N and D J Baric v Roads and Traffic Authority of NSW

JUDGMENT 1 HIS HONOUR: A. INTRODUCTION 2 This is an objection pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 s 66(1) against the amount of compensation in the sum of $2,884,868 offered by the Respondent pursuant to s 42 of the Act in accordance with the Valuer-General's determination in respect of the Respondent's compulsory acquisition of the Applicants' land situate at No 92 Skipton Lane, Prestons comprising lots 10 and 11 in Deposited Plan 1053436 which occurred on 10 October 2003 by Notice of Compulsory Acquisition published in Government Gazette No 164 of that date. 3 That Notice also compulsorily acquired a number of parcels of land variously located at Prestons, Hoxton Park, Horsely Park and Plumpton, all of which lands (including the Applicants' land and the immediately adjoining parcel to its south and all (or substantially all) of the immediately three adjoining parcels to its north) were collectively acquired for "the purposes of the Roads Act 1993". 4 It is common ground that the particular purpose under the Roads Act for which the described lands were acquired was for the purposes of the Western Sydney Orbital (WSO) being a major road forming a connecting adjunct to the National Highway by linking it between the M5 Motorway situate at Prestons in the south and the M2 Motorway situate at Baulkham Hills in the north. (More recently the section of the road has been nominated as the M7 Westlink). 5 The land compulsorily acquired from the Applicant is shown as Lots 10 and 11 in Deposited Plan 1053436 (being a plan of subdivision prepared on behalf of the Respondent and registered on 29 May 2003) a copy of which is annexed hereto and marked "A". 6 The combined area of lots 10 and 11 is 1.992 hectares. Prior to that subdivision, the Applicants land was contained in Lot 2 Deposited Plan 2845 comprising a rectangular shaped parcel of land with a separate street frontage of approximately 50 metres to Skipton Lane in the east and Ash Road in the west. The Applicants have owned and resided upon the land since 1977. 7 In support of their objection to the amount of compensation offered by the Respondent ($2,884,868) the Applicants in their amended Points of Claim filed 19 July 2004 claimed compensation in the sum of $3,631,278 comprising the following compensable heads under the Just Terms Act, s 55: (i) market value $3,421,600 (ii) loss attributable to disturbance $ 189,678 (iii) solatium $ 20,000 Total $3,631,278 8 As so often occurs in cases of disputed compensation claims under the Just Terms Act, the Applicants' claim for compensation for an amount considerably greater than the amount offered, was countered by the Respondent contending for an amount of compensation far less than the compensation offered. Thus, according to its Points of Defence, the Respondent contended for an amount of compensation in the sum of $1,897,490 comprising: (i) market value $1,800,000 (ii) Disturbance loss $ 97,490 (iii) Solatium $ 19,665 $1,897,490 9 The competing amounts of compensation reflected in the parties' respective pleadings were to materially change in the course of the hearing, at the end of which the gap between the parties' competing estimates of the market value of the compulsorily acquired land had considerably narrowed. This outcome was achieved by the extensive areas of agreement struck by the parties' respective expert witnesses (ie the town planners, hydrological engineers and valuers). 10 As a result of these extensive agreements (which are appropriately adopted by the Court in undertaking its statutory function as judicial valuer under the Just Terms Act), there are only a few contested matters that require adjudication along the way of determining the compensation payable in the present case under the Just Terms Act. B. THE COMPULSORILY ACQUIRED LAND - ITS PHYSICAL CONTEXT AND ITS PLANNING AND DEVELOPMENT HISTORY 11 At the date of compulsory acquisition, separate parts of the Applicants' land were subject to three different zonings under the Liverpool Local Environmental Plan 1997, namely: (i) 11,676 m2 situate to the east of Maxwells Creek (which traverses the land in a northerly direction) with frontage to Skipton Lane was zoned " Residential 2(a) " ; (ii) 2,125 m2 being a band some 45 m2 wide corridoring Maxwells Creek was zoned " Special Uses 5(a) - Drainage "; and (iii) 6,032 m2 situate to the west of the drainage reserve with frontage to Ash Road was zoned " Recreation 6(a) - Public ". 12 At the date of compulsory acquisition, the subject land, in common with the neighbouring properties fronting Skipton Lane and Ash Road situate between Kurrajong Road in the north and Camden Valley Way in the south was zoned for urban development under the Liverpool Local Environmental Plan 1997 (the LEP) being part of the Prestons Residential Release Precinct. However, although so zoned since 1992 as part of the Hoxton Park Stage 2 Urban Release Area, the relevant land (including the Applicants' land) had not undergone any residential urban development, unlike the position of similarly zoned lands that were included in the Prestons Residential Release Precinct flanking Skipton Lane to the east of the subject land and Ash Road to the west of the subject land, which lands were at the date of compulsory acquisition substantially developed by residential subdivision and housing development (which process is continuing). 13 Mr Lunney's valuation Report (Exhibit 6) noted at p 14: Prestons is a rapidly developing residential suburb. Development to the eastern side of Skipton Lane is predominantly single residential development which appears to have taken place in the mid to late 1990s whilst development to the western side of Ash Road comprises San Marino Estate (A.V. Jennings) which has been progressively developed over the past 5 years. 14 Although Mr Lunney's Report does not comment upon the stark contrast in the rapidly developing Prestons residential suburb on either side of the land located between Skipton Lane and Ash Road and Kurrajong Road and Camden Valley Way (and the absence of residential development on that discrete section of the Prestons Residential Release Area, apart from the existence of rural/residential dwellings such as exists on the Applicants' land) that stark contrast cries out for explanation in the present case. In my judgment, Mr Ingham's opinion that but for the proposed WSO, this discrete section of the Prestons Release Area would itself have been residentially developed by the compulsory acquisition date in common with the development that had occurred elsewhere in the Release Area is far and away the most probable explanation for this state of affairs and I so find. 15 This factual finding is to similar effect to the factual findings I made in Mosca v Roads and Traffic Authority [2004] NSWLEC 676 (involving the compulsory acquisition of another parcel of land in Skipton Lane, some 300-400 m north of the Applicants' land), although the finding in that case was based upon my consideration of the extensive documentary evidence concerning (i) the history of the relevant planning provisions governing the Urban Release of the Prestons Residential Area; and (ii) the history of the proposal for the WSO. Those relevant documents were all in the nature of official public documents. 16 The relevance and significance of this fact to the determination of the market value of the compulsorily acquired land conformably to the Just Terms Act, s 56(1)(a) (which mandates that market value be unaffected by any alteration in value caused by the public work for which the land is acquired) does not appear to have been fully appreciated in the manner in which the parties have presented their competing cases. I shall have to return to this topic when I come to adjudicate upon the few but important matters that remain in contest between the parties. C. THE MATTERS REQUIRING ADJUDICATION FOLLOWING THE EXPERTS' CONFERENCING 17 As earlier noted, the several conferences of the expert witnesses ultimately yielded agreements on many issues that were originally in contest leaving the following disputed issues for adjudication: (i) the extent of the residentially developable area within the compulsorily acquired land; (ii) whether in determining the market value of the compulsorily acquired land there should be a discount for time and risk in implementing the trunk drainage scheme; (iii) the value of the undevelopable area of the compulsorily acquired land; (iv) the extent of the allowance in the market value of the compulsorily acquired land of decontaminating the land; and (v) the extent of the allowance in the market value of the compulsorily acquired land for carrying out trunk drainage works. 18 I proceed at once to determine each of these disputed issues before applying the results of such adjudications to the required task of determining the amount of compensation under the Just Terms Act payable in the present case. (i) The extent of the residentially developable area 19 This question arises because the parties have proceeded on the common basis that notwithstanding the zoning of more than 40 percent of the Applicants' land for Drainage and Public Recreation purposes, the value of the compulsorily acquired land should be determined as if the whole of the land were capable of residential development, subject to any physical constraints which would otherwise preclude such development. The legal basis for such a common assumption is the fact that under the LEP, the owner of lands so zoned may require the Liverpool Council to acquire the land so zoned and the (unstated) assumption that in the event of acquisition, the price paid would reflect value unaffected by the public zonings. 20 The issue has been presented on the common basis that the amount of residentially developable land is entirely determinable by the adoption (by the hypothetical parties to the hypothetical transaction) of the appropriate manner of providing trunk drainage to Maxwells Creek and undertaking related flood works on the land to enable its residential development. This is the single matter upon which the hydrological engineers (Professor Ball and Mr Bewsher) were ultimately unable to agree. 21 Ultimately, their competing opinions depend, not upon engineering considerations, but upon whether the value of the compulsorily acquired land as a residential development site should be assessed as an isolated site or in conjunction with the development or potential development of neighbouring sites. If the former, then Professor Ball's requirement for on-site provision for flood storage purposes means that less land (some 2,000 m2) would be available for residential development than would be the case if the flood works for the development site could be provided in conjunction with the development of neighbouring properties along the lines of Mr Bewsher's "regional Creek corridor proposal" (as it was referred to in the Experts' Joint Statement, Exhibit 11). 22 In amplification of these competing opinions of Professor Ball and Mr Bewsher, it is agreed by the parties and their valuers (Mr Large and Mr Lunney - vide their Joint Statement, Exhibit 16) that the area of residentially developable land is 14, 245 m2 on the basis of Professor Ball's proposal and 16,463 m2 on the basis of Mr Bewsher's proposal. 23 It is to be noted that these competing areas of residentially developable land involve all of the residentially zoned land (ie 11,767 m2) plus a part of the land zoned Recreation 6(a) (the precise size of the part varying according to whether the scheme of Professor Ball or Mr Bewsher be adopted). As earlier noted, this fact arises from the circumstance that the competing cases have been presented upon the common basis that the determination of the market value of the compulsorily acquired land assume that the whole of the land were residentially zoned but were subject to applicable physical constraints involving (i) the existence of Maxwells Creek traversing the land in a northerly direction and (ii) parts of the land being flood liable and requiring filling to raise lands above the 1 percent flood levels. 24 In my judgment, the amount of residentially developable area of the compulsorily acquired land is the whole of the area of the land less the area comprising a 70 m wide corridor flanking Maxwells Creek and providing the required riparian corridor. That corridor area measures 3,464 m2 (inclusive of the Creek) and accordingly the residentially developable area is calculcated at 16,463 m2 (ie 19,927 m2 less 3,464 m2). 25 The foregoing conclusion is, in my opinion, the correct assumption upon which the hypothetical parties to the hypothetical sale would strike their bargain. 26 The assumption, though consistent with Mr Bewsher's opinion, is in my judgment even more compellingly supported by the application to this case of the fundamental principle of compensation for compulsory purchase that is now embodied in the Just Terms Act, s 56(1)(a), namely that the market value of compulsorily acquired land must be determined by disregarding any decrease in the value of the land caused by the public purpose or proposal for the public purpose for which the land was acquired - see the discussion of this fundamental principle in my recent judgment in Mosca v Roads and Traffic Authority, a case involving the compulsory acquisition of another parcel of land in this section of the Prestons Residential Release Area situate a few hundred metres to the north in Skipton Lane. 27 In the present case, (as with the Mosca case) the known history of the WSO has blighted the realisation of the residential development potential of the affected section of the Prestons Residential Release Area (ie the area bounded by Kurrajong Road, Skipton Lane, Camden Valley Way and Ash Road) in a manner that starkly distinguishes that section from the remainder of the Prestons Residential Release Area (which has a total area in the order of 500 hectares). I have earlier recorded my acceptance of Mr Ingham's opinion that but for the history of the WSO, this section of the Prestons Release Area would probably have been developed by the date of compulsory acquisition in common with the unaffected parts of that Release Area. Although in the present case the documentary evidence concerning (i) the planning history of the Prestons Residential Release Area; and (ii) the history of the proposal for the WSO has been considerably less comprehensive and detailed than the corresponding documentary evidence in the Mosca case, it included Liverpool Council's Development Control Plan 31 adopted by the Council on 10 December 1995 in respect of the Hoxton Park, Carnes Hill and Prestons Residential Release Areas. DCP 31 included Map 3 (a copy of which is annexed to Mr Ingham's Report, Exhibit 3) which provided detailed planning of the layout of all proposed subdivisional roads throughout the Prestons Release Area and the locations of open space and the locations of drainage infrastructure. 28 Map 3 of DCP 31 contains the following endorsement: Note: The area east of Bernera Road may be subject to replanning due to the proposed Western Sydney Orbital Road 29 This note is an important recognition that although all lands within the Prestons Residential Release Precinct had been included in the detailed planning provided by DCP31, the area situate to the east of Bernera Road (which includes the section between Ash Road and Skipton Lane) may require revised detailed planning in view of the WSO proposal. 30 This is the first, and surprisingly, the last time that any of the relevant planning instruments recognise the existence of WSO and demonstrates the sustained period of uncertainty up to the Minister's approval under the Environmental Planning and Assessment Act 1979, Part 5 of the WSO in February 2002 for the identified section of the Prestons Release Precinct affected or potentially affected by WSO. 31 The existence of the WSO has inevitably adversely affected the value of the Applicants' land. One effective and justifiable way of disregarding that adverse effect (which would include lost opportunities for earlier realisation of its residential potential) is to treat the land as being available for residential development, at the date of the hypothetical sale subject to due allowance for trunk drainage provision to Maxwell's Creek and the creation of an acceptable riparian corridor. So to formulate the hypothesis upon which the price to the hypothetical transaction would be struck inevitably means that Mr Bewsher's proposal is far more compatible with the required hypothesis than is Professor Ball's proposal. 32 But the required hypothesis upon which the hypothetical sale would be transacted that I have propounded in order to give effect in the present case to the imperative of s 56(1)(a) goes far beyond providing a sound basis for preferring Mr Bewsher's opinion over Professor Ball's competing opinion. Rather, it means that the market value of the compulsorily acquired land is to be determined upon the basis of the hypothesis that all of the compulsorily acquired land except for the 70 m wide riparian corridor encompassing Maxwell's Creek is available for residential development. 33 The matter in dispute having been settled by hypothesis necessarily formulated to give effect to the imperative of the Just Terms Act, s 56(1)(a) means that the solution has been found to lie beyond the parameters set by the competing evidence of Professor Ball and Mr Bewsher and by an adjudication on those competing opinions. 34 If the solution had depended upon an adjudication on the competing expert opinions, I would have preferred Mr Bewsher's opinion (which had the support of Mr Ingham as a planner) over Professor Ball's opinion (which had the support of Mr Sanders as a planner) for the fundamental reason that the premise for Professor Ball's opinion (namely that the value as a residential development site of the compulsorily acquired land must be measured in isolation of neighbouring lands) wholly fails to appreciate (indeed, it nullifies) the fact that the land is part of a planned Residential Urban Release Area, the development of which conventionally proceeds along the lines of (i) land amalgamations and/or joint developments; and (ii) the orderly provision of pre-planned trunk and local drainage schemes - which conventions maximise both capital expenditure on urban infrastructure and the proper economic exploitation of land resources in a situation such as the present where former rural/non urban lands are released for planned residential development. 35 For all the foregoing reasons I would hold that the residentially developable area of the compulsory acquired land is 16, 463 m2. (ii) whether the market value should be discounted for time and risk in implementing Mr Bewsher's trunk drainage proposal 36 In the Joint Statement of the Valuers (Exhibit 16), Mr Lunney's valuation of some $2.9 million based upon the larger area of residentially developable area that was derived from the adoption of Mr Bewsher's proposal was expressed to be based upon the assumption that "the Bewsher Trunk Drainage Scheme had been implemented by Liverpool Council as at the date of acquisition". 37 In his oral testimony, he said that being of the opinion that the evidence adduced in the case had not validated that assumption, he would reduce his valuation by allowing a discount of 20 percent for risk and delay in the implementation of the Bewsher scheme. This involved a reduction in his valuation by $562,400 as is reflected in his mathematical calculation in Exhibit N. 38 Mr Large, the Applicants' valuer, disagreed with any discount for delay or risk because the local real estate market for the Prestons suburb was "very hot" at the date of compulsory acquisition having risen by 48 percent in the preceding two years (ie reflecting an average price rise of 2 percent per month over that period). 39 Moreover, Mr Large said that en globo residential lands were in scarce supply in the Liverpool area at the time and that big developers were in the habit of acquiring land banks for ongoing development, including lands at Hoxton Park that had been zoned for some time as future residential lands. Mr Large was of the opinion that in all these circumstances, a developer/purchaser would have had no concerns at the prospect of some 12-18 months being required from the date of purchase for the implementation of the Bewsher trunk drainage scheme. He also adopted Mr Ingham's advice that the residentially zoned land could be readily developed in advance of the other parts of the Applicants' land and the required trunk drainage works in a staged development process. 40 In my judgment, it is not appropriate to discount the market value either in the manner or to the extent contended for by Mr Lunney in his evidence. The principal reason for so concluding flows directly from my conclusion on the first disputed issue. Having concluded that the area of the residentially developable land was determined according to the hypothesis that I have held to be required in the present case by the Just Terms Act, s 56(1)(a) and upon the basis of which the bargain would be struck in the hypothetical transaction, it follows that any discount for delay and risk encountered in the implementation of the Bewsher truck drainage scheme is simply irrelevant. 41 However, if the adjudication of the disputed issues had required a consideration of the competing opinions of Mr Lunney and Mr Large, I would have preferred Mr Large's opinion that no discount would be required because I think that his opinion would more closely reflect the views of the hypothetical prudent parties to the hypothetical transaction, especially given the status and the context of the land as part of the Prestons Residential Release Area. 42 Accordingly, I hold that the market value should not be discounted on account of the suggested delay or risk in the implementation of the Bewsher trunk drainage scheme. (iii) the value of the undevelopable area of the compulsorily acquired land 43 The "undevelopable area" comprises come 3,464 m2 being the 70 metre wide riparian corridor flanking (and including) Maxwells Creek. 44 Mr Large attributed a value to this land at the rate of $ 60 per square metre whereas Mr Lunney applied a rate of $25 per square metre. (Mr Lunney's rate of $25 per square metre was the same rate that had been adopted by the Valuer-General in his statutory valuation for the non-developable portion of the Applicants' land.) 45 Mr Lunney's valuation was supported by his analysis of two sales of development constrained lands located at Hinchinbrook and Hoxton Park respectively. Mr Large's valuation was based upon his opinion, without recourse to sales evidence, although in the course of his testimony he placed some reliance upon the two sales of land in Illaroo Road, Hoxton Park which had been relied upon by the Valuer-General in his statutory valuation in support of his estimate of value at the rate of $25 per square metre of the undevelopable area. The Valuer-General's Report discloses an analysis of those two sales yielding rates of $42 and $60 per square metre but these were the analysed rates of the whole of the sale lands which were included in the future urban 1(e) zone, only parts of which were subject to relevant development constraints. 46 The task of estimating the value of the non-developable area is intrinsically difficult, as is the task of analysing sales where only parts of the sale properties are subject to physical development constraints where the analysis seeks to isolate out of the sale price a value of the constrained lands. 47 Ultimately on this issue, I think that Mr Lunney's estimate of value is more plausibly advanced than Mr Large's competing opinion. 48 For these reasons, I adopt as the value of the undevelopable area the rate of $25 m2. (iv) the extent of the allowance for decontaminating the Applicants' land 49 It is common ground that at the date of compulsory acquisition the Applicants' land included contaminated land probably caused by the earlier usage between 1978 and 1985 of parts of the land as factory units which had been unlawfully developed and which development was restrained by orders made by this Court (including mandatory orders requiring the removal of the unlawful factory units): see Baric v Liverpool City Council (1985) 56 LGRA 428 which annexed the earlier unreported decision of this Court in Liverpool City Council v Baric (16 April 1984). 50 Although the factory units had long since gone, the consequential land contamination problem existed at the date of compulsory acquisition and did so visibly by virtue of a grey coloured powder layer lying on parts of the Applicants' land. 51 The parties each obtained expert advice on the contamination issue and the relevant experts (Ms Ford and Mr Graham) conferred and prepared a Joint Statement (Exhibit 10) which states the following: Kerrie Ford and Peter Graham met on 21 July 2004 to review their individual evidence and to determine the matters on which both parties agreed and any matters on which they disagreed. Agreement was reached on all points. The estimates provided in this Joint Statement replace all previous estimates by either party. The issue was dealt with as a) based on the information contained in the ADI Report alone, and alternatively b) on a without prejudice basis, based on the information contained in the ADI Report together with the extra information contained in the EES Reports. The ADI Report refers to a report by ADI 1997 Environmental Site Investigation, 92 Skiptons Lane, Prestons NSW. This Report was available to both parties. The EES Reports refers to extra investigative work conducted by Environmental & Earth Sciences and reported in the Statement of evidence by Peter Graham dated 10 June 2004. This extra work is to the best of Kerrie Ford's knowledge not in the public domain and was unknown and unavailable to Kerrie Ford until receipt of the Statement of Evidence given by Peter Graham in late June 2004. With regard to item a) the likely cleanup cost based on the information contained in the ADI Report alone was approached differently by each party but with a very similar outcome, the agreed costing being $230,000. With regard to item b) the agreed costing was $340,000. It was further agreed that the costings figures were based upon limited information and various assumptions about volumes to be cleaned up. With greater information than that provided in any of the Reports the figure could vary significantly either way from the estimated amounts. 52 In my judgment, the hypothetical prudent purchaser would have adopted the higher estimate of $340,000 by way of allowance for costs of decontaminating the land. This is because of the very obviously observable fact that the site was contaminated (presumably by virtue of its earlier industrial usage which had long since ceased) and the comparatively small expenditure ($3,000 to $5,000) to obtain the additional information that was obtained in the EES 2002 Report or could have been obtained in a report like it. 53 Accordingly, I hold that an allowance of $340,000 would be made in the price offered by the hypothetical prudent purchaser for cost of decontaminating the subject land. (vi) the extent of the allowance in the market value for carrying out trunk drainage works 54 Both Mr Large and Mr Lunney included an allowance in their respective market value estimates for works to render the land available for residential development. Mr Large's allowance of $57,300 was confined to costs of demolishing the existing dwelling-house and building remnants from the former industrial usage of the land. Mr Lunney's allowance of $97,200 (reflected in his calculation Exhibit N) adopted the cost estimate provided in the addendum Report (Exhibit M) of Mr Saunders, quantity surveyor, for undertaking Mr Bewsher's trunk drainage works, but referable only to the compulsorily acquired land. That estimate excluded remediation works already provided for in the $340,000 allowance for decontamination. 55 Although Ms Ford doubted or queried some of the particular items allowed for in Mr Saunder's costs estimate, I think that Mr Saunder's estimate would be considered by the hypothetical prudent purchaser as the appropriate and reasonable allowance to make in respect of works required to render the land available for residential development. Accordingly, I adopt the allowance of $97,200. D. CONCLUSIONS AND ORDERS 56 I am now in the position to apply my findings in determining the market value of the compulsorily acquired land. 57 I determine the market value of the compulsorily acquired land in the sum of $2,812,000 made up as follows: (i) Developable land 16,463 m2 at $200 per m2 $3,292,600 (ii) Undevelopable land 3,464 m2 at $25 per m2 $ 86,600 Gross Value $3,379,200 Less (iii) Allowance for costs for decontaminating land $ 340,000 (iv) Allowance for costs for trunk draining works $ 97,200 (v) Agreed cost of undergrounding existing electricity transmission line $ 130,000 $ 567,200 Net Value $2,812,000 58 The parties have requested that I defer determining compensation for disturbance loss, in anticipation of the parties being able to agree upon this matter. 59 For all of the foregoing reasons, I make the following orders: 1. Compensation is determined subject to Order 2, in the sum of $2,831,665 made up as follows: (i) market value $2,812,000 (ii) solatium $ 19,665 2. By consent, the question of compensation for disturbance loss be reserved - if the parties agree, the amount agreed upon is determined to be the amount of compensation for disturbance loss and in the event of no agreement, the question may be restored to the Court for determination on three days' notice. 3. Exhibits be returned. 4. The question of costs be reserved.

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Judgment (7 paragraphs)

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