land was already subdivided into residential lots and has two street frontages with access to all services. The valuer called by the Council, Mr Dundas, was of the opinion that, for that reason, no such deduction should be made. I do not see any need to make such a deduction, which Mr Dempsey says is a "rule of thumb" applicable to the development of "greenfields" sites in the outer metropolitan area which are not serviced. Upon the demolition of the building, this land would be immediately available for development. Mr Dempsey makes a further deduction of 66 per cent to this and to all the comparable sales for the operational open space restrictions, to which I shall return. I am of the opinion, reinforced by the view of the site, that the location of this land is superior to the acquired land. After making an allowance for the superior location and the fact that this land is contaminated, I am of the opinion that this sale is indicative of a market value for the acquired land of about $1,100 per square metre.

No. 74 Excelsior Street, Leichhardt 12 This property was sold to the Council on 22 June 2000 for $514,329, representing a rate per square metre of $1,374. The sale occurred three years before the date of acquisition of the acquired land. Adjusting the sale figure for the increase in median house prices in the intervening three years - an increase of 30 per cent - results in an adjusted rate per square metre of $1,786. After deducting the assumed value of the improvements, the underlying land value is $1,385 per square metre. Although this land was zoned open space, this value also reflects its existing use rights. Mr Dempsey again adopts an englobo value for this site of 40 per cent. Again, however, for the reasons described above, I would make no such deduction: the land is a residential allotment fronting two residential streets with all services and there would be no development costs if it were to be redeveloped. Again, I shall return to discuss Mr Dempsey's further deduction of 66 per cent. I am of the opinion, reinforced by the view of the site, that the location of this land is superior to that of the acquired land. Having regard to the fact that this site also required decontamination, it is, in my opinion, indicative of a market value for the acquired land of about $1,100 per square metre.

No. 80 Excelsior Street, Leichhardt 13 This property adjoins No. 74 Excelsior Street, Leichhardt, described above. It was sold to the Council in September 2001 for $563,000. Although zoned open space, it had a house on it and thus had the benefit of existing use rights. The sale represents a rate per square metre of $2,018. After adjusting this figure for the difference in time, I derive a figure of $2,470 per square metre. After a further deduction for the value of improvements, say, $150,000, one derives a rate per square metre of $1,932. Having regard to its superior location, this sale is indicative of a market value for the acquired land of about $1,800 per square metre.

No. 3 White Street, Lilyfield 14 Also zoned open space, this property was sold on 12 June 2003 to the Crown, represented by the Minister for Environment and Planning ("the Minister"), for addition to the adjoining regional park. The sale price of $950,000 represents a rate of $995 per square metre, and after allowing for the added value of the existing cottage at $200,000, the underlying value is $785 per square metre. For the reasons explained above I do not think it is appropriate to adopt Mr Dempsey's "rule of thumb'" to arrive at an englobo value. Having viewed the site, I am inclined to agree with Mr Dempsey that this land has greater utility compared to the acquired land and is thus indicative of a value for the acquired land of $700 per square metre.

No. 22 Wisdom Street, Annandale 15 This property was also sold on 12 June 2003 to the Minister for addition to the same regional park. Although zoned open space, it has an old industrial building on it. The sale price was $839,300, representing a rate of $1,264 per square metre, but after allowing for the value of the industrial building, the underlying value is $1,113 per square metre, which, of course, includes an element of its existing use potential. For the reasons previously explained it is not appropriate to reduce this figure to Mr Dempsey's "rule of thumb" 40 per cent englobo value. This site would also require decontamination. My view of this site confirms Mr Dempsey's opinion that this land is in a superior location to the acquired land and is indicative of a value for the acquired land of about $800 per square metre.

No. 9 The Crescent, Annandale 16 Zoned open space, this property was sold to the Council in May 2001 for $1,655,000 for addition to an adjoining park. The sale represents a rate per square metre of $1,190, which may be adjusted for the time difference to July 2003 to $1,800 per square metre. It has an old industrial building which I estimate as adding $100,000 to the value, so that the underlying value is $1,728 per square metre. Again, this figure would include an element for existing use entitlements. This land is also contaminated. Of all the sales, however, this is in my view, a location which is the most comparable to that of the acquired land. Having regard to the need for decontamination it is, in my opinion, indicative of a value for the acquired land of about $1,550 per square metre.

The Crescent, Annandale 17 The Crown sold this property to the New South Wales Harness Racing Club Ltd for the purpose of the Harold Park Paceway. Although, zoned open space, the land cannot be used for active recreation due to its limited access caused by its location under the Harold Park Paceway. It is next to a large and unattractive concrete stormwater channel. It is not at all comparable to the acquired land: I gain no assistance at all from this sale.

Ferry Road and Forsyth Street, Glebe 18 Also zoned open space, this land has a waterfrontage to Blackwattle Bay and adjoins Sydney University Women's Rowing Club. On 12 April 2002, the Waterways Authority sold the land to the Council for $310,000, representing a rate of $215 per square metre. The Council immediately on-sold the land to an adjoining owner, Australand, for $3,622,500. Australand was able to include the open space land in its floor space ratio calculation and thereby increase the density of the development on its land; and the Council, in turn, gained the benefit of foreshore land in the overall development being dedicated for open space purposes. The sale by the Council to Australand was clearly not a reflection of its value as open space land but rather its value to Australand as part of a development site and having special value to an adjoining owner. I am thus prepared to ignore it. The sale by the Waterways Authority to the Council, however, appears to have been on the basis of its value as open space land. This land is clearly superior to the acquired land and after making an adjustment for the time difference and the superior location, I agree with Mr Dempsey that it would be indicative of a value for the acquired land of about $175 per square metre.

No. 4 Jubilee Place, Balmain 19 This is another waterfront site at Camerons Cove, opposite Darling Harbour. In April 2002, the Waterways Authority sold the land to the Crown for the New South Wales Water Police facility. The sale price of $2,500,000 was based on a 1997 valuation. The zoning of the land is "public purpose" and it is now used as the base for the Water Police. The Water Police do not occupy all of the land and the unoccupied part of it is now open space. There are too many unusual circumstances surrounding this sale to afford any reliable guidance in the present case. Application of the sales evidence to the acquired land 20 In applying the sales described above to the acquired land in the present case, it can be seen that they suggest a range of values from $175 per square metre to $1,800 per square metre. The sale in Ferry Road and Forsyth Street, Glebe, is however, so greatly out of step with the other sales and the circumstances appear to be so unusual that I am inclined to disregard it. The sales to which I have had regard suggest a value for the acquired land of about $1,175 per square metre.

21 It must be remembered, however, that although the sites to which I have had regard were acquired for open space purposes they all enjoyed existing use rights. That is, the purchaser could have continued to use the land for its existing use rather than as open space, or, alternately, could have made an application to change the existing use to some other use. That is not the case with the acquired land, which at the date of its acquisition was used as open space and which could not readily be put to any other use.

22 The Just Terms Act requires that an assessment be made of the market value of the acquired land. That includes any advantages or disadvantages that it may possess at the date of its acquisition. I cannot have regard to what it may cost the Council to replace the land that has been taken from it. This leads to the question of whether I should have regard to the restrictions which apply to the acquired land by reason of its zoning as open space and its classification as community land under the LG Act and whether such restrictions should be taken into account in assessing the market value.

23 Corrie & Anor v MacDermott [1914] AC 1056; 18 CLR 511 is authority for the proposition that it is necessary to take into account the extent to which restrictions affect the value of land. In MacDermott v Corrie (1913) 17 CLR 223, Barton ACJ explained the relevant principle in the following terms (at 237): [The dispossessed owners] are not to be put in a better position than they would have held if the land had not been taken from them. Hence any restriction or other circumstance which diminishes the value in their hands must be allowed for in arriving at the value. 24 In the Privy Council, Lord Dunedin said (at 514): The value which has to be assessed is the value to the old owner who parts with his property, not the value to the new owner which takes it over. If, therefore, the old owner holds the property subject to restrictions it is a necessary point of inquiry how far these restrictions affect value. 25 Corrie v MacDermott has been consistently followed and applied in both the Court of Appeal and in this Court. In Hornsby Shire Council v Roads and Traffic Authority of New South Wales (1998) 100 LGERA 105, Stein JA described the restrictions applicable to land which is classified as community land under the LG Act in the following terms (at 107): The Local Government Act [1993], Chapter 6, Part 2, deals with "public land" vested in a council. The LG Act provides that all such public land must be classified as either "community" or "operational". If land is classified as "community land", it cannot be reclassified except by the process of making a local environmental plan under the Environmental Planning and Assessment Act 1979 (NSW) (the Planning Act ). Moreover, s 29 of the LG Act provides that a council must arrange a public hearing under s 68 of the Planning Act in respect of any such proposal. Prior to the LG Act,, there was no concept of "community land". No similar provision is to be found in the 1919 LG Act . A number of restrictions on the use and dealing with community land are to be found in Div 2 of Pt 2, Ch 6. First, such land can only be used and managed in accordance with a plan of management. The LG Act lays down detailed requirements for the content of management plans and for community participation in their making. The most severe restriction on the use to which community may be put is to be found in s 45. This provides that a council cannot "sell, exchange or otherwise dispose of community land". Further, a lease or licence of such land by a council is severely restricted by ss 46 and 47. 26 Stein JA then said, Priestly JA and Sheppard AJA concurring (at 107): The appellant accepts that the classification of the parcels as "community land" under the LG Act constitutes a restriction which is relevant to the determination of compensation upon resumption. Corrie v MacDermott (at 1062) is authority for the proposition that it is necessary to determine to what extent the restrictions affect the value of the land. The chance of those restrictions being discharged must also be considered (at 1064). 27 The trial judge in the Hornsby case had applied Corrie v MacDermott and valued the land, having regard to the restrictions in that case, as being one-third of the open space valuations. As to this, Stein JA said (at 108-109): It seems apparent that His Honour was "valuing" the restriction at two-third of the market value. That is, he concluded that the depressive effect of the restriction reduced the market value to one-third. In doing so, his Honour properly applied Kitto J in Royal Sydney Golf Club v Commissioner of Taxation (Cth) (at 391). … I can discern no error of law in his Honour's valuation of the restriction of the classification of community land and his determination of the chance of the restriction being discharged. 28 In Roads and Traffic Authority of New South Wales v Hurstville City Council (2001) 112 LGERA 223 Mason P, Sheller and Powell JJA concurring, said (at 226 [14]): Market value was to be determined on the basis of highest and best use. This meant that, if the parkland were to be placed for sale on the open market, it would be sold subject to the open space zoning and the statutory restrictions touching this particular community land, each of which placed significant restraints upon the exploitation of the land. It is common ground that what is to be valued in the present case is the value of the land to the respondent under the statutory conditions upon which the land was held at the time of resumption (see generally Corrie v MacDermott [1914] AC 1056 and Hornsby Shire Council v Roads and Traffic Authority (NSW) (1998) 100 LGERA 105 at 107). 29 In Ashfield Municipal Council v Roads and Traffic Authority of New South Wales (2001) 117 LGERA 203, Davies AJA, Mason P and Heydon JA concurring on this point, after referring to the Hornsby case and to Corrie v MacDermott (inter alia) said (at 230): It was, therefore, necessary for the trial judge to take into account, insofar as they were relevant, any restrictions placed upon the use of the lands, any restrictions imposed upon the sale of the lands and any restrictions imposed upon the disposition of the proceed of sale. 30 In the Ashfield case the Court of Appeal held however, that the primary judge erred in applying the two-thirds discount which had been applied in the Hornsby case without considering the particular facts in the case before him. As Davis AJA said (at 231): "Every case turns on its own facts".

31 Reference was made in both the Hornsby case and the Ashfield case to Royal Sydney Golf Club v Federal Commissioner of Taxation (Cth) (1955) 91 CLR 610. That was a land tax case in which it was held that in arriving at the unimproved value the land should not be valued without regard to the provisions and effect of the County of Cumberland Planning Scheme Ordinance, which had the effect of limiting its use. Upon remittal of that case to the trial judge, Kitto J, (Royal Sydney Golf Club v Federal Commissioner of Taxation (Cth) (1957) 97 CLR 379), it was held, applying Corrie v MacDermott (at 385, 391), that the correct method was to value the land as if it were reserved for open space and then allow for such chance as there was that the restrictions would be removed.

32 In this Court, in Canterbury City Council v Roads and Traffic Authority of New South Wales [2002] NSWLEC 161 Pearlman J applied Corrie v MacDermott in holding that it is necessary to inquire how far the restrictions arising from the fact that the resumed land was classified as community land and was therefore the subject to severe restrictions on sale, exchange and disposal, affect its value (at [20]). Pearlman J noted the difficulty in performing this task (at [22]): The conventional approach to determining market value is to have regard to comparable sales. The difficulty with this case is that there are no truly comparable sales, since land zoned as open space and held as community land cannot be sold. 33 Pearlman J then turned to the question of how to apply the principle stated in Corrie v MacDermott (at [28]): Initially, Mr Dundas [the Council's valuer] made a deduction of 50% to take account of the statutory restrictions. This resulted in him adopting a value of $125 per square metre. However, in a subsequent report, he altered this approach, on the basis that, where councils have purchased land to provide open space, they have done so knowing that the land will be classified as community land and subject to the restrictions under the LG Act. There is therefore no justification, in his opinion, for a further discount for these restrictions and consequently his final valuation was $250 per square metre for the majority of the resumed land. This approach does not accord with principle, and Mr Dundas's initial approach seems to me to be correct. 34 Pearlman J then said that in the case which she was deciding, "the likelihood of re-classification of the resumed land from community land to operative land - (which is free of the particular restrictions) is very low". Her Honour continued (at [31]): The evidence establishes that there is a lack of open space land classified as community land in the Canterbury local government are, and there are statutory hurdles to overcome in achieving a lifting of the restrictions (see Hornsby Shire Council v Roads and Traffic Authority (the judgment on appeal) per Stein JA at 108). 35 Her Honour held that one method of applying the principle that the statutory restrictions must be taken into account is to discount the value by reason of them. In that case, her Honour adopted the expert evidence of the council's valuer, Mr Dundas, and applied a deduction of 50 per cent.

36 Mr T F Robertson SC and Ms J M Jagot, appearing for the Council, submit that if the correct basis of compensation is no longer value to the owner then Corrie v MacDermott and the cases which follow and apply it may no longer be good law. I do not intend a disservice to their detailed and thorough argument as to why this may be by the following attempt to summarise it.

37 The submission proceeds, as I understand it, along the following lines: (a) Corrie v MacDermott and the cases which follow and apply it are contrary to the approach in the important but neglected decision of the House of Lords in London County Council v Church Wardens etc of Erith & Ors [1893] AC 562.

(b) In Stephen v Federal Commissioner of Land Tax (1930) 45 CLR 122, the High Court decided by a statutory majority (two to two, with the Chief Justice's decision prevailing) that Randwick Racecourse and Warwick Farm racecourses were assessable for tax at the value of the fee simple, subject to the conditions and restrictions of the grant. Those restrictions limited the use of the land in each instance to a racecourse and training ground for racehorses. Isaacs CJ and Starke J were in the majority, applying Corrie v MacDermott . Dixon and Rich JJ dissented. Dixon J considered that the land tax legislation required "the ascertainment of the unimproved value of a hypothetical fee simple absolute and not the actual fee simple subject to conditions and encumbrances" (at 145). Dixon J rejected the applicability of Corrie v MacDermott (at 144), because in his view the statutory hypothesis required a value not of the actual land in the hands of its owner but rather of the unencumbered fee simple.

(c) Decisions of the High Court reached by a statutory majority do not form a precedent.

(d) When the question rose again in the Royal Sydney Golf Club case, the High Court, with Dixon CJ presiding, preferred his dissent in Stephen , approaching the question as one of policy, and rejected the reasons of the statutory majority in Stephen and thus rejected by inference the application of Corrie v MacDermott .

(e) In the Royal Sydney Golf Club case, Kitto J only made reference to Corrie v MacDermott by way of comparison. It is not the case that Kitto J applied Corrie v MacDermott . Accordingly, Stein JA in the Hornsby case was not correct in stating that Corrie v MacDermott had been applied by Kitto J in the Royal Sydney Golf Club case. (f) It is conceded that a stronger case for the application of Corrie v MacDermott was the Court of Appeal's decision in Sydney Sailors' Home v Sydney Cove Redevelopment Authority (1977) 36 LGERA 106. In that case, it was held that land which was held upon trust and which was dedicated for public purposes under the Crown Lands Consolidation Act 1913, should be valued having regard to the principles in Corrie v MacDermott, which included taking into account the effect of restrictions on disposition as well as on use (per Hope JA at 118). The Court embraced the value to the owner principles as underlying Corrie v MacDermott; that is, valuation on a reinstatement basis may have been appropriate "where that basis will produce a higher value than a market value basis" (at 120).

(g) It is no longer correct to say that the basis of compensation in resumption cases is value to the owner. The compensable sum is now market value as defined by s 56 of the Just Terms Act. The reinstatement basis of valuation is arguably no longer available under the Act. As value to the owner has ceased to be the basis of compensation for resumption, decisions which are based on that criterion, such as Corrie v MacDermott, are now open to review.

38 The difficulty I have with the submission is that decisions of the Court of Appeal (and, of course, the High Court) are binding upon me. It is not open to me, a trial judge, to hold that decisions of the Court of Appeal are wrongly decided. I am bound by the decisions of the Court of Appeal in Hornsby, Hurstville and Ashfield. Apart from the High Court, only the Court of Appeal itself can overrule its own decisions, just as only the High Court that can overrule its own decisions. The Court of Appeal decisions, to which I have referred, adopt Corrie v MacDermott as correctly stating the relevant principles. I have no option but to follow and apply those principles.

39 Mr Robertson SC and Ms Jagot also submit that the discount approach involves double counting the effect of the restrictions on value: it is not legitimate to discount the value reached by examining what the class of hypothetical purchasers have done in comparable situations, when the assumption on which the hypothetical purchase is based is that the land will be held subject to the same restrictions. Reliance is placed upon Mayor, Councillors and Citizens of the City of Brighton v Roads Construction Authority [1986] VR 255 (at 263). In that case Gobbo J found, after considering the evidence, that there was a market for open space land, which was effectively constituted by purchases on the part of local government authorities of residential land for use as open space. Accordingly, his Honour awarded compensation at near residential values, taking into account that, generally speaking, the quality of residential land purchased by councils was impaired in the same way, which made it less valuable than residential land. Gobbo J then considered the effect of restrictions on the use or disposition of open space land and concluded that it would be an error to assume that such restrictions necessarily depressed market value. Mr Robertson SC and Ms Jagot rely upon the following passage in His Honour's judgement. After referring to Corrie v MacDermott and the Royal Sydney Golf Club case, his Honour said (at 263): At the same time it is necessary to guard against the view that restrictions, because they restrict the class of potential purchasers, inevitably mean a lower value… The price the purchaser will pay will be largely influenced by the fact that for that purchaser this land will or may be able to be used for its highest and best use and the further consideration of what it would otherwise cost to purchaser a satisfactory alternative. It is always a relevant matter that land restricted to more or less one use such as parkland offers less potential uses than other land not so restricted. That may widen the appeal of the latter but it does not mean the first parcel will not have particular value for a purchaser of parkland, especially if the only effective way of securing parkland is to buy land with added potential that the buyer does not want and cannot readily realise. 40 In my view, however, the discount approach does not involve double counting the effect of the restrictions on the land value. The sales upon which both parties have relied in the present case are of land which, although purchased for use as open space land, may in each case also be used for its existing use as either residential, industrial, or for some other use with development consent. There is no guarantee that the Council, upon purchasing such land, will retain it. For example, the Council immediately on-sold the Ferry Road land to Australand. Further, if the land is retained by the Council, it may not automatically be put to use as open space. For example, the property purchased by the Council at No. 9 Crescent, Annandale is still being used for an industrial purpose and the occupier is, presumably, paying rent to the Council. Moreover, the vendor of such land, being fully informed, is not going to part with it for a lesser sum simply because the purchaser may want to put it to a limited non-economic use when he or she knows that another purchaser can continue either the existing use or some changed use. In the case of the acquired land, however, the vendor and purchaser in the hypothetical sale would be taken to be aware of the restrictions applying to the land which in turn would influence the price - that is, there would be no opportunity to use it for either an industrial or residential purpose or for some purpose other than open space.

41 The passage from the judgment of Gobbo J set out above refers to the class of potential purchasers as being restricted. The more fundamental fact, however, is that the use of the land itself and the ability to dispose of the land is restricted. It is that, rather than anything else, which requires the restrictions to be taken into account. As I have previously noted, it is not the reinstatement value which the Just terms Act requires but the market value of the acquired land itself.

42 Mr Robertson SC and Ms Jagot also submit that where, as here, there is a shortage of available land for purchase for open space, a demand for open space and a program for the purchase of open space by buying residential land, then the price for land already capable of use for open space purposes might be higher than residential values. The following comments of Gobbo J in the Brighton City Council case are relied upon (at 263): Where a parcel of land is set aside for parkland use, its value will be related to the price that a purchaser of parkland will be prepared to pay, given that such purchaser will be using the land for that which constitutes for it the highest and best use of the land. It will also be related to what that purchaser would have to pay - assuming reasonable opportunity and not compulsion to effect a purchase - if it were to purchase other land that might equally meet its purpose. Such purpose of other land may lead it to have to pay the equivalent of residential values. The fact that emerges very clearly is that municipalities, especially those like that claimant in developed areas, cannot purchase land appropriately zoned for parkland purposes. They are obliged to buy residential land, at or near residential values, when they wish to secure parkland. The authority's valuers argued that where a municipality bought residential land for parkland purposes and then had imposed on the land a reservation for public open space, its value was immediately reduced. It is difficult to understand why this is so, for the municipality is the main factor in the market for parkland. It will clearly be prepared to pay the original price it paid for the very good reason that, if it did not buy this land at that price, it would be compelled to pay that price for residential land, there being no parkland so zoned available for sale. 43 In summary, the Council submits that where, as here, the highest and best use of the acquired land is open space, it should be valued according to comparable sales of land acquired for open space purpose, adjusting value to take account of position, quality, state of readiness and the like, with no discount to what otherwise would be the open market value for such land.

44 The difficulty I have with the Council's submission and with the passage from the judgment of Gobbo J is that they are contrary to the principles explained in Corrie v MacDermott and the cases which follow and apply it, and contrary to the decisions of the Court of Appeal in the Hornsby, Hurstville and Ashfield cases which are binding upon me. With the greatest respect to Gobbo J, it seems that His Honour's approach is to adopt a value which represents the cost of reinstatement. But that is not the valuation required by the Just Terms Act. As I have previously noted, the Act requires an assessment to be made of the market value of the acquired land. Moreover, where the Council has purchased other land for the purpose of open space, that land has not been subject to the kind of restrictions which apply to the subject land. As noted above, such other land purchased by the Council, may be on-sold (as with the land at Ferry Road, Glebe), or may continue to be used for its existing use (as with No. 9 Crescent Road, Glebe). Both the vendor and the purchaser would have been well aware of this. Where, however, the acquired land may not be dealt with in those ways, then the restrictions to which it is subject must be taken into account (Hornsby, Hurstville and Ashfield).

45 Mr Robertson SC and Ms Jagot submit that the acquired land was a potential redevelopment site. It is adjacent to a government works deport to the south and to land used by the Commonwealth Department of Defence in the north. Prior to the date of acquisition, there was a masterplan in the course of preparation for the redevelopment of the Defence land which involved its sale and development for housing. There was a proposal that the masterplan also include the adjoining land, namely the Council's land including both the acquired land and Blackmore Park and the works depot. The proposal involved a co-ordinated development of the three landholdings for residential development with the open space being located along the foreshore of Iron Cove and Hawthorne Canal. As a consequence of the compulsory acquisition, it is submitted that the opportunity to include the acquired land in such a proposal has been lost.

46 However, the Council did not take up the opportunity of allowing its land to be part of the masterplan. The Council informed the proponents of the masterplan in late 1997 that Blackmore Park is not to be included in the study for the masterplan. The evidence also shows that there was a strong community demand to increase the amount of open space in the area and to halt further residential development in the area - the preferred option being to gain monetary contributions from development to provide funds for the enhancement of the existing facilities at Blackmore Park. I have described above (par [7]) the Council's policy of identifying and purchasing land to meet the shortfall of open space in its area. Moreover, the parties' valuers, Mr Dundas and Mr Dempsey, both agreed that it is not reasonable to assume for the purposes of the Just Terms Act that the Council would sell part of Blackmore Park for use other than that permitted under the existing zoning. The acquired land was clearly an adjunct to Blackmore Park and functioned as part of the park. Mr Dempsey noted that there is no evidence to suggest that the Council would sell part of Blackmore Park for a higher use assuming a reclassification to operational land and rezoning could be achieved. The burden of showing the probability of zoning or other restrictions being lifted or relaxed lies on the person so contending: Parramatta City Council v Valuer-General (1964) 10 LGERA 160. Not only has the Council failed to discharge that burden, but such evidence which exists is to the contrary. I thus do not accept the submission that there was some potential for the acquired land to have been put to some higher use than open space.

47 Having accepted that the acquired land is subject to the restrictions of the kind described above (par 25), and thus offers less potential uses than other land not so restricted, I now turn to the question of the extent to which the restriction affects its market value.

48 Mr Dundas would make no deduction for the restrictions which apply to the acquired land. This approach is, however, contrary to principle. Mr Dempsey, was initially of the opinion that the restrictions gave the acquired land a value in the order of 66 per cent of land which is not subject to such restrictions. Mr Dempsey derived this deduction from a general "rule of thumb" from his knowledge and experience as a valuer with the Valuer-General's Department. However, having regard to other cases in the Court that have allowed discount between 50 and 66 per cent for the restrictions imposed on community land, and resolving all doubts in favour of the dispensed owner, he adopted a discount of 50 per cent.

49 In a subsequent report, however, Mr Dempsey expressed the opinion that a 50 per cent discount was not sufficient having regard to actual sales evidence. Whilst acknowledging his earlier adoption of a "rule of thumb", he sought to quantify a discount from actual sales evidence, comparing the sale of land having development potential with sales of nearby land without development potential. Since no such sales evidence exists in Leichhardt, Mr Dempsey examined the sales of land in North Arm Cove, Port Stephens.

50 In North Arm Cove there is subdivided village land zoned " Zone 1(a) Rural" and "Zone 2 Village" in close proximity. The lots in the "Zone 1(a) Rural" cannot be used for residential purposes because the land must have an area of at least 40 hectares for the erection of a dwelling. There are no proposals in the foreseeable future for any changes to these planning controls. The subdivided village land in "Zone 2 Village" can be used for residential purposes. The lots in both zones have similar amenity. The sales evidence shows that the difference in value between the lots in the two zones is between 87 per cent and 90 per cent. In Mr Dempsey's opinion, the discount to be applied should be at least 80 per cent and may be up to 90 per cent given that there is less likelihood of the restrictions in Leichhardt being changed.

51 In the present case, the evidence shows that at the time of acquisition the likelihood of the restrictions being lifted or removed was extremely remote. As noted above, there was a shortage of open space land in Leichhardt and the Council had in place a policy of acquiring more land for open space. The evidence also shows that there was strong community opposition to the disposal of existing open space land, including opposition to the incorporation of Blackmore Park (of which the acquired land was an adjunct) into any redevelopment scheme or masterplan for the area. I find that the likelihood of the restrictions being lifted in the present case was at least as unlikely as, and probably more unlikely than, the land described by Mr Dempsey at North Arm Cove.

52 The only evidence of a direct comparison between the value of land which is subject to restrictions and land which is not is contained in the evidence of Mr Dempsey that I have described. It thus seems that the appropriate discount in the present case, based upon the evidence of the sales comparisons at North Arm Cove and the extremely remote possibility of the restriction being lifted in the present case, is in the order of 87 to 90 per cent. No contrary sales evidence has been adduced by Mr Dundas. Bearing in mind that in compensation cases doubts are resolved in favour of a more liberal estimate of value (Commissioner of Succession Duties (SA) v Executor Trustee and Ageing Co of South Australia Ltd (1947) 74 CLR 358 at 373-374), and having regard to the sales evidence described by Mr Dempsey, I am thus prepared to adopt a discount of 80 per cent.

53 It follows that I determine the market value of the acquired land at an initial figure of $1,175 per square metre discounted by 80 per cent to $235 per square metre, namely $210,748, which may be rounded up to $210,750.

Injurious affection 54 This claim relates to the residue land which has been partly filled and performs the function of an embankment supporting the new road that has been constructed on the acquired land. Whereas formerly it was utilised for active recreation, it has now been planted with numerous trees and forms a landscaped area between the road and Blackmore Park. Mr Dundas values the reduced value of the residue land at $1,125,000. This appears to be based upon an assumption that the residue land now has no value at all.

55 In cross-examination, however, Mr Dundas conceded that the residue land now comprises a sloping bank planted with trees, through which there is a well-constructed footpath, that the landscaping on either side of the footpath provides an amenity for the footpath and that the slope planted with trees is a legitimate element of open space. Mr Dundas also accepted that the cricket practice pitches and nets occupied a minority of the previous use of the acquired land together with the residue land, but this would not mean that the balance of the land had no value. Further, Mr Dundas agreed that not every part of a park must be put to some active recreation use in order to have some value.

56 The photographs of the area taken before the RTA commenced construction show not only the two cricket pitches on the land, but grassed areas around them outside the netting and mature trees along the northern boundary. Having viewed the area, including the current state of the residue land, it is apparent that the treed embankment forms a backdrop to, and enhances the amenity of Blackmore Park. Additionally, as conceded by Mr Dundas, it provides an amenity for the constructed footpath which now passes through it. Although the residue land also provides support for the nearby constructed road, the purpose of the road is to provide access to Blackmore Park and the adjoining parkland along Hawthorne Canal. In view of all these facts, it cannot be said that the residue land has no value. Although it can no longer be used for the purpose of active recreation, it nevertheless performs a role as part of the adjoining Blackmore Park, enhancing the setting of that park, and the setting of the pathway through the residue land which leads from the road to the park, and thus fulfils the function of passive recreation.

57 Although the residue land performs a valuable role in the manner I have described, the option of using it for active recreation is no longer available. The loss of that option has probably lessened its value. Doing the best I can, having viewed the land, its area of 1145.4 square metres (according to Mr Dundas) means that it has a market value of $269,169, which has in my opinion been consequently reduced by about 30 per cent.

Court orders 58 As previously noted, the parties have agreed on the amount claimed for disturbance, namely $7,945. Accordingly, the Court makes the following orders: (1) The amount of compensation under the Land Acquisition (Just Terms Compensation) Act 1991 is determined in the sum of $299,446 as follows: (a) market value pursuant to s 55(a), the sum of $210,750; (b) special value pursuant to s 55(b), nil; (c) loss attributable to severance pursuant to s 55(c), nil; (d) by consent, loss attributable to disturbance pursuant to s 55(d), the sum of $7,945; (e) the decrease in the value of the retained land, pursuant to s 55(f), the sum of $80,751. (2) The question of costs is reserved.

I hereby certify that the preceding 58 paragraphs are a true copy of the reasons for judgment herein of the Honourable Mr Justice D H Lloyd.

04/03/2005 - Formatting - Paragraph(s) 37 04/03/2005 - Omission of Judgment Reference - Paragraph(s) Key notes 07/03/2005 - Omission of Judgment Reference - Paragraph(s) Key notes

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