PORT STEPHENS COUNCIL v FIDLER as Trustee for HOWSHIP HOLDINGS PTY LIMITED

LOWER COURT JURISDICTION : Land & Environment Court LOWER COURT FILE NUMBER(S) : LEC 30156/97 LOWER COURT JUDICIAL OFFICER : Cowdroy AJ

COUNSEL : J F Kildea (Appellant) W R Davison SC (Respondent) SOLICITORS : Trevor Dunn Solicitors (Appellant) Clayton Utz (Respondent) CATCHWORDS : LAND AND ENVIRONMENT COURT - Class 3 - compulsory acquisition of land - Land Acquisition (Just Terms Compensation) Act 1991 - minimal residential subdivision - (implied) rejection of Council's valuation - investigation by trial judge of hypothetical value of subject land - whether appropriate - valuation principle - cross-appeal - Pointe Gourde principle ACTS CITED : Land Acquisition (Just Terms Compensation) Act 1991 s 56(1)(a) Land and Environment Court Act 1979, s 57 Yates Property Corporation v Darling Harbour Authority (1991) 24 NSWLR 156 CASES CITED: Turner v Minister of Public Instruction (1956) 95 CLR 245 Electricity Commission of NSW v Arrow (1994) 85 LGERA 418 Housing Commission of NSW v San Sebastian Pty Ltd (1978) 140 CLR 196 DECISION : Appeal allowed; Award of compensation set aside; Remit the proceedings to the Land and Environment Court to determine what compensation should be awarded for the minimum residential subdivision; The respondent to pay the appellant's costs of the appeal and have a certificate under the Suitors' Fund Act, 1951 if otherwise entitled; The order for costs made in the Land and Environment Court be set aside and the costs of the trial at first instance be determined by the Land and Environment Court on the remitter; Cross-appeal dismissed with costs.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40710/98 LEC 30156/97 MASON P STEIN JA DAVIES AJA Tuesday, 3 August 1999 PORT STEPHENS COUNCIL v Tony FIDLER as Trustee for HOWSHIP HOLDINGS PTY. LIMITED

On 21 August 1998 the respondent was awarded $1,108,600 compensation under the Land Acquisition (Just Terms Compensation) Act 1991 by Cowdroy AJ in the Land and Environment Court.

On appeal , it was argued that the respondent was only entitled to $700,000 on the basis that:

1. His Honour erred in holding that it was appropriate to investigate the hypothetical value of the subject lands; 2. His Honour erred in not adopting the valuation provided by the Council's valuer;

3. His Honour erred in determining the value of the land as if it were subdivided land.

On cross-appeal , the respondent argued that it was entitled to $2,577,500 compensation on the basis that his Honour erred in failing to ignore the open space zoning of the land.

On appeal: His Honour was entitled to proceed on the basis that a minimal subdivision may have been permissible, but in assessing compensation his Honour should have had regard to the valuation provided by the Council's valuer, unless it could be rejected or an available alternative preferred. It may have then been appropriate for his Honour to proceed on the basis of a hypothetical valuation if there was evidence before him to carry out the exercise. However, there was no estimate of profit and risk factors before the court. His Honour erred in valuing the subject lands contrary to the valuation principle and failed to give reasons for (impliedly) rejecting the Council's valuation.

His Honour did not err in ignoring the open space zoning of the land.

3. Remit the proceedings to the Land and Environment Court to determine what compensation should be awarded for the minimum residential subdivision.

4. The respondent pay the appellant's cost of the appeal and have a certificate under the Suitors' Fund Act , 1951 if otherwise entitled.

5. The order for costs made in the Land and Environment Court be set aside and the costs of the trial at first instance be determined by the Land and Environment Court on the remitter.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

CA 40710/98 LEC 30156/97 MASON P STEIN JA DAVIES AJA Tuesday, 3 August 1999 PORT STEPHENS COUNCIL v Tony FIDLER as Trustee for HOWSHIP HOLDINGS PTY. LIMITED JUDGMENT

1 MASON P: I agree with Stein JA. 2 STEIN JA: On 21 August 1998 the respondent, Tony Fidler, as trustee for Howship Holdings Pty. Limited, was awarded $1,108,600 compensation under the Land Acquisition (Just Terms Compensation) Act 1991 (the Act) in the Land and Environment Court. The appellant, Port Stephens Council, appeals against the decision maintaining that the respondent is entitled to $700,000 as compensation for the resumption of its lands. The respondent cross-appeals claiming to be entitled to receive $2,577,500 as compensation. The appeal is confined to a question of law pursuant to s 57 of the Land and Environment Court Act 1979. 3 The appeal from Cowdroy AJ arises out of a concession made by the Council that a minimal residential subdivision may have been possible, viz. 4 lots on Lot 71 and one on Lot 2. Accordingly, his Honour found that this was the highest and best use of the land. The Council's valuer, a Mr Sorrenson, valued this at $500,000 for Lot 71 and $200,000 for Lot 2. His Honour noted the valuation and that his evidence was not challenged, nor was any evidence adduced in response. His Honour observed that 'no valuer provided evidence of the value of individual lots in the minimal subdivision'. It was, in his Honour's view, appropriate to investigate the hypothetical value of such lots (Judgment para 62). 4 The judge then proceeded to undertake this exercise and, using a comparable sale from the former Lot 72, came to a gross value of $1,000,000 for Lot 71, from which he deducted development costs of $141,400 leaving a net value of $858,600. His Honour applied the same value to Lot 2 ($250,000) and assumed, in the absence of evidence to the contrary, that development costs would be negligible. Accordingly, his Honour fixed $1,108,600 as the compensation under s 55 of the Act. 5 His Honour did not say that he rejected Mr Sorrenson's valuation. By implication it may be assumed that he must have. However, the court is unable to discern what reasons he may have had because his Honour gave none. It is submitted on behalf of the appellant that his Honour disobeyed Yates Property Corporation v Darling Harbour Authority (1991) 24 NSWLR 156 at 175 - 176. It is claimed that it was inappropriate for his Honour to investigate the hypothetical value of such lots. Moreover, when his Honour purported to do so, he erred in making no deduction for profit and risk factors (as he had done in considering the respondent's 26 lot subdivision): Turner v Minister of Public Instruction (1956) 95 CLR 245. 6 In my opinion, his Honour was entitled to proceed on the basis that a minimal residential subdivision may have been permissible. However, his assessment of this must have regard to Mr Sorrenson's valuation, the only one before the court, unless it could be properly rejected or an available alternative preferred. The judge may then have been entitled to proceed on the basis of a hypothetical value of the minimal subdivision if there was evidence before him to carry out the exercise. It is clear that while his Honour had an estimate of the development costs, he had no relevant material on the profit and risk factors which would enable the completion of the valuation exercise. 7 In proceeding as he did his Honour made an error of law. He erred in valuing the land contrary to valuation principle and failed to give reasons for (impliedly) rejecting the Council's valuation. This is not a case of preferring one valuer's method of valuation over another valuer's method, see Electricity Commission of NSW v Arrow (1994) 85 LGERA 418. 8 In my opinion, the matter should be remitted to the Land and Environment Court for the purposes of ascertaining the value of the minimal residential subdivision in order to determine the award of compensation. Accordingly, the award of compensation made by his Honour is set aside.

Cross-appeal 9 The cross-appellant claims that his Honour erred in not ignoring a step in the resumption process, namely the open space zoning of the land. In doing this it is submitted that the judge failed to obey s 56(1)(a) of the Act and the Pointe Gourde principle (Housing Commission of NSW v San Sebastian Pty Ltd (1978) 140 CLR 196). 10 However, a fair reading of the judgment makes it very clear that his Honour did not so err. I am satisfied that he ignored the current zoning and applied San Sebastian, see in particular the Judgment at paras 49 - 51. The cross-appeal should be dismissed.

3. Remit the proceedings to the Land and Environment Court to determine what compensation should be awarded for the minimum residential subdivision.

4. The respondent pay the appellant's costs of the appeal and have a certificate under the Suitors' Fund Act , 1951 if otherwise entitled.

5. The order for costs made in the Land and Environment Court be set aside and the costs of the trial at first instance be determined by the Land and Environment Court on the remitter.

6. Cross-appeal dismissed with costs. 11 DAVIES AJA: I agree with Stein JA.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.