Overton Investments Pty Ltd v The Minister administering the Environmental Planning and Assessment Act 1979

Overton Investments Pty Ltd v The Minister administering the Environmental Planning and Assessment Act 1979 - [2001] NSWCA 137 - NSWCA 2001 case summary — Zoe

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2 STEIN JA: Introduction 3 By notice published in the Government Gazette on 4 August 1995 the respondent Minister resumed Lot 11, Deposited Plan 850969 from the appellant, Overton Investments Pty Limited. The land was resumed for the purposes of the Environmental Planning and Assessment Act 1979. The area of the resumed land is 1.323 ha. The resumption left the appellant with residue lands in Lot 10 of the Deposited Plan, comprising 1.598 ha. As at the date of the resumption, a village of aged persons units was partly erected on the residue lands. 4 The resumed land was zoned 7(b) County Open Space under the Bankstown Planning Scheme Ordinance, 1979. This zoning and reservation had applied to the land since the County of Cumberland Planning Scheme Ordinance in 1951. The balance of the land, being the higher land above the escarpment, was zoned Residential 2(a3) under the Bankstown Ordinance. This zoning permitted aged persons housing with the consent of the local Council. 5 In 1984 the Council, as consent authority, granted development consent for 160 aged persons units on the residential land. By an amendment to the consent in 1992 this was increased by 4 to 164 units. By the date of the resumption (4 August 1995) 124 units had been erected. Stages 5 and 6 of the development, totalling 40 units, had not commenced to be constructed. All of the aged persons' units were constructed, or approved for construction, on the retained land. 6 In December 1993 the appellant required the respondent to acquire the land reserved for County Open Space. This lead ultimately to the gazettal of the resumption on 4 August 1995. The statutory valuation of the resumed land made by the Valuer General was in the sum of $727,500. The appellant elected not to accept this sum and commenced proceedings in the Land and Environment Court for the amount of compensation to be determined under the Land Acquisition (Just Terms Compensation) Act 1991 (the Act). His Honour determined compensation in the sum of $186,031.54. The appellant appeals to the court and, by s 57 of the Land and Environment Court Act 1979, the appeal is confined to questions of law.

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Grounds 1 and 2 - Severance 7 In determining compensation Sheahan J found that had the resumed land not been required for the public purpose for which it was resumed, it would have been zoned Residential 2(a3), as was the retained land. 8 His Honour concluded that the highest and best use of the resumed land was potentially that of a retirement village. Before the Court was a retirement village concept for 88 units on the resumed land devised by Mr Geoffrey Twibill, architect. The appellant had submitted that such a proposal would have been approved by the Council in 1984. This was referred to as Scenario 1. 9 With regard to this scenario, his Honour said that he did not accept that it could be compared with what happened in Lasseter v Blacktown City Council (Court of Appeal, unreported 5 December 1996), where the landlocked condition of the land was a direct and actual consequence of the subdivision which was seen to be a step in the resumption process. 10 Sheahan J said: Here, the link is far more tenuous. There is no guarantee that consent would have been granted in 1984 for the 88 units, even with a strong recommendation from Minnaard. There was in fact no application in 1984. The specific proposal for the 88 units was not even devised until 1996. The Court cannot assume so speculative a proposition. The "consentless" condition does not bear a sufficiently direct connection to the resumption process. 11 Accordingly, his Honour turned to Scenario 2 of the appellant's case, in which it was maintained that a hypothetical purchaser would obtain development consent in 1995 to extend the existing retirement village onto the resumed land. Under Scenario 2 his Honour considered whether this concept would have been likely to receive development approval and whether it was economically viable. 12 His Honour considered the evidence of various constraints on the development and concluded that he accepted the opinion of Mr Minnaard (former town planner with the Council) that the constraints would not preclude the Council granting consent to the hypothetical development. 13 However, his Honour found that such a proposal was not financially viable. Accordingly, Sheahan J concluded that a hypothetical purchaser would not have viewed the Twibill proposal as 'within the realm of probability'. Rather, it would have been seen by a prudent purchaser as speculative. It could not, therefore, be regarded as the highest and best use of the resumed land. 14 The finding on the financial viability of Scenario 2 is a finding of fact and cannot be challenged on appeal. Accepting this situation, the appellant properly makes no challenge to the finding. 15 His Honour then went on to find that the highest and best use of the resumed land was for a single dwelling site. This he valued at $105,000, to which he added $81,031.54 for disturbance, making a total award of compensation of $186,031.54. 16 The appellant had also claimed compensation based on severance under s 55(f) of the Act for the lost development potential of the retained land. This is the subject of grounds 1 and 2 of the appeal. 17 Section 55 of the Act provides that in determining compensation regard must be had to: (c) any loss attributable to severance; … (f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired. 18 Section 58 defines 'loss attributable to severance' of land as meaning 'the amount of any reduction in the market value of any other land of the person entitled to compensation which is caused by that other land being severed from other land of that person'. 19 It may be that the claim for severance would have been more appropriately made under s 55(c), but it matters not. 20 His Honour recited what he understood to be the submission of counsel for the appellant. He said that the appellant claimed to have lost the benefit of being able to develop the retained land for additional units up to a maximum of 128. His Honour said that he rejected the claim for severance for 'similar reasons to those underpinning my rejection of the applicant's Scenario 1'. 21 In addition he said: The land must generally be valued at the date of resumption in its then existing condition ( Yates ). The acquisition of the acquired land did not decrease the value of the retained land at the date of the acquisition. As outlined in the discussion of the Scenario 1, the Yates principle is subject to the San Sebastian rule, as applied in Lasseter , so that the Court must set aside conditions of the land which are the direct consequence of the resumption process and which affect the land's value. Here, there is not a sufficiently direct connection between the condition asserted by the applicant - the lost development potential of the retained land - and the resumption process. The Court cannot assume a higher development potential as a basis for awarding compensation when a development application for the additional units was never lodged and where there is no evidence before the Court that it was likely to have been approved . (emphasis added) 22 The severance case was based upon the evidence of the appellant's valuer, Mr John Robertson. In his valuation report he argued that the taking of the resumed land severed the lands and reduced the value of the retained land. In para 15.14 of his report he stated that if the resumed land had not been severed from the retained land, the owner would have had the opportunity to develop 292 units on the combined land. That is 88 units on the resumed land (the Twibill concept) and 204 on the retained land. This last figure is made up of 164 units approved in 1984 plus 40 additional units on the retained land. The figure of 292 units resulted from a mathematical calculation of one unit per 100m2 of site area provided under the Bankstown Planning Scheme Ordinance, (cl 62(3)). 23 The complaint made by the appellant is that his Honour did not deal with its alternative severance claim of the loss of development potential for 40 additional units on the retained land. 24 Mr Robertson's report stated that: The owner has lost the development potential of 40 units which could have been accommodated on the upper level had the land not been designated for County Open Space. 25 The valuer assessed this loss of 40 units at $1,680,000 or $1,400,000 depending on a unit value assigned of either $42,000 or $35,000. 26 In his report in chief, Mr Minnaard, the appellant's planner, did not refer to any suggestion that the resumption caused a potential loss in the development of 40 additional units on the retained land, or for that matter, to any other severance claim. 27 Nor was there any direct mention of the loss of the potential to develop an additional 40 units on the retained land in Mr Minnaard's lengthy report in reply. At the very end of this report, the planner mentions (para 10.11) that a density of 1 unit per 100 sq m of site area would have meant that it would have been possible to provide up to an additional 132 units. That is, one assumes, the 88 units in the Twibill concept plan and 40 additional units on the retained land, although there is a discrepancy of 4 units which may be explained by the 1992 modification. 28 In para 10.12 of the report Mr Minnaard said that if a development application in the form of the Twibill plan had been before the Council in 1984, he as the then Chief Town Planner of the Council, would have recommended approval. Again, this is a reference to Twibill's concept plan of 88 units on the resumed land. 29 The last paragraph of Mr Minnaard's report in reply (10.14) deals with 'the same application' as at the date of the compulsory acquisition in 1995, viz a hypothetical application to approve 88 units on the resumed land, and states that he would have supported it. 30 Mr Minnaard then adds a final sentence: I also consider that, due to the unit entitlement possible for the site that Council would also have considered allowing the additional entitlement added to the existing development above the escarpment. (emphasis added) 31 A number of observations may be made about this sentence. First, it was the only town planning evidence adduced on the question of additional units on the retained land. Second, Mr Minnaard refers to the possible unit entitlement wholly on the basis of the theoretical maximum mathematical entitlement under the planning scheme. Third, he says that having regard to the arithmetic, 'Council would also have considered' allowing the expansion of the existing development. No specific number of units is mentioned. 32 The appellant accepts that this material (Mr Robertson and Mr Minnaard) is the sum total of the evidence called by it to support the severance claim. Mr Minnaard was not cross-examined on the part of his report in reply which has been referred to above. 33 We have been referred to the written submissions of counsel for the appellant at the trial, in particular to page 22. His Honour's judgment closely followed the wording of the written submissions. Speaking for myself, it does not leap out of the page that a separate severance claim was being put forward in relation to 40 additional units lost on the retained land. 34 Counsel for the appellant returned to the matter in his oral address at the trial. At pp 1116 - 1117 of the transcript, Mr Webster referred to the lost development rights of 128 units. In this submission, counsel did refer to his client losing the benefit of being able to develop 'the top part of the land for the additional units'. He added, however, that just how this would have been achieved was 'difficult to imagine'. 35 This last comment was clearly appropriate given that there was no plan before the court as to how the existing approved development on the retained land would have been able to be re-designed to accommodate an additional 40 units. Forty units were still to be erected on the periphery of the residential land and 40 additional units would have to be added to this part of the uncompleted development. Thus a new development application would have had to have been lodged in 1995 for 80 units on the remainder of the retained land where stages 5 and 6 of the 1984 development approval were yet to be constructed. About this scenario there was no town planning evidence whatsoever. No evidence of how it could be achieved or whether there was any likelihood of it being approved. The town planning evidence from Mr Minnaard provided no support for the proposition, except perhaps on a simple arithmetic basis. In any event, the highest his evidence reached was that the Council 'would have considered' allowing the construction of additional units to the existing development, not that they would have been likely to approve an additional 40 units. It is unsurprising that the respondent chose not to cross-examine Mr Minnaard on what appeared to be little more than a throwaway comment at the end of a lengthy report in reply. Mr Robertson, of course, is a qualified valuer and his evidence provides no town planning opinion. 36 In so far as Sheahan J rejected the severance claim regarding the 1984 situation, 128 units (that is 88 plus 40), his Honour's conclusion is unassailable as involving no error of law. This leaves the severance claim of 40 lost units on the retained land. But the 40 units were included in the 128 unit submission rejected by his Honour. 37 In this respect, his Honour's notation of the concession by counsel that 'a density to comply with this criteria on the retained land would have been difficult to justify' speaks volumes as to the likelihood of approval being forthcoming. The fact of the matter is that the appellant never made any application for additional units on the retained land and there was no evidence that if it had, it was likely to have been approved. As I have said, Mr Minnaard's evidence provides no assistance in this regard. It may also be noted that notwithstanding that 160 units were approved in 1984 on the retained land (plus an extra four in 1992) only 124 had been built by 1995. This makes it wholly unlikely that an application for additional units would have been made in 1995, let alone approved. 38 Notwithstanding the perhaps elliptical reasons given by his Honour on the severance claim, promoted I think by the somewhat confused nature of the appellant's submission and the dearth of relevant evidence, his Honour's conclusion was open. His Honour was entitled, as regards the claim for the lost development potential for 40 units on the retained land, to find that there was no sufficient connection between it and the resumption process. His Honour was also entitled to conclude that the court was unable to assume a higher development potential when no application for additional units had been lodged and when there was no evidence that any such application was likely to be approved. The first proposition is undoubtedly correct. The second proposition was one which was open to his Honour. Indeed, it was probably the only conclusion which was open. That is, I think, an end of the matter. Mr Minnaard's evidence, referred to earlier, provides no evidence to the contrary. 39 Nor do I think that any inference favourable to the appellant on this issue can be drawn from his Honour's earlier acceptance of Mr Minnaard's opinion that the constraints on development on the resumed land would not preclude Council from approving the hypothetical development. This was a reference to Scenario 2, being the potential in 1995 for approval to extend the existing village onto the resumed land by the addition of 88 units thereon. It was not a reference to an additional 40 units on the retained land promoted in the severance claim. Mr Minnaard's evidence in this regard was directed to the earlier issue of the highest and best use from the perception of a hypothetical purchaser. 40 In any event, the crucial findings of his Honour are findings of fact and it is difficult to see how they can be transformed into questions of law. 41 I would reject the grounds of appeal going to severance.

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Ground 3 - Comparable sales 42 This ground maintains that his Honour erred in law in failing to adopt a proper valuation principle with respect to the resumed land. It is contended that his Honour should have applied comparable sales to the highest and best use of the land, as an extension to the retirement village, as the primary valuation method. 43 The appellant submits that the hypothetical development of 88 units on the resumed land was only a check method on the application of comparable sales by Mr Robertson, the appellant's valuer. Just because his Honour rejected the potential of the site for 88 units, did not mean that his task was complete. Having found that the Twibill concept was uneconomic to build as a hypothetical development, it is contended that his Honour should have considered whether a smaller development was possible and then to apply the evidence of comparable sales. 44 Speaking for myself I simply cannot see how this ground of appeal can succeed. His Honour found that the highest and best use of the subject land was as a site for a single dwelling. He found that the retirement village concept would be regarded by a prudent purchaser as speculative and that it could not be considered as the highest and best use of the land. 45 Having determined the highest and best use of the land, as a single dwelling site, his Honour relied on comparable sales. 46 His Honour's finding that the highest and best use of the land would be as a single dwelling house site was a finding of fact open to his Honour. The choice and application of comparable sales is also a question of fact. Once it is found that the highest and best use of the resumed land is not as an extension of the retirement village, the comparable sales referred to by the appellant's valuer are of no relevance to the exercise being undertaken. 47 There was no obligation upon his Honour to consider whether some unspecified number of units less than 88 was possible. 48 No error of law is apparent and this ground of appeal should be rejected.

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Ground 4 - Disqualification for bias 49 On 31 July 1997 his Honour declined to disqualify himself from hearing the case on the basis of alleged apprehended bias. The appellant had submitted that it was apprehensive about his Honour hearing the matter because he had served as Minister for Planning and Environment for 10 months in 1984 and, as such, was the Minister responsible for the Department of Environment and Planning. Subsequently, from 1991, the Minister for Planning and Environment was the Minister responsible for the administration of the Act. His Honour left the Parliament in 1988. 50 It was submitted that a reasonable person would apprehend that his Honour's sympathies were with the respondent or would apprehend that the judge would not be able to resolve the case with a fair and unprejudiced mind. 51 It was not suggested to his Honour that he had any involvement in the relevant events and it must be recalled that the resumption took place in August 1995, some 7 years after his Honour ceased to be a member of Parliament, let alone the Minister for Planning, which was the portfolio he held briefly some 11 years prior to the resumption. 52 The trial commenced on 4 August 1997 after his Honour refused to disqualify himself. It ran until 1 September 1997, when judgment was reserved. Judgment was delivered on 24 April 1998. It has not been suggested that there was any conduct of his Honour during the lengthy trial, or exhibited in his judgment, which suggested bias. 53 There is a real issue of delay on the part of the appellant in not seeking to agitate the bias allegation earlier. At least soon after 30 June 1997. If it had done so then, and sought leave to appeal, the four week trial may have been avoided. 54 Nevertheless, the appeal on this ground is lacking in merit. His Honour was correct to decline to disqualify himself in the circumstances. 55 It cannot be concluded that a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the case. His Honour properly applied R v Watson, Ex Parte Armstrong (1976) 136 CLR 248 and Webb v The Queen (1984) 181 CLR 41. The principle has recently been re-stated by the High Court in Ebner v Official Trustee (2000) 75 ALJR 277 at 279 [6]. 56 Ebner also pointed out that what is important is how the existence of the judge's 'association' or 'interest' might possibly divert the judge from making an impartial decision. 57 The joint judgment of Gleeson CJ, McHugh, Gummow and Hayne JJ (with whom Callinan J agreed) stated: In each case, however, the question must be how it is said that the existence of the "association" or "interest" might be thought (by the reasonable observer) possibly to divert the judge from deciding the case on its merits. As has been pointed out earlier, unless that connection is articulated, it cannot be seen whether the apprehension of bias principle applies. Similarly, the bare identification of an "association" will not suffice to answer the relevant question. [p 282] 58 There was virtually no attempt made by the appellant to articulate any connection between being Minister for Planning and Environment in 1984 and his Honour's hearing of the compensation claim in 1997 relating to a resumption gazetted in 1995. 59 This ground of appeal also fails.

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Costs 60 His Honour ordered that each party pay its and his own costs of the trial. This order has sparked appeals by both sides. The appellant says that the respondent should have been ordered to pay its costs and the respondent (by cross-appeal) seeks an order that the appellant pay his costs of the trial. 61 The award of costs quintessentially involves the exercise of discretion, albeit one which is to be exercised judicially. In exercising the discretion under s 69 of the Land and Environment Court Act 1979 his Honour took into account a number of factors. These included: · That the amount of primary compensation determined was $105,000, which was significantly less than the amounts contended for by the appellant, which ranged between $1.2 million and $4.19 million. · That the amount of primary compensation determined was slightly higher than the amount of $84,000 contended for by the respondent. · That the amount of primary compensation determined was significantly less than the Valuer-General's determination under s 41 of the Act which, including disturbance, was $727,500. · That the appellant declined to accept the Valuer-General's determination and instituted proceedings in the Land and Environment Court under s 66 of the Act seeking that the Court determine the amount of compensation that it was to receive. 62 The appellant submitted to his Honour that it had succeeded in obtaining an award of compensation which was in excess of the respondent's offer and, accordingly, costs should follow the event. On the other hand, the respondent submitted that in no terms could the appellant be seen as the successful party in the litigation. Although the appellant had succeeded on a number of issues, these were but stepping stones to the larger issue upon which the appellant failed, namely the highest and best use of the land. The respondent claimed that he had almost entirely succeeded and, accordingly, should be entitled to costs. 63 His Honour noted a number of authorities in the Land and Environment Court which referred to the resumption of a citizens' land by the Government as being a serious matter so that if a landowner disagreed with the statutory valuation and invoked the jurisdiction of the Court to determine the amount of compensation, she should not be required to bear her costs and thus reduce the compensation awarded. That is, of course, setting aside any disentitling conduct which may effect the discretion. 64 His Honour rejected a submission by the appellant that it should be entitled to receive its costs with respect to the issues found in its favour. This finding is not challenged on appeal. 65 Sheahan J concluded that despite the appellant's claim being bona fide, it could not be said that it had succeeded in the proceedings. Although the claim was 'unrealistic', it was not 'insincere or mischievous'. Thus, his Honour said he would reject the respondent's application for indemnity costs. On the issue of indemnity costs, this may have been a legitimate factor to weigh. However, since the respondent does not seek indemnity costs in its cross-appeal, the question does not arise. 66 However, his Honour went on to say that: Overton disagreed with the amount of compensation assessed by the Valuer-General. It adhered to its belief in the land's higher value, and was thereby obliged to contest the matter in this Court, where it continued to adhere to its view, to the end of the case. As I do not cast any doubt on the sincerity of Overton's belief, I do not think the Court's discretion should be exercised to order that it pay the Respondent's costs. 67 Neither party suggests that his Honour was entitled to take account of the appellant's 'belief' in the land's higher value or its 'sincerity' as a discretionary factor. It clearly is an irrelevant factor. 68 The question, however, is whether this error involves a miscarriage in the exercise of the discretion which should lead this court to intervene and re-exercise it. In my view, the court should not. 69 In the hearing of objections under the Act to the statutory amount of compensation determined by the Valuer-General to be offered to the landowner, I do not think that it should always follow, exceptional circumstances aside, that costs should follow the event of an award of compensation. The Act sets up a fairly precise regime for the assessment and determination of compensation. In the first instance this is to be determined by the Valuer-General. His determination of the amount to be offered to the landowner as compensation and the procedures to be followed in relation to such offer are all provided for by the Act. It is clear that if the landowner objects within 90 days to the amount of compensation offered it does so by instituting proceedings in the court. The court is then required to hear and dispose of the person's claim for compensation by fixing an amount that will 'justly compensate' that person. 70 The amount of compensation to be determined by the court is at large and the Valuer-General's determination may or may not play a part in the hearing. Like this trial, most compensation hearings take a considerable time to hear by reason of the valuation evidence regarding hypothetical developments, comparable sales and the like. This case was no exception. 71 This court heard argument as to the relevance to the issue of costs of the amount of the Valuer-General's determination and its relationship to the ultimate award by the court. I do not understand either party to suggest that it is an irrelevant factor to be taken into account on costs. In my view, it can be a relevant factor but one which rarely will be a determining one. Nevertheless, I do not see that his Honour placed any undue weight on the factor. 72 Nor do I see that it is a simple matter of ascertaining who won or lost the litigation. Compensation determinations are not like awards of damages for personal injury. Obtaining an award of compensation of $100 does not necessarily mean that a landowner 'wins' the litigation. A judge is entitled to look realistically at the litigation, the issues, the way it was conducted and the result, in order to assess who really succeeded and to what extent. 73 In my opinion, the exercise of the discretion by his Honour, although involving the error identified above, was otherwise a sound exercise of discretion. The result of the order that each party pay its and his own costs was a fair one and properly reflective of the litigation. I do not think that this court should intervene. In any event, if the court were to re-exercise the costs discretion, I would come to the same conclusion as his Honour. 74 On a final note, it was said that if a landowner was not entitled to his costs of a trial where an award of compensation is obtained, then he could be at the mercy of the Government in prolonging the litigation. I do not accept that this is so and indeed, the opposite could be claimed. That is, if a landowner is always to get its costs so long as it obtains an award of compensation, however small, the resuming authority may be at the mercy of the landowner in prolonging a trial. 75 In my view, both the ground of appeal of the appellant as to costs and the cross-appeal of the respondent should be rejected. 76 Accordingly, I propose that the appeal be dismissed with costs and that the cross-appeal be dismissed with costs. 77 IPP AJA: I agree with Stein JA.

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