These proceedings relate to the determination of compensation payable to a Crown land manager for the acquisition of three areas of parkland in North Sydney, NSW for a construction lease for the period of 4 years and 11 months.
[2]
Facts
On 26 March 2021, Transport for New South Wales (TfNSW or the Respondent) compulsorily acquired a leasehold interest for a period of 4 years and 11 months subject to the terms as set out in the registered memorandum of Lease (Lease).
The acquired land the subject of the Lease (Acquired Land) comprises:
1. Part of Cammeray Park (which includes the Cammeray Golf Course (Golf Course)):
1. the total area of Cammeray Park is 15.35Ha and the area acquired is 48,435.3m2;
2. Cammeray Golf Club (Golf Club) has an existing lease of the Cammeray Golf Course from the Applicant to 31 May 2026 (Golf Course Lease);
3. the Golf Course Lease covers part of Cammeray Park, though excludes the Golf Course clubhouse and associated carparking area, which is leased by the Golf Club directly from the Crown. The Applicant is not the Crown land manager of that land;
4. the Respondent entered into an arrangement with the Golf Club to reconfigure the Golf Course and associated infrastructure entirely upon the residue land. As at the date of the hearing such works had been completed. The Golf Club has been compensated for the acquisition;
5. subsequent to the acquisition, the Applicant has continued to receive rent in respect of the land the subject of the Golf Course Lease in the amount that it would have received but for the acquisition of the Acquired Land.
1. Part of ANZAC Park:
1. the total area of ANZAC Park is 1.25Ha and the land acquired is 3,040m2; and
2. is improved with a memorial and community garden and landscaping, such as turf and trees of various stages of maturity. That part of the Acquired Land that is in ANZAC Park was improved with landscaping.
1. Part of St Leonards Park:
1. the total area of St Leonards Park is 15Ha and the area of the Acquired Land is 7,440m2; and
2. is mainly improved with a bowling club and greens and trees of various stages of maturity. That part of the Acquired Land that is in St Leonards Park was improved with landscaping only.
The location of the Acquired Land is depicted below in the Respondent's Sketch "SR 5439-CA Overview":
Areas 1 and 2 are the Acquired Land of Cammeray Park; area 3 is the Acquired Land of ANZAC Park and areas 4 and 5 are the Acquired Land of St Leonards Park.
The Acquired Land is owned by the State of New South Wales, is vested in the Crown, and is subject to the provisions of the Crown Land Management Act 2016 (NSW) (CLM Act). The Crown has been compensated for the Acquisition of its interest in the Acquired Land, including compensation for market value.
North Sydney Council (Applicant or Council) is the Crown land manager of the Acquired Land under the provisions of the CLM Act (Crown Land Manager).
The Respondent is the proponent of the Warringah Freeway Upgrade and Western Harbour Tunnel project (Project). The Project is critical State significant infrastructure, approved by the Minister for Planning and Public Spaces on 21 January 2021 as SSI-8866. This approval has been the subject of two approved modification applications (Planning Approval).
The leasehold interest in the Acquired Land was compulsorily acquired by the Respondent for the purposes of the Roads Act 1993 (NSW), namely, the construction of the Project.
The Acquired Land is zoned RE1 public recreation under the North Sydney Local Environmental Plan 2013. The objectives of that zone are:
• To enable land to be used for public open space or recreational purposes.
• To provide a range of recreational settings and activities and compatible land uses.
• To protect and enhance the natural environment for recreational purposes.
• To ensure sufficient public recreation areas are available for the benefit and use of residents of, and visitors to, North Sydney.
On 9 March 2022, the Valuer-General determined the amount of compensation in respect of the Acquired Land as $35,003, comprising $3 for market value pursuant to s 55 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act) and $35,000 for disturbance pursuant to s 59 of the Just Terms Act.
On 3 June 2022, the Applicant commenced the current proceedings objecting to that determination of compensation.
[3]
Legislative framework
Whilst the land was compulsorily acquired pursuant to the provisions of the Just Terms Act it was an agreed position that the provisions of s 55 of that Act do not apply as the Acquired Land is Crown land managed by the Council as Crown Land Manager.
The operative provision relating to the determination of compensation is s 2.24 of the CLM Act which provides:
2.24 Limits on compensation payable for compulsory acquisition of dedicated or reserved Crown land
(1) This section applies to each of the following -
(a) the determination of the amount of compensation payable under Part 3 of the Land Acquisition (Just Terms Compensation) Act 1991 in respect of the compulsory acquisition of the whole or part of dedicated or reserved Crown land managed by a Crown land manager,
(b) the determination under section 191 of the Roads Act 1993 of the amount of compensation payable or provided under Division 2 of Part 12 of that Act in respect of the acquisition under that Division of the whole or part of dedicated or reserved Crown land managed by a Crown land manager,
(c) the determination under section 22A of the Pipelines Act 1967 of the amount of compensation payable in respect of the vesting of the whole or part of dedicated or reserved Crown land managed by a Crown land manager or the vesting of an easement over the whole or part of land of that kind.
(2) This section does not apply to land that comprises dedicated land for which a Crown grant was granted to a former reserve trust or a predecessor in title before the commencement of the Crown Lands (Land Titles) Amendment Act 1980.
(3) Despite section 55 of the Land Acquisition (Just Terms Compensation) Act 1991, in determining the amount of compensation, if any, payable to a Crown land manager of dedicated or reserved Crown land managed by the manager, regard is to be had to the following matters only (as assessed in accordance with this section) -
(a) the value to the manager of any improvements (including structures) erected or carried out by the manager on the land being acquired or vested, or over which the easement is vested, on the date the land is acquired,
(b) the amount of any loss attributable to the reduction in public benefit from any loss of public open space that arises from the acquisition or vesting of the land,
(c) the amount of any reduction in the value to the manager, as at the date the land is acquired or vests, or the easement vests, of any other improvements (including structures) erected or carried out by the manager on other land that is caused by the land acquired being severed from the other land under management,
(d) the cost to the manager of acquiring additional land having environmental benefits that are comparable to the land being acquired or vested,
(e) any loss attributable to disturbance (as defined in section 59 of that Act), other than loss arising from the termination of a lease or licence over the whole or part of the land being acquired.
(4) For the purposes of a determination of an amount of compensation -
(a) the Crown is to be treated as being the only holder in fee simple of the land that is acquired or vested or over which the easement is vested, and
(b) section 56(2) of the Land Acquisition (Just Terms Compensation) Act 1991 applies as if the value of improvements (including structures) erected or carried out by the Crown land manager on the land is the market value of the manager's interest in the land.
(5) If dedicated or reserved Crown land is managed by the authority acquiring the whole or part of the land, the authority is not entitled to compensation in respect of the acquisition or vesting if it decides not to require compensation and does not revoke that decision before the acquisition of the land concerned.
(6) This section does not affect -
(a) any function of the Minister over the dedicated or reserved Crown land or the requirements of the Crown land management rules concerning the application of compensation that is payable, or
(b) the rights under the Land Acquisition (Just Terms Compensation) Act 1991 of a person from whom native title rights and interests in relation to land have been acquired.
(7) In this section -
dedicated or reserved Crown land managed by a Crown land manager includes land -
(a) to which the provisions of this Part are applied by another Act or that is taken under another Act to be dedicated or reserved Crown land under this Act, and
(b) for which a Crown land manager has been appointed or is taken to have been appointed.
Section 2.24(1)(a) of the CLM Act applies to the determination of compensation under Pt 3 of the Just Terms Act in respect of Crown land that is compulsorily acquired and payable to the Crown land manager. The chapeau to s 2.23(3) of the CLM Act expressly displaces as considerations otherwise relevant to the determination of compensation provided by s 55 of the Just Terms Act, stating as it does: "Despite s 55 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW)….".
[4]
The claims
The Council seeks compensation arising from the acquisition pursuant to the following losses it has identified in its Further Amended Points of Claim filed 6 May 2024:
1. Claim under s 2.24(3)(b) of the CLM Act in the amount of $11,547,730 as the amount of loss comprising amounts attributed to the reduction in open space arising as a consequence of the acquisition for:
1. loss of health benefits from open space;
2. loss of property value from loss of open space; and
3. loss from deprivation of use of acquired open space.
1. Claim under 2.24(3)(d) in the amount of $4,750,000 being the cost to the Crown Land Manager of acquiring additional land having environmental benefits that are comparable to the Acquired Land.
2. Claim under 2.23(3)(e) being the loss attributable to disturbance in the amount of $27,062,293.40 comprising:
1. legal costs;
2. valuation costs;
3. reinstatement of the public benefit that was present on the Acquired Land prior to acquisition including:
1. reinstatement of the Golf Course at Cammeray Park;
2. reinstatement of trees and vegetation on the Acquired Land; and
3. reinstatement of infrastructure including drainage, seating and pathways on the Acquired Land.
Apart from an agreement as to the disturbance costs comprising the legal and valuation fees, the Respondent contends that the Council is not entitled to any compensation pursuant to s 2.24 of the CLM Act.
[5]
Claim under s 2.24(3)(b) of the CLM Act - reduction in public benefit
The claim under s 2.24(3)(b) of the CLM Act relates to the amount of any loss attributable to the reduction in public benefit from any loss of public open space that arises from the acquisition or vesting of the land.
As the parties acknowledged, this is a novel situation in that it is the first time that a claim for compensation under s 2.24(3)(b) of the CLM Act has arisen for judicial consideration. The predecessor to s 2.24(3)(b), being s 106A of the Crown Lands Act 1989 (NSW), which is relevantly identical in terms to s 2.24(3)(b), was considered in Tempe Recreation Reserve Trust v Sydney Water Corporation [2013] NSWLEC 221. At [59]-[61], Biscoe J held:
59 The entitlement to compensation for compulsory acquisition of property is an important right and hence provisions such as s 106A(3) are to be construed with all the generality that their words permit: Marshall v Director- General Department of Transport [2001] HCA 37, (2001) 205 CLR 603 at [38]; Roads and Traffic Authority of New South Wales v Heywood [2002] NSWCA 99, (2002) 54 NSWLR 289 at [20], [21]; George D Angus Pty Limited v Health Administration Corporation [2013] NSWLEC 212 at [100] per Preston CJ of LEC. Compensation determined with regard to the matters in s 106A(3) is subject to the just terms override required by ss 3(1)(b) and 54(1) of the Just Terms Act, for it is only s 55 of the Just Terms Act that has been ousted by s 106A of the Crown Lands Act.
60 Under s 106A(3)(b), what a "loss" that is "attributable" to a "reduction" in a "public benefit" is in terms of a monetary amount is not easily discerned from the text. It has to be kept in mind that it is the Crown, not a reserve trust, that owns the fee simple and is compensated for the acquisition of the market value of the fee simple: s 106A(4).
61 The task of statutory construction involves reading an Act as a whole, putting the relevant provision into its proper context: Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28, (1998) 194 CLR 355 at [69]; Monis v The Queen [2013] HCA 4, (2013) 295 ALR 259 at [309]. Understanding the context and any lack of clarity in the provision may be assisted by analysis of the mischief the provision was intended to remedy. The preamble to the Crown Lands Amendment (Compensation) Act 2001, which introduced s 106A into the Crown Lands Act, states that it is: "An Act to amend the Crown Lands Act 1989 to clarify the compensation payable when certain reserve lands are compulsorily acquired or vested; and for other purposes". Section 106A is titled "Limits on compensation payable to reserve trusts". The mischief that s 106A was intended to address and how it was intended to address it, is illuminated by reference to the legislative history.
The Respondent raised as matters preliminary to the determination of the quantum (if any) of compensation determined having regard to the matters contained in s 2.24(3)(b) of the CLM Act whether:
1. There was a loss of open space;
2. There was a reduction in public benefit; and
3. There was a loss attributable to the Council as Crown Land Manager.
I will address each of these matters as preliminary to the determination (if any) of compensation.
[6]
Is there any loss of public open space that arises from the acquisition?
It is common ground that each of the three areas of parkland from which the land was acquired are "open space" within the meaning of s 2.24(3)(b) of the CLM Act.
During the course of the hearing the Respondent indicated a preparedness to admit that, as a matter of fact, there is a loss of open space, albeit temporary (for the period of the lease, namely 4 years and 11 months) over the three areas of parkland.
The initial reluctance on the part of the Respondent to make such a concession related to its ultimate submission that, upon the completion of the Project, the Respondent was required to provide a net increase in open space pursuant to its obligations arising under the Planning Approval. The Respondent maintained as a relevant consideration in the determination of the Council's claim for compensation the consequence to the Council and the public of such obligations.
As I am determining the loss that arises as a consequence of the acquisition, the focus is, in this case, the loss that arises during the term of the Lease as a consequence of the acquisition. The fact that the Respondent may be obliged to provide a net improvement in open space at the conclusion of the Project does not affect the relevant assessment during the Lease period. Therefore, I do not consider the Respondent's obligations under the Planning Approval to provide additional open space in the locality affects the determination of compensation pursuant to s 2.24(3)(b) of the CLM Act.
Accordingly, it is apparent from the evidence that for the purposes of s 2.24(3)(b) of the CLM Act there is a loss of open space for the term of the Lease.
[7]
The amount of any loss attributable to the reduction in public benefit from any loss of public open space
The Respondent contended that in order for a loss to relevantly arise in the consideration of the matters in s 2.24(3)(b) of the CLM Act it was necessary that the reduction in public benefit be identified with some degree of precision and that the Council had not done so in this case. I do not accept that such a criticism necessarily arises in this case.
True it is that the statutory language of s 2.24(3)(b) of the CLM Act requires a loss attributable to the reduction in public benefit, but the circumstances of each case will determine the precision with which such public benefit must be particularised. In the circumstances of this case, the Acquired Land is relevantly recreational land, permitting for the active and passive recreation of the public. The availability of such land for recreational uses is a relevant public benefit and the Crown land manager has the care, control and management of the Acquired Land to maintain such benefits. Where the open space that has been lost is open space that provides for a generalised use such as recreation it follows that a reduction in the quantum of the open space reduces the public benefit by the amount of such reduction as there is less space available for such use.
In the circumstances of this case, I find that there is a relevant reduction in public benefit. The question of how such a reduction is to be ascribed a value is a matter for consideration below.
[8]
Loss suffered by the Applicant as a quantifiable financial loss
As a preliminary matter the Respondent contended that the Applicant would only be entitled to any compensation if the loss was suffered by it as Crown Land Manager. Mr Lunney, the Respondent's expert land valuer was asked to make such an assumption and on the basis of that assumption determined that the quantum of compensation would be $nil. As a preliminary matter, I consider the validity of such assumption.
The Respondent sought to develop an argument that, on the proper construction of the relevant provisions of the CLM Act and the applicable parts of the Just Terms Act, the relevant "loss" to which s 2.24(3)(b) of the CLM Act related was a loss in the hands of the Crown Land Manager as distinct from a loss experienced by those for whom the Crown land was managed. The argument was put at par 61 of the Respondent's closing submissions as:
…The loss must be a quantifiable financial loss and a loss occasioned to the Applicant as Crown Land Manager. True it is that the loss must be "attributable" to a loss of public benefit, but the loss is not an economic effect at large. It is a loss of the Crown Land Manager as the facilitator, by management of Crown land, of that public benefit, and accordingly it is only loss, if any, to the Applicant that the statute seeks to compensate.
From a statutory construction standpoint, I understood the Respondent to be contending that:
1. Section 54 of the Just Terms Act provided an entitlement to an amount of compensation that would "justly compensate the person for the acquisition of the land";
2. The relevant person is identified in the opening words of s 2.24(3) of the CLM Act as "the Crown land manager";
3. The references to loss in s 2.24(3)(b) must therefore be limited to that of the Crown Land Manager in its role as Crown land manager, and not in any other capacity, as there are no words in that section that reference any other identity;
4. The balance of the provisions of s 2.24(3) all refer to values, costs of losses to "the manager" and s 2.24(3)(b) should be read in the same fashion;
5. The legislative history indicates an intention consistent with the Respondent's construction that it was the legislative intent to limit compensation payable to Crown land managers where the compensation is referrable to a loss experienced by it in that functional position; and
6. The primary purpose of the introduction of s 2.24 was remedial in the sense that it was intended to overcome the decision of Pearlman (former CJ of LEC) in Prince Alfred Park Reserve Trust as Trustee for the Prince Alfred Park v State Rail Authority of New South Wales (1997) 96 LGERA 75 and it therefore should be construed in that context.
For the reasons that follow, I do not accept that such a narrow and limiting construction should be placed on the operation of s 2.24(3)(b) of the CLM Act.
First, s 54 of the Just Terms Act concerns compensation for which a person is entitled having regard to certain nominated considerations. The entitlement to compensation is derived from s 37 which provides:
37 Right to Compensation if land compulsorily acquired
An owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part by the authority of the State which acquired the land.
Therefore, a proper construction of the reference in s 54 to compensating "a person" is a reference to the holder of the interest acquired. In this case, the holder of the relevant interest was the Council as Crown Land Manager. The interest of a Crown land manager is created by the CLM Act. The CLM Act identifies the functions of a Crown land manager at s 3.13 which includes the care, control and management of that Crown land for the purposes for which it was dedicated or reserved. Where a local council is the Crown land manager the land must also be managed as community land pursuant to the provisions of the Local Government Act 1993 (NSW). Such an interest is for the purposes of providing a benefit not to the Crown land manager, but to the public on whose behalf the land is held.
Secondly, the reference to the Crown land manager in s 2.24(3) of the CLM Act is not limited to only its functionary position but also the broader position of the body charged with the care, control and management of the land for the purpose for which it was dedicated. In this case, each of the parks were dedicated for the purpose of public recreation. The Crown land manager does not itself engage in the recreational purpose, but ensures the land remains available for such a use by members of the public.
Thirdly, the loss identified by s 2.24(3)(b) of the CLM Act is the loss attributable to the reduction in public benefit as such the loss is not one experienced by the Crown land manager as manager of Crown land. The loss is experienced by the members of the public but payable to the Crown land manager as the body that maintains that public land so as to provide the benefit that flows from the provision of the land.
Fourthly, the objective of s 2.24 of the CLM Act is to provide a mechanism for a Crown land manager to seek compensation for Crown land that has been acquired and dictate the matters relevant to a determination of the quantum (if any) of such compensation. In identifying the objective of such provision each party considered that, pursuant to an application of s 34 of the Interpretation Act 1987 (NSW), the extrinsic material comprising the parliamentary debates and committee minutes that accompanied the making of s 2.24 were relevant considerations. Such extrinsic material, as it relates to the subject matter of s 2.24(3)(a), identified the purpose of s 2.24(3)(b) as Committee 28 March 2001:
…It has been the general practice for acquiring authorities to use parkland and nature reserves as a cheap source of land for their activities. A true cost has not been put on the acquisition of this type of land. It is not until the community notices that its parks and nature reserves are being eaten up by approved developments that the acquiring authorities need to have a second look at the cost options. Parks and nature reserves in urban areas are limited and are becoming more so. The purpose of the amendments is to make the acquiring authority aware that if it takes away that community asset the community will need to be compensated for the loss of the land.
Such an objective indicates that the purpose of the provision is to permit compensation to the community for the loss of the land acquired through the mechanism of compensation being paid to a Crown land manager.
Section 2.24(3)(b) of the CLM Act requires a monetary value to be placed upon a loss which is not usually represented by a monetary sum. However, the Just Terms Act and s 2.24 of the CLM Act requires the determination of a monetary sum such that the relevant claimant can be compensated for its loss. The appropriate manner for such determination will depend upon the factual circumstances of each case.
As to whether the loss must be a quantifiable financial loss, I do not accept that the Crown Land Manager must be able to identify some monetary loss. To require the loss, at the point of the incurring of the loss, to be financial disregards the loss being identified in s 2.24(3)(b) of the CLM Act, namely the reduction in public benefit.
For those reasons, I do not accept that the proper construction of s 2.24(3)(b) of the CLM Act is limited solely to a loss in the hands of the Crown Land Manager or a quantifiable financial loss in the sense identified above.
[9]
Determination of compensation (if any) under s 2.24(3)(b) of the CLM Act
The Council contended an entitlement for compensation for such a loss pursuant to the provisions of s 2.24(3)(b) of the CLM Act on two alternate bases. First, a loss quantified by the application of an economic cost benefit analysis undertaken by Dr Fahrer, economist; and secondly, a land value exercise undertaken by Mr Dyson, land valuer. I will deal with each of these approaches.
[10]
Cost benefit analysis
The Council adduced expert evidence from Dr Fahrer. Dr Fahrer was familiar with the process of undertaking cost benefit analyses for major projects. In a cost benefit analysis, some costs were identified as "externalities" as they were not the subject of market-based transactions. The determination of the value of externalities are commonplace in a cost benefit analysis. In this case, Dr Fahrer identified three relevant externalities that arose from the acquisition of the Acquired Land, namely: health costs; use deprivation costs and property value losses. He applied the NSW Framework for Valuing Green Infrastructure and Public Spaces (2023) (Framework) to determine the quantum of such losses and derived the following sums attributable to the loss of the benefits of the Acquired Land (as adjusted in his evidence):
Cammeray Park St Leonards Park ANZAC Park Total
Health costs $3,099,106 $243,504 $98,993 $3,685,107
Use deprivation costs $63,079 $51,549 $935,928
Property value $7,991,499 $7,991,499
Total $11,090,605 $306,583 $150,542 $11,547,730
[11]
The Respondent did not adduce expert economic evidence, but it did cross-examine Dr Fahrer upon his evidence. Mr Lunney, the Respondent's expert land valuer also gave evidence with respect to Dr Fahrer's property value externality.
[12]
Foundation of cost analysis
Dr Fahrer's evidence was founded upon an application of the Framework to the particular facts of this case. Dr Fahrer made no independent economic assessment of the losses apart from an application of the Framework, albeit he did make some adjustments to the calculations identified in the Framework that, in his opinion, were necessary to reflect the facts of this case.
The appropriateness of the use of the Framework to provide assistance in the identification of heads of loss and the determination of the quantum of such loss was challenged by the Respondent. Whilst the Respondent called no counterpart economist, I accept that does not mean that Dr Fahrer's evidence must be accepted at face value. The Council, whilst accepting that I was not bound to accept Dr Fahrer's evidence uncritically merely because he was the only expert opining on this particular subject matter, did contend that I should be slow to reject the methodology of an expert in relation to the valuation of land where it was capable of yielding a result within reasonable bounds: Bronzel v State Planning Authority (1979) 44 LGRA 34 (Bronzel) at 516 (Wells J), cited by Jagot J in Almona Pty Ltd v Roads and Traffic Authority of New South Wales (2008) 160 LGERA 375 (Almona). The caution expressed in Bronzel and adopted in Almona was to the following effect:
…this Court should be slow to reject any method that, in expert hands, is capable of yielding a result within bounds that are not unreasonable. The limitations of every method must, of course, always be kept clearly in mind. I am of the opinion that the approach likely to result in the most direct and reliable resolution of the outstanding differences between the valuations is to consider the particular features of each valuation that are capable of yielding to adverse criticism.
The conditional feature of this caution is that there must be an assessment whether the method adopted is one that is capable of producing an assessment within bounds that are not unreasonable. The criticism of Dr Fahrer relates not so much to the adoption in principle of the use of a cost benefit methodology per se but rather whether Dr Fahrer's cost benefit, in the circumstances of this case, is appropriate to provide a reasonable assessment of the factors identified in the legislative language. Whilst I will adopt a cautious approach, I do not consider that there is any compulsion to accept Dr Fahrer's determination either because there was no expert contradictor or because he has utilised a particular methodology of a cost benefit analysis commonly relied upon by economists.
Dr Fahrer utilised as a primary resource the Framework. The Framework had as its purpose to provide guidance to support practitioners undertaking cost-benefit analysis of projects, programs and policies relating to green infrastructure and open space for evaluation of a business case to support funding proposals or policy changes. It deals specifically with the creation of green infrastructure and open space, but it does not identify guidance for costing the loss of existing infrastructure. The Framework therefore does not, in terms, provide guidance to determine the loss identified in s 2.24(3)(b) of the CLM Act, namely the amount of any loss attributable to the reduction in public benefit from any loss of public open space that arises from the acquisition or vesting of the land, nor does it provide guidance as to a temporary loss of open space, as is the circumstance of this acquisition.
In light of the Framework not providing a direct application to the factual circumstances of this case, its use as the foundation for the assessment made must be justified, as must the manner in which it is thereafter applied to the facts of the case. In Dr Fahrer's evidence he addresses those considerations by stating (folio 1896) (footnotes omitted):
NSW Interim Framework for Valuing Green Infrastructure and Public Spaces
17 There is long established economics literature on the theory and estimation of non-transacted environmental benefits and costs from infrastructure projects. While this literature can be technically complex, a good non-technical guide for practitioners was recently published by the NSW Government through the NSW Department of Planning and Environment. It provides a good and useful overview of the issues arising when valuing non-financial benefits and costs.
18 The Framework is designed for a cost benefit study of additional infrastructure or public space, where the public benefit, in various dimensions, is positive. The case considered here is different in three respects (a) public spaces are being removed, not added (b) parts, not all, of the parks are being removed, and (c) the removal is temporary (a period of four years and eleven months). These differences do not present any conceptual difficulties; what would be benefits from additional green space become negative benefits, or costs, from reductions in green space.
19 The Framework discusses several benefits from green spaces. In Chapter 4 of this report I estimate the value of losing three of them as a result of TfNSW's park acquisitions: health benefits, use benefits and property values.
20 Other costs are the loss of tree canopy, noise and other disturbances which I discuss qualitatively.
Whilst Dr Faher acknowledges that the Framework was not designed for the exercise he undertakes, his reasons for applying the Framework are brief and do not provide a rationale as to why an application of the Framework to those facts would not provide "any conceptual difficulties". As has been observed, expert evidence must be sufficient to enable the Court to sufficiently consider for itself the soundness of, and foundation for, the opinions expressed by the expert. This principle was developed in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at [87] as follows:
87 There is no doubt about Professor Morton's authority, experience, qualifications and skill. It is also the case that Professor Morton's report is quite lengthy and detailed. But, given that the court is not obliged to take the opinion of an expert as conclusive even though no other expert is called to contradict it, can it be said that Professor Morton's report goes beyond a series of oracular pronouncements? Does it usurp the function of the trier of fact? More vitally, did it furnish the trial judge with the necessary scientific criteria for testing the accuracy of its conclusions? Did it enable him to form his own independent judgment by applying the criteria furnished to the facts proved? Was it intelligible, convincing and tested? Did it go beyond a bare ipse dixit? Did it contain within itself materials which could have convinced the trial judge of its fundamental soundness?
Or as formulated in Street v Luna Park Sydney Pty Limited [2007] NSWSC 691 at [2]:
…The test is whether the report sufficiently discloses the basis and rationale of the expert's opinion as to enable it to be understood and appreciated and fairly challenged.
Dr Fahrer, by failing to provide any meaningful basis for his assertion that the Framework should be utilised for the task posed by s 2.24(3)(b) of the CLM Act does not permit an analysis or ability to understand the reasons for that assertion such that its soundness could be tested and accepted. For that reason alone, I would place little if any weight upon the evidence of Dr Fahrer.
Notwithstanding the finding as to the weight to be placed on Dr Fahrer's evidence, if I am wrong and the Framework was capable of providing relevant assistance, I will consider each of the elements of the claims for loss identified by the Council.
[13]
Health costs
Dr Fahrer identified that the Framework identified one of the benefits of open space was health benefits. As stated in section 5.1.2 of the Framework:
The availability of public open space is an important enabler of physical activities, including organised and casual sports. Physical activity has a positive impact on health and wellbeing…
In the same section it identified that:
Key determinates [sic] of the health benefit from public open space are the:
• Number of people impacted by the public open space
• Amount of physical activity caused by the change in public open space
• Extent to which increases in physical activity occur for less active people, where the health benefits will be higher
• Access, location and quality of public open space, which is important in driving the above determinants.
The Framework identified three methods to quantify the benefit, of which Dr Fahrer adopted the Method 3: Catchment Based Method. Method 3 was stated to be applicable for projects that substantially increase the attractiveness of parks or establish an attractive large new park. It then provided a dollar value per person per year, the value varying depending upon the benefit considered appropriate. In this analysis, Dr Fahrer applied a calculation based upon his adopted population of the catchment of each park, multiplied by the average of the dollar values identified in the Framework, multiplied by the proportion of each park acquired. He did make some further downward adjustment to the figures for ANZAC Park and St Leonards Park based upon the attractiveness of the Acquired Land.
I do not accept this approach properly considers the reduction in the public benefit from the loss of the public open space comprising the Acquired Land. The method adopted derives a health benefit based upon the expected change in behaviour of people within the catchment. It clearly identifies, as recited at [50] above, that it is the change in physical activity caused by the change in the provision of public open space that is the operative criterion. The facts of this case are not apposite to that analysis. Each of the parks remain available for active and passive recreation notwithstanding the acquisition of the Acquired Land. Further, each of the parks remain capable of being classified as either large parks in the case of Cammeray Park and St Leonards Park, or a small park in the case of ANZAC Park, even after the reduction in the quantum of open space caused by the acquisition. In order for the identified health benefits to be lost it would be necessary to identify a reduction in physical activity consequent upon the acquisition. There is no evidence that such is the case.
The Framework is not sensitive to changes in quantum that do not affect the classification of a park by its size nor does it provide any foundation to adjust the health benefit where the reduction in size is for a relatively short period of time. Its application to determine health benefits in this case does not permit a quantification of lost health benefits in any reliable and meaningful way.
I therefore find, even if the Framework was of some utility, its application to the facts of this acquisition would not identify any loss attributable to the reduction in public benefit (health effects) for any loss of public open space that arises from the acquisition.
[14]
Property value costs
The Council claimed as part of its s 2.24(3)(b) of the CLM Act claim a component representing a loss in property value of land privately held by the surrounding population.
Section 5.1.1.1 of the Framework identifies the parameter for determining the benefit derived from new parks and sports fields or improvements of facilities in such parks. It is intended to reflect the value derived from individuals directly interacting with open spaces. It is the amount that consumers are prepared to pay for their use of the good, service or amenity.
For new parks and sports fields, the Framework (folio 1359) identifies the means by which a "base value" of the new park is determined as:
base value - the approach to estimating the base value for urban parks and sports fields relates changes in public open space to changes in property values. The framework recommends measuring this benefit by applying a 0.3% increase in property prices per percentage point increase in the share of open space in the surrounding catchment area that is open space (see Box 5.1). This value would be applied to blue infrastructure within parks, as well as green areas, such as wetlands.
The Framework goes on to observe (folio 1359-60):
While the benefit for the base value is measured through a once-off change in property values, this is simply a proxy for the value of the annual services provided to users of a park, which is then incorporated into the value of the property.
Note that the assumed benefit related to the amount of open space is a highly generic value. It does not reflect differences in the quality of the green place and the existing amount of green space. The value of providing certain additional facilities at new parks can be estimated using available WTP estimates or through a broad approach to open space augmentation based on capital expenditure levels.
A caveat to the recommended approach to estimating the base value is it does not allow for a lower value to be applied if there is a large amount of existing parkland and a higher amount if there is a scarcity of parkland.
Dr Fahrer utilised this part of the Framework to identify his property value cost. Whilst considering the Framework he made some adjustments to the calculation of this loss by reference to the fact that the Acquired Land is not the only areas of public open space in the relevant catchment. He reduced his claim to 0.47% of the value of such land (on a rental return basis). He further used a rental market value to approximate a loss for the 4 years and 11 months represented by the acquisition.
Whilst Dr Fahrer, and to some extent the Council, relied upon lost property value as a part of its claim, what is apparent from the Framework is that the impacts on property values are intended as a proxy to represent the value that a person would pay to have the advantage of new or improved open space recreational areas.
If the claim is considered in light of the manner in which the Framework intended the assessment to represent, it is not a reliable proxy for the factual situation in this case. The Framework is valuing a new park, that is, the provision of open space where either none exists, or new areas are being added to an existing supply. That is a benefit that is fixed and will continue into the future. The fact of this case is for a fixed period of time, the term of the Lease, part of an existing pool of open space will be unavailable for use but will be returned to the pool at the completion of that term. There is no evidence adduced in these proceedings that the value of a reduction for a limited period of time of the available pool of open space is properly represented by a property value proxy, even if adjusted to represent an annual cost or to reflect the presence of alternative open space in the catchment.
For these reasons, I do not accept that, upon an application of the Framework, the use of property value as a proxy for loss of a part of the existing pool of open space for a fixed period of 4 years and 11 months is the appropriate measure for any part of the claim for the loss attributable to the reduction in public benefit from any loss of open space that arises as a consequence of the acquisition of the Acquired Land.
[15]
Use deprivation costs
The Council identified this element of the claim as an approximation of the loss of benefit of using the Acquired Land during the Lease term. Dr Fahrer approximated this loss as equivalent to the quantum of compensation paid to the Golf Club for the acquisition applied on a per square metre value to each of the areas of the Acquired Land. In closing submissions, the Council did not press a claim for use deprivation of Cammeray Park, as the Golf Club had already been compensated for that loss. However, it sought an application of the per square metre rate derived from that compensation sum to the areas of ANZAC Park and St Leonards Park to arrive at figures of $51,549 and $63,079 respectively.
Whilst Dr Fahrer initially identified the nature of his assessment as providing "an estimate of the loss of public benefit arising from the compulsory acquisition…. In particular, I have considered the amount of any loss attributable to the reduction in public benefit from any loss of public open space that arises from the acquisition of the land", he stated that he undertook an assessment of the "total economic loss caused by the acquisition… not the quantum of compensation that ought to be paid to North Sydney Council…".
This claim did not arise by application of any part of the Framework. The utilisation of the amount of compensation paid to the Golf Club represented the losses caused by the acquisition to that club as determined in accordance with the principles of the Just Terms Act, including s 55. That assessment does not represent a loss of public benefit as required by the considerations under s 2.24 of the CLM Act. Its application to St Leonards Park and ANZAC Park, each of which (as identified below) have no capacity for commercial exploitation, renders it an inapplicable proxy for determining the monetary value of loss of use of the Acquired Land of each of those parks. I reject this approach as an appropriate determiner of the amount of any loss attributable to the reduction in public benefit from any loss of public open space that arises from the acquisition of the land.
[16]
Findings on s 2.24(3)(b) of the CLM Act claim - cost benefit analysis
For the reasons outlined above, I find that on the evidence and the circumstances of this case, the Applicant has not established that there is any loss attributable to the reduction in public benefit from any loss of open space that arises from the acquisition of the Acquired Land taking into account the cost benefit analysis methodology contended for by Dr Fahrer.
[17]
Land value methodology
The Respondent instructed its expert land valuer, Mr Lunney, to assume that compensation was only available for losses in the hands of the Crown Land Manager. On that assumption he determined that the quantum of compensation should be $nil. In light of my findings at [38] above, that compensation is not so limited, the assumption Mr Lunney was asked to make is an inappropriate basis to determine compensation.
The Council contended that, in the alternative to a cost benefit analysis the quantum of the loss expressed in monetary terms could be determined by reference to land valuation methodologies. The Council relied upon a direct comparison land valuation methodology as determined by Mr Dyson. The evidence of Mr Dyson was that the appropriate valuation methodology to be adopted in determining the value of the reduction of public benefit from the loss of the open space that arose from the acquisition was by direct comparison approach that assessed the market rental values of the Acquired Land on the basis of its potential income (or loss of income). In the joint expert report of the land valuers Mr Dyson and Mr Lunney agreed that Mr Dyson's valuation approach was best described as a "loss of opportunity" approach, or in other words an assessment of the potential income which could have been generated by the Acquired Land had the leasehold interests not been acquired by the Respondent.
Mr Dyson identified ten leases that he relied upon to determine an appropriate rental income from the Acquired Land. Of those ten transactions three were construction leases to an acquiring authority. The remaining seven transactions were leases of open space land where such land was improved with sporting infrastructure and other facilities. From a consideration of the rental returns for such leases Mr Dyson identified a range of values of between $25/m2 to $45/m2.
Mr Dyson then applied that range to the three parks that were acquired depending upon the size of the area occupied by the Lease (discounted by a rate of 2.5% to determine the present value). In his opinion, the following rates should be applied to the Acquired Land:
1. Cammeray Park: $25/m2-$30/m2 - discounted by 50% to take into account that the Acquired Land was used by both the Golf Club and members of the public;
2. St Leonards Park: $30/m2-$35/m2; and
3. ANZAC Park: $35/m2- $40/m2.
Applying the relevant arithmetic calculations as identified in his workings, Mr Dyson determined that the appropriate total quantum of compensation utilising this methodology was $4,750,000.
In considering the three construction lease transactions, I do not consider that they are comparable to the Acquired Land such that they are of assistance in determining the value by this method of valuation. First, Mr Dyson was unable to identify whether any of the construction leases were over Crown land, such that the comparability of the lease of land to which the Council was Crown Land Manager was unable to be ascertained. If the land the subject of the construction lease was land held by the Council as freehold land the determination of rent for that lease would have been on a different basis.
Secondly, I accept the evidence of Mr Lunney that the relevant task for a consideration of a claim under s 2.24(3)(b) of the CLM Act is not the market value of the construction leases. The construction leases are for a higher order use than a recreational use and are therefore assessed at a different market rate. I therefore do not consider these transactions are relevantly comparable and I do not place any weight on the construction leases as comparable sales for the purposes of determining the claim under s 2.24(3)(b).
In considering the evidence of the seven transactions of open space land I also accept the evidence of Mr Lunney that such transactions are not relevantly comparable so as to assist in deriving a value of the Acquired Land as:
1. The Acquired Land of both ANZAC Park and St Leonards Park were landscaped open space areas with no sporting infrastructure. There was no feature of these lands that would attract commercial or community interest in leasing such land on commercial terms. Further, there was no evidence that the Acquired Land of either of these parks had in the past attracted any use by way of lease or license that generated any income from its use; and
2. The Acquired Land of Cammeray Park related to the use by members of the public (not the Golf Club) who had access across the Golf Course, and were used primarily for walking, not taking advantage of the sporting (golf) facilities. Due to the fact that the Golf Club had a lease over the land, the Council would not have been able to lease the land used by the members of the public to derive an income, such that there is no lost opportunity.
Having regard to such factors, the seven transactions of open space land do not provide evidence of a market for leasing land comparable to the Acquired Land. To the extent that such transactions may be adjusted in the traditional manner to take account of the income producing infrastructure to render them more comparable, Mr Dyson accepted that he had not attempted to make any such adjustments, nor had he had regard to the magnitude of any such adjustment.
Therefore, having regard to the nature of the Acquired Land, the Council has not identified as a matter of fact or inference that there would be a "loss of opportunity" to derive an income. Further, even if such a valuation methodology were appropriate, the sales relied upon by Mr Dyson to derive the range of rates determined by him are not relevantly comparable to the Acquired Land to assist in determining what such rates should be.
Taking into account the matters identified above and the particular features of the Acquired Land, I do not accept that a valuation methodology that seeks to determine a "loss of opportunity" by reference to the eight transactions identified by Mr Dyson is an appropriate methodology to attempt to determine a claim for compensation having regards to the matters identified in s 2.24(3)(b) of the CLM Act.
Whilst I have not accepted Mr Lunney's primary position as to the determination of compensation pursuant to s 2.24(3)(b) of the CLM Act, Mr Lunney has identified an alternative approach providing a direct comparison method of valuation that does not rely upon the assumption he was asked to make: see [67] above.
Mr Lunney's alternative approach was to estimate a "recreational" rental value for the Acquired Land which was more in line with golf course rental values (as opposed to "market values") or the income received by the Council for passive recreational uses. On the basis of that methodology, Mr Lunney considered the rents for golf courses identified in the valuation report of the Valuer-General together with inter-governmental transfers of open space land. I accept that none of this information was sufficiently particularised to determine a rate/m2.
Mr Lunney considered that the total quantum of compensation for the Acquired Land based on those considerations would be $17,348.83, with the present value of this notional annual recreational rental value, discounted at an interest of 5% pa over the 4 years and 11-month term of the Lease is $74,000 (rounded).
Both valuers agreed that it was difficult to identify and make reliable market-based observations as to the true "recreational" rental value of land in a particular area. Whilst I accept that such is the case, I consider that the transactions to which Mr Lunney referred indicate, in a broad sense, that the market rental approach adopted by Mr Dyson (and addressed above) derives a significantly higher rate/m2 than in circumstances where the land has no intensive sporting infrastructure (such as tennis courts) and little capacity for commercial exploitation by a lessee, which is the factual scenario in this case.
In an attempt to identify some recreational value to the Acquired Land the valuers in their joint expert report considered the valuation of the Golf Course Lease that was undertaken in 2016 (Golf Course Valuation), coincidently by the firm of valuers of which Mr Dyson was previously a partner, Knight Frank. In attempting to identify from the evidence some indication of the recreational value of the Acquired Land I consider that the lease of the Golf Club is a transaction that is capable of assisting in that task as it:
1. Is of land in the locality, in particular, it is part of the Acquired Land;
2. Is a lease for recreational value, in that, whilst there was some infrastructure to permit the Golf Course to function, that infrastructure was largely related to the maintenance and manipulation of the natural features of the land;
3. Is a lease, which due to the date of the valuation and the term of the lease is capable of being adjusted to current value; and
4. Is a lease which is the best evidence available to me (absent any other comparable transactions sufficiently particularised to assess comparability) of a transaction for recreation use of similar land to the Acquired Land.
In considering the Golf Course Lease the valuers agreed (folio 1866-7):
Cammeray Golf Club
Agreement
22. We agree that Cammeray Golf Club was subject to a lease for a period of 20 years from 1 June 2006 and expiring on 30 May 2026.
23. We agree that the Passing Rent under the Lease was $21,454 per annum as at 26 March 2021.
24. We agree that under the terms of the lease market reviews could occur on 1 June 2015, 1 June 2020 and 1 June 2025 with annual CPI increases each other year.
25. We agree that the last formal market review of the rent was on 1 June 2015 with the Lessor agreeing to no review of rent on 1 June 2020 due to COVID.
26. We agree that Clause 2(z) the lease provides that "The Club shall permit public access to all parts of the Land leased excepting to the greens, tees and Clubhouse".
27. We agree that since the acquisition of the leasehold interest over part of the Cammeray Golf Club site by TfNSW, the Golf Club has continued to meet its rental obligations under the Lease and that the Applicant has received as much rental from the Golf Club as it would have received if the project and the acquisition did not proceed.
The valuers, however, disagreed as to the manner in which the Golf Course Lease should be utilised to derive a rate/m2 of the Acquired Land. In particular, the valuers disagreed as to:
1. Whether the passing rent of the Golf Course Lease should be utilised as the rental rate or whether the Golf Course Valuation determination of $220,000 (which was then reduced by $200,000 in recognition of the maintenance cost of the leased land to derive the passing rent) should be utilised. If the Golf Course Valuation determination was utilised a rate of $3/m2 would be derived; alternately, if the passing rent were used the rate of $1.43/m2 would be derived; and
2. The extent of any discount to the rate/m2 in connection with the Cammeray Park determination to take account of the concurrent use by the Golf Club and other members of the public. Mr Dyson accepted that having regard to the concurrent uses the amount of any determination of compensation should be reduced by 50% as the only loss being compensated was that of the public, not the Golf Club. Mr Lunney considered that such a discount was excessive as of the Acquired Land the Golf Club occupied 82% of the land pursuant to the Lease and the use by members of the public were limited to formed paths and the like which occupied an area of land smaller than 50% of the Acquired Land within Cammeray Park.
Having regard to the nature of the Golf Course Lease, I consider it appropriate to utilise the Golf Course Valuation determination of value to be the appropriate integer. The benefit to the public and the Council from the occupation of the Golf Course by the Golf Club comprises both the rent and the works in kind. The carrying out of the maintenance of the public asset provides a benefit to the users of the Golf Club and also the members of the public that have resort to it for recreational uses such as walking along accessible paths. In the circumstances, when identifying the recreational rental value, I consider that it is appropriate to adopt the combined value of the financial element together with the value of the works in kind. Accordingly, I adopt a base rate of $3/m2.
As to the appropriate discount rate to be applied to the Acquired Land at Cammeray Park to take into account the concurrent uses, I accept the evidence of Mr Dyson. The Golf Course Lease imposes upon the Golf Club the obligation to permit the use by members of the public of the leased land apart from the greens, tees and Golf Club. The capacity to use those areas for the physical use by members of the public is not the sole benefit that the public derives. The adjoining areas of the greens and tees and the open space provided places the useable areas within a landscaped setting to which those persons are attracted to the land and appreciated whilst using it. Recognising the limitations in the accessible areas, however, is appropriate, as the value to the user is limited spatially by the terms of the Golf Course Lease. I consider the 50% adjustment proposed by Mr Dyson is appropriate in the circumstances.
As to St Leonards Park and ANZAC Park I accept Mr Lunney's opinion that such a sum is at the more generous end of the range of recreational value for the Acquired Land of these parks. However, as judicial valuer I must do the best I can with the evidence before me to determine the appropriate value: see Hornsby Shire Council v Roads and Traffic Authority (NSW) (1998) 100 LGERA 105 at 108. As neither of these parks are golf courses, they are still available recreational land. Whilst the use may be more of a passive kind as compared to the playing of golf, I have no evidence to permit me to adjust that rate to take into account the variations in size and useability of that part of the Acquired Land. Accepting, as I do, that a recreational land value is an appropriate rate based upon the only relevantly comparable transaction being the Golf Course Valuation, I have no evidentiary basis to adopt a lesser rate. I therefore apply the rate of $3/m2 as being a rate within the reasonable range of recreational rental values.
The experts undertook arithmetic exercises considering a number of scenarios that could be derived from the utilisation of the Golf Course Valuation in exhibit 9. Having regard to my findings above, the appropriate arithmetic exercise is that identified on page 1 of exhibit 9 as amended by Mr Dyson which produces a total quantum of compensation in the sum of $481,813.
I determine that the amount of compensation payable to the Applicant as Crown Land Manager for the amount of loss attributable to the reduction in public benefit from the loss of public open space that arose from the acquisition by the Lease for the period of 4 years and 11 months as $481,813.
[18]
Claim under s 2.24(3)(d) of the CLM Act - value of replacement land
The claim under s 2.24(3)(d) of the CLM Act relates to the cost to the manager of acquiring additional land having environmental benefits that are comparable to the land being acquired or vested.
The Council accepted that, if I determined that the Crown Land Manager was entitled to compensation on the basis of the considerations in s 2.24(3)(b) of the CLM Act on the basis of a real estate valuation, the claim for compensation pursuant to s 2.24(3)(d), also being formulated on a real estate valuation, would constitute compensation for the same loss. In this case, as I have determined that the loss identified under s 2.24(3)(b) is appropriately determined by reference to a real estate valuation, it follows that the claim under s 2.24(3)(d) would not arise for consideration in the circumstances of this case.
In light of the above, I find that there is no further compensable loss to be determined in the circumstances of this case pursuant to the considerations provided for in s 2.24(3)(d) of the CLM Act. Accordingly, the issues of statutory construction and valuation methodology relating to s 2.24(3)(d) do not arise for determination.
[19]
Claim under s 2.24(3)(e) of the CLM Act - disturbance claim
The claim under s 2.24(3)(e) of the CLM Act relates to disturbance claims under s 59 of the Just Terms Act.
There was agreement between the parties as to the quantum of the disturbance claims for legal costs and valuation fees (total amount of $140,352.40) in the following amounts:
1. Legal costs: $109,232.40 (excl GST); and
2. Valuation costs: $31,120 (excl GST).
Therefore, the only remaining matter for determination under this issue is the Council's claim for reinstatement costs claimed as disturbance under s 59(1)(f) of the Just Terms Act which provides that disturbance includes: any other financial cost reasonably incurred (or that might be reasonably incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition.
The nature of the claim was quantified in the Council's Further Amended Points of Claim at pars 13(c)(iii), 14(b)(iii) and 15(b)(iii) as:
1. $23,000,113 for the cost of reinstating the acquired portion of Cammeray Park which previously formed part of the Golf Course;
2. $2,710,295 for the cost of reinstating the assets of ANZAC Park; and
3. $1,211,533 for the cost of reinstating the assets of St Leonards Park.
These claims can be grouped as:
1. Loss arising from the reinstatement of mature trees removed by the Respondent from each of the three parks comprising the Acquired Land;
2. Financial costs reasonably incurred for the reinstatement of the Golf Course including the reinstatement of the stormwater dam; and
3. Other financial costs.
To establish the particularisation of each of the claims the Council relied upon the expert evidence of Mr Yong, quantity surveyor. Mr Yong indicated the nature and scope of his evidence at par 1.1.2 of his expert report as:
1.1.2 I prepare an expert report setting out my opinion as to the reasonable cost of replacing assets in each affected area identified in the Dilapidation Report and reconfiguration of land as shown on Outline Plan:
a. To assess fair and reasonable estimated reinstatement cost of North Sydney Council owned infrastructure, public open space and amenity within the leased areas by Transport of NSW for Warringah Freeway Upgrade Project;
b. To assess fair and reasonable estimated reinstatement cost of North Sydney Council owned infrastructure, public open space and amenity outside leased areas by Transport of NSW for Warringah Freeway Upgrade Project;
c. To assess fair and reasonable estimated cost of redesign and reconstruction of golf course due to land acquisition for Warringah Freeway Upgrade Project.
It is noted that the Council has not actually incurred any costs as it relates to this part of its claim and makes the claim on the basis that it relates to costs that might reasonably be incurred.
[20]
Legal principles relating to the s 59(1)(f) of the Just Terms Act claim
The principal dispute between the parties as to the s 59(1)(f) of the Just Terms Act claim was whether the costs could be found to be "reasonably incurred". The relevant construction of those words in the statutory language were considered in Roads and Traffic Authority v McDonald (2010) 175 LGERA 276 where Tobias JA (with whom Giles and McFarlan JJA agreed) found at [143]:
143 In summary, I am of the following views:
(a) As was acknowledged by the RTA, in each of s 59(c) and (f), the word "reasonably" governs the word "incurred" and not the expression "financial costs". The issue that arises under each subparagraph is whether the relevant costs are "reasonably incurred": it is not a question as to whether those costs are reasonable in themselves; nor does the Just Terms Act contemplate some overarching test of reasonableness in respect of compensation otherwise properly assessed having regard to "all relevant matters" in Part 3;
(b) Given that it was not in dispute that upon vacating the residence on the acquired land when required by the RTA the respondent had no option but to rent premises pending the construction of her new residence upon the residue land, the only relevant question was whether the incurring of the financial costs in the form of rent was itself reasonable. The incurring of rent may not have been reasonable if, for instance, the respondent already owned an alternative residence which she and her partner could have occupied pending the construction of her new residence upon the residue land or if she had rented an expensive penthouse overlooking Sydney Harbour at an exorbitant rent. In such cases it could legitimately be said that the rent claimed was not "reasonably incurred";
(c) The factors to which Talbot J referred in Horton could not as a matter of law bear upon the reasonableness of the respondent incurring the rent claimed as a consequence of leasing temporary premises in which to reside having been forced out of her home by the compulsory acquisition;
(d) Accordingly, the primary judge erred in relying upon Talbot J's approach to the question of the rental claim in that case and applying it to the present case. His Honour seems to have applied a general test of reasonableness that does not accord with either the plain text of s 59(c) or (f) or the statutory objective of ensuring just compensation for the separate head of loss attributable to disturbance."
The provisions of s 59(1)(f) of the Just Terms Act therefore requires a consideration of whether the costs are incurred (or might be incurred) reasonably, not whether those costs are reasonable in themselves: see also Roads and Maritime Services v United Petroleum Pty Ltd (2019) 99 NSWLR 279 (United Petroleum) at [150]-[151].
[21]
Replacement of mature trees
The Council's claim as particularised by Mr Yong as relating to the claim for the trees was:
1. ANZAC Park: 27 small trees; 17 medium trees; and 8 large trees;
2. St Leonards Park: 2 small trees; 4 medium trees; and 4 large trees; and
3. Cammeray Park: 60 small trees; 144 medium trees; and 60 large trees.
Mr Yong identified the number and size of the trees by reference to the dilapidation report that had been prepared by Council prior to the acquisition of the Acquired Land. Mr Yong valued the trees using what he referred to as the "Peter Thyer Valuation Method" (Thyer Method). The scope of the Thyer Method is stated to be:
The valuations given by this method are an expression of the positive qualities of the tree, the contribution the tree makes to the landscape and the environment, and the extent to which it is appreciated by the community.
The Thyer Method combines four factors to establish a significance index for each tree. The four factors are:
1. Size - measures of height, crown side view area, dripline diameter and girth;
2. Age of the tree;
3. Physical assessment of the tree and location; and
4. Social benefit and how the tree is appreciated.
To derive a dollar value the derived significance index is multiplied by the planting costs (which is a cost derived from local current average supply and installation costs as described).
Mr Yong was challenged in cross-examination as to the appropriateness of the use of the Thyer Method and stated at Tcpt, 1 May 2024, p 182(30-40) that:
Q. You agree with me that for every figure, dollar value--
A. Yes.
Q. --in your report applicable to trees or to any tree, that that figure is not the cost of replacing the tree. Is it?
A. Yes.
Q. And at least insofar as you have utilised those values in your report, I suggest to you that you have not provided an opinion as to the reasonable cost of replacing trees. Correct?
A. That's correct.
The reasoning of Mr Yong was traversed in re-examination at Tcpt, 1 May 2024, p 191(4-17) as follows:
Q. The question that was put to you according to my note was at 1300 the amount that you've allocated for, and an example was given, the four large trees of $364,008 was not the cost to replace the tree. According to my note, your answer is, "Yes, you can have a like for like, but that would be a higher amount." You recall that answer?
A. That's right.
Q. Why did you not include the higher amount in your tables, including at 1300?
A. The reason I'm not putting that in there is that the - is because of procure the tree and the logistic and the - and - and the planting of tree and the temporary structure that we had put in, which - which I believe is a - is a much higher cost to do that. So, I just try to use [the Peter Thyer Valuation]..(not transcribable)..method to - to - to value the tree that has been lost.
The Respondent submitted that Mr Yong's particularisation of the replacement cost of the trees was not in fact an identification of cost but rather a determination of value to the community as identified in the Thyer Method. The determination of such value does not equate to a financial cost for the replacement of such trees as required by s 59(1)(f) of the Just Terms Act. To the extent that Mr Yong opined that a determination of cost would produce a higher number, he did not undertake such an exercise at all, or sufficiently to enable a determination of cost for the purposes of s 59(1)(f).
The Council contended that Mr Yong's approach was appropriate as it adopted the lesser amount between the value of the tree and the cost of replacement.
I accept the submissions of the Respondent. The application of the Thyer Method to determine the value of the tree to the community does not in any way attempt to identify the actual financial cost of replacing the trees that were removed (as identified in the dilapidation report). Whilst Mr Yong stated that in his opinion the cost of replacement would be greater than the value attributed by the application of the Thyer Method, he provided no foundation for that opinion. Absent some particularisation of the costs that he relied upon to express such opinion I am unable to ascertain whether the costs comprised costs that would be recompensed by the proper application of s 59(1)(f) of the Just Terms Act.
For those reasons, I find that the Council has not established on the evidence that the costs of the replacement of the trees are those sought in the Further Amended Points of Claim and identified in the statement of evidence of Mr Yong. I therefore find that the Council is not entitled pursuant to s 59(1)(f) of the Just Terms Act its claim for the replacement of the trees.
[22]
Reinstatement of the Cammeray Golf Course including the stormwater dam
The Council sought the cost of reinstatement of the Golf Course to its original configuration, including the reinstatement stormwater dam in its previous location.
The evidence established that the Respondent had undertaken works on Cammeray Park to reconfigure the Golf Course on the residue land including the relocation of the stormwater dam.
The Council's case was put in closing submissions at Tcpt, 7 May 2024, p 554(32-50) - p 555(1-12) as:
GALASSO: No. That reasonableness is reasonableness in what the respondent has done to the lands, authorised by the authority that's constituted by the lease and its project approval. The reasonableness is a spotlight that's put on the dispossessed owner. That is, the question is whether the costs might reasonably be incurred. If, at the date of acquisition, it was a golf course, and a significant portion of it is taken away and converted, so that the residue, the non-acquired bit, is a golf course, one asks, rhetorically, why isn't it reasonable, when the land comes back, for there to be a desire to reinstate it back to golf course?
There may not be an obligation on them to reinstate it to a golf course, but why is simply wanting the land to be back in the state of its acquisition unreasonable? Let's look at the golf course. 1906, it was being a golf course. Transport comes along, it acquires it, it mucks around with it for five years, it pushes it all into a corner of the golf course, and then it runs away. What it did might have been within authority of the acquisition of the lease, and the lease term that sends us to the project approval, in terms of what they did was not illegal, or was authorised, but when I come back on the land and I turn up, I go, In 2021 it was a golf course. It's been a golf course since 1906. They've left it there, that's fine, I can't complain that they've left it there, but why is it not unreasonable simply to seek a reinstatement back to it?
It operates in that way in the circumstances of these leases. Before I go on, the same with the dam. Sure it is, they built another dam, and sure it is, they were authorised to do so. In fact, on one view of it, they were obliged to do so. There were project conditions that required them to do the dam. But, having left the site, let us not forget that the dam affected the golf course. If your Honour looks at exhibit A, the third sheet and the fourth sheet, the dam had the effect of, in fact, reducing one of the longest holes on the course. Why is it unreasonable, when they leave it, for me to say I want to put the dam back to where it was, and I want to reinstate the golf course? That's not unreasonable.
The Respondent contended that as it had reconfigured the Golf Course and the stormwater dam on the residue land it would be unreasonable for the Council to incur a financial cost to reinstate the original golf course and dam.
With respect to the Council's submissions, I do not accept that reasonableness in the context of s 59(1)(f) is determined merely by a claimant's desire, it must be measured by the factual context in which such a cost is to be incurred, and it must also arise as a direct and natural consequence of the acquisition. In this case, the Golf Course was configured and the dam was relocated as required by conditions E209 and E101 of the Planning Approval and pursuant to the Interface Agreement dated 24 October 2022 between the Respondent and the Golf Club. Whilst each of these features was not identical to the pre-acquisition state of the infrastructure as it was relocated to different parts of the land (from the acquired to the residue) there must be some factual impetus that would permit a finding of reasonableness in incurring costs to reconfigure to the pre-acquisition state.
With respect to the dam, there is no evidence that the dam is not fully functional or that it does not perform the necessary functions for which it was designed such that it would require relocation and reconstruction from an operational perspective. The Council appears to link the need to reinstate the dam to its prior location to the reinstatement of the Golf Course configuration (as to leave the dam in its present location would prevent reinstatement of the Golf Course). On that basis, unless I find that the reinstatement of the Golf Course to its pre-acquisition configuration is reasonable, there is no evidentiary basis that would support a finding that the incurring of costs to relocate the dam would be cost reasonably incurred in the circumstances of this case.
As to the Golf Course reconfiguration there was evidence adduced from Mr Gould, General Manager of the Golf Club. His evidence was in effect that whilst the course was now different from its pre-acquisition configuration the reconfigured Golf Course operated sufficiently and appropriately to meet the needs of users of this type of golf club. The membership of the Golf Club had remained consistent with the pre-reconfiguration membership numbers.
The Council also adduced evidence from a golf professional, Mr Rainey, who stated that in his opinion the configuration of the Golf Course provided less of a challenge to more competent golfers than the previous configuration and therefore, in his experience as a golf professional was of a lesser quality than in its pre-reconfigured state.
Having regard to that evidence, I find that the desirability of a golf course will depend upon the competence of each golfer and the type of game (long or short) that they are seeking. Cammeray Golf Course has always been a 9-hole golf course of the less challenging type than other golf course offerings in the locality. Its attraction is to the less experienced or less competent players seeking a golfing experience that sharpens the short game. Notwithstanding that some of the elements of the pre-reconfiguration course have been removed in the reconfigured course, I accept the evidence of Mr Gould that such a course will remain attractive to the type of golfer that was attracted to the course prior to its reconfiguration.
For those reasons, it would be unreasonable for the Council to incur financial costs associated with the reinstatement of the original Golf Course. I therefore do not allow the costs for the reinstatement of the Golf Course pursuant to the s 59(1)(f) of the Just Terms Act claim.
[23]
Remaining s 59(1)(f) of the Just Terms Act disturbance claims
There remains a small number of claims relating to the reinstatement of the surface of the Acquired Land relating to the replacement of turf, drainage infrastructure etc. These claims do not arise in the circumstances of this case as I accept the assurance of the Respondent that such works are part of the reinstatement works that the Respondent is required to undertake in accordance with the terms of cl 8.3 of the Lease that provides:
8.3 TfNSW's obligations
(a) Except where the surface of the Land or any structure is entitled to remain following the Terminating Date pursuant to any agreement between TfNSW and the Lessor made prior to the Terminating Date or pursuant to some other right benefiting TfNSW, TfNSW shall, prior to the Terminating Date:
(i) restore the surface of the Land to its condition as at the Commencing Date;
(ii) remove any Structures from the surface of the Land; and
(iii) make good any damage (if any) to the Land caused by the carrying out of the Works as identified in the Dilapidation Report.
(b) TfNSW shall at its own cost remove from the Land prior to the Terminating Date all of its plant and equipment, materials, waste and rubbish unless such plant and equipment, materials, waste and rubbish is entitled to remain following the Terminating Date pursuant to any agreement between TfNSW and the Lessor made prior to the Terminating Date or pursuant to some other right benefiting TfNSW.
(c) TfNSW will not be required to comply with the obligations imposed by clause 8.3(a)(iii) where any damage to the Land has been caused by an act of the Lessor or its employees, agents, contractors, or any negligence for which the Lessor is responsible.
I therefore find that as such works will be undertaken by the Respondent upon the terminating date pursuant to the Lease, they will not be costs incurred by the Council and therefore do not arise as financial costs reasonably incurred as a direct and natural consequence of the acquisition.
[24]
Uncertainty arising from the Respondent's Project requirements
There was evidence adduced from the Respondent's employees, Mr Sheppard and Mr Cooper. Both of these persons were involved with the carrying out of the Project. During the course of cross-examination, it became apparent that there was a strong probability that at the end of the Lease term there may be a continuing need to occupy some of the Acquired Land for construction purposes or that the design of the Project may in fact require the use of some parts of the Acquired Land for the purposes of the Project on a permanent basis.
To the extent that such probabilities may affect the implementation of the Lease, that is, the return of the Acquired Land with its surface restored, at the end of the Lease, that is not a matter for consideration in these proceedings. The Acquired Land was acquired for the purposes of the Lease. The terms of the Lease dictate the entitlements and obligations upon the acquiring authority. I am required to determine the compensation that arises as a consequence of that acquisition and not the carrying out of the Project more generally: see s 2.24(1) of the CLM Act and s 54 of the Just Terms Act.
If the position changes in the future the acquiring authority may need to acquire further leases or acquire a freehold interest in the land. At that time, the losses (if any) to the Applicant will be the subject of determination in association with those acquisitions. I therefore do not take into consideration in the determination of this compensation claim any losses or potential losses that arise as a consequence of the use or occupation of the Acquired Land for any purpose other than that specified in the Lease.
[25]
Costs
The parties agreed that it was appropriate that they consider the determination of compensation and my reasons prior to making any submissions as to costs. The parties requested that costs should be reserved. Accordingly, I will reserve the costs of the proceedings.
[26]
Conclusion and orders
For the reasons herein, I determine that the Applicant is entitled to compensation in the following amounts:
1. Section 2.24(3)(b) of the CLM Act and s 54 of the Just Terms Act: $481,813; and
2. Section 2.24(3)(e) of the CLM Act and s 59(1)(a) and (b) of the Just Terms Act: $140,352.40.
Accordingly, the Court orders that:
1. Compensation under Part 3 Division 4 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (Just Terms Act) and s 2.24 of the Crown Land Management Act 2016 (NSW) (CLM Act) for the compulsory acquisition of the Applicant's interest as Crown Land Manager pursuant to the CLM Act of the land listed in Schedule 1 hereto is determined in the sum of $622,165 plus statutory interest being payable under ss 49 and 50 of the Just Terms Act;
2. Costs are reserved;
3. The proceedings are listed for mention at 9am on 17 October 2024 on the question of costs; and
4. The exhibits are returned.
Schedule 1 - Land
All those pieces or parcels of land situated in the North Sydney Council area, Parish of Willoughby and County of Cumberland, shown as:
1. Lot A in TfNSW Sketch No. SR 5439-CA, being part of the land in Certificate of Title 2/244543;
2. Lot B in TfNSW Sketch No. SR 5439-CA, being part of the land in a closed road by notification in Government Gazette No. 114 of 27 September 1968, page 3892;
3. Lot 3 in Deposited Plan 244543, being the whole of the land in Certificate of Title 3/244543;
4. Lot 4 in Deposited Plan 244543, being the whole of the land in Certificate of Title 4/244543;
5. Lots C and E in TfNSW Sketch No. SR 5439-CA, being parts of the land in Certificate of Title 7302/1136001;
6. Lot D in TfNSW Sketch No. SR 5439-CA, being part of the land in Certificate of Title 7303/1136001;
7. Lot 5 in Deposited Plan 244543, being the whole of the land in Certificate of Title 5/244543;
8. Lot 6 in Deposited Plan 244543, being the whole of the land in Certificate of Title 6/244543;
9. Lot F in TfNSW Sketch No. SR 5439-CA, being part of the land dedicated as a reserve for public recreation by notification in Government Gazette No. 55 of 12 March 1869, page 643 and declared to be a public park by notification in Government Gazette of 7 December 1886, page 8333; and
10. Lot G in TfNSW Sketch No. SR 5439-CA, being part of the land in Certificate of Title 7321/1149783.
[27]
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Decision last updated: 03 October 2024