Land and Environment Court (NSW)|1994-03-03|Before: Bignold J

R LASSETER v. BLACKTOWN CITY COUNCIL [1994] NSWLEC 24 (3 March 1994)

This is a claim for compensation in respect of the resumption on 31 May 1991 ("the resumption date") by the Respondent ("the Council") of a parcel of land situate at Seven Hills and known as Lot 13 DP 730891 ("the resumed land") then in the ownership of the Applicant ("the Claimant").

The resumption was effected pursuant to the provisions of the Local Government Act 1919 by Notice published in Government Gazette No 86 of 31 May 1991. The Gazette Notice stated that the purpose of the resumption was "providing grounds for public recreation, convenience and enjoyment".

The resumption had been instigated by a written request dated 21 July 1988 made on behalf of the Claimant pursuant to the provisions of cl 26(2) of the Blacktown Planning Scheme Ordinance ("the Ordinance") that the Council acquire the resumed land.

Clause 26 of that Ordinance which applied to land within Zone No 6(c) "Proposed Recreation" (which zone included the resumed land) was in the following terms:

"26. (1) Nothing in the Act or this Ordinance shall require the responsible authority to acquire or to a pay compensation for any land included in Zone No 6(c) where such land may be required to be provided without cost to the Council as a condition of approval of a subdivision of adjoining land in the same ownership.

(2) The owner of any land included in Zone No 6(c) may by notice in writing require the responsible authority to acquire such part or parts of the land included in that zone which may not be required to be provided without cost to the Council as a condition of approval of a subdivision of adjoining land in the same ownership and upon receipt of such notice the responsible authority shall acquire the land to which the notice relates."

(The Council was relevantly "the responsible authority".) Soon after the Claimant's written request was made the Ordinance was repealed and replaced by Blacktown Local Environmental Plan 1988 ("the LEP"). However both (i) the right conferred upon the Claimant and (ii) the correlative obligation imposed upon the Council, by cl 26(2) of the Planning Scheme were preserved: vide 30(1) of the Interpretation Act 1987.

In any event the LEP effectively perpetuated (i) the open space zoning of the resumed land and (ii) the right of the Claimant to require the Council to acquire it, by including the resumed land in Zone No 6(a) "Public Recreation" and by enacting cl 17 ("Acquisition of land in Zone No... 6(a)...") to similar effect to cl 26 of the Planning Scheme. These provisions of the LEP were in force in respect of the resumed land on the resumption date.

The state or condition of the resumed land as at the resumption date may be summarised as follows (which I express in the past tense, though no material change has occurred since the resumption date):

The resumed land, being generally rectangular in shape comprised an area of 8,838m2. It was vacant land.

Topographically the resumed land was steep terrain. In the centre of the lot there was the convergence of a major gully extending north/south and another major gully extending east/west. The slope gradients of the resumed land in its northern and western sections were some 20%, and in its south-eastern were some 16%.

The gullies functioned as natural watercourses carrying stormwater run-off from two catchments (totalling some 8 hectares, 6 hectares being developed for residential purposes and 2 hectares being developed for open space - both located to the north and east of the resumed land).

The resumed land was generally covered by native trees (maximum height of 15-20m) including a remnant open forest and introduced species. Cleared grassland areas existed in the western section.

The resumed land did not have any frontage to a road, it being the immediate rear lands or hinterland to residentially developed lots having street frontage either to Wagner Place (north of the resumed land) or Beethoven Street (east of the resumed land) or Mozart Street (south of the resumed land) or Lowana Crescent (west of the resumed land). Some 14 residential lots (all developed by single dwellings) fronting one of these aforesaid roads, backed onto the resumed land.

The resumed land had common boundaries with two separate areas of public reserve, namely a boundary of some 110m with the public reserve fronting Beethoven Street, and boundaries of 21m and 25m respectively with the public reserve having a narrow access corridor (some 4m wide) to Wagner Place. (This latter public reserve comprising 1,504m2 was created by the Claimant's subdivision of the residentially zoned section of Lot 3 DP 550331 (a 5 acre parcel) of which the resumed land formed part.)

The resumed land is situate some 1.5 kilometres north of Seven Hills shopping centre and railway station, a short distance south of the intersection of Seven Hills Road and Old Windsor Road. It is situate within an established residential precinct almost exclusively developed by single dwelling-houses, which generally have come into existence in the last 30 years following the release of areas from the former "Green Belt" restrictions operating under the County of Cumberland Planning Scheme (which came into force in 1951).

All conventional urban services were available to the resumed land, namely, water, sewerage, electricity and telephone.

As earlier mentioned the resumed land was, at the resumption date, zoned 6(a) "Public Recreation" under the LEP.

It is common ground that this zoning must be ignored in determining the value of the resumed land as at the date of resumption in accordance with the requirements of s116 of the Environmental Planning and Assessment Act 1979 ("the EP&A Act") which although repealed by the Land Acquisition (Just Terms Compensation) Act 1991 ("the Just Terms Compensation Act") (vide s75) continues to operate in the present case because that Act does not apply to any acquisition effected before its commencement (vide Schedule 3 Pt 2 cl 2) such as occurred in the present case. Hence s116 of the EP&A Act and the Public Works Act 1912 continue to apply to acquisition effected prior to the commencement of the Just Terms Compensation Act and it is the now repealed law that governs the present case.

Section 116(1) of the EP&A Act relevantly provided that where land affected by a relevant public purpose zoning or reservation (such as was the resumed land) is resumed "the value of the land shall be determined as if it had not been so reserved..."

In Wimpey Construction UK Limited v. The Minister (1983) 53 LGRA 75 Cripps J held that although s 116 removed the necessity (enunciated in Housing Commission of New South Wales v. San Sebastian Pty Ltd [1978] HCA 28; (1978) 140 CLR 196) for a connexion to be established between the reservation for a public purpose and the subsequent resumption of that land so reserved, in order to apply the principle of valuation law embodied in s 124 of the Public Works Act 1912, both the decision in San Sebastian and the effect of s 124 otherwise continued to apply to the assessment of compensation for land compulsorily acquired.

Section 124 of the Public Works Act (as adapted by s 536C(1) of the Local Government Act 1919 requires the Court to assess compensation "according to what it finds to have been the value of such land... and without reference to any alteration in such value arising from the construction of any works upon the land taken".

The underlined expression is the relevant adaptation or modification of the following corresponding expression in s 124:

"and without reference to any alteration in such value arising from the establishment of railway or other public works upon or for which such land was resumed."

In Abbey Orchard Property Investments Pty Ltd v. Sydney City Council (1978) 37 LGRA 230 Rath J considered the effect of this modification or adaptation to s 124 in the following passage at 241, that I would respectfully adopt for myself:

"It is understandable that some modification was made to these words for the purposes of a resumption under the Local Government Act; but the change from "establishment" to "construction" does suggest the possibility of a different intended meaning. However, I discern no significant difference in the connotation of the two words in their context. The effect of qualification such as is contained in the words of the Public Works Act had as far back as 1890 been authoritatively described as: "the land is to be assessed at the value it would have had if the railway for which it is resumed had never been contemplated": Black v. Commissioner for Railways (1890) 11 NSWLR(l) 160 at p 165, per Innes J. It would require a much clearer expression of legislative intent than such a change of words to warrant any departure from such a long standing interpretation of the qualification, particularly as that interpretation is consistent with English authority, also of long standing, dealing with principles of assessment of compensation where the relevant statute has no such qualification. I shall make reference later to some of this authority. For these reasons I reject the submission that the words "the construction of any works" relate only to actual construction. In my opinion the words in s 124 of the Public Works Act, included the steps taken for the establishment of the work."

It is also common ground that the competing valuations adduced in evidence assume a "residential zoning" for the resumed land in consequence of the statutory requirement (under s116) to ignore the "Public Recreation" zoning under the LEP. However the vital difference between the parties (and between their respective valuers who gave evidence at the trial and whose valuations reflected the competing legal opinions respectively provided to their clients) is whether the resumed land is to be valued as residentially zoned land (i) that is landlocked (as the Council's case contends) or (ii) that is assumed to be accessible via Wagner Place (as the Claimant's case contends).

The resolution of this principal dispute between the parties is fundamental because it substantially explains the vastly disparate values contended for by the parties - the Council contending for a value of $120,000 (based upon the sale of portions of the resumed land to owners of adjoining residential properties) and the Claimant contending for a value of some $900,000 (based upon a medium density residential development of 29 dwellings with vehicular access from Wagner Place). In truth the Council's principal case denies the resumed land the capacity for any independent residential development notwithstanding its attributed (or deemed) residential zoning whereas the Claimant's principal case assumes maximum residential development of the resumed land having frontage to Wagner Place. As will be shown I am of the opinion that neither party's principal case is correct or can be accepted, without significant qualification.

Each party advances alternative valuations, based upon variations on their principal cases. Additionally each party advances an alternative case based upon the possibility of access to the resumed land via Lowana Crescent by virtue of the purchase of one or two existing lots fronting that street which adjoin the resumed land.

The key to the solution of the principal dispute between the parties (namely whether or not the resumed land is to be valued as landlocked land) in the present case, is in my judgment, to be found in the proper application of s124 of the Public Works Act 1912, (as explained by the decision of the High Court in Housing Commission of New South Wales v San Sebastian Pty Ltd [1978] HCA 28; (1978) 140 CLR 196) to the facts of this case, and in particular to the "pre-resumption date" facts. These "pre-resumption" facts essentially emerge from a consideration of the Claimant's connexion with the resumed land which I shall next consider.

The resolution of the dispute based upon the alternative basis of value (namely recognising the possibility of access being obtained via Lowana Crescent) does not involve any disputed application of s124. I shall consider this aspect of the case after I have determined the dispute on the principal valuation approach advanced by the parties.

C. THE CLAIMANT'S CONNEXION WITH THE RESUMED LAND

When the Claimant acquired the resumed land in 1957, it formed part of a vacant five acre parcel of land, rectangular in shape having a road frontage (of some 66m) to Seven Hills Road, and was included within the "Green Belt" zone designated by the County of Cumberland Planning Scheme.

In 1960 the resumed land, in common with extensive other lands within Sydney's "Green Belt" Zone, (including neighbouring lands to the resumed land) was released for urban development. Initially the Council proposed that the whole of the five acre parcel owned by the Claimant be zoned for "park" or "open space" purposes. This decision provoked a protest from the Claimant who had intended to build his family home on the land. His protest was directed to the Council and to the then Minister for Local Government. As a result of this protest the Council proposed to zone 50% of the land (having frontage to Seven Hills Road) for residential purposes and the remainder (the rear land) for park or open space purposes.

Again the Claimant protested to the Council about the proposed zoning, considering it unfair that his land should be so extensively affected by the park or open space zoning when the adjoining five acre lot was proposed to be zoned entirely residential.

This protest elicited an assurance from the then Shire Clerk that the Claimant "had nothing to worry about" as the Council would eventually resume the "park" land and pay him the same value as the adjoining land having the residential zoning.

Thereafter the Council prepared a Development Control Plan ("the DCP") showing, inter alia, the proposed road patterns for the residentially zoned former "Green Belt" lands. The DCP showed the internal road system including Beethoven Street and Wagner Place, the latter providing access via the former, to the residentially zoned section of the Claimant's five acre lot. It also designated as a public reserve an extensive area fronting Beethoven Street adjoining the rear section of the Claimant's land that was zoned for "park" or "open space purposes" and extending onto land on the opposite side of Beethoven Street. It appears that the zoning for public recreation of the lands fronting Beethoven Street reflected open space needs of adjacent lands concurrently set aside for residential subdivision and development (which development had generally occurred by the time the Claimant subdivided his property in 1986 as had the creation of the public reserves on either side of Beethoven Street).

The Council's proposed zoning for the Claimant's land (as shown in the DCP) were in 1968, formalised and perpetuated by the provisions of the Blacktown Planning Scheme made under Pt XIIA of the Local Government Act 1919. At that time s342AC of that Act conferred a right of compensation for "injurious affection" in respect of the proposed recreation zoning. However, there is no need to further consider this matter since San Sebastian establishes that the preferred approach in cases such as the present generally lies in the direct application of s124 of the Public Works Act. (See also Stocks and Parkes Investments Pty Ltd v The Minister (1971) 25 LGRA 243.)

Some years later (after the Claimant had established his family home near the Seven Hills Road frontage) the Claimant decided to proceed with a residential subdivision of the residentially zoned section of his land. (As I have stated by this time much of the neighbouring area had been residentially subdivided and developed.) To this end he commissioned Mr Warren Eldridge, a Surveyor, to prepare a plan of subdivision for submission to the Council and on 13 May 1981 Mr Eldridge submitted to the Council a development application proposing the subdivision of the residential zoned section of the Claimant's land (then known as Lot 3 DP 550331) into eleven residential lots (one of which comprising an area of 3,020m2 and having frontage to Seven Hills Road contained the Claimant's family house).

The other ten proposed residential lots were to be accessed via an extension of Wagner Place (an existing a-cul-de-sac off Beethoven Street) involving the construction of a road 18m wide and 97m in length. The proposed subdivision showed the residue of the Claimant's land as "public reserve" comprising some 0.99 hectares with extensive frontage to the end of the proposed extension of Wagner Place . A copy of the plan showing the proposed subdivision is annexed hereto and marked "A".

Immediately prior to the lodgement with the Council of the aforesaid development application the Claimant wrote to the Council in the following terms:

"I propose to subdivide my 5 acre block of land on Seven Hills Road.

Approximately 60% of the area is zoned "Residential" and 40% "Public Reserve".

I understand that 10% or thereabouts must be donated to the Council. This leaves about 30% zoned "Public Reserve", which I wish to evaluate.

I would like to know the Council's basis for valuation of this approximately 30%, in the event of my proposed application to Council to purchase it.

I discussed my intentions, by phone yesterday, with Mr. Tony Brown, who expressed the opinion, that the 30% would be valued on the basis of the adjoining "Residential" valuation. This agrees with advice given to me 6 or 8 years ago by Mr Dale.

Also, is the Council obliged to purchase this land, and if so within what time frame."

By letter dated 6 August 1981, the Town Clerk's reply stated inter alia:

"As you are aware, Council is currently considering a subdivision application in respect of the subject property and a final determination of that proposal is expected in the near future. The property is zoned Residential 2A and Open Space 6C (Proposed Recreation) under the Blacktown Planning Scheme. Any approval granted for the abovementioned subdivision would require a proportion of the land zoned Open Space to be dedicated to Council for Public Reserve.

With respect to the balance of your land zoned for open space, Clause 26.2 of the Blacktown Planning Scheme Ordinance states that the owner of such land may ,by notice in writing, require the responsible authority (Council) to acquire that land and upon receipt of such notice, the responsible authority (Council) shall acquire the land to which the notice relates. At this stage, Council has not allocated funds specifically for the purchase of the subject open space land and accordingly no indication can be given as to the length of time that would be involved in acquiring the land, after receiving your notice.

Please note that the prescribed method of valuing land for the purpose of acquisition, is set out in Section 116 of the Environmental Planning and Assessment Act, 1979 (please see copy attached). This section appears to make provision for the valuation of land to be acquired by Council, to be based on the "underlying zoning" which in this case would be residential. However, the residential value of the land would be assessed on its development potential, taking into account such matters as development costs and land form etc. It should be stressed that Council is seeking legal advice as to the applied interpretation of Section 116 and further information will be available when this advice comes to hand."

A few days later the Council notified the grant of development consent and approval under Pt XII of the LG Act of the subdivision application subject to a number of specified conditions including the following:

"The dedication of 1,190 sq.m. of land to be shown as public reserve and numbered Lot 14. Under the obligations imposed under Section 333(1)(g) of the Local Government Act, Council is required to take into consideration the amount of public reserve to be provided and Council considered the above land is the amount necessary for the recreational benefit of the population to be housed on the subdivision."

However, the Claimant did not implement this development consent. Instead, Mr Eldridge on his behalf, made a further development application in December 1981 by way of "re-submission for variation of existing approval", seeking approval for a residential subdivision creating 12 residential lots (including one lot comprising 2,760m2 accommodating the claimant's family home) one lot designated public reserve (comprising an area of 1,309m2) and one residue lot comprising an area of 9,040m2. (The last mentioned two lots together constituted the land within Zone No 6(c) designated by the Planning Scheme).

The Council treated the application as a fresh development application and on 11 February 1982 granted both development consent under the EP&A Act and subdivision approval under Pt XII of the LG Act subject to a number of conditions including the following:

"4. The dedication of 1,504 sq.m. of land to be shown as public reserve and numbered Lot 14. Under the obligations imposed under Section 333(1)(g) of the Local Government Act, Council is required to take into consideration the amount of public reserve to be provided and Council considered the above land is the amount necessary for the recreational benefit of the population to be housed on the subdivision. This area contains the amount of land required for the additional 11 allotments created as a result of the subdivision plus that additional land zoned Residential 2(a) which is being offered by the applicant as public reserve in excess and in lieu of that part of Lot 8 affected by the Open Space 6(c) zoning which is to be the subject of a Local Environmental Plan.

13. An application for rezoning shall be submitted to Council together with the fee of $750, plans and supportive information, prior to Council issuing approval for the Engineering plans."

In the Chief Town Planner's Report to the Council (the consideration of which resulted in the grant of the aforesaid consent and approval) the following matters were noted:

part of proposed Lot 8 was affected by the public recreation 6(c) zoning and that a rezoning (involving an adjustment to the common boundary between the residential zoning and the public recreation zoning) would be required;

the subdivision involved a minor variation to the road pattern of Wagner Place shown in the Planning Scheme resulting in a shortening of Wagner Place as it penetrates the Claimant's property;

subdivision of the property was difficult "due to the slope of the land" and the proposal had located the proposed residential lots on the less sloping land; and

the proposed subdivision involving four battle-axe lots exceeded by two, the maximum number permitted by the Council's Subdivision Code - however because three of the lots fronted land zoned public recreation the Code could be waived without adverse impact on the proposed lots and adjoining lands.

On 31 August 1982, Mr Eldridge made an application to the Council, on behalf of the Claimant, for the required rezoning as contemplated by Condition 13 of the development consent. This application was duly processed by the Council and resulted in the making on 8 July 1983 of Blacktown Local Environmental Plan No 49 ("LEP No 49") which adjusted the common boundary between the residential zoning and the public recreation zoning of the Claimant's property. LEP No 49 amended the planning Scheme by amending the definition of "scheme map" so as to include the amendment shown on the plan marked "Blacktown Local Environmental Plan No 49". A copy of this plan is annexed hereto and marked "B".

One effect of the adjustment of the common boundary was that the area of the Claimant's property affected by the public recreation zoning was increased from 9,605m2 to 10,231m2. However the more significant effect was that the public recreation zoning had a greatly reduced frontage to the proposed extension of Wagner Place as shown on the plan referred to in LEP No 49 (which extension was designed principally to provide access to the residentially zoned portion of the Claimant's property). As I have previously mentioned the frontage to Wagner Place of the access corridor to Lot 14 (which lot was required by Condition 4 of the Council's consent to be dedicated as public reserve) was some 4m and the width of the access corridor was likewise some 4m.

The Claimant undertook the physical works required by the development consent and subdivision approval culminating in the registration of the plan of subdivision (prepared by Mr Eldridge) on 21 February 1986 as DP 730891 (a copy of which is annexed hereto and marked "C".

That plan dedicated Lot 14 (comprising 1,504m2) as public reserve (as required by Condition 4 of the council's consent) and also dedicated the extension of Wagner Place as a public road. That extension involved a penetration into the claimant's property for a distance of only some 45m (compared with the distance of some 97m as contemplated in the original development consent and subdivision approval granted by the Council).

The plan also created as Lot 13 what was to become the resumed land. The combined areas of Lots 13 and 14 correspond with the portion of the Claimant's property that was zoned "public recreation" under the Planning Scheme (as amended by LEP No 49).

It was only following the sale of the residential lots (except for the lot accommodating his home which the Claimant still owns) that the Claimant in 1988 requested the Council to acquire Lot 13 "on a residential basis". The Claimant asserted that it "would have been capable of being developed for residential allotments of ten and a half plots after allowing for roadworks".

In his written statement of evidence (Exhibit 8) the Claimant (no doubt seeking to rebut the Council's assertion (reflected in the valuation it advanced) that the resumed land was properly to be valued as "landlocked" land lacking the capacity for any independent residential development) states, inter alia:

"When planning the sub-division, we knew that the land zoned park was to remain park and therefore we provided an access appropriate to a park and in accordance with Council's requirements and the control plan. In doing so we fell into the trap of creating a situation that the Council's Valuer could, in the future, describe as "landlocked", when considering a theoretical residential or medium density development, for the purpose of determining compensation.

If, for argument sake, we knew that the park section was to change to residential zoning at a later date we could have made provision for future road extension into that section by sacrificing one block (equivalent to Lot 8, which sold for $34,500 in Sept 1987)."

The Claimant was not cross-examined on this statement and I accept his evidence (which is corroborated by the documentary evidence that I have earlier summarised and by Mr Eldridge's evidence) as a true and fair account of how and why the subdivision or the residentially zoned portion of his property and the creation of the two "public reserve" lots came about between 1982 and 1986 culminating in the registration of DP 730891. This finding is subject to the additional fact (which I find) that the form and content of that subdivision involved less development costs (and hence greater profitability) for the Claimant by virtue of the shortened extension of Wagner Place than would have been involved had the claimant proceeded to implement the original subdivision approval granted by the Council in 1981.

The extent of the difference in development costs was not explored in any detailed fashion at the trial. However Exhibit 14 comprising Mr Eldridge's "hypothetical development valuation" exercises undertaken in relation to (i) the originally approved subdivision layout and (ii) a variant of that approved layout closely approximating the ultimately approved layout that was undertaken, indicates that the development cost savings were in the order of $20,000 (of which some $6,000 was the difference in road construction costs). In the absence of any competing evidence I am prepared to accept the cost differences contained in Exhibit 14.

In addition to this saving in developments costs, as I have already noted, the council was prepared to vary its Subdivision Code to allow two extra battle-axe residential lots to be created because they (and one other lot in the subdivision) fronted the public recreation zoned portion of the Claimant's property and in consequence the Claimant's residentially zoned portion was probably enhanced in value in its subdivided state by virtue of the public recreation zoning of the residue of his property. However no attempt was made in the proceedings to quantify the value of this probable enhancement to the Claimant's residential subdivision, although as I have earlier noted the Claimant in creating Lot 14 as a public reserve in DP 730891 dedicated some 200m2 of land additional to the area that the Council's Subdivision Code required to be dedicated in respect of the Council approved subdivision of the residentially zoned portion of the Claimant's property and this might fairly be regarded as a benefit conferred upon the Council (and the public) which, in turn, might fairly be regarded as cancelling out any enhancement to the Claimant's subdivision on account of the public recreation zoning of the residue of the Claimant's property. In the absence of any competing evidence to help me resolve the matter, I am disposed to so find and accordingly there is no need to further explore the suggestion of enhancement.

In order to apply s124 of the Public Works Act to the present case, it may be helpful if I summarise my findings (relevant to that application) in relation to the Claimant's connexion with the resumed land as follows:

the resumed land since 1960 has been totally affected by a public recreation zoning under relevant town planning laws;

prior to obtaining the original approval in 1981 for the subdivision of the residentially zoned portion of his property the Claimant was informed by the Council that in due course the Council would acquire that portion of the public recreation zoned land that was not required to be dedicated on the subdivision of the residentially zoned portion of the Claimant's property at the same value as if it were zoned residentially;

the Claimant's original subdivision application did not propose the creation of any lot as public reserve but wholly subdivided the residentially zoned portion of his property leaving intact (as an undivided residue lot) that portion of his land that was zoned public recreation which was accessible via the full extension of Wagner Place, as a cul-de-sac, as proposed in the application;

the Council in granting the original subdivision approval in 1981 required the Claimant to dedicate as a public reserve an area of 1,190m2 (being part of the Claimant's land zoned for public recreation) and to show this land as a separate lot in the approved plan of subdivision;

the Claimant's amended subdivision application created an additional residential lot (principally obtained by virtue of the reduction in the area of the lot accommodating the Claimant's dwelling-house) and also created as a separate lot (Lot 14) the required public reserve, and in so doing re-arranged the subdivision layout by substantially shortening the length of the required extension of Wagner Place, with the consequence that there was no direct access between it and the resumed land except via the public reserve lot (Lot 14) which itself had only a 4m frontage to Wagner Place (and a similarly dimensioned width of access corridor); however the resumed land additionally had direct and generous access to Beethoven Street via an existing adjoining public reserve fronting that street;

the Council's approval in 1982 of the Claimant's amended subdivision application required the public reserve lot (Lot 14) to be increased by some 200m2 in excess of the area that would normally be required by its Subdivision Code and was also conditional upon the rezoning of the Claimant's land in respect of the required adjustment to the boundary between the residential zoning and public recreation zoning of the Claimant's property;

the Claimant carried out the approved amended subdivision in accordance with - (i) the road pattern for the extension of Wagner Place and (ii) the zoning demarcations - shown in LEP No 49 (which relevantly amended the Planning Scheme);

the form and layout of the approved subdivision (which was registered in 1986 as DP 730891) including in particular (i) the creation of Lot 14 as public reserve; (ii) the creation of Lot 13 as the residue lot (intended for future acquisition by the Council for the purpose of public recreation) was principally influenced, if not dictated, by the public recreation zoning of the resumed land, and by the Council's requirements in its approval of the subdivision of the residentially zoned portion of the Claimant's property;

but for the public recreation zoning of the resumed land the Claimant in undertaking his residential subdivision would have provided for direct access between the extension to Wagner Place and the resumed land (on the assumption that it also was available for residential subdivision) to facilitate the residential subdivision of the resumed land;

having regard to (i) the zoning history of the resumed land; (ii) the Council's commitment to the Claimant to acquire in the future the resumed land at residential value; and (iii) the accessibility of the resumed land (as proposed public reserve land) to the existing public reserve fronting Beethoven Street - the fact that the Claimant did not extend Wagner Place to the resumed land was not only reasonable conduct on his part but to do or to expect otherwise, (namely to provide for the full extension of Wagner Place to the resumed land) would have been both unreasonable and wasteful of land and economic resources without advancing or achieving any sound or worthwhile planning purpose.

E. IS THE RESUMED LAND TO BE VALUED AS IF IT WERE

I come then to the crucial question in dispute namely whether for the purpose of assessing its value at the resumption date, the resumed land is to regarded as (i) landlocked land thereby effectively depriving it of its capacity for any independent residential development that would be consistent with its agreed underlying residential zoning (ie independent of the dwelling-house developments of the existing residential lots which back onto the resumed land) or (ii) as land having the ready capacity for such independent residential development.

The question was indirectly encountered at the outset of the hearing when the Court was asked to rule upon the effect (if any) on the value of the resumed land of:

the inclusion of Lot 14 within the same public recreation zoning as is applicable to the resumed land;

the dedication as a public reserve of Lot 14, as required by a condition imposed upon the grant of development consent and subdivision approval of the Claimant's subdivision of the residentially zoned section of his land.

The resolution of the question so posed, was thought to be crucial because the Claimant's Valuer, Mr Eldridge had valued the resumed land upon the assumptions (i) that Lot 14 was to be regarded as available in any subdivision of the resumed land (by providing access from Wagner Place to the resumed land) and was to be re-provided in a different location within that subdivision) and (ii) that other lots in the Claimant's historical subdivision were also to be regarded as notionally available to any residential development of the resumed land.

After hearing argument I ruled that both the aforesaid facts concerning Lot 14 were to be ignored in determining the value of the resumed land, holding that the San Sebastian principle produced such a result.

As it turns out, this preliminary ruling, of itself, is not sufficient to notionally provide access to the resumed land that would be required for its residential development.

In his final address, Counsel for the Council urged me to depart from my preliminary ruling in respect of the dedication of Lot 14. I shall return to this matter later in these reasons, after I have considered the present question.

It is of fundamental importance to appreciate precisely how the question I have posed arises in this case. It arises in the context of the required statutory hypothesis (required by s116 of the EP&A Act) to ignore the public recreation zoning of the resumed land in determining its value with the concomitant consequence that it be deemed to be residentially zoned (being the obvious zoning commonly adopted by the parties that the land would have attracted but for its public recreation zoning. The rationale for the required hypothesis is that the value of the resumed land (being the chief component of compensation payable in this case) is not to be affected (either advantageously or disadvantageously) by the public purpose zoning (including (i) the proposed public work and (ii) the resumption process): vide s124 of the Public Works Act 1912.

It would, in my opinion, be a strange, if not perverse result, if the required hypothesis dictated the conclusion in the present case that the value of the resumed land, as undisputedly residentially zoned land (being land that is immediately available for residential development) were nonetheless to be treated as landlocked land thereby effectively negating or destroying its value as residential land. Yet this is the thrust of the Council's case notwithstanding its past advices to the Claimant that it would in the future acquire the resumed land at residential value. However the Council's case (despite its apparent volte face) is not lacking in legal substance because it is will founded upon the established doctrine that resumed land is to be valued at the resumption date in its then present condition: Yates Property Corporation Pty Ltd v Darling Harbour Authority (1991) 73 LGRA 47. However this doctrine is, in my judgment, subject to the San Sebastian principle.

It may help to understand the operation of the statutory hypothesis in the present case to recall my earlier factual findings that at the resumption date the resumed land (i) was zoned for public recreation purposes (which zoning had at all times contemplated public acquisition); (ii) was in the physical context of adjoining an existing public reserve fronting Beethoven Street, which public reserve together with (a) the public reserve on the opposite side of Beethoven Street and (b) the resumed land and (c) Lot 14 dedicated as public reserve in the Claimant's approved subdivision of his residentially zoned land, was obviously intended to function as an overall or integrated open space system or unit; and (iii) had come into its then physical condition as a result of the public recreation zoning and actions taken by the parties in contemplation of the establishment of the public open space.

It is apparent that the agreed operation of the statutory hypothesis (namely to deem the resumed land to be residentially zoned) sits uncomfortably with the fact that the physical condition and layout of the resumed land were tailor made for its inclusion in the public open space system contemplated by the public recreation zoning of the resumed and other affected lands. In these circumstances how is the statutory hypothesis to be applied -in a manner that gives full faith and credit to the deemed residential zoning, or in a manner that negates or stultifies it?

In my judgment, s124 of the Public Works Act as expounded in San Sebastian (see also the judgment of Hope JA in the Court of Appeal, 37 LGRA 191 especially at 202/203) does not produce such a manifestly unjust result in the present case, as the Council's principal submission would have it. On the contrary it produces, in my judgment, the manifestly just result of requiring the resumed land to be valued as if it were residentially zoned with the ready capacity for residential development, unaffected by any blight or depreciation arising from (i) the public recreation zoning; (ii) the proposed public work; and (iii) the resumption process.

More particularly to the extent that it can be said (as the Council has contended) that the resumed land is to be valued in its existing condition as landlocked (residentially zoned land) with the obvious depreciation in its value on account of being landlocked, any such disadvantageous affectation on its value must be ignored because the physical condition of the resumed land (ie of being isolated from public roads, but integrated with existing public reserves) is the direct consequence of the public recreation zoning of the resumed land and of the resumption process (which includes the Council's in contemplation of the proposed public park (i) to approve the Claimant's subdivision and (ii) to make LEP No 49).

As the Court of Appeal stated in Griffith City Council v Polegato (1990) 71 LGRA 208 at 213:

"The principles applied in Housing Commission of New South Wales v San Sebastian require the land to be valued at the relevant date on the artificial, but just, assumption that such value has not been affected by the resumption process."

Based upon my findings, earlier stated, the physical condition of the resumed land as being landlocked residential land (of course it is not landlocked public recreation land) is the direct result of the resumption process or perhaps more accurately stated, forms part of the actions taken (by both parties) in contemplation of the establishment of the public park (per Hope JA in San Sebastian). The landlocked condition of the resumed land clearly depreciates its value as land deemed (by the statutory hypothesis) to be residentially zoned. That disadvantageous affectation on value must accordingly be ignored and the resumed land must, in accordance with the San Sebastian principle, be valued on the artificial, but just, assumption that its value has not been affected by the resumption process or by actions taken in contemplation of the establishment of the public park.

F. HOW IS THE SAN SEBASTIAN PRINCIPLE TO BE GIVEN EFFECT IN

In my judgment the precise scope and extent of the relevant actions taken in the present case in contemplation of the establishment of the public park that are to be ignored, in accordance with the San Sebastian principle, may justly be confined to those actions resulting in the resumed land being isolated from any public road frontage, (ie lacking access thereto). Accordingly there is no justification for ignoring the whole of the Claimant's subdivision of the residentially zoned portion of his land, but only those aspects of it which created the result of the resumed land being so landlocked.

Such actions would in my judgment most obviously include the dedication of Lot 14 as required by the Council's conditions of consent to the Claimant's subdivision of his residentially zoned land. The Council has submitted that consistently with (i) the decided cases and (ii) the legislative framework, the fact of dedication of Lot 14 cannot be ignored. I do not understand the decided cases relied upon by the Council to preclude the operation of the San Sebastian principle in the present case, of requiring the effect on the value of the resumed land of the dedication of Lot 14 to be ignored. Rather those cases (especially Abbey Orchard Property Investments Pty Ltd v Sydney City Council (1978) 37 LGRA 230; Parramatta City Council v Gestetner Pty Ltd (1978) 37 LGRA 246) support my conclusion (expressed in my preliminary ruling at the hearing) that the effect on the value of the resumed land of the dedication of Lot 14 is to be ignored as a step in the establishment of the public park in respect of both Lot 14 and the resumed land.

Whereas it is clear that Condition 4 (imposing the Council's requirement of the dedication of Lot 14 as a public reserve) derived from s333(1)(g) of the Local Government Act 1919 it is nonetheless also the fact that the requirement emanated from cl 26 of the Ordinance (see the Council's letter of 6 August 1981 to the Claimant that I have earlier recited) and it is this latter fact that supplies the necessary nexus between the proposed establishment of the public park (as contemplated by the public recreation zoning under the Ordinance) and the resumed land, so as to activate the San Sebastian principle.

The Council submits that the Claimant chose to dedicate Lot 14 and that he must therefore suffer the consequences of his choice. The evidence does not support this submission. As I have noted the Council specifically advised the Claimant before approving his subdivision application that he would be required to dedicate "a proportion of the land zoned Open Space" and cl 26(1) of the Ordinance limited the Council's obligation to acquire or to pay compensation, in respect of land included in Zone No 6(c) "where such land may be required to be provided without cost to the Council as a condition of approval of a subdivision of adjoining land in the same ownership". In these circumstances to assert that the Claimant "chose to dedicate Lot 14" is entirely inaccurate and inapposite. Once the source of the obligation to dedicate Lot 14 can be traced to cl 26 of the Ordinance (as it obviously can in the present case) it follows that the effect of both the Council condition and cl 26 on value of the resumed land must also be ignored in accordance with the San Sebastian principle.

Finally the Council's submission, (in reliance upon the decision of the High Court in The Minister v Stocks and Parkes Investments Pty Ltd [1973] HCA 29; (1973) 129 CLR 385) that the Court must take into account the possibility of Lot 14 being reserved for open space independently of the Council's decision to establish the public park, must be rejected since s116 of the EP&A Act operates to require the public zoning to be ignored whether or not that zoning was in contemplation of the establishment of the proposed public work. To this extent only, the San Sebastian principle has been modified.

For similar reasons the Council's reliance upon the legislative framework of cl 26 of the Ordinance does not, in my judgment, impair the application in the present case of the San Sebastian principle for clearly cl 26 is a statutory provision inserted in the Ordinance in contemplation of the establishment of the proposed public park (for which the Ordinance appropriately zoned both the resumed land and Lot 14). Clause 26 does not impair the operation of the statutory hypotheses created by s116 of the EP&A Act and s124 of the Public Works Act or the effect of those sections in determining the value of resumed land.

The most obvious effect on the value of the resumed land of the dedication of Lot 14 is the fact that it isolates the resumed land from street frontage (to Wagner Place). It is this effect on value that must be ignored.

This raises the question of how that effect is to be ignored in valuing the resumed land. This of course is principally a question for expert valuation evidence (cf San Sebastian at p203 per Hope JA.) As I have earlier noted Mr Eldridge in his valuations (Exhibit 2) (one valuation being based upon a conventional residential subdivision and the other valuation being based upon a medium density residential development) ignores the effect (i) by notionally regarding a section of Lot 14 as being available for access to the resumed land and (ii) by relocating the public reserve (provided by Lot 14) elsewhere in the hypothetical subdivision of the resumed land.

In my judgment this is a legitimate valuation exercise or valuation approach and gives effect to the requirement to ignore the effect on value of the resumed land of the dedication of Lot 14.

However as I have indicated Mr Eldridge's valuations of the resumed land depend upon more than the notional availability of Lot 14 to provide access from Wagner Place to the resumed land. In the case of the valuation based upon a residential subdivision (creating nine new lots) he notionally brings into the hypothetical subdivision three existing lots in the Claimant's subdivision of his residentially zoned land, namely Lots 7, 8 and 9, in order to provide an access road from Wagner Place into the resumed land and then accounts for those three lots in a notional re-organisation of the existing subdivision (forming part of the subdivision of the resumed land).

In his valuation (Exhibit 2) based upon a medium density residential development (29 x 3 bedroom units) Mr Eldridge provides for access to the resumed land from Wagner Place over Lot 14 (the dedicated public reserve) and Lot 8 (the adjacent lot in the existing subdivision carried out by the Claimant) and also utilises parts of each lot to accommodate some (namely four units in total) of the hypothetical medium density development.

The public reserve (provided by Lot 14) is provided in a relocated position in the resumed land and a value of $225,000 is assigned to Lot 8 (at the resumption date it was developed by a dwelling-house) which is deducted from the value assigned to the resumed land.

The Council submitted that Mr Eldridge's valuations were flawed in that they were based upon facts that did not exist at the resumption date, (or upon assumptions that were contrary to fact) namely the notional availability to a subdivider/developer of the resumed land of lots in the existing residential subdivision that, prior to the resumption date, had already been disposed of by the Claimant and subsequently developed by their respective owners by the erection of dwelling-houses thereon. The Council submitted that Mr Eldridge's valuation approach was contrary to authority (in particular the decision of the Land and Valuation Court in Nuland Developments Pty Ltd v Parramatta City Council (1978) 37 LGRA 258) and to the evidence adduced by the Council (and not challenged by the Claimant) that Lot 8 was not available for purchase at the resumption date.

The relevant facts in Nuland Developments were that prior to resumption the Claimant had subdivided land into 21 lots, two of which had been identified as "land to be acquired for Council purposes as the continuation of parklands". The Council's approval of the subdivision had imposed a condition requiring the dedication as public reserve of the two lots thus identified, but an appeal against the Council's decision had been settled by deleting the condition requiring dedication. Some years later the two lots were resumed. In the resulting proceedings for compensation the Claimant's valuer had valued one of the lots on the basis that it would yield six residential lots as shown in a hypothetical subdivision of the resumed land (Lot 11) in conjunction with a re-organisation of two other residential lots in the existing subdivision (Lots 12 and 1) in circumstances where one of those lots (Lot 12) was no longer owned by the Claimant, having been sold before the date of resumption.

At p 271 Rath J having expressed the opinion that the valuation approach just described was not the correct one, continues:

"The first major objection that was taken to Mr Bowen's subdivision was that lot 12 (which was part of his "reorganization") has been sold by the plaintiff prior to the resumption date, and hence was not available for participation in this reorganization. For the plaintiff it was said that the plaintiff's subdivision had to be ignored as a step in the process of resumption, and hence that lot 12 must be regarded as notionally available to the plaintiff. It is true that it must be assumed that the public reserve had never been contemplated, but it does not follow from this assumption that as at the resumption date the plaintiff had land which it had in fact sold. It is unnecessary to express any final opinion on this point, because I think it is reasonably clear (and this was the second objection) that the reorganization of lots 12 and 13 would not have been given approval."

It is quite plain from this passage that Rath J deliberately chose to leave open the question whether the application of the San Sebastian principle, which required the assumption that the public reserve land never been contemplated, additionally required the further assumptions (i) that the relevant subdivision be ignored (this was the Claimant's argument) and (ii) that the Claimant as at the date of resumption still owned a lot that he had in reality already sold.

If the matter rested there, it is clear that the Council could not sustain its submission that Mr Eldridge's valuation approach is contrary to Nuland. For my part I would not understand Rath J's obiter dicta remarks as meaning that the valuation approach that he rejected was wrong in law or in valuation principle. Rather I take his remarks as merely meaning that his Honour rejected, as a finding of fact, that valuation approach. (In present case the facts are different, because as I have found, the way in which the land was subdivided and sold was dictated by the resumption process.)

However the Council seeks to make good its submission by relying upon a later passage in Rath J's judgment where his Honour was dealing with (and ultimately rejected) the Claimant's submission that the resumed land had a special value to it, for which it should be compensated, over and above the market value of the resumed land. At p 273 Rath J rejected the claim to special value (based upon the assertion that gross realisations in the hypothetical subdivision exercise should not be subject to a deduction for developer's profit and risk). As his Honour observed at 273 such an approach was "contrary to a fundamental principle of compensation". In support of this holding, his Honour cited the familiar authority of Turner v Minister of Public Instruction [1956] HCA 7; (1955) 95 CLR 245.

Notwithstanding, his Honour's view that Turner's case seemed to be decisive of the issue, Rath J at 274 enunciated the following further reason for rejecting the claim to special value and it is this passage that the Council relies upon in the present case:

"Counsel for the defendant submitted that the concept of value to the owner meant value to the owner at the date of resumption in his then existing circumstances, and that the San Sebastian principle could not be extended to make value to the owner measurable by reference to assumptions contrary to the fact. I think this submission is correct. On the highest authority the concept of value to the owner has been put in this way: the plaintiff is entitled to that which a prudent man in his position would have been willing to give for the land sooner than fail to obtain it: Pastoral Finance Association Ltd v Minister [1914] UKPC 77; [1914] AC 1083 at p 1088. On the San Sebastian principle where a public work adds value to land, that added value is to be disregarded; and in the same way where it takes value from the land that loss is to be disregarded. These are market considerations, and have nothing to do with value to the owner, which involves a consideration of the owner's position in relation to the land at the date of resumption. The word "value" where first used in s124 of the Public Works Act 1912 (whether in the words of that Act or of the Local Government Act 1919, s532(2)(d)) requires consideration of value to the dispossessed owner. Though in the section thereafter the reference is to "same or "such" value, this wording does not require the concept of value to the owner to be stretched beyond its traditional limits. When the section speaks of disregarding alteration in value it is not referring to the aspect of value particular or peculiar to the expropriated owner, but to the aspect of value that is capable of alteration by the scheme for which the land is taken. For these reasons I am of the opinion that lot 11 at the date or resumption did not have a value to the owner which it would not have had in the hands of any other owner."

In my respectful opinion this passage does not assist the Council in the present case for it is clear that his Honour, in limiting the San Sebastian principle to "market value" as opposed to "value to the owner" (a view that, incidentally, I would respectfully prefer to leave open) was doing so in the context of considering the Claimant's claim to special value. On this ground alone, his Honour's remarks (which are in the nature of obiter dicta) are not applicable to the present case where the Claimant does not claim special value, but claims market value.

In any event I do not think the passage yields the meaning the Council would seek to extract from it. It is hardly likely that having deliberately left open at p271 the question whether the San Sebastian principle justified the assumption that the claimant had notionally available to it in any hypothetical subdivision of the resumed land, a lot in the subdivision that had already been sold, his Honour would a few pages later (at p274) decide that very question. Although it is not clear from the passage at p274 already cited what "fact" his Honour is referring to in his statement "by reference to assumptions contrary to fact", in context, it cannot be the fact that Lot 12 (the sold lot) was not available to the claimant in any hypothetical subdivision of the resumed land because that exercise was based upon the opposing valuer's exercise which did not notionally include the sold lot (see p273).

Accordingly, for the reasons given, I do not accept that Mr Eldridge's valuation approaches (reflected in Exhibit 2) are contrary to authority or to any established principle of law or principle of valuation. This conclusion is more obviously applicable to Mr Eldridge's valuation based upon a hypothetical subdivision of the resumed land with access from Wagner Place being provided partly though Lot 14 (the dedicated land) and the adjoining Lot 8 in the Claimant's residential subdivision (which is accounted for in re-organised subdivision). This hypothetical subdivision is similar, in the layout of the subdivisional road, to the Claimant's original subdivision application made to the Council in respect of the residentially zoned section of his land which proposed the end of the cul-de-sac extension to Wagner Place to abut (and hence give access to) the section of his land zoned "public recreation" (which included the resumed land).

The access road to Mr Eldridge's hypothetical subdivision of the resumed land is very different from the access road proposed in Mr Eldridge's hypothetical medium density residential development of the resumed land which development incorporates as part of the development site the areas (excluding the access corridors) of Lots 14 and 8 in the existing subdivision. For this development the assumed access is provided by dint of the access corridors of the two existing lots (ie Lots 14 and 8). The combined width of those access corridors is only some 7m whereas the access road provided in Mr Eldridge's hypothetical subdivision is 13m wide.

A difficulty in applying the San Sebastian principle to the facts of the present case is encountered by Mr Eldridge's valuation based upon a hypothetical medium density residential development in that such development was not permissible, or indeed was not within contemplation, at the times that the Claimant obtained approval and thereafter subdivided his residentially zoned section of land. (It is common ground that medium density development of residentially zoned land within the City of Blacktown only became a permissible form of development in 1988 when the LEP came into force).

To the question, "what access would have been provided from Wagner Place to the resumed land to facilitate its development, but for the contemplated public park?" the answer would clearly be, in my judgment, "access provided by an extension of Wagner Place by way of an internal subdivisional road of the nature as proposed by the claimant in his original subdivision or as proposed in Mr Eldridge's hypothetical subdivision of the resumed land". This accords with the evidence adduced in the Claimant's case and with his Counsel's submission that had the resumed land not been zoned for public recreation the Claimant would have subdivided the resumed land in the manner shown in Mr Eldridge's hypothetical subdivision.

Accordingly, in my judgment, the application to the present case of the San Sebastian principle is fully satisfied by ignoring the Claimant's subdivision only to the extent that it would preclude the provision of such access to the resumed land.

Whereas it is true that that same access might also be availed of by the Claimant to undertake Mr Eldridge's hypothetical medium density residential development, no valuation has been undertaken on that basis. Rather, as I have earlier noted, the assumed access arrangement for the hypothetical medium density development is to use only the access corridors of existing Lots 14 and 8, incorporating the bulk of those lots in the medium density development.

Counsel for the Claimant submitted that but for the public recreation zoning of the resumed land the Claimant would have had the opportunity to withhold Lot 8 from sale so as to give effect to Mr Eldridge's hypothetical medium density residential development and that the availability of Lot 8 "to contribute to the medium density proposal is to be assumed". In my judgment, and for the reasons given, this submission cannot be accepted other than in the sense that I have earlier stated namely that the assumed road access to the resumed land that the application of the San Sebastian principle requires, might also, as at the resumption date, be utilised for a medium density development if that development truly reflects the highest and best use of the resumed land. (As will appear I do not find such development to reflect the highest and best use.)

It may be helpful if I summarise my foregoing findings and reasoning by stating that in the present case, the application of the San Sebastian principle requires the Claimant's subdivision to be ignored to the extent that it would preclude road access to the resumed land from Wagner Place of the nature contemplated in Mr Eldridge's valuation based upon a hypothetical subdivision of the resumed land.

Valuation evidence was given by Mr Eldridge for the Claimant and by Mr Pye for the Council.

In the course of the hearing both valuers produced multiple valuations (some primary and some in response to each other's competing valuations).

Overall, the competing valuations embraced three different bases (reflecting different opinions as to the potentiality of the subject land) in respect of which bases the competing valuations were widely divergent. These bases were as follows (and I express the bases in ascending order according to the values assigned by the valuers):

Basis (i) as having no potential for independent development other than as potential additions to existing residential lots backing onto the resumed land;

Basis (ii) as having the potential for residential subdivision yielding nine lots; and

Basis (iii) as having the potential for medium density residential development for a maximum of 29 x 3 bedroom units.

In respect of Basis (iii) there were several variants including the potential to be developed, independently of the assumed access from Wagner Place, via Lowana Crescent (the adjacent road to the west) by dint of the possible purchase of an existing lot (Lot 11) which is developed by a derelict dwelling. This last-mentioned potentiality arose at the end of the Claimant's case (although it had been recognised in the Council's case which is understandable since it had consistently denied the possibility of access from Wagner Place).

The competing valuations proffered by Mr Eldridge and Mr Pye on the aforesaid different bases can be summarised as follows:

Basis (i) No Independent Residential Development Potential

Mr Eldridge $397,700 (Exhibit 3) (This was a responsive valuation)

Mr Pye $120,000 (Exhibits E, F and Q) (This was a primary valuation)

Basis (iii) Medium Density Residential Development

From this remarkable array of valuation opinions the divergence between the competing valuations (comparing highest valuation with highest) is a maximum of $780,000. If comparison is confined to the competing valuations on the same basis the maximum divergence is as follows:

A principal cause of such uncommon divergence in valuation opinion is the different legal advices that the respective valuers acted upon concerning the application of the San Sebastian principle. Generally (but not totally) this disputed issue has been determined in favour of the Claimant for the reasons given in this judgment under Headings E and F.

Putting aside the application of the San Sebastian principle, much of the divergence in the valuations based upon a hypothetical medium density development of the resumed land (which was the basis of valuation most comprehensively considered at the hearing) can be substantially explained by the different town planning assumptions made by the valuers. These assumptions were based upon competing town planning advices received by them. (These competing town planning opinions were given directly in evidence.) That given to the Claimant's Valuer was that the resumed land and the bulk of existing Lots 14 and 8 could be developed yielding 29 x 3 bedroom units. This is the maximum number of units that is permitted by the Council's Medium Density Housing Development Control Plan. The competing town planning opinion given by Mr Player (a Consultant Town Planner) was that any medium density development of the resumed land would yield far fewer units because of access difficulties, topographical problems with the site, the likelihood that the Council would not approve of the relocated public open space (previously provided in Lot 14), and the risk that the requisite development consent would not be obtained because of various non-compliances with the Council's Development Control Plan and of amenity problems caused by the proposed access arrangements to residences in Wagner Place.

In my judgment, the hypothetical prudent purchaser would reasonably regard the resumed land as not being capable of a medium density development yielding the maximum development permitted by the Council's Development Control Plan. He would reasonably regard the town planning assumption made in Mr Eldridge's valuation as being subject to a very substantial risk that approval would not be granted by the Council. I generally prefer Mr Player's town planning assessment of the capacity of the resumed land to accommodate medium density residential development to the competing assessment made by Mr Cole, the Consultant Town Planner, called by the Claimant. In doing so I do not accept Mr Player's opinions that are contrary to the operation of the San Sebastian principle that I have held to be applicable in this case, but that qualification does not impair my preference for his assessment of the capacity of the resumed land to yield any medium density development.

The effect of this conclusion means that Mr Eldridge's valuations based upon a maximum medium density residential development of the resumed land cannot be accepted without substantial modifications, drastically reducing the value he assigns to the resumed land on this basis of valuation.

Moreover there are additional difficulties in Mr Eldridge's valuation on the basis of a medium density development. One difficulty is the incorporation within the development site of the bulk of Lots 14 and 8 (yielding a total of four units). Although this aspect of his valuation is not necessarily inconsistent with the assumption as to road access from Wagner Place to the resumed land which I have held to be justified by the San Sebastian principle, that assumption is not consistent with the use he has made in his valuation of those lots forming part of the development site, and, as I have earlier pointed out, his valuation is not based upon a development that reflects the assumed access to the resumed land. Difficulties are compounded by his assumption (based upon legal advice) that Lot 8 (developed by a modern dwelling-house at the resumption date) could have been acquired by the developer/purchaser of the resumed land for its land value only (ie $90,000). The evidence given indicates that the value of Lot 8 (as an improved property) at the resumption date was $225,000. (This is the amount that Mr Eldridge's original valuation (Exhibit 2) allowed for acquisition costs. However on legal advice, he changed this allowance to $90,000 (Exhibit 10)).

In my judgment, and for the reasons earlier given, the ultimate assumption made by Mr Eldridge is not supportable in terms of legal principle. Moreover not only is there evidence that the value of Lot 8 at the resumption date was $225,000 but there is also evidence (which the Claimant does not challenge) that the lot was not actually available for purchase at the resumption date. Whereas this latter fact does not affect the operation of the San Sebastian principle properly reflected in Mr Eldridge's valuation based upon the hypothetical subdivision of the resumed land (in which he notionally brings Lot 8 into the hypothetical subdivision but notionally gives it back in a re-organisation of some of the lots in the Claimant's historical subdivision) in his valuation based upon a medium density development Mr Eldridge does not notionally give back the lot into the historical subdivision but instead incorporates it in the hypothetical development. I am not persuaded that his valuation exercise of simply deducting the value of Lot 8 (even its improved value of $225,000 as he did in Exhibit 2) is justified by the San Sebastian principle.

Further substantial adjustments (by way of reduction) to Mr Eldridge's valuation also would need to be made in respect of his inadequate assessment of extra development costs, by virtue of site problems with the resumed land, (in the course of the hearing the parties agreed upon extra engineering costs that would be incurred and the costs are substantial) and in respect of his estimate of the en globo value per unit ($37,000) which I consider to be too high.

For all the foregoing reasons I must reject Mr Eldridge's valuations based upon a medium density development of the resumed land with the assumed access from Wagner Place that the application of the San Sebastian principle justifies in the present case.

This leads to my consideration of the alternative concept for a medium density development of the resumed land without the assumed access from Wagner Place but with access from Lowana Crescent made possible by acquisition of Lot 11 fronting Lowana Crescent and abutting the resumed land which lot contains a derelict dwelling. In this alternative concept, the San Sebastian principle has no application. (Indeed the alternative concept was only provisionally explored lest the Claimant's approach based upon San Sebastian be rejected).

Though I generally accept the Claimant's case on the operation of the San Sebastian principle I shall nonetheless consider the alternative development concept in case it produces a higher value for the land than does any other relevant basis for value.Place.

Mr Eldridge's written valuations did not address this potential of the resumed land and he only touched on the matter at the end of his evidence. (The possibility of alternative access from Lowana Crescent had been raised by Mr Player in his town planning assessment and had been taken up by Mr Pye. That possibility contemplated the acquisition of two lots fronting Lowana Crescent developed by far more substantial dwellings than the derelict dwelling on Lot 11. The high estimated costs of acquisition of those two developed lots made the alternative access development concept unviable and led to Mr Pye's valuation of only $36,000.)

However, when Mr Pye addressed the potentiality of the resumed land for medium density development with access from Lowana Crescent via the single lot (Lot 11) containing the derelict dwelling, he assigned a value of some $183,000 which he discounted by 15% for the risk in acquiring Lot 11, producing a valuation of some $160,000 (Exhibit AA). That valuation was based upon a hypothetical development of 22 units (based upon the town planning advice from Mr Player (Exhibit Z) having an en globo value of $30,000 per lot. Mr Pye allowed $150,000 for the costs of acquiring Lot 11 (Lowana Crescent) and adopted a 15% risk factor.

Mr Eldridge did not prepare a written valuation in respect of a hypothetical medium density development of the resumed land gaining road access via Lot 11 Lowana Crescent. However he expressed the opinion in evidence that Lot 11 was ripe for redevelopment and would have a value just above land value. He estimated its value at $100,000 . He also prepared an alternative medium density concept (Exhibit 18) which proposed 28 units (including 5 on Lot 14 the public reserve lot in the Claimant's subdivision).

In his final address Counsel for the Claimant submitted that a valuation exercise based upon Mr Eldridge's (i) proposed alternative development concept (Exhibit 18 or Exhibit 19) yielding 27 units; (ii) estimate of the value of $100,000 for Lot 11 (Lowana Crescent); and (iii) en globo value of $37,000 per unit would produce a value of $534,976.

My Pye's counterpart responsive valuation was based upon a 22 unit development at an en globo value of $30,000 per unit. Thus the difference between the valuers on the number of units and their en globo value is some $339,000. Further differences are reflected in costs of acquiring Lot 11 (Lowana Crescent) - $100,000 (Eldridge); $150,000 (Pye); and in Mr Pye's additional 15% risk allowance in the acquisition of Lot 11.

In my judgment, Mr Eldridge's estimates of (i) the number of units and (ii) their en globo value are excessive. The hypothetical purchaser would reasonably regard the town planning proposal upon which Mr Pye's valuation is based as a more achievable and less risky development. In any event I do not think the alternative development concept should include Lot 14 (in respect of which Mr Eldridge's proposal accommodates five units) because the ignoring of the dedication of Lot 14 required by the application of the San Sebastian principle is not relevant to the alternative development concept which does not depend upon access from Wagner Place. Hence the value of the resumed land on the basis of the alternative development concept does not require any disadvantageous effect (of being landlocked caused by the dedication of Lot 14) on the value of the resumed land to be ignored.

Whereas I think that Mr Eldridge's en globo value of $37,000 per unit is too high an estimate, also I think Mr Pye's estimate of $30,000 per unit (en globo) is too low. on the evidence I would adopt an en globo value of $33,000 to a hypothetical development comprising 22 units. This would increase Mr Pye's valuation (Exhibit AA) by $66,000. I also think Mr Pye's estimate of the costs of acquiring Lot 11 Lowana Crescent is too high. I would accept Mr Eldridge's estimate of $100,000 but would adopt Mr Pye's risk allowance of 15%, which provides a sufficient margin to induce the sale, well above market value.

In the result I think that the value of the resumed land on the alternative development concept (ie with access from Lowana Crescent) would be some $120,000 more than Mr Pye's valuation has allowed ie having a value of approximately $280,000. Since the value of the resumed land on the basis of a hypothetical subdivision produces a higher value, there is no need to complete the details of any valuation exercise based upon a medium density development of the resumed land.

Of the competing valuations based upon a hypothetical subdivision of the resumed land yielding nine new lots I generally prefer Mr Eldridge's opinions to Mr Pye's opinions.

Mr Eldridge's original valuation of $468,000 on this basis (as set forth in Exhibit 2) clearly contained errors which were exposed in cross examination. In particular his profit and risk allowance of 20% revealed a fundamental error. However he repaired the damage in his later valuations (Exhibit 17) which proffered as alternatives 30% and 25% profit and risk factors producing valuations of $386,000 and $400,000 respectively.

In my judgment the appropriate profit and risk factor to adopt in the present case is 30% having regard to the stagnant state of the market at the resumption date.

One of the several valuations undertaken by Mr Pye on this basis during the course of the hearing (see Exhibit CC) adopts the same profit and risk factor of 30% and the same gross realisations namely nine lots at $90,000 per lot.

Despite these common features the difference in valuations is still some $238,000. The principal component in dispute is the estimate of development costs, Mr Eldridge estimating some $156,000 compared with Mr Pye's estimate of $380,000. This difference is also reflected in the allowance for interest on development costs.

The detailed breakdown in the various components of development costs reflects the following additional development costs allowed by Mr Pye's estimates:

For such disparate estimates it would have been reasonable to expect the matters in dispute to have been extensively explored at the hearing. Regrettably they were not and very little time was devoted to the matters in dispute, presumably because it was not Mr Eldridge's principal valuation and Mr Pye did not even consider (in any of his primary valuations) a hypothetical subdivision as a basis for valuing the resumed land.

In this obviously unsatisfactory state of affairs, I generally prefer to adopt Mr Eldridge's estimates having regard to his experience in carrying out the Claimant's subdivision of the residentially zoned portion of his land. Both Mr Eldridge and the Claimant (himself an engineer) anticipated that costs of the hypothetical subdivision would generally accord with costs, both estimated and actually incurred, in the Claimant's subdivision undertaken in 1986. As I have stated, Mr Pye's competing valuations were responsive exercises, hurriedly undertaken in the course of the hearing. They relied upon the Council's estimates of road costs (which were not otherwise proved). Moreover, Mr Pye mistakenly included $101,000 for agreed extra engineering costs when the agreement was confined to costs in relation to the hypothetical medium density development of the resumed land.

Accordingly subject to correction for minor mis-calculations in his exercise (Exhibit 17) I adopt Mr Eldridge's lowest valuation (in the sum of $386,000) based upon a hypothetical subdivision of the resumed land. The correct calculation is $384,000. For the reasons earlier given, I consider that that valuation correctly reflects the application of the San Sebastian principle to the facts of the present case.

In my judgment this value reflects the highest and best use of the resumed land (with assumed access from Wagner Place) at the resumption date as residential land. It is considerably higher than the value assigned on the basis of a hypothetical medium density development (which was the basis of valuation most comprehensively explored during the course of the hearing no doubt because it held the promise of yielding the highest value to the Claimant).

The only remaining basis of valuation, namely assuming the sale in various portions of the resumed land to owners of existing lots backing onto the resumed land, in my judgment produces a far lower value than either of the alternative bases debated at the hearing and does not reflect the highest and best use of the land. In my judgment Mr Eldridge's valuation on this basis (which yielded a similar amount to his lowest valuation based upon the hypothetical subdivision) is unacceptably high and must be rejected.

For all the foregoing reasons, I determine compensation in the sum of $384,000.

Exhibits (other than Exhibit 17) may be returned and the question of costs is reserved.

I HEREBY CERTIFY THAT THIS AND THE PRECEDING 48 PAGES

ARE A TRUE AND ACCURATE COPY OF THE REASONS FOR JUDGMENT

___________________________________________________________________________

KEYWORDS: Claim for compensation in respect of resumption by Council of land zoned public recreation - s116 of the Environmental Planning and Assessment Act 1979 - s124 of the Public Works Act 1912 - San Sebastian principle applicable to ignore effect of resumed land being landlocked - competing bases for value - (i) residual land only or (ii) medium density development or (iii) hypothetical subdivision.

HELD: Hypothetical subdivision reflects highest and best use.

Local Government Act 1919

R LASSETER v. BLACKTOWN CITY COUNCIL [1994] NSWLEC 24 (3 March 1994)

At a glance

Court

Decision date

Before

Source

Judgment (185 paragraphs)

R LASSETER v. BLACKTOWN CITY COUNCIL [1994] NSWLEC 24 (3 March 1994)

Legislation Cited (1)

Cases Cited (3)