By notice published in the New South Wales Government Gazette, No 58, 30 April 2010, at 2035 (the acquisition date), the Roads and Traffic Authority of New South Wales, as the present respondent was then known, acquired land being Lots 11 and 14 in DP 1138459 (the Land) pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Compensation Act). The Land was expressed to be acquired for the purposes of the Roads Act 1993 (NSW), the particular purpose under that Act being the upgrade of a section of the Pacific Highway at Banora Point in far north New South Wales.
At the acquisition date, the Land was owned by Reysson Pty Ltd, the applicant. It brings the proceedings under s 66 of the Compensation Act, objecting to the amount of compensation offered by the respondent for the acquisition of the Land. That objection having been lodged, it is for this Court to determine the applicant's claim for compensation.
In hearing these proceedings, I was assisted by Acting Commissioner Parker: s 37(1) of the Land and Environment Court Act 1979.
[3]
The Land
The Land is located about 5km from the Queensland border at Banora Point in the Tweed Shire. It has an area of 10.45ha. It is generally flat and low lying although close to its southern boundary it rises steeply up to about 15m AHD. Moving to the north, the Land falls away to very low levels. Indeed, much of the Land was flood liable.
At the acquisition date the Land was substantially unimproved except for some areas of clearing and fencing. Fill had been placed upon the Land in the late 1990s but since then it had generally revegetated. The land has been been used for cattle grazing and bee keeping.
Towards the northern end of the Land it was traversed by a drainage channel known as the Lake Kimberley Canal. The Canal had been constructed across the Land with the consent of the applicant. The Lake Kimberley Canal linked the estuary of the Tweed River, to the east, with a large basin that had been excavated to the west of the Land, known as Lake Kimberley. Because the source of water flowing through the Kimberley Canal was the Tweed Estuary, the level of water in the Canal was subject to tidal fluctuation. The length of Lake Kimberley Canal running through the Land was approximately 330m, with a width of about 23m between the top of its banks.
It is convenient to refer to the land to the north of the Canal as "the northern land" and that part to the south of the Canal as "the southern land".
The relevant statutory instrument controlling development upon the Land at the acquisition date was Tweed Local Environmental Plan 2000 (the 2000 LEP), published in New South Wales Government Gazette, No 44, 7 April 2000, 13018. The bulk of the southern land was zoned 2(c) Urban Expansion, while the northern land was zoned 6(b) Recreation. A small circular area of land just south of the Lake Kimberley Canal was zoned 7(l) Environment Protection (Habitat) being the habitat, and the nesting site of an osprey.
On 21 January 1993, Tweed Shire Council (the Council) granted development consent for a staged 34 lot subdivision of the Land. In 1997, shortly before the 1993 Consent was due to lapse, a roundabout and slip road affording access to the Land was constructed. At that time, surveying work had been carried out in preparation for the commencement of any subdivision works. Those two activities were sufficient to preserve the operation of the 1993 Consent (Reysson Pty Ltd v Roads and Maritime Services [2012] NSWLEC 17; 188 LGERA 252).
A further condition of the 1993 Consent identified the level to which the Land was required to be filled in order to address its flood liability. In late 1997 about 20,000m³ of fill was brought to and spread on the Land. Since then, no further attempt has been made to implement the 1993 Consent. It is for that reason that the area on which fill was spread has revegetated and the Land used in the manner I have earlier described. The Land had been owned by the applicant since 1979.
In the course of the proceedings, the parties were at issue as to the highest and best use of the Land for the purpose of determining its market value. They were also at issue as to what that market value should be.
In his final submissions, counsel for the applicant accepted that the highest and best use should be that adopted by the respondent's valuer. That involved a 30 Lot subdivision yielding 150 dwellings, comprising 143 townhouses with 15 home sites involving gross residential land of 70,300m². That gross residential land area was located within the southern land. However, there remained a significant difference between the parties as to the compensation to be determined on that basis.
The applicant contended that market value should either be $9,982,600 determined on an en globo basis with claim for disturbance of $1,035,570, giving a total claim of $11,018,170. In the alternative, the market value of the northern and southern land should be determined separately with an aggregate sum of $12,361,200. Disturbance in the sum of $1,245,048 was also claimed, giving a total claim of $13,606,248.
The respondent contends that the market value of the Land is $5,465,500 with disturbance determined in the sum of $25,968.68, giving a total compensation figure of $5,491,468.68.
Before turning to consider the issues giving rise to such significant difference between the parties, it is necessary to identify the key provision of the Compensation Act.
[4]
The Compensation Act - key provision
Section 54(1) of the Compensation Act requires that the amount of compensation to which a person is entitled "under this Part" is the amount "having regard to all relevant matters under this Part" as "will justly compensate that person for the acquisition of the land" in question. Section 55 then articulates those matters to which regard is to be had under "this Part", being Pt 3 of the Act. That section, also in Pt 3, relevantly provides:
"55 Relevant matters to be considered in determining amount of compensation
In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division):
(a) the market value of land on the date of its acquisition,
…
(d) any loss attributable to disturbance,
… ."
"Market value" is defined by s 56, as follows:
"56 Market value
(1) In this Act:
market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid):
(a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and
(b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and
(c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law.
… ".
Section 59 provides:
"59 Loss attributable to disturbance
(1) In this Act:
loss attributable to disturbance of land means any of the following:
(a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land,
(b) valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land
(c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs),
(d) stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired),
(e) financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage),
(f) any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition."
Section 59 of the Compensation Act, pars (a), (b) and (f) would appear to be those upon which the disturbance claim of the applicant is founded.
[5]
An amended claim
At the time of making its final submissions, the applicant sought to amend the basis upon which it sought to sustain its claim for compensation. This change was reflected in its Fourth Amended Points of Claim. The respondent initially objected to those points of claim being filed at such a late stage of the proceedings. The thrust of the amendments sought in the Fourth Amended Points of Claim were directed to the value of the northern land. The approach to determine that value was put in the alternative.
The northern land had a gross area of about 1.2ha. The first basis upon which the amended pleading sought to assert the value of that land was by direct comparison with nominated comparable sales of land expressed as a rate per m². The comparable sales to which reference was made for that purpose were identified, being sales that had been identified in the evidence and addressed by the valuers retained by the parties.
That basis of claim was pleaded in pars 28, 28A and 28B of the amended pleading. The matters there raised did not appear to me to cause difficulty to the respondent in addressing the amended basis of claim.
The first alternative, pleaded in paragraph 28B(A) and 28C was that the northern land should be valued on the basis that a lesser area than 1.2ha was able to be developed for commercial purposes. An allowance for development costs was pleaded and a discount applied to allow for the time to obtain a development consent or rezoning of the Land, the deferment period pleaded being a period of two years.
The prospect that the applicant would contend for the value of the northern land on the basis that some form of commercial development could take place on that land had been addressed in the evidence. One of the uses contemplated was for a supermarket.
The further alternate basis on which the applicant would argue for the value of the northern land was that a purchaser would pay a premium for that land over and above the value of the southern land. That alternative is pleaded in par 29 as follows:
"29 Further or alternatively to paragraphs 28A-28D the Land should be valued on the basis that a willing but not anxious purchaser would pay a premium for the Land because of the potential to develop the northern land, the potential amenity to the southern land that would result from embellishment of the northern land, and because the canal and northern land would be dedicated in lieu of the payment of contributions under s 94 of the Environmental Planning and Assessment Act."
This was the paragraph in the amended pleading to which the respondent took particular objection. It submitted that had the case been pleaded on the basis that dedication would be accepted by the Council in lieu of the payment of contributions under s 94 of the Environmental Planning and Assessment Act 1979 (NSW), the Council would have sought evidence to establish whether, at the acquisition date, the Council would have been amenable to that waiver.
The force of that submission was ultimately accepted by the applicant, with the result that it agreed to delete the words "in lieu of the payment of contributions under s 94 of the Environmental Planning and Assessment Act" from par 29.
Subject to deletion of the words that I have last identified, I agree that the amendment should be allowed. The matters that were otherwise raised have been addressed in the evidence and the respondent was able to deal with them. I allow the applicant to rely upon the Fourth Amended Points of Claim subject to the deletion of the words in par 29 that I have identified.
[6]
Town planning evidence
Town planning evidence was given on behalf of the applicant by Stephen Connelly and by Anthony Rowan on behalf of the respondent. In light of the applicant's acceptance, in final submissions, as to the highest and best use of the Land as I have earlier described, the scope for debate as to town planning issues, explored at length during the course of the hearing, is considerably narrowed. The highest and best use accepted as appropriate by the respondent's valuer, Laurie Hamilton, generally accords with one of the alternate schemes for development posited by Mr Connelly, namely what became known as revised Scenario D.
Both planners accepted that the hypothetical purchaser at the acquisition date would approach the likely development of the Land on the basis that the development that was the subject of the 1993 Consent had commenced. That purchaser would take advantage of that consent to clear the Land before seeking to advance an amended scheme.
Taking advantage of the 1993 Consent would be important because it authorised the clearing of the Land. By reason of the regrowth of vegetation since fill was placed on the Land, significant environmental issues would now arise if development consent was sought without implementing that further aspect of the 1993 Consent. The hypothetical purchaser is able to take advantage of that consent by reason of the determination in this Court that it had commenced.
Implementation of Scenario D would not only involve a clearing of vegetation in the area required for residential development on the southern land, but would also require additional fill to be brought onto the Land to provide an appropriate development platform. The required level was above the 1 in 100-year annual exceedance probability level. From the perspective of the planners, once that level is achieved, either a modification of the 1993 Consent would be sought or a new development application made in order to accommodate the revised Scenario D proposal.
There is a controversy concerning the proposal for the southern land involving the use of land in the south-western corner of the site. When the 1993 Consent was granted, an area in the southwest corner of the site was set aside for open space. Subsequently, the Council constructed an extension of Darlington Drive through that area, although it has never acquired the Land for that purpose from the applicant. That portion of the applicant's land was part of the public road at the acquisition date.
On the map for the LEP 2000, part of the Land in question was 5(a) Special Uses land. Another portion of that area was uncoloured on the map, but shown to be within the area denoted "Pacific Highway". The area of the 5(a) zoned land was 0.39ha and the area of the uncoloured land was 0.44ha.
When the 1993 Consent was granted, the uncoloured land was hatched red and zoned Special Uses (Arterial Road Reserve). It was clearly intended to form part of an expanded Pacific Highway. The Land that is now zoned 5(a) was zoned under the Tweed Local Environmental Plan 1987 (the 1987 LEP) as a 2(c) zone, permitting, with consent, development for residential purposes. In the 1993 Consent, the Land was designated on the subdivision plan then approved as "public open space/road reserve". It is apparent from that designation on the approved plan that it was so proposed because of the Special Uses zoning that attached to at least part of it. The applicant contends that such designation therefore reflected the resumption purpose. As a consequence, it submits that the underlying zoning at the acquisition date should remain by reference to that delineated in the 1987 LEP, having been made before the decision in 2000 to expand the arterial road reservation. That, so it is argued, means that the Land should be considered as falling within Zone 2(c), being land available for residential purposes.
The respondent, through Mr Rowan, advanced a number of matters as to why the road constructed through the south-western corner of the applicant's land should not be viewed as part of the purpose of the Pacific Highway upgrade. He identified contemporary Council documents from which he inferred that the road was constructed as part of an arrangement whereby the open space requirement for the lot was offset to allow the road. That offset was incorporated into the assessment of the 1993 development application. The material suggested that the Council distinguished between the primary arterial road, referred to as the Pacific Highway, and the extension of Darlington Drive under the highway bypass connecting to Laura Street. Reference is also made to the fact that the Concept Report for the Banora Point Pacific Highway upgrade was not published until 2006. Darlington Drive now serves the local road network and is the road within which the roundabout was constructed in 1997 to give access to the Land.
At the time at which the applicant's subdivision application was being considered in 1993, the Council wrote to the then consultants to the applicant stating:
Roadworks incorporating a southbound slip lane for the Pacific Highway/Darlington Drive access are proposed at a future stage in accordance with [the] proposed design indicated on the Council drawing to which you refer. However, the ultimate design, road layouts and associated land requirements for road reservations will be dependent upon and assessed accordingly with the submission of the access road design for the above subdivision. A roundabout is the preferred option for the proposed intersection with the subdivision access road and Darlington Drive underpass.
The Council subsequently granted the 1993 development consent. The applicant then requested the Council to acquire all the land zoned as arterial road reservation in the 1987 LEP, stating:
The total area of this land has been considered as unavailable for residential purposes because of the zoning. The subdivision has been designed accordingly. The residual portion of the arterial road reservation is therefore of no use to Reysson and would not warrant rezoning.
That seemed to suggest that the subdivision design for which consent had been granted was selected not because of the slope of the Land in the south-western corner but rather because of the zoning. The Council resisted the payment of compensation on the basis that a condition of the 1993 Consent required dedication of that land, a factor that the Council presumably considered material when determining to grant the 1993 development consent.
The Applicant contends, in short, that the 5(c) zone was imposed on the south-western corner of the Land under the 1987 LEP for the public purpose for which the Land came to be acquired in April 2010. The respondent submits that the contention of the applicant does not give effect to the statutory disregard in s 56(1)(a) of the Compensation Act. Reference is made to the decision of the High Court in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; 233 CLR 259, where the Court said, at [54]:
" … The construction of the market value disregard in para (a) for which the Foreshore Authority correctly contends, links 'the proposal' to that of the resuming authority. It puts aside anterior discussions or agitations by the Council and others in favour of classifying the Land as public space. In this way there is reflected in the terms of para (a) of s 56(1) a policy to require a disregard only of that increase or decrease (as in this case) in value for which the resuming authority is responsible.
In the 1986 LEP, cll 12 and 13 propounded two separate sources of authority for development on reserved land. Relevantly, the acquiring authority for land zoned 5(c) was the Roads and Traffic Authority: cl 12(1)(a). As cl 13(1)(a) provided, development permissible within an adjoining zone may be carried out on land within the 5(c) zone until the Land is acquired by the RTA.
Consent to any development within the 5(c) zone first required the concurrence of the RTA. Clearly, the 5(c) zone was not one intended for acquisition by a council of local roads: the zone that accommodated for that purpose was Zone 5(d). As the applicant submitted, the 5(c) zone was imposed to support the acquisition purpose, namely, the widening of the Pacific Highway, which was the very function performed by the then RTA, as reflected ultimately in the Banora Point Upgrade Project. The position is made the clearer by the provisions of LEP 2000 when that section of the Land was incorporated into the unzoned area of the Pacific Highway.
I accept these submissions. The determination of market value relevant to the Land should include the land in the south-western corner. That is what Mr Connolly's Scenario D does, reflecting the highest and best use of the Land adopted by Mr Hamilton.
There was also a debate between the planners as to the capacity to develop the south-western land because of the steep rise in the Land at this location. Having visited the Land and its environs for the purpose of these proceedings, I do not think that the steepness of this relatively small proportion of the area would be an impediment to development in accordance with Scenario D. As Mr Connolly suggested, some of the area could be cut and used as fill on other parts of the site. Moreover, the inspection of a number of comparable sale sites revealed that relatively steep land in the Tweed area presented no impediment to residential development. I accept Mr Connolly's evidence in this regard.
There was a further debate between the planners as to the development that the hypothetical purchaser might contemplate on the northern land. It will be remembered that this land was zoned 6(b) Recreation. On the acquisition date, the Draft Tweed Local Environmental Plan 2010 (the Draft LEP) was in the public domain, indicating that the Land was proposed to be zoned RE2, a zoning equivalent to the 6(b) zone, although more restrictive in permissible land use.
Development permissible with consent in the 6(b) zone included a number of uses, including general stores and motels. However, the objectives of the 6(b) need to be noticed. The "primary objective" was expressed as being "to designate land, whether in public or private ownership, which is or may be used primarily for recreational purposes".
Clause 8(1) imposed a constraint upon the grant of consent to any permissible form of development. The subclause relevantly provided:
(1) The consent authority may grant consent to development (other than development specified in Item 3 of the Table to clause 11) only if:
(a) it is satisfied that the development is consistent with the primary objective of the zone within which it is located, and
(b) it has considered those other aims and objectives of this plan that are relevant to the development, and
(c) it is satisfied that the development would not have an unacceptable cumulative impact on the community, locality or catchment that would be affected by its being carried out or on the area of Tweed as a whole.
Commercial development in the form of a supermarket or aged-care facility was posited for use on the northern land. It was also speculated by the applicant that the Land may one day have been rezoned as 3(c) Commerce and Trade. That speculation is not permitted (Vilro Pty Ltd v Roads and Traffic Authority (NSW) [2010] NSWLEC 234; 179 LGERA 47 at [91]).
Further, as the respondent submits, contemplating a supermarket development or speculating as to some future rezoning would not demonstrate that a purchaser was acting prudently if that was the advice tendered at the acquisition date. Not only would the provisions of cl 8(1) cast doubt upon the Council rationally consenting to commercial development in the form of a supermarket, having regard to the constraint on the exercise of power imposed by cl 8(1) of LEP 2000, but also having regard to the circumstance that the draft LEP then in the public domain proposed the recreation zoning in terms that would have prohibited a supermarket on that northern land.
Further, as long ago as 1988, the Tweed Heads South Project Planning Report had proposed that the Land provide a buffer between South Tweed Heads and Banora Point while the Tweed Development Control Plan 2008 (NSW) described the Land as "public open space".
Mr Connolly sought to support development of the 6(b) land and the possible future rezoning of that land to a commercial zoning on the basis that the 6(b) zone was a relic. It is said to have been a relic from a proposal known as the Eastlakes development proposal, contemplating a canal development on land to the northeast of the Land. That development was supported by a Commission of Inquiry but rejected by the Minister. Further, with the rejection of the canal estate development, the need for the buffer remained, reflected in the circumstance that the 6(c) zoning under the 1987 LEP was elevated to a 6(b) zoning in LEP 2000, followed by the Draft LEP proposing more restrictive development purposes in the RE2 Zone. This progression of instruments showed an intention on the part of the Council to retain the northern land as a buffer.
The persistence of the Council in seeking to retain an open-space buffer is not only reflected in the planning regime to which I have referred but is also reflected in its dealings with the applicant. On two occasions the applicant applied to the Council to rezone the Land but, on each occasion, the Council responded by stating that it had no intention so to do.
Those matters are persuasive as to why it would be imprudent for a hypothetical purchaser to contemplate some form of commercial development on the northern land at the acquisition date.
One of the permissible uses in the 6(b) zone is "dwelling houses if for caretakers". Dwelling houses are not otherwise permissible in the 6(b) zone.
The applicant submits that the permissibility of a caretaker's residence is sufficient to engage the provisions of State Environmental Planning Policy (Housing for Seniors or People with a Disability) 2004. By cl 4(1), the Policy applied to land zoned primarily for urban purposes or land adjoining land zoned primarily for urban purposes, but only if the purpose of "dwelling houses" is permitted on the Land. Accepting that the provisions of the Policy may render permissible a form of development that complies with that Policy, that circumstance does not preclude the consent authority from refusing development of that kind on discretionary grounds, rather than determining that such development is prohibited (Hastings Point Progress Association Inc v Tweed Shire Council [2009] NSWCA 285; 168 LGERA 99 at [6]). Considerations of the kind that I have earlier identified referrable to development of the northern land for a supermarket would equally apply to the doubt that would reasonably exist at the acquisition date as to the likelihood of the Council granting consent to development under the Policy.
I am persuaded that at the acquisition date, there was no real prospect of using the northern land for a commercial purpose or for a seniors living development. At best, the northern land could have been used as open space or recreational buffer in conjunction with development on the southern land.
[7]
Traffic issues
The respondent submitted that a further constraint upon commercial development of the northern land arose from problems in gaining vehicular access from Minjungbal Drive onto that land. That road was, at the acquisition date, a non-arterial road under the care and control of the Council. It was classified as an urban distributor road.
Traffic issues associated with vehicular access to and egress from that land were addressed by Christopher Hallam, a traffic engineer retained by the applicant, and Philip Brogan, retained on behalf of the respondent. The relevant issue between them was directed to the possibility of weaving movements or conflict arising for vehicles entering and leaving the northern land. The problem was said to arise because Mr Brogan held the opinion that an acceleration lane for vehicles leaving the land was required. The road geometry was said to cause a difficulty in that regard.
Mr Hallam contended that the provision of an acceleration lane, enabling exiting vehicles to enter the traffic flow, was no longer accepted as being good practice. He produced publications to support that assertion. Further, he stated that the road geometry in the location of any exit from the northern land provided a satisfactory level of safety.
In the course of giving evidence, Mr Brogan also suggested that there were general safety concerns arising in the vicinity of any anticipated entry/exit point. Mr Hallam did not accept that such a problem would arise but indicated that in any event, the safety concerns expressed by Mr Brogan could be resolved by the installation of a concrete island in the road. In a sense, this represents conflicting advice that, if sought, would be given to the hypothetical purchaser of the Land. Noting that to be the case, it is not absolutely necessary that I resolve the conflict, although having regard to the explanations given by the experts, I favour the evidence of Mr Hallam that, on balance, a safe entry and exit configuration for motor vehicles could be devised to accommodate vehicular access to and egress from the northern land.
[8]
Hydrology
Each party called an hydrologist to address two issues. The first related to the piping of the Lake Kimberley Canal as it passed through the Land and the second related to the extent to which fill would be required in order to raise the level of the Land sufficient to allow residential development to proceed. Drew Bewsher was called on behalf of the applicant and Dr Ian Joliffe called on behalf of the respondent.
The applicant's acceptance of the highest and best use of the Land that I have earlier identified renders it unnecessary to address the first issue. The plan for Scenario D did not contemplate the piping of the Lake Kimberley Canal.
In addressing the level to which the Land would need to be raised to accommodate residential development, Dr Joliffe stated that the advice he would have offered to a prudent party contemplating the purchase of the Land would have been that the level to which the Land was required to be raised was 2.8m AHD. Undertaking that work would involve significant earth works, together with ancillary drainage and water quality works, all of which would be expensive.
For his part, Mr Bewsher said that hydraulic modelling used to establish the 1 in 100 year flood level upon which a 2.6m AHD minimum level is based, already included in it an implicit allowance for climate change.
While Mr Bewsher is correct in stating that the Council had required consideration to be given to climate change in estimating levels to be achieved in order to avoid flooding in the 1 in 100 year event, the level suggested by Mr Bewsher did not reflect the most recent consideration given to appropriate levels by the Council. Between 3 March and 31 March 2010 the Council had exhibited a draft development control plan that addressed development of flood liable land. The exhibited draft had indicated in respect of the subject land that the level should be 2.9m AHD. When the Council came to adopt the DCP on 9 June 2010, admittedly after the acquisition date, the level adopted was 2.8m AHD. The level required in the DCP that was operative at the acquisition date was 2.6m AHD.
Given the level that was required by the 1993 Consent together with that posited by Mr Bewsher, I am inclined to accept that the hypothetical purchaser would take into account those conflicting views and select a level somewhere between the two, knowing that if, as is anticipated, a further development consent was required once filling had been completed, there may be a requirement imposed by the Council to elevate the land even further.
[9]
Filling of the Land
Brad Thomson, a quantity surveyor, gave evidence on behalf of the applicant, and Paul Parker gave evidence on behalf of the respondent. Both agreed that when advising a potential developer, it would not be assumed that fill would be freely available to a purchaser developing the Land at the acquisition date. Mr Thomson calculated the cost of earthworks for Scenario D to be $1,226,130, while Mr Parker's costs for earthworks was $2,990,130. Each assumed a gross residential area to which fill needed to be applied of 70,300m2.
In arriving at his costs, Mr Parker acknowledged that he had not undertaken work in the Tweed area and that, for the purposes of costing, he relied upon Rawlinsons Cost Manual and also a colleague from his office. He was unclear as to the availability of material from local quarries, having made no enquiries in that regard, although he acknowledged that such an enquiry would be sensible. He also acknowledged that data derived from contractors working in the area was a "preferable method" to assess likely costs.
By contrast, Mr Thomson had worked in the Tweed area, he had spoken to local contractors and, based upon his enquiry, adopted a mix of available free fill and purchased fill to be used on the Land. He also relied upon his local experience, together with local enquiry, to determine likely transport costs of bringing fill to the Land.
I prefer the evidence of Mr Thomson for the reason that his evidence is more directly related to the likely fill costs for the Land at the acquisition date. His cost for fill amounts to $17.44/m2, assuming a gross residential area of 70,300m2 to be filled to achieve the required level.
[10]
The Approach to Valuation: Impact of the GFC
The applicant gave particular emphasis to discussion that arose in the course of the valuation evidence directed to sales relied upon by the respondent's valuer. In the course of his evidence, Mr Hamilton, had referred to the impact on the property market by the phenomenon generally known as the "Global Financial Crisis" (the GFC). He spoke of "anxiety" in the marketplace brought about by the GFC. According to Mr Hamilton, the GFC was responsible for sales of land to be transacted at prices below those for which properties had earlier been acquired. He also identified the reluctance of lenders to lend for acquisition of land, particularly for large parcels of land, intended for residential development.
It is correct that in giving his evidence, Mr Hamilton does use the language of anxiety. The applicant submits that if that be the case, any transactions identified as reflecting anxiety should be ignored because the definition of "market value" in s 56 of the Compensation Act assumes a non-anxious vendor and purchaser. If, so it submitted, "anxiety" reflects the market generally at the time of acquisition, then it is to be ignored, giving appropriate consideration to the statutory language determining market value.
I can accept that if, on enquiry, a particular transaction is demonstrated to have been undertaken by an overanxious or distressed vendor, it is a sale that would need to be treated with considerable caution. However, to reflect upon market conditions when they are shown to be depressed, assuming they are so shown, is simply a reflection of the market at which the hypothetical parties would sell and buy a property at a given date. The assessment of market value under s 55 of the Compensation Act requires that assessment to be made at the acquisition date. If, because the market at that time is shown to have fallen below some erstwhile high, one asks rhetorically, what are the transactions that should be identified to establish the market value at that time. To the extent to which the GFC should be seen to be affecting the market at the acquisition date, that will simply be a reflection of the amount that would have been paid for the land if sold at that time, by the parties identified in s 56. This is particularly pertinent to the Land, because it is a large parcel of land intended for residential development.
[11]
Valuation evidence
Valuation evidence was given on behalf of the applicant by Owen Allsop. He tendered two reports dated 15 March 2011 and October 2012 respectively and gave evidence before me. He assessed compensation in the sum of $14,737,000, varied to $15,221,000 in those reports and varied further to $16,653,000 in a joint report prepared with the respondent's valuer. Those figures were reached on the basis of comparable sales that he identified.
Laurie Hamilton, retained by the respondent, also prepared two reports and was a signatory to the joint report prepared with Mr Allsop. His initial determination of market value in the sum of $3,500,000 was varied to $4,720,000 in the reports, also based on hypothetical sales and checked by using a discounted cash flow analysis.
There were two potentially comparable sales that were identified by each valuer. They related to property being:
Lot 8, Darlington Drive, Banora Point, and
213 Leisure Drive, Banora Point.
Mr Allsop also identified one further potentially comparable sale being the sale of a property by RSL Care at 126 Leisure Drive, Banora Point. He identified five sales to derive a value for the northern land being:
63 Minjumgbal Drive, Tweed Heads South
153 Minjumgbal Drive, Tweed Heads South
155 Minjumgbal Drive, Tweed Heads South
Lot 1, Station Street, Mullumbimby
3 Hughes Place, Port Macquarie
Mr Hamilton identified three further potentially comparable sales being:
126 Mahers Lane, Terranora
Lot 3, Byangum Road, Murwillumbah
17 Lloyd Street, Tweed Heads South
In its final submissions, the applicant did not seek to address the evidence given by Mr Allsop. Rather, it seeks to construct its determination of market value by criticising the evidence of Mr Hamilton. The abandonment of the evidence given by Mr Allsop is significant because he had contended in his report that "the Reysson site would NOT (his emphasis) be developed for traditional residential development - it is a seniors site for developers to create housing for active, passive and frail retirees".
The applicant's apparent abandonment of the evidence given by Mr Allsop is hardly surprising. Unfortunately, the evidence that he gave was unsatisfactory. His report did not contain the facts, assumptions, and bases informing his views with significant omissions from his written materials. An example of the difficulty that he experienced was the way in which he described the highest and best use of the Land as being "for seniors living, passive, frail retirees such as a retirement village, nursing home, broadly of the nature of the RSL". The latter reference was a reference to an existing RSL retirement village that the parties were invited to visit in the course of the site inspection. It involved a large nursing home facility with independent living quarters around it. When pressed as to whether that was really what he was advocating for the Land, he sought to resile from that description but did so in terms that did not make his alternate clear (Tcpt: 418-420). Further, he had identified a sale transaction in support of a contention that there had been no diminution in the price at which properties were transacted prior to and after the GFC. One transaction relied upon was for the sale of a property in 2002 and its resale in 2007. There was no question that the sale price increased. However, he did not disclose that after 2007 the market value for that land in 2010 appearred to have dropped significantly, a fall he suggested was about 50 percent (Tcpt: 519-522). Further, when seeking to adjust a rate per square metre for a development site that he derived from comparable sales, the manner in which he sought to adjust that rate so as to apply it to the Land, the quantum of the adjustments were unquantified, so that the manner in which quantum adjustments were made was not transparent.
The sale upon which Mr Hamilton relied was one of the two sales that were common to both valuers. He analysed the sale at Lot 8, Darlington Drive, Banora Point at a rate of $168/m². The property was sold in February 2010 and is located around Lake Kimberley. It is a property that is superior in terms of its view, overlooking Lake Kimberley and in its close proximity to a large sports club and a neighbourhood shopping centre. It is nearly level and within an easy walking distance of most amenities. Importantly, it did not require expensive civil construction works and there were no uncertainties arising from the town planning controls applicable to that land. It was smaller in area than the subject Land and therefore, required a shorter time to be developed.
The land at 213 Leisure Drive, Tweed Heads South was sold in July 2007. It was subject to the same land use controls as that applied to the Land but it had an area of 3,991m², very much smaller than the Land.
There is a necessity for adjustment as to time because the sale was transacted in 2007. That adjustment reflected a diminution in value brought about by the GFC. Evidence in that regard will be referred to shortly. The sale of this site is ultimately of only limited value.
The sale of land at 126 Mahers Lane, Terranora was of greater assistance to Mr Hamilton. That sale took place in January 2008. The land was zoned both 2(c) under LEP 2000 and 7(d) Environmental Protection (Scenic/Escarpment). It sold for $6,000,000, having a land area of 61,420m². According to Mr Hamilton, that sale occurred at a time when the market for residential development sites was buoyant. His assessment of the fall in value of development sites between those sold before the GFC and those sold immediately after its full impacts were felt showed a discount range of 31.8 percent to 47 percent. Mr Hamilton had initially applied a discount rate of 35 percent to the rate per square metre deduced from the sale of 97.7/m², resulting in a figure of 63.5/m².
However, he recognised that the residential density to be achieved on the Land is 22 dwellings per hectare, whereas the density on the sale property was only 8 dwellings per hectare. That necessitates an upward adjustment to the applied rate because of the higher density achievable on the Land. That increase should be a figure of 15 percent to 20 percent per square metre yielding an adjusted rate when applied to the Land of $85-$95/m².
Based on his analysis, Mr Hamilton considered the sales at Lot 8 Darlington Drive, Banora Point and 126 Mahers Lane, Terranora to be those that are of most assistance in determining the market value of the Land, subject to those sales being adjusted for differences in filling and improvements.
The superior views and smaller area of Lot 8 Darlington Drive requires substantial downward adjustment when the rate from that sale applies to the Land. Significantly, no adjustment is required on account of any GST impact because the sale of that land in February 2010 was a sale transacted in the same market as a sale transacted on 30 April of that year. The adjustments to be made are to reflect the advantage that the sale site offered when compared to the Land .
Three adjustments were made by Mr Hamilton to this sale. As the sale property is only one quarter the size of the Land, a deduction of 15 percent to the deduced rate of $168/per square metre should be made. A further reduction of 15 percent should be made on the basis that the sale property was nearly level and did not require the importation of fill, fill compaction or the construction of any retaining structures. The Land requires each of those works to be undertaken. As a consequence a 15 percent reduction is made.
Third, account is taken of the northerly aspect that the sale property enjoyed. Although described in somewhat unflattering terms by counsel for the applicant, having viewed the sale property, its aspect over a large lake or basin is attractive. I accept Mr Hamilton's evidence that the basin would make it attractive to a purchaser intending to acquire that land for the purpose of residential development. A further deduction of 10 to 15 percent, as proposed by Mr Hamilton is appropriate. These deductions have the consequence that the deduced rate for the sale of $168/m², when applied to the Land, is approximately $80m² to $100m² of land area.
Mr Hamilton is criticised by the applicant on a number of bases. One such criticism was directed to his reference to anxiety in the market place created by the GST. Mr Hamilton provides three examples of the sale and resale of property reflecting a downward trend in the market between 2005/2007 and 2009/2010. The first such sale related to land at 136-154 Drydock Road, Tweed Heads South. It was purchased with a development consent for a 271 unit resort in January 2007 for $11,000,000. That property was on the market from mid 2009 with the only indication of interest being a figure of between $7,000,000 and $7,500,000. Assuming that approximated the price to be paid, it represented a fall in value since January of 2007 of from about 32 percent to about 36.5 percent. The site did not require fill and did not have significant environmental constraints.
There is a difficulty in relying upon this property as a true indication of the extent to which property values fell. The evidence showed that the owner had defaulted in meeting mortgage commitments with the result that the mortgagee had taken possession and was wishing to sell the property to cut its losses. Such a transaction, if there was one, must be viewed with caution and, for my part, I would not be prepared to rely upon it in order to demonstrate the extent to which the GFC is said to have affected the market.`
The second sale upon which Mr Hamilton relied was a sale at Labrador on the Gold Coast. It was a site of 4,940m² and was sold in August 2007 for $12,448,775. It resold in May 2010 for $6,600,000. The site had approval for 150 high and low rise apartments at the date of the resale. The resale represents a fall of 47 percent. I have no reason not to accept that sale as evidence of the fall in the market.
The third sale relied upon by Mr Hamilton was the sale of a site having an area of 9.49ha located at 2 Nollamara Drive, Elanora, purchased by RSL War Veterans Homes in September 2004 for $9,000,000. The RSL intended to develop the land with aged persons accommodation. It sold the land in September 2009 to a company intending to create a conventional 85 lot subdivision. It is said to have been sold for $5,000,000. That showed a fall of in excess of 44 percent.
Mr Hamilton also gave evidence that the property cycle was affected by different phenomena. While that evidence alone does not persuade me, looking at the material to which he addressed his attention, including two of the sales to which I have referred, I am satisfied that there was a downturn in the property market from 2008 to 2009 that had a depressing impact upon the market in April 2010.
Despite the observation just made, it is unnecessary for my purpose to assign any rate of decline in property prices or, indeed, to be accurate in determining that the GFC had a downward impact upon market value at all. This is because the best sale for the purpose of assigning value for a residential development on the Land was the sale of Lot 8, Darlington Drive. As I have said, that sale took place in the same market as prevailed at the time at which the hypothetical sale of the Land was required to be assessed. There is no other sale suggesting that the rate derived from that sale of $168/m² needs to be considered before adjustments are made to derive a value of the Land. Only those adjustments to which I have earlier referred are necessary to be considered. That circumstance addresses a number of the criticisms directed to Mr Hamilton's evidence.
The only criticism to which I need make further reference is that directed to his evidence in which he stated that no value would be added by a hypothetical purchaser because of the existence of the northern land. I have earlier determined that a hypothetical purchaser would not realistically expect the northern land to receive approval for development, as a supermarket, another innominate commercial activity or seniors living development. Nonetheless, I would accept that acquiring the Land on an en globo basis, a purchaser would regard the northern land as having value to the development of the southern land in providing a green buffer for the residential development on the southern land.
While the 10 percent premium advocated by the applicant is not the subject of any valuation reasoning, it seems to assume that it would reflect the opportunity to increase the worth of the northern land because of the possibility that in the future some other form of development may be possible. I do not accept this possibility would realistically be contemplated by the hypothetical purchaser on 10 April 2010.
I propose to adopt the rate of $85/m² as appropriate to be applied when determining the value of the Land. Doing the best I can, it seems to me that it would be appropriate to increase that figure, to reflect the worth of the northern land by a further $3/m², giving a rate of $88/m².
This accepts, at least in principle, the approach reflected in the applicant's final submissions, being the first of the alternate bases upon which it suggests market value should be determined. The second basis is to determine separately the value of the northern and southern land, albeit on an en globo basis, but assuming that the northern land is valued for its potential to provide commercial or seniors living development. For reasons that I have earlier given I do not accept that potential and as a consequence reject the second basis upon which it is submitted that market value should be determined.
Applying the rate of $88/m² to the gross residential area of $70,300m², the market value of the Land is determined in the sum of $6,186,400.
[12]
Disturbance
The applicant claimed a number of items for disturbance under s 59 of the Compensation Act. Its claims for legal and valuation fees are accepted in the sum of $25,969.
A claim is made based on s 59(f) for stamp duty on replacement land necessary to maintain a land bank because, so it is submitted, the applicant is a land developer and the Land was part of its stock in trade. The evidence does not support that contention.
First, in evidence Mr Warren Beveridge, the development manager for the applicant when asked the following question, gave the following response:
"Q. Yes, so the company is not in the business of buying vacant land, hanging onto it for the purpose of a capital gain and then selling it on and buying other land, is it?
A: No, its to build and develop." (Tcpt 7/05/2013 at 104:12-15).
That evidence is not consistent with a claim that the applicant was land banking.
Second, there was tendered in evidence a letter dated 7 January 2005 to the Office of State Revenue and signed by Mr K A Beveridge, a director of the applicant. In that letter he stated that the Land was being used for primary production. He stated that the cost of development and the uncertainty of development controls had made the applicant's proposals in 1993 "a costly exercise that availed no increased benefit to the Company".
The applicant defended its position in opposition to the imposition of land tax in the Administrative Decisions Tribunal. The submissions it made included a statement that "there is no evidence at all that the land is being used as an investment use". That is also inconsistent with a claim that the Land was a land bank as part of a development enterprise conducted by the applicant.
Third, the only evidence before the Court of the applicants development activity was that it held a property at Baulkham Hills in Sydney as an investment and had a motel business at Parramatta. Otherwise, the Land has remained undeveloped since acquired in 1979.
Those facts do not support a submission that the land banking reflected an "actual use of the land" within the meaning of s 59(f) of the Act. The applicant's claim in this regard does not satisfy the criteria found in s 59(f) to sustain the claim (Blacktown Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259; Nasser v Roads and Traffic Authority NSW [2006] NSWLEC 562; 149 LGERA 289).
For these reasons I do not allow the claim made by the applicant in the sum of $848,750 for stamp duty.
Also claimed under s 59(f) are amounts for fees paid to Sharron Bryan for administration or management fees associated with the acquisition. Those fees are said to relate to or include negotiation with representatives of the RTA in respect of the proposed acquisition. Such fees are not able to be claimed (Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority (NSW) [2005] NSWLEC 467 at [36]).
Likewise, professional fees that are claimed in the form of fees to town planners and accountants are not claims available to be made under s 59(f) because they have nothing to do with the "actual use" of the Land.
For these reasons, I do not allow the sums claimed by the applicant under s 59(f) of the Compensation Act.
[13]
Orders
Accordingly, I make the following orders:
1. Determine compensation for land being Lots 11 and 14 in DP 1138459 acquired on 30 April 2010 in the sum of $6,212,369.
2. Costs reserved.
3. Exhibits may be returned.
[14]
Amendments
06 June 2016 - Coversheet typo
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Decision last updated: 06 June 2016