Roads Corporation v Love [2010] VSC 537

1 Volcanic eruptions have shaped the landscape of Victoria throughout its geological history.[1] The Tertiary period began about 65 million years ago with the demise of the non-avian dinosaurs and was followed by the Quaternary period which commenced about 1.8 million years ago.[2] During the late Tertiary and early Quaternary periods, a great amount of violent volcanic activity took place in the State. It was not the place to be. Eruptions surfaced continuously or at intervals from Seymour in central Victoria to the coast west of Portland belching molten lava, cinders, steam, and gases over thousands of kilometres. In the Quaternary period alone, some 15,000 square kilometres were covered with lava.[3] In hundreds of spectacular primordial events, large sheets of this lava flowed freely over earlier flows. Some of it settled in the vicinity of an area north of Melbourne, now known as Epping, where it solidified to form a range of volcanic rocks, including what has become the stone resource now valuable to humankind known as basalt.

2 Two such lava flows provide the genesis of these proceedings: an earlier flow, the "lower flow" and a later flow, the "upper flow". They range in age from the late Pliocene epoch (or the Piacenzian age, which spanned a period 3.6-2.588 million years ago) to the mid Pleistocene epoch (which occurred between 0.781-0.126 million years ago).

3 Moving forward. On 11 February 2002 (the "acquisition date" or the "relevant date"), by notice published in the Government Gazette, the Applicant ("the Corporation") compulsorily acquired part of the land of the Respondent, Mr Love ("Mr Love"), comprising 25.62 hectares of land at 410 Cooper Street, Epping ("the acquired land"). Mr Love was the sole registered proprietor of the acquired land, which, at the time of the acquisition, he used for cattle grazing. The land holding had been in his family for decades, since 1915, and Mr Love understandably has a great attachment to it.

4 The acquisition was undertaken in the exercise of statutory power pursuant to Part 2 of the Land Acquisition and Compensation Act 1986 ("the LAC Act"). The land was compulsorily acquired for the purposes of the "Craigieburn Bypass" (the "Craigieburn Bypass" or the "Bypass").

5 Mr Love claims $30,420,000.00 by way of compensation for loss of market value of his land. The Corporation says that compensation for loss of market value should be in the sum of $2.5 million.

6 What is the explanation for this massive gulf? The answer lies in the vastly different positions taken by the parties in relation to the highest and best use to which Mr Love's land might be put.

7 Mr Love contends that the land acquired formed part of a site which had potential to be developed as a quarry for the extraction of basalt and for subsequent use as a landfill, and that this was its highest and best use. Accordingly, he contends that the market value for the land acquired should be assessed on this basis. The potential he perceives for the use of his land could have been exploited for the benefit of himself and his family, and he is aggrieved at its loss.

8 Mr Love submitted that prior to the acquisition, in the "before" acquisition situation, the resource was large enough to attract interest from large vertically integrated quarry operators as a capital purchase. However, after the acquisition date, in the "after" situation, the resource would only have been of interest to small operators who could not afford a capital purchase but would instead operate the quarry on a leasehold basis, if it was viable to conduct a quarry operation at all.

9 Consequently, at the centre of Mr Love's claim is the proposition that the acquisition of the land for the Craigieburn Bypass has brought about the loss of a major quarry site on his land. He submitted that this has been caused by:

• The loss of the land taken, which was through the heart of Mr Love's proposed quarry site; and
• The land buffers to neighbouring properties required for any future quarry operation have been lost.

10 Mr Love's case does have an obvious attraction on physical inspection. The area surrounding the site of his proposed quarry operation does have a number basalt quarries and landfill sites which are presently operating or have in the past been operating, exploiting the extensive basalt resources in the area.

11 On the other hand, the Corporation contends that the highest and best use of the acquired land at the date of acquisition was for the purpose of future industrial use. The Corporation's case was that, on the assumption that the highest and best use of Mr Love's land was as future industrial land, the market value of the acquired land as it was immediately prior to the acquisition date would have been $15 million. It contended that, following the acquisition, the future industrial value of Mr Love's land would be $12.5 million. On this basis, the Corporation contended that compensation for loss of market value should be assessed at $2.5 million (broadly, $15 million in the "before" situation - $12.5 million in the "after" situation).

12 Neither party contended that the highest and best use of the subject land was its actual use as at the date of acquisition, that is, cattle grazing.

13 Accordingly, the fundamental issue in assessing the market value of the acquired land and the compensation due to Mr Love in this case, is whether Mr Love's land had any and what potential as a future basalt quarry and landfill site and whether, on the assumption it did have any such potential, it had a higher market value than it had as future industrial land.

14 Mr Love made further claims for compensation. These claims were particularised in his final address as follows:

(a) Loss of the Clonard Homestead valued at $420,000.00;

(b) Replacement agricultural infrastructure, motor vehicle and travel expenses, respondent's time claims, and injurious effect on the 410 Cooper St residence. In the course of the trial Mr Love abandoned his claim in respect of a new drainage system at 275 O'Herns Road initially claimed at $517,000. The claims made for the remaining items pressed at the conclusion of the case were as follows:

(i) agricultural infrastructure replacements ($244,662.81)

A breakdown of these claims in their final form and the Corporation's responses to each claim are set out in the table below:

(ii) Motor Vehicle and travel expenses.

A breakdown of these claims in their final form and the Corporation's responses to each claim are set out in the table below:

Registration of off-road vehicles and additional plant

(iii) Mr Love's Time Claims

A breakdown of these claims in their final form and the Corporation's responses to each claim are set out in the table below:

(iv) Injurious effect on 410 Cooper Street residence ($45,000.00)

Mr Love claims $45,000 as "injurious affect on his home at 410 Cooper Street, Epping".

The Corporation contends that any claim for injurious affection to Mr Love's home falls for consideration as part of compensation for loss of market value in the application of section 41 (3) of the LAC Act. It makes no separate allowance for this item of claim in this case.

(c) Solatium

Under section 44 of the LAC Act, Mr Love claimed solatium of $5,712,000.00. This figure represents 10 percent of the market value of the whole of Mr Love's land "before" acquisition as valued by Mr Love's expert quarry and land valuer, Mr Herdman. Following the adjustment of the claim for loss of market value, Mr Love reduced his claim for solatium to $4,945,000.00.

In support of his claim, Mr Love relies on the longevity of ownership of his family of the land (since 1915), his attachment and that of his family to the land, he having been born and raised on the land and having actively worked it since 1990, and upon the time and stress associated with the acquisition and implementation of the Bypass proposal.

The Corporation contends that the starting point for solatium is to determine an appropriate monetary allowance, taking into account the specific factors in section 44 (2) of the LAC Act as they apply to the case. The second step is to make an award accordingly unless the amount considered appropriate exceeds the applicable ceiling.

The Corporation has offered $98,000 in this case, reserving to itself the right to contend that a lesser award is appropriate. It contends that the applicable "ceiling", for the purpose of an award of solatium, is $185,571. That is, 10 percent of the market value of the 25.62 hectares of land actually acquired.

(d) Total valuation and other professional expenses as at 3 April 2006 of $142,895, a sum which has already been paid by the Corporation.

(e) Under Section 53 of the LAC Act, penalty interest from 11/2/02 to the date of judgement.

The Compensation Claim and the Corporation's Offers

15 This proceeding was commenced on 28 June 2004 by way of a referral by the Corporation under s 80 of the LAC Act of a disputed claim for compensation made by the respondent, Mr Love.

16 Mr Love initially claimed $38,120,000.00 by way of compensation for loss of market value. In his final address he confirmed that he had reduced this claim to $30,420,000.00 to allow for the moving of a gas pipe line which runs through his hypothetical quarry site ($2,000,000.00) and the deferral of the landfill development on the site by five years ($5,700,000.00) to allow for filling of the void under the landfill with clean fill.

17 Both before and after referral, the parties exchanged offers and claims for compensation. Compensation offered by the Corporation has been advanced to Mr Love as contemplated by s 51 of the LAC Act.

18 On 26 July 2002, the Corporation made an initial offer of compensation in the sum of $2,488,295.

19 On 7 November 2003, Mr Love made an interim claim for compensation in the sum of $132,782. On 6 March 2004, Mr Love made a claim for "infrastructure replacement works" and "disturbance" in the sum of $22,061.

20 Following referral and on 10 September 2004, Mr Love made a claim in the sum of $8,947,855.

21 On 15 October 2004, the Corporation made a revised offer in the sum of $2,707,000 in lieu of its earlier offer.

22 Progressing, the whole of the amount of $2,707,000, the subject of the offer made 15 October 2004, was advanced to Mr Love well prior to trial. On 1 December 2003, Mr Love requested an advance of the initial amount offered in the sum of $2,488,295. On 9 January 2004, that amount was advanced. On 31 December 2005, Mr Love requested an advance of a further $218,705. On 25 January 2006, that amount was advanced.

23 The trial of the proceeding commenced on 10 May 2010 and thereafter occupied 33 days of evidence and two days of final address.

24 The Court conducted a view of Mr Love's land. The view also included neighbouring and proximate quarry landfill operations.

25 Save for an appearance on his behalf by Mr G Uren of Her Majesty's counsel with Mr O'Brien of counsel during the trial of the separate questions hereinafter described, Mr Love appeared in person to prosecute his case. The Corporation throughout was represented by Mr J Delany, Senior Counsel, with Mr DJ Batt and Mr PF Chiappi of counsel.

26 In conducting the case I was conscious of the observations of Bell J in Tomasevic v Travaglini[4] as to the duty of a trial judge in these circumstances to ensure a fair trial;[5] of the duty to assist a self-represented litigant by providing such information as is necessary to enable him to have a fair trial[6] and to address the imbalance as far as possible; and in so doing, bearing in mind that what a judge must do to assist a litigant in person depends on the litigant, the nature of the case, and the litigant's intelligence and understanding of the case.[7]

27 However, a balance must be achieved as far as it is possible to do so. In the course of ensuring a fair trial for the self-represented litigant, an advantage cannot be conferred on that party. This was recently emphasised by Kyrou J in Slaveski v State of Victoria & Ors[8] where his Honour said:

During the first and second phases of the trial, I explained to Mr Slaveski and Mrs Slaveska, respectively, the rules of evidence and procedure on various issues, and provided other assistance to them, in accordance with my duty to ensure a fair trial. This duty was discussed by Bell J in Tomasevic v Travaglini [2007] VSC 337; (2007) 17 VR 100, 129-30 [139]-[142] ("Tomasevic") in the context of a self-represented litigant. The current proceeding, and its unusual course, has highlighted the need to ensure that the principles governing a trial judge's duty to conduct a fair trial where one of the parties is self-represented are flexible and pragmatic so that the trial judge has sufficient latitude to manage the proceeding in the interests of all the parties and of the administration of justice. It is vital that the principles are formulated and applied in a manner that does not tip the balance too far in favour of self-represented litigants, impose too high a burden on the trial judge or result in prejudice to opposing parties.[9]

28 The general principles governing the role of a judge in civil proceedings involving a litigant in person were earlier stated by the New South Wales Court of Criminal Appeal in Rajski v Scitec Corporation Pty Ltd ("Rajski"),[10] in which Samuels JA said:[11]

In my view, the advice and assistance which a litigant in person ought to receive from the court should be limited to that which is necessary to diminish, so far as this is possible, the disadvantage which he or she will ordinarily suffer when faced by a lawyer, and to prevent destruction from the traps which our adversary procedure offers to the unwary and untutored. But the court should be astute to see that it does not extend its auxiliary role so as to confer upon a litigant in person a positive advantage over the represented opponent ... At all events, the absence of legal representation on one side ought not to induce a court to deprive the other side of one jot of its lawful entitlement ... An unrepresented party is as much subject to the rules as any other litigant. The court must be patient in explaining them and may be lenient in the standard of compliance which it exacts. But it must see that the rules are obeyed, subject to any proper exceptions. To do otherwise, or to regard a litigant in person as enjoying a privileged status, would be quite unfair to the represented opponent.[12]

Mahoney JA in Rajski made observations to the same effect:

Where a party appears in person, he will ordinarily be at a disadvantage. That does not mean that the court will give to the other party less than he is entitled to. Nor will it confer upon the party in person advantages which, if he were represented, he would not have. But the court will, I think, be careful to examine what is put to it by a party in person to ensure that he has not, because of the lack of legal skill, failed to claim rights or to put forward arguments which otherwise he might have done.[13]

29 In Tomasevic, Bell J expressed the principle in the following terms:

The judge cannot become the advocate of the self-represented litigant, for the role of the judge is fundamentally different to that of an advocate. Further, the judge must maintain the reality and appearance of judicial neutrality at all times and to all parties, represented and self-represented. The assistance must be proportionate in the circumstances - it must ensure a fair trial, not afford an advantage to the self-represented litigant.[14]

30 In the present case, I found Mr Love to be an intelligent man with an excellent grasp of the factual and technical details relating to the issues canvassed at trial. He graduated with a Bachelor of Engineering from Monash University in 1970 and obtained a Master of Administration from that university in 1976. He described himself as:

...a professional engineer, business strategist, negotiator and manager with tertiary business qualifications ... [with] considerable experience working as a project engineer in heavy industry including the mining industry.

31 He conducted himself admirably as a litigant in person during the proceeding.

32 As to legal issues which arose during the hearing, Mr Love was given the opportunity, when he sought it, to obtain legal advice on specific matters and was granted leave to be represented by both senior and junior counsel in presenting his submissions on the trial of the separate legal questions stated by the Court for determination. It was also observed that the Corporation, as a model litigant, gave assistance to Mr Love in the course of the trial.

33 Further, during the course of the hearing, topics for final address were progressively settled by the Court in conjunction with the parties, including Mr Love. Final addresses were directed to be delivered in two parts, namely:

(a) a written draft judgment in which each party was called upon to submit their best case on the findings of fact and law which each party invited the Court to make on each of the topics as finally settled by the Court; and

(b) an optional component which was to include any further or alternative submissions by way of a supplement to each party's draft judgment.

This approach worked to reduce the likelihood of Mr Love ignoring subject matter of importance in the presentation of his case and to optimise the opportunity for each party to address the case of the other.

34 During the course of his opening of his case, Mr Love made it clear that a foundation for part of the case which he sought to advance was an admission which he said had been made by the Corporation in the course of the proceeding. The admission was to the effect that its position for the purposes of the proceeding was that, as at the acquisition date of 11 February 2002, Mr Love would have had a planning permit to conduct a quarry operation on his land and that the case was to proceed on that basis. The Corporation, however, denied making any such admission. Alternatively, if it did, it said that no estoppel arose preventing it from departing from any such representation, or if any such representation was to be treated as an admission for the purposes of the proceeding, it was free to resile from such admission.

35 Because of the apparent fundamental importance of the question of the admission to the case which Mr Love wished to advance, I determined that it would be appropriate to state questions for determination following a separate trial pursuant to Rule 47.04 Supreme Court (General Civil Procedure) Rules 2005. A further factor which weighed heavily in the exercise of the discretion to state questions for a separate trial was the discrete nature of the issues raised. The factual matrix against which the questions were to be determined, arose from procedural steps taken in the proceeding, rather than any substantive issues which were to be determined in the proceeding at trial.

36 On 2 June 2010, upon a trial of separate questions, as they were eventually formulated, the Court ruled as follows:[15]

(a) Did the Corporation make a representation that its position, for the purposes of the proceeding, was that:

(i) as at the acquisition date, 11 February 2002; and/or

(ii) within a reasonable time after delivery of the planning panel's report of October 1998;

Mr Love would have had a planning permit in existence to conduct a quarry operation on the subject land on terms in accordance with the report of the planning panel of October 1998, and that the case is to proceed on that basis ("the representations")?

Answer: yes, in both cases;

(b) If the Corporation did make one or other of the representations, is it now estopped from departing from the representations?

Answer: no;

(c) Has the Corporation made an admission to the effect of one or other of the representations?

Answer: in relation to both representations 1(a) and 1(b), yes;

(d) If the Corporation has made one or other of the admissions, may the Corporation resile from that admission?

Answer: no in relation to both representations.

37 Following the determination of the separate trial on 2 June 2010, the trial proceeded on the basis of the ruling delivered that day, that is that as at the acquisition date, 11 February 2002, and within a reasonable time after delivery of the planning panel's report of October 1998, Mr Love would have had a planning permit in existence to conduct a quarry operation on the subject land but issued on terms that were subject to conditions reflecting the findings of the quarry permit panel in its report of October 1998 (the "notional planning permit").

38 During the trial of the separate questions, as earlier noted, Mr Love was represented by senior and junior counsel.

39 The City of Whittlesea (the "WCC") is located in the metropolitan fringe approximately 20 kilometres to the north of Melbourne. Covering an area of approximately 487 square kilometres, the City is physically one of the largest municipalities in metropolitan Melbourne.

40 The Western Ring Road traverses the southern section of the City provides an important passenger vehicle and freight link to the Hume Highway, Melbourne Airport and the port of Melbourne.

41 The Hume Highway is a major arterial road that links Melbourne to a number of Victorian and New South Wales provincial cities, together with Sydney and the Australian Capital Territory. It is a National Highway and part of the National Highways System. Over the past 20 years the Federal Government (through the Federal National Highway Program) has funded the upgrading of the highway to divided highway and freeway standard. As part of the upgrade, it was intended to provide a freeway connection between Hume Freeway at Craigieburn and the Metropolitan Ring Road, to bypass a heavily congested section of the Hume Highway between these points. This particular section of the Hume Highway carried a large volume of traffic with a high proportion of heavy trucks. It became increasingly congested, with major traffic delays and a high accident rate.

42 The initial reservation for a connection between the Metropolitan Ring Road at Thomastown and the Hume Freeway at Craigieburn, was created in 1975. It was situated near the Merri Creek, well to the west of Mr Love's land.

43 However, the reservation passed through the 400 hectare Craigieburn Grasslands, which were later recognised as being of national significance, and the 70 hectare Cooper Street Grasslands, which are of State significance. These grasslands are some of the only remnant areas of self-sustaining native grasslands on the northern fringe of Melbourne. They were initially included on the Interim List of the Register of the National Estate and on 27 October 1998 they were added to the Register of the National Estate under the Australian Heritage Commission Act 1975.

44 In March 1996, the Victorian Minister for Conservation and Natural Resources announced the Government's Conservation and Environment Policy, "A Clean and Green Victoria", which provided for the creation of the Craigieburn Grasslands Flora and Fauna Reserve with a commitment to move the freeway reservation.

45 Recognition of the significance of the grasslands required the consideration of an alternative alignment for the Craigieburn Bypass.

46 On 15 May 1997, an advisory committee was appointed to consider and hear submissions regarding the relocation of the Hume Freeway Reservation between Craigieburn and the Western Ring Road. It held public hearings in May 1999 and published its report in October 1999. The committee considered seven options for modifying the alignment of the reservation.

47 The Committee found that there was a need for a freeway from Craigieburn to the Metropolitan Ring Road arising from both a strategic need and traffic needs. It found that a "no construction" option was not a viable alternative.

48 The committee concluded that Option 5 was the preferred option. Option 5 passed through 360 Cooper St and through that part of Mr Love's land adjoining 360 Cooper Street to the north.

49 Subsequently, a working party, comprising officers from the Department of Infrastructure, the Department of Natural Resources and Environment and VicRoads, identified three new route alternatives, options X, Y and Z. The members of the advisory committee were reappointed as a second advisory committee to consider, amongst other matters, those options.

50 The second advisory committee reported in December 2000.[16] The committee recommended option Y. That alignment ran through Mr Love's land. It subsequently became the acquired land resumed by the Corporation.

51 On 21 February 2001, the Premier announced that option Y had been selected.

52 On 11 February 2002, the acquisition date, by notice published in the Government Gazette, the Corporation acquired part of Mr Love's land for the purpose of the Craigieburn Bypass.

53 Prior to the acquisition, Mr Love's land comprised 207.09 hectares in 2 titles: Volume 10321 Folio 255 (460 Cooper Street); and Volume 10321 Folio 252 (410 Cooper Street).

54 The two titles were separated by an unmade and unused government road known as Vearings Road. Prior to January 2001, it had been licensed to Mr Love for use for agricultural purposes. However, as at the acquisition date on 11 February 2002, no such licence was extant.

55 To the west of the unmade Vearings Road was the land in Certificate of Title Volume 10321 Folio 255, being Lot 2 on Plan of Subdivision 50451G, known as 460 Cooper Street (the "western land"). It had an area of 55.89 hectares. A title plan of the western land is set out below.

56 To the east of Vearings Road was the bulk of Mr Love's holding being the land in Certificate of Title Volume 10321 Folio 252, being Lot 22 and part of Lots 23 and 24 on Plan of Subdivision 5819, known as 410 Cooper Street (the "eastern land"). It had an area of 151.2 hectares. A title plan of the eastern land is set out below.

57 Thus Mr Love's land, which remained in his ownership on the acquisition date, was an irregular shape, enjoying substantial frontage to Cooper Street, Epping and broadly running between Cooper Street to the south and O'Herns Road to the north. The irregular shape of the land was the legacy of sections of the original Love family holding having been earlier sold.

58 In 1981, Mr Love's family sold land previously quarried for basalt under lease to Blue Metal. This site was located between the eastern land and the western land. It was sold to WCC for the purposes of a putrescible tip ("the WCC No.1 tip").

59 In 1989, Mr Love's family sold a further parcel of land to the north with frontage to O'Herns Road. This again was sold to the WCC for use as a putrescible tip ("the WCC No.2 tip"). This land had earlier been quarried for basalt by Pioneer and its predecessors under lease from Mr Love's family.

60 By the acquisition date, both the No.1 and No.2 tips had ceased to accept fill and had been capped. The WCC dog pound was located on the WCC No.2 tip site. An access licence previously granted by Mr Love in favour of the WCC permitting it access to the WCC No.2 tip site from Cooper Street across the WA149 land had been terminated in about January 2001.

61 In his submissions, Mr Love helpfully described the physical conditions of his land by reference to an aerial photograph, a copy of which is set out below:

62 I accept the further observations made by Mr Love in describing his land as follows:

(a) The western land, being 55.89 hectares, was the subject of an existing extractive industry operation under Work Authority WA149 (the "WA149 Land"). As detailed below, this land was worked as a basalt quarry by Conundrum Holdings Pty Ltd ("Conundrum"), under the directorship of a Mr Kerr, pursuant to a lease and licence granted by the Love family. The land was zoned Special Use Schedule 4 Extractive and Stream and Floodway.

(b) Most of the eastern land (which in total comprised an area of 151.2 hectares), was the subject of a Work Authority application WA658 (the "WA658 land"). The WA658 land comprised 88.44 hectares. The northern portion of this land was zoned Special Use Schedule 4 Extractive while the balance of the land was zoned Rural. A groundwater bore and windmill located in the centre of the WA658 land provided stock water for that part of the Love property.

(c) At the acquisition date, improvements to Mr Love's eastern land included two dwellings.

(d) The first was Mr Love's main farm dwelling at 410 Cooper Street with an access driveway to Cooper Street to the south, out-buildings and a water bore wind-mill (together referred to as the "homestead dwelling"). At the acquisition date and to date, Mr Love and his wife have continued to live in the homestead dwelling. The homestead dwelling was situated to the south west of the WA658 Land. The complex included a home, garage/workshop, machinery shed and three storage sheds. A groundwater bore and windmill located in that complex provided stock water for that part of the Love property and the WA149 land. The complex was located on high ground with a commanding easterly view.

(e) The second dwelling was a weatherboard house, nearby cottage and associated out-buildings (together referred to as the "Clonard dwelling"), with a frontage to O'Herns Road to the north. At the acquisition date, the Clonard dwelling was tenanted. The Clonard dwelling is situated to the northeast of the WA658 land. It is separated from the WA658 land by a water course, designated 4447, which was a tributary of Edgars Creek. The complex includes a home, cottage and garage which were leased to the residential tenant and a large set of cattle yards surrounded by various farm buildings including a milking shed/storage shed, a dairy/storage shed and a hay shed all of which were used by the Love family. A groundwater bore and bore pump located within the cattle yards provided stock water for that part of the Love property. The complex had adjacent to it two bull paddocks for the housing of Angus bulls when they were not in service.

(f) The balance of the eastern land, comprising some 62 hectares, was used for the grazing Angus beef cattle. From time to time, Mr Love's cattle also grazed on the WA149 land.

(g) The balance of the eastern land also contained the driveway entrance to the Clonard Homestead. A water course named Edgars Creek crossed the north east corner of that land. A groundwater bore and windmill located to the west of Edgars Creek and approximately 100 metres from the land's northern boundary provided stock water for that part of the Love property. The land surface was dominated by stony rises and, together with all of the Love property, had been the subject of geological exploration for basalt quarry rock in 1970. It and the balance of the Love property not contained within the area covered by WA149 were the subject of further geological exploration in 1995.

(h) The land to the south of the Love property and south of Cooper Street was zoned Special Use Schedule 4 Extractive, Rural and Stream and Floodway. The Special Use land had in place an extractive industry Work Authority WA381 and was leased or owned by a quarrying company, Hanson PLC ("Hanson"). The Special Use land was not being quarried but was being considered for reopening as a quarry and landfill site by Hanson.

63 Mr Love's freehold title to the eastern land described in Certificate of Title Volume 10321 Folio 252 was encumbered by a gas pipeline easement running in a north-south direction and bisecting Lot 24 ("the gas easement"). The gas easement served as a de facto planning boundary or divide in town planning strategy documents. The gas pipeline was buried within the gas easement ("the gas pipeline").

64 Adjoining Mr Love's land on Cooper Street to the east is the land known as 360 Cooper Street. This is owned by interests associated with Mr Scanlon (the "Scanlon Land"). Part of Mr Love's land known as Lot 22 is to the north of the Scanlon land.

65 As to the lease and licence in respect of the WA149 land, on 14 September 1990, Mr Love's family granted a lease and an associated licence ("the quarry lease") over much of the western land in favour of Conundrum, a company of which Mr Kerr is a director. The area of land leased to Conundrum more or less corresponded to the land the subject of work authority number 149 issued pursuant to the Extractive Industries Development Act 1995 ("the EID Act"). The quarry lease area was extended by letter dated 28 May 1998 and, shortly prior to the acquisition date, had a total area of 40.24 hectares. The quarry lease as varied expired by the passage of time on 28 January 2002 but, as at the acquisition date, Conundrum continued to occupy and to quarry the leased land for basalt. Extraction took place and continues above the water table with Conundrum having sales of 227,698 tonnes of basalt products in the 2001 to 2002 year.

66 As well as quarrying the WA149 land under lease from Mr Love, Conundrum had, since 1996, been lessee of land to the north of WA149 known as the Miller land (the "Miller land"), to which work authority WA445 applied. At the acquisition date, some excavation for basalt had occurred on the Miller land. The basalt resource on the Miller land comprised 7 million tonnes above the water table. A further 1 million tonnes of basalt rock was above the water table but within a section of the Miller land zoned "Urban Floodway Zone" under the Whittlesea Planning Scheme.

67 To the west of the Miller land, toward the Merri Creek, was land known as "Alvies" (the "Alvies land"). This land had also been previously quarried. However, at the acquisition date, the Alvies land was occupied by Hanson (previously Pioneer). It was operated by Hanson at that time as a tip licensed to receive both putrescible and solid inert fill.

68 At the acquisition date, most of Mr Love's land was zoned "RUZ - Rural Zone" under the Whittlesea Planning Scheme (the "WPS").

69 As to other zonings of Mr Love's land, the WA149 land was zoned "Special Use Zone 4"under the WPS. A small area of land approximately north of Mr Love's homestead dwelling adjoining the former WCC No.2 tip was also zoned "Special Use Zone 4". A narrow strip of land to the west of Vearings Road was zoned "Urban Floodway Zone".

70 In all of the zones which applied to Mr Love's land, a "quarry" was a permitted use, subject to a grant of a permit.

71 Following the decision to use option Y for the bypass alignment, on 4 September 2001 Amendment C23 to the WPS was approved. This reserved the acquired land for the purposes of the Craigieburn Bypass by imposing a Public Acquisition Overlay for the reservation of the necessary land for the option Y alignment. Included in Amendment C23 was an environmental significance overlay ("ESO 3") which was introduced in respect of a small part of the WA149 land on its south western corner near the Merri Creek.

72 As part of the February 2002 acquisition a design and development overlay ("DDO 2") was introduced. This applied to land 150 metres either side of the proposed Craigieburn Bypass. DDO 2 provided for a splay road formation in the vicinity of the Cooper Street interchange.

73 In October 1997, Mr Love applied to the WCC, by application number 704078, for a planning permit for the use and development of part of the eastern land for the purposes of a basalt quarry. The October 1997 application sought to extract on both sides of the gas easement down to, but not below, the water table and, at a much later time, potentially to extract below the water table but on the western side of the gas easement only.

74 The land the subject of planning permit application 704078 was, as expressed in the application, said to have an "indicated mineral resource" of 15.1 million tonnes of basalt rock. Of this, some 7 million tonnes was said to be above the water table and about 8 million tonnes below.

75 Well after the acquisition date and in 2007, further drilling, and thereafter further testing, of basalt cores was carried out. The 2007 drilling revealed a total resource estimated at 53.6 million tonnes in the central portion of Mr Love's land, being the land in Lot 24 and part of Lot 23. This included basalt rock within the gas easement. Of the total "indicated resource" 4.77 million tonnes was estimated to comprise the better quality "upper flow", for the most part above the water table, and 48.8 million tonnes was estimated to comprise the lesser quality "lower flow" (45.2 million tonnes of it being below the water table). Of the upper flow, 3.4 million tonnes was above the water table west of the gas easement and 0.2 million tonnes was above the water table to the east of the gas easement.

76 At about the time of seeking planning permission, Mr Love also applied for a work authority under the EID Act to the Department of Natural Resources and Environment to quarry either side of the gas easement down to, but not below, the level of the water table. The application for the work authority was designated "WA658" and covered a substantial part of Mr Love's eastern land (the "WA658 land").

77 On 1 July 1998, planning application 704078 was "called in" by the relevant Minister, Minister Cooper, at Mr Love's request. In a letter dated 1 July 1998 the Acting Minister for Planning and Local Government advised the Whittlesea City Council as follows:

I consider that this application raises a major issue of policy and that the determination of the application may have substantial effect on the achievement of planning objectives.

I have therefore determined to utilise section 97B(1) of the Planning and Environment Act 1987 and direct the responsible authority (City of Whittlesea) to refer the application for Planning permit No. 704078 to me for determination.

78 On 31 July 1998, the Minister established a panel ("the quarry permit panel") to consider the application. After conducting hearings and receiving submissions, the quarry permit panel sent its report to the Minister on 18 October 1998. The Minister, then Minister Maclellan, decided that the report should not be published at that time.

79 The quarry permit panel was informed by Mr Love that Conundrum was the likely quarry operator. The panel report records that:

It was anticipated that the site would be operated by Conundrum Holdings who currently operate quarries further to the west. The actual sales volumes were estimated to be in the order of 350,000 tonnes per year.

The panel also noted: "It is important to appreciate that any activity proposed under the planning permit will not be initiated for a further 15 years or thereabouts". This accorded with Mr Love's understanding that a 15 year delay was what was being proposed, with the result that no quarrying of the WA658 land would commence until 2013.

80 The quarry permit panel, while recognising that significant basalt resources existed and major quarry operations were being conducted in the municipality, observed that constraints were needed to limit any quarrying operation on Mr Love's land so as not to inhibit the growth of the anticipated urban development in the area. In this respect the panel noted that two constraints should operate to ensure that, by 2025 or thereabouts, quarrying on Mr Love's land should cease. The two constraints were: (a) confining quarrying to the area of Mr Love's land which was west of the gas pipeline; and (b) further confining any future extraction operation by recommending that no quarrying should occur below groundwater level.

81 The combined impact of these conditions, if acted upon, would have been to limit extraction to a total of about 4 million tonnes of basalt from the resource then estimated to be in total 15.1 million tonnes.

82 The reasoning of the quarry permit panel will be dealt with in more detail later in these reasons.

83 The far eastern block, forming part of Mr Love's land, being the land comprised in Lot 22, was not included in the WA658 or 704078 applications. The rock resource on this part of Mr Love's land was said in the 704078 application documents to comprise 3.6 million tonnes. This area was not the subject of further drilling in 2007 and whatever rock lies within it may be ignored for the purposes of the proceeding.

84 On 25 November 1999, the Minister signed a refusal to grant the application 704078 permit. Three reasons were stated for the refusal, namely:

1. The proposed use is not considered appropriate to the location and would prevent proper future development of the area.
2. The proposed site is not an appropriate use for the land having regard to the Whittlesea Planning Scheme.
3. The proposed use is not an appropriate one for the land because of its effect on the amenity of the neighbourhood.

85 Accordingly, at the acquisition date, there was known to be a further rock resource within the 70748 application area, however, because application 704078 had been refused, no planning permit was in existence. There was similarly no work approval under the EID Act in place to quarry the land. That was so despite the lodging of the 10 March 1998 work approval application and an updated August 2000 version which proposed the relocation of the gas easement being lodged for approval.

86 Apart from the WA149 land to the west of Vearings Road, which, at the relevant date, was improved by various quarry assets owned by Conundrum, the balance of Mr Love's land was being farmed by him. The improvements upon the balance of Mr Love's land were consistent both with that use and the fact that most of the land was zoned "RUZ - Rural Zone" under the relevant planning scheme.

87 Immediately after the acquisition, there was no change in the physical condition of Mr Love's land. After possession was taken in early 2003, leaving to one side the "protected area" which included the improvements known as "Clonard", works were carried out to construct the Craigieburn Bypass. Those works commenced on approximately 15 January 2003 on the acquired land and were concluded in late 2005 with the Bypass itself being opened to the public on 20 December 2005. As part of the Bypass works, O'Herns Road, which is to the north of Mr Love's property, was re-constructed as an elevated road over the divided bypass.

88 The acquisition severed Lot 22 of Mr Love's land so that direct access across the farm was no longer available once possession was taken of the acquired land. However, access continued to be available via O'Herns Road between the main part of Mr Love's land after acquisition and the Lot 22 land.

The Acquired Land and the Effect of the Acquisition on the WA658 Land

89 As a result of the acquisition, a strip of Mr Love's land, about 1.6 kilometres long, in a north-south direction more or less parallel and to the immediate east of the gas easement was taken by the Corporation. The land in Lot 22 immediately north of the Scanlon land was severed from the balance of Mr Love's land remaining.

90 The acquired land bisected the area of Mr Love's land where he proposed to conduct his quarry operation. I am satisfied that this rendered any quarrying of basalt on the WA658 land unsustainable.

91 The Clonard dwelling is situated within the acquired land. Mr Love contends that "Clonard" is of historic significance and, following the identification of proposed routes for the bypass potentially passing through it, he opposed both the acquisition of it for the purposes of the Bypass and its demolition for the implementation of the project. On 28 February 2003, the Corporation received conditional consent from Heritage Victoria to demolish the homestead.

92 For approximately 12 months after the acquisition, Mr Love and the tenant of "Clonard" remained in occupation of the acquired land. On 15 January 2003, the Corporation took possession of the acquired land pursuant to a warrant of possession. On 14 February 2003, Mr Love commenced proceeding 4504 of 2003 by writ ("the writ proceeding"). On 6 March 2003, an interlocutory injunction was granted by Nettle J in that proceeding restraining the Corporation from, amongst other things, taking steps to demolish "Clonard".

93 The injunction remained in place until discharged following the trial of the writ proceeding by order made 23 June 2009.[17] In the intervening period, the homestead and the cottage were occupied by members of the Donovan family who, from time to time, assisted Mr Love with farm work.

94 At the date of trial, "Clonard", in fact, remains in tact. "Clonard", together with various aspects of Mr Love's land, including the WA149 land, and Conundrum's quarry upon the WA149 and WA445 land, were the subject of a view by the Court in the course of the trial. It was observed that the homestead was boarded up and uninhabited.

95 I have set out a chronology of key events which I find occurred prior to the date of acquisition, namely 11 February 2002, and shortly after that event.

96 The chronology is attached as "Annexure B" to these reasons.

97 The present proceeding invokes the exercise of a statutory jurisdiction conferred upon the Court pursuant to Part 10 of the Land Acquisition and Compensation Act 1970 ("the LAC Act"). Section 89 requires the Court to determine the amount of compensation to be paid in respect of the claim, in this case, constituted by the current claim made by Mr Love dated 16 November 2007, as amended in the course of this proceeding.

In determining the compensation payable the Tribunal or the Court is not bound by the exercise of any discretion of the Authority or by any opinion or determination of the Authority, but must determine the compensation payable in the particular circumstances of the case having regard to the provisions of this Act.

99 Section 30 of the LAC Act provides a right to compensation for acquired land:

30 Right to compensation on acquisition

Subject to this Act, every person who, immediately before the publication of a notice of acquisition, had an interest in land that is divested or diminished by the acquisition of the interest to which that notice relates has a claim for compensation.

100 Section 41(1) of the LAC Act provides for the general principles upon which compensation is to be based:

41. General principles on which compensation is to be based

(1) Except as otherwise provided in this Part, in assessing the amount of compensation payable to a claimant in respect of an interest in land which is acquired under this Act, regard must be had to the following factors -

(a) the market value of the interest on the date of acquisition;

(b) any special value to the claimant on the date of acquisition;

(c) any loss attributable to severance;

(d) any loss attributable to disturbance;

(e) the enhancement or depreciation in value of the interest of the claimant, at the date of acquisition, in other land adjoining or severed from the acquired land by reason of the implementation of the purpose for which the land was acquired;

(f) any legal, valuation and other professional expenses necessarily incurred by the claimant by reason of the acquisition of the interest.

101 Section 5A of the Valuation of Land Act 1960 ("VL Act") provides an underlying statutory framework for the valuation of land in the following terms:

5A Determining value of land

(1) Unless otherwise expressly provided where pursuant to the provisions of any Act a court board tribunal valuer or other person is required to determine the value of any land, every matter or thing which such court board tribunal valuer or person considers relevant to such determination shall be taken into account.

(2) In considering the weight to be given to the evidence of sales of other lands when determining such value, regard shall be given to the time at which such sales took place, the terms of such sales, the degree of comparability of the lands in question and any other relevant circumstances.

(3) Without limiting the generality of the foregoing provisions of this section when determining such value there shall, where it is relevant, be taken into account -

(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use;

(b) the effect of any Act, regulation, local law, planning scheme or other such instrument which affects or may affect the use or development of such land;

(c) the shape size topography soil quality situation and aspect of the land;

(d) the situation of the land in respect to natural resources and to transport and other facilities and amenities;

(e) the extent condition and suitability of any improvements on the land; and

(f) the actual and potential capacity of the land to yield a monetary return.

102 An owner is to be compensated for no less and no more than the loss suffered by the acquisition, except where the legislation otherwise provides. As Osborn J observed in Roads Corporation v Love (the "Cooper Street proceeding"):[18]

... the notion of compensation envisages that an owner is entitled to be compensated fairly and fully for his loss, but is not entitled to receive more than fair compensation.[19] Quoting from Scott LJ in Horn v Sutherland Corporati__on[20] in Transport for London v Spirerose, Lord Neuberger referred to the underlying concept in the following terms: "the principle of equivalence which is at the root of statutory compensation, the principle that the owner shall be paid neither less nor more than his loss", save, I should add, where the legislation otherwise provides.[21]

103 However, it is well established by authority that, other things being equal, if there is a doubt as to the amount properly payable by way of compensation, the doubt should be resolved in favour of the more liberal estimate.[22]

104 Section 40 of the LAC Act defines "market value" in relation to any interest in land on a particular date as meaning: the amount of money that would have been paid for that interest if it had been sold on that date by a willing but not anxious seller to a willing but not anxious purchaser.

105 Market value is an objective rather than subjective standard. Accordingly, the test adopted in the law to assess market value is hypothetical: the hypothetical price at which the hypothetical seller and buyer are prepared to agree will be the value of the asset on the day in question. Thus special value to the actual owner is excluded from market value because that person is not the hypothetical seller. On the other hand, special value to hypothetical purchasers is included in market value since no potential purchasers are to be excluded. The market as a whole needs to be considered, including segments of the market which might require the land for specialised uses, and differently resourced potential purchasers which may exist within those specialised markets.

106 It is only the facts considered on the day of acquisition which are relevant in undertaking the assessment of value. As Isaacs J said in Spencer v Commonwealth[23] ("Spencer"):

All circumstances subsequently arising are to be ignored. Whether the land becomes more valuable or less valuable afterwards is immaterial. Its value is fixed by Statute as on that day. Prosperity unexpected, or depression which no man would ever have anticipated, if happening after the date named, must be alike disregarded. The facts existing on 1st January 1905 are the only relevant facts, and the all important fact on that day is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted. The plaintiff is to be compensated; therefore he is to receive the money equivalent to the loss he has sustained by deprivation of his land, and that loss, apart from special damage not here claimed, cannot exceed what such a prudent purchaser would be prepared to give him. To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration.

107 Griffith CJ emphasised the hypothetical nature of the exercise when he wrote in Spencer:[24]

In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie, whether there was in fact on that day a willing buyer, but by inquiring "What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?"

108 These concepts are now the subject of statutory recognition in the LAC Act. Section 40 provides:

40 Market Value

In relation to any interest in land on a particular date, means the amount of money that would have been paid for that interest if it had been sold on that date by a willing but not anxious seller to a willing but not anxious purchaser.

109 The hypothetical seller and buyer are assumed to have full knowledge of the land in question. As Isaacs J continued in Spencer:[25]

We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason so ever in the amount which one would otherwise be willing to fix as the value of the property.

110 These principles have been recently confirmed by the High Court. In Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority[26] the Court cited with approval the summary of the judicial exegesis in Spencer provided by McHugh J in Kenny & Good Pty Ltd v MGICA (1992) Ltd, [27] where his Honour McHugh J said:

Value is determined by forming an opinion as to what a willing purchaser will pay and a not unwilling vendor will receive for the property. In determining that value, there must be attributed to the parties a knowledge of all matters that affect its value. Those matters will include the predicted impact of future events as well as the experience of the past and the rates of return on other investments. As Isaacs J pointed out in Spencer v The Commonwealth:

"We must further suppose both to be perfectly acquainted with the land, and cognisant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property."

The market for the property is, therefore, assumed to be an efficient market in which buyers and sellers have access to all currently available information that affects the property.

Part of Land Acquired - "Before and After" Analysis

If less than the whole of the land in which a claimant's interest subsists is acquired or less than the whole of that interest is acquired, the market value of the acquired interest is the difference between the market value of the interest before the acquisition and the market value of the interest after the acquisition.

112 This sub-section requires the assessment of market value in a case such as the present to be undertaken by way of a "before and after" analysis. Thus: Market Value where part of land acquired = A (value of whole of the land before acquisition) - B (value of what remains after acquisition). A before and after analysis will embrace not only the loss of the value of the land acquired but also the effect of the acquisition upon the value of the balance of the land at the date of acquisition. As Osborn J observed in Roads Corporation v Love:[28]

Loss attributable to severance as defined in the LAC Act is thus potentially embraced by the before and after analysis (at least insofar as the notion of severance applies to the balance of the acquired land).

113 A proper market value should also reflect the highest and best use of the asset. It is the highest and best use for the subject land which is to be measured. In Spencer, Isaacs J expressed the measure of compensation in these terms:[29]

... the question for the tribunal is, what is the point at which the parties would meet; what is the sum the one would be willing to give and the other to take? That is practically the same as asking what is the highest sum such a purchaser would give, because we must assume the owner would be willing to take the best he can get. The best he can get in those circumstances is the test of what he loses, and it is his loss which must be replaced.

114 Thus the highest and best use is an important attribute of the land for the purposes of assessing its value in the hypothetical open market. Section 5A(3)(a) of the VL Act reflects that market value is to be assessed, amongst other things, by reference to the potential highest and best use available to the land as at the relevant date, whether or not the land is actually being used for its highest and best use as at the acquisition date. Such an approach is necessary to ensure compensation for the full value of the land to the owner.[30]

115 The development potential of the land may affect its highest and best use. It is accepted that the notion of highest and best use permits a combination of actual and potential uses. In ISPT Pty Ltd v Melbourne City Council,[31] the Court of Appeal stated:

The concept of highest and best use is implicit in the theoretical basis of assessment of market value at a given point in time. Such value is understood to be ascertainable in accordance with the formulation of Isaacs J in Spencer's case:[32]

To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.

It is implicit in this formulation that both vendor and purchaser are to be regarded as aware of the potentially most advantageous ongoing use of the land and not simply its current use, when formulating the relevant value. Such potential is a circumstance which necessarily affects the value of the land either advantageously or prejudicially.

Further, in Turner v Minister of Public Instruction[33] Dixon CJ stated:

After all the purpose (of valuation) is to ascertain the full return which may reasonably be expected from the sale of the land, not the most conservative value.

In Commonwealth Custodial Services Ltd v Valuer-General (NSW)[34] Biscoe J elaborated the concept by reference to relevant authority in the following terms:

There is no statutory definition of "highest and best use". It has been described in the High Court as "the most advantageous purpose for which [the land] was adapted": Spencer v The Commonwealth. It "is the present value alone of such advantages that falls to be determined": Cedar Rapids Manufacturing and Power Co v Lacoste. In Park v Allied Mortgage Corporation Ltd Hill J said at [70]: "As Spencer's case itself makes clear the valuation must proceed by reference to the best use of the property. For this purpose the valuer will take into account not only the present use to which the land is applied, but any more beneficial use to which it may reasonably be applied. This is the process which a purchaser negotiating to purchase the property would undertake. Thus, it is not inappropriate in valuing property to take into account a potential development of the property, for among the range of hypothetical purchasers can be assumed to be a person who would undertake such a development as would maximise the usage of the land". In Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources Jacobs J said:

Common experience shows that land ideally suited for commercial development will fetch a higher price per unit of area than residential land, but it does not follow that the highest and best use of all land is a commercial use, for the highest and best use means exactly what it says - the most advantageous use of the subject land having regard to planning and all other relevant factors affecting its present and future potential. The first task of the valuer is to determine what that use is and then to value the land on that basis. It is not appropriate to determine the highest and best use by reference only to value.

In the present case the Tribunal summarised the underlying concept as follows in terms with which, with respect, we agree:

Highest and best use represents the most profitable potential use to which land can be put having regard to both planning and like controls and the circumstances of the land. It is to be distinguished from the present use of land; although the present use might also be the highest and best use. When land is sold, the market values the land at its highest and best use: as buyers will not be constrained to continue the existing use; and the seller will seek to achieve the highest price for the land. This is why highest and best use is relevant in assessing value, whether improved value or site value.

It also expressly referred to the notion of most advantageous use articulated by Jacobs J in the passage quoted above from the Adelaide Clinic case. Such a notion takes account of all factors relevant to the land affecting its present and future potential.

Further, as the Tribunal recognised in the course of its judgment, the highest and best use of a particular piece of land is flexible and may, at a particular point in time, be to "bank" the land with a view to future development rather than to use it actively.

By reference to s 5A, [of the VL Act] it can be seen that the Tribunal was required to take into account the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use where it was relevant. In the present case the question of highest and best use was potentially relevant both to the question of valuation generally pursuant to s 5A(1) and more specifically to questions of comparability of sales of other land pursuant to s 5A(2).

The language of the subsections is in our view deliberately flexible and capable of application to a potentially wide variety of circumstances as they may develop over time.

The role and weight to be given to the factor of highest and best use in a valuation exercise must in turn logically depend upon its relationship to other relevant factors disclosed by the evidence and affecting value.

This said, it was common ground between the parties that the proper ascertainment of the highest and best use of the subject land in the present case was a necessary preliminary step to its valuation. As Jacobs J stated in the Adelaide Clinic case in the passage already cited:

The first task of the valuer is to determine what that [highest and best] use is and then to value the land on that basis. [References in part omitted]

116 As to the nature of the enquiry in relation to the highest and best use, where the land in question has development potential beyond its current use, Osborn J further observed in Roads Corporation v Love:[35]

The question of highest and best use may involve enquiry into the probability of planning permission being obtained for such use.

117 This approach was exemplified in Transport for London v Spirerose Limited,[36] a case in which the House of Lords considered the position where the inferior tribunal found that there was a probability that planning permission for a valuable redevelopment of the land in question would have been granted. However the inferior tribunal awarded compensation on the basis of a valuation of the land not on the footing that it would probably have been granted but on the footing that it would have been granted.

118 In rejecting the approach of the inferior tribunal, Lord Scott observed:[37]

The party whom lies the burden of proving a relevant fact can succeed in discharging that burden on the so-called "balance of probabilities". If the existence of the fact is more probable than not, the burden of proof is satisfied. But this is to do with proof of historic fact. It has nothing to do with valuation. A search for the market value of land at a particular date must take account of the attributes of the land at that date. Absent statutory intervention there is no warrant for adding attributes that the land does not possess nor, for that matter, for subtracting attributes that the land does possess. The land in the present case had a promising potential for the grant of planning permission but it did not have the benefit of an actual grant of planning permission. To transform a probability of planning permission into a certainty of planning permission on the footing that the civil standard of proof, the balance of probabilities, has been satisfied misunderstands, in my respectful opinion, the nature of the valuation exercise ... [required].

119 In the same case, Lord Collins stated the issues for consideration in the appeal in the following terms:

The issue on this appeal can be stated shortly: where land is compulsorily acquired, and the Lands Tribunal, in assessing compensation, finds on the balance of probability that but for the compulsory acquisition (in what has been called since the 1970s, in the jargon of compulsory acquisition claims, "the no-scheme world") planning permission would have been granted by the valuation date, should the tribunal (a) treat that hypothetical permission as a certainty, to be assessed at its full value (in this case what is known as the "residual valuation"), or (b) award "hope value" that is, a percentage of the full value, discounted for the chance that permission would not have been granted?

120 In answer to this question, Lord Collins (with whom the other members of the House of Lords agreed) concluded:

In light of this finding of fact, it seems to be to be a plain on the basis of the statutory provisions, and of authority going back more than 100 years, which is entirely in accordance with commercial common sense, that:

(a) the value of the land is the open market value;

(b) any depression in the price which the land might be expected to fetch which is caused by the scheme is to be disregarded;

(c) the valuation must take into account the potential for the land, including its potential for development; and

(d) the future uncertainties.

If that is right, it provides a clear answer to the question on this appeal, namely that the valuation on the "hope value" basis is the appropriate one. [Emphasis added]

121 The House of Lords held that on the evidence valuation should be based on "hope value" and not on planning approvals assumed to be in place. This resulted in the compensation of £608,000 awarded by the tribunal (as affirmed by the Court of Appeal) being reduced to £400,000, to reflect the uncertainties involved in the grant of planning permission to achieve the highest and best use of the land.

122 The present case involves significant issues as to whether and how the value of the land's potential for development as a basalt quarry and a landfill use should be discounted for future uncertainties, including planning uncertainties. As will appear, a most significant uncertainty arises in relation to the obtaining of requisite land use approvals. The resolution of these issues falls to be determined in accordance with the terms of the LAC Act and not notions of general principle.[38] Nevertheless, as Osborn J observed in Roads Corporation v Love[39] the English authority reflected in Transport for London v Spirerose Limited provides a useful illustration of an accepted approach to the valuation of land which has development potential.

123 The approach of the House of Lords in Spirerose has found support in Australian authority. In Crouch v Minister for Works,[40] Wells J considered the position where at the time of the acquisition the subject land was used for grazing, but it was agreed by the parties that it was then fit and ripe for subdivision. His Honour stated the problem for determination in the following terms:[41]

At the root of the problems concerning an appropriate hypothetical subdivision, lies the question whether a subdivision of any kind of land in the Hills Face Zone - in particular, in the forms proposed - would have been approved in December 1974; and if there is some doubt that approval would have been forthcoming, whether that doubt ought to have an effect upon a valuation based upon the particular subdivisions hypothesized.

Where a court finds facts in issue in a civil case it is empowered to act, of course, on the balance of probabilities, but where the circumstances of a case yield only probabilities to a court's evaluation, leaving open doubts and misgivings, a valuer must, when dealing with the same circumstances, reflect, in his reasoning, not only the probabilities, but also the doubts and misgivings. In short, if the purchaser-developer judges that planning approval is virtually certain, the price that he will pay will be higher than that which he will pay if planning approval is no more than probable, and is attended by a real risk that it will be refused.

In my judgment, therefore, a correct application of the Spencer's case test implies that, if the valuer is proceeding on the basis of a hypothetical subdivision contemplated by the willing, but not anxious, buyer and seller alike, the risk that approval of the subdivision would have been refused must be taken into account in determining the bargain price, and cannot be eliminated by attributing to the valuer the liberty to treat as certain that which, in truth and in deed, would have been no more than probable.

...

Consequent upon the foregoing analysis of the planning prospects, I am satisfied - and I find - that the hypothetical subdivisions proposed by both valuers ought, at the very least, to be treated with caution, and upon a decidedly conservative basis.

Potential Use and Avoidance of "Double Counting"

125 The Court is expressly directed by s 41 (2) of the LAC that, if market value is assessed on the basis that the land had potential to be used for a purpose other than the purpose for which it was used on the date of acquisition, then, to avoid double counting:

compensation must not be allowed for-

(a) any special value in respect of any pecuniary advantage that would necessarily have been foregone in realising that potential; and

(b) any loss attributable to disturbance that would necessarily have been incurred in realising that potential.

126 Wells J in Minister for the Environment v Petroccia,[43] in dealing with a similar statutory regime, put the position as follows:

It is trite law that if the subject land has two or more possible uses, one in fact being made of it and one or more that could well be made of it, and a valuation based on the latter yields a higher figure than one based on the former, the claimant may be denied any compensation for and in respect of subsidiary heads of claim such as disturbance or injurious affection, that ... draw their validity from the former use. A claimant cannot have it both ways; he cannot seize the benefit of the theoretical use, and claim other items of compensation based upon the actual use of the land.[44]

127 Section 43(1)(a) of the LAC provides that in assessing compensation the following matters must be disregarded:

... any increase or decrease in the market value of the interest in land which is acquired arising from the carrying out, or the proposal to carry out, the purpose for which the interest was acquired.

128 In assessing the "before" value of the land in the present proceeding, the Court is required to give effect to s 43(1)(a), insofar as it may be relevant. This may be contrasted with the "after" assessment, where any increase or decrease in the market value of the land arising from the carrying out or proposal to carry out the purpose for which the interest was acquired must be brought to account.[45]

129 A real question which arises in the present case is whether s 43(1)(a) of the LAC provides a statutory directive, not only to disregard any increase or decrease in the market value of the "before" value of the interest in land which is acquired arising from the carrying out, or the proposal to carry out, the purpose for which the interest was acquired, but also to disregard events which occurred which may have had such an effect.

130 Mr Love relies on s 43(1)(a) in the following manner. He submits that the carrying out of the construction of the bypass, being the purpose for which his land was acquired, and the proposal to carry out such construction, reduced the market value of his land and that such reduction is to be disregarded in assessing the "before" value. As a matter of law, such a proposition is unexceptional. However, he claims further that a number of events occurred because of the proposal to carry out the bypass construction and that such events are to be disregarded by virtue of s 43(1)(a).

131 On this view of the case for which he contends, Mr Love submits that s 43(1)(a) requires that the Court to disregard:

(a) the decision of the quarry permit panel and the conditions on the development of a quarry which it imposed; and

(b) the Ministerial refusal to grant a permit of 1999.

132 However, Mr Love's case goes further. He claims that in applying s 43(1)(a), not only must the Court disregard certain events, but it is open to the Court to assume the occurrence of certain events which would have taken place in the absence of the disregarded events. The events that are to be assumed on this view of Mr Love's case are not only these events that in effect are substituted, but all the things that would have happened over time had the disregarded events not occurred, including the physical development of his land.

133 Thus Mr Love asks the Court to assume in place of the disregarded events:

(a) that in 1999 planning approval had been granted by the Minister without the limitations imposed by the panel; and

(b) the development of his land as an operating quarry.

He therefore contends that his land should be valued in the "before" situation on the basis that, as at the relevant date, there was a viable quarry on the land, operating with planning permission without any relevant limitations, and producing and selling 700,000 tonnes of basalt per annum.

134 The Corporation, on the other hand, submitted that s 43(1)(a) of the LAC does not direct that the occurrence of an event or a chain of events, as opposed to any increasing or decreasing effects on market value, are to be disregarded in assessing the "before" value. It submitted that s 43(1)(a) does not require, or enable, the Court to proceed on the basis that events that did not in fact happen are to be treated as having happened, and that physical alterations to the land that were not in fact made are to be treated as having been made, because, but for the purpose for which the compulsory acquisition took place, they would have occurred or been made.

135 The Judicial Committee of the Privy Council in Point Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands[46] determined in essence that compensation for the compulsory acquisition of land cannot include any increase in the value of the acquired land which is entirely due to the scheme underlying the acquisition. The reverse situation, that compensation cannot include any decrease in the value of the acquired land, was later applied by the Privy Council in Melwood Units Pty Ltd v Commissioner of Main Roads.[47] Both limbs of the rule, as developed by the Judicial Committee, have become known as the "Point Gourde" principle.

136 The principle was applied by the High Court in Housing Commission of New South Wales v San Sebastian Pty Ltd.[48] San Sebastian concerned s 124 Public Works Act 1912 (NSW) which provided that compensation for land compulsorily acquired should be assessed without regard to any alteration to the value of the land arising from the establishment of any public works upon or for which the land was resumed. The High Court observed, citing Point Gourde, that "this provision states in statutory form a principle which had been developed in the cases independently of express statutory provision".[49]

137 Jacobs J, in delivering the lead judgment of the High Court, said of the rationale for Point Gourde:[50]

A difficulty which arises in the application of this principle is that valuation is in the ordinary case based on market value and, if the proposed public purpose and the possibility or likelihood of resumption therefore has become known prior to the date of resumption, the market value at the time of resumption will probably reflect by way of increase or decrease the possibility or likelihood of resumption for that public purpose. Therefore that value cannot be accepted. Yet it is inevitably in most cases the starting point of the process of valuation. With the actual market value at the time of resumption as the starting point it is then necessary to determine whether that value has been depressed or elevated by the market's foreknowledge of the possible or likely public purpose and consequent resumption.

138 In San Sebastian[51] Jacobs J also pointed to the difficulty in applying Point Gourde arising from planning and land use legislation and the processes pursuant to which statutory restrictions on land use are imposed, observing that:

Restrictions on land use, so that, explicitly or practically, use is restricted to a use for a public purpose for which the land might be resumed, are commonly imposed as a result of consultation with or direction by the public authority concerned with the carrying out of the particular public purpose.

139 As to the necessary nexus between the planning restriction imposed and the subsequent resumption, Jacobs J further observed in San Sebastian:[52]

Assume an area of land on the outskirts of existing settlement, and assume a planning authority concerned to designate land uses in a planning scheme. The land is designated open space. Thereafter it is resumed for the purpose of a public reserve. The fact that the land was zoned as open space may have depreciated its value. Does the resuming authority pay compensation at the depreciated value of open space or at some other value? The question cannot be correctly answered without knowing whether there was any connexion between the zoning as open space and the subsequent resumption. If the zoning was done with the intent or in anticipation that the land should be resumed for a purpose such as a public reserve or if the zoning was proposed or dictated by the resuming authority then s.124 [Public Works Act 1912 (NSW)] requires that the zoning be ignored. It is only a step in the process of subsequent resumption. But in other circumstances the resumption may be unconnected with the act of zoning. It may be that the resuming authority selects the land for resumption as a public reserve because it is zoned open space; if it does so it is doing no more than ensuring that it, as well as others, conforms to the planning scheme. In those circumstances there is no relevant relationship between the zoning and the public purpose. No public purpose, existing or anticipated, intended, or urged by the zoning authority, leads to the zoning; rather, the zoning leads to the public purpose and consequent resumption. [Emphasis added]

140 The Point Gourde principle was further referred to by the High Court in Emerald Quarry Industries Pty Ltd v Commissioner of Highways[53] where Mason J, in describing the underlying principle behind s 25(h) of the Land Acquisition Act 1969 (SA),[54] said:

The principle which underlies s.25(h) is one of long standing. It denies to the dispossessed owner the benefit of an enhancement in value and the disadvantage of a diminution in value which would flow from the execution of the undertaking. It was a rule of the common law which did not depend upon statute: Fraser v City of Fraserville (1917) AC 187. As Lord MacDermott said in the Pointe Gourde Case (1947) AC at p 572 : "It is well settled that compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition."

141 Gibbs J in Emerald Quarry Industries also made reference to the principle in the following passages:[55]

The Pointe Gourde principle has been frequently expounded and discussed, but for present purposes it is enough for me to cite two statements of the principle. In Fraser v City of Fraserville (1917) AC 187 at p 194:

"... the value to be ascertained is the value to the seller of the property in its actual condition at the time of expropriation with all its existing advantages and with all its possibilities, excluding any advantage due to the carrying out of the scheme for which the property is compulsorily acquired, the question of what is the scheme being a question of fact for the arbitrator in each case."

And in Melwood Units Pty Ltd v Commissioner of Main Roads (1979) AC 426 at p 434, Lord Russell of Killowen said:

"Under the principle in Pointe Gourde Quarrying and Transport Co. Ltd. v. Sub-Intendent of Crown Lands ... the landowner cannot claim compensation to the extent to which the value of his land is enhanced by the very scheme of which the resumption forms an integral part: that principle in their Lordships' opinion operates also in reverse". [56]

142 Some 15 years later, Kirby P succinctly described the Point Gourde principle in Haigh v Minister[57] where he said:

According to the principle, which is one devised by the judges, in valuing land for resumption purposes, any increases in the land's value which is entirely due to the scheme underlying the acquisition is to be disregarded. The converse of the principle is also accepted. Any diminution in the value of the land which is entirely due to the resumption scheme, or to any blight caused by a step in the resumption process, is to be disregarded in determining the value of the land: see Housing Commission of NSW v San Sebastian Pty Ltd [1978] HCA 28; (1978) 140 CLR 196 at 214; [1978] HCA 28; 37 LGRA 214 at 228.

Thus, where it is found that there is a direct connection between a restriction on land use imposed by planning and land use legislation and the proposed establishment of the public works for which the land might be resumed, the extent of such restriction on the value of the land must be ignored.

Behind this principle lies a search for fair valuation and an insistence upon just procedures. If it were not upheld in the determination of the value of resumed land, it would be possible for a resuming authority to use its powers and influence, in respect of such matters as zoning, to diminish the value of the land to be resumed, to its own advantage and to the disadvantage of the owner at valuation.

143 Thus, planning restrictions on land use must be ignored in any case in which there is a direct relationship between the restriction and the proposed public work which results in the eventual land resumption. The relationship will exist where it is found that there is a direct connection between a restriction on land use imposed by planning and land use legislation and the proposed establishment of the public works for which the land might be resumed. [58] Evidence that the restriction was imposed with the intent or in anticipation that the land in question would be acquired for a public purpose, may be sufficient in the appropriate case to establish the necessary nexus. [59] If the nexus can be established as a matter of fact, the Court will ignore the relevant planning control over the land and assume that which would have applied had there been no intervention by the resuming authority.[60] Conversely, where the Court cannot be satisfied on the evidence that there existed a direct connection between a restriction imposed under a planning scheme or like instrument and the proposed establishment of the public works for which the land might be resumed, the restriction cannot be ignored and will be taken into account in valuing the land in the "before" situation.

Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority

144 The Corporation submitted that the Point Gourde principle has been significantly altered by the decision in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority ("Walker Corporation").[61] It submitted that s 43(1)(a) of the LAC is to be interpreted in the light of the judgment of the High Court in that case, and that, as the High Court said in its joint judgment in Walker Corporation:[62]

It is the terms of the legislation that are determinative and it is not to be assumed that they reproduce or attempt to reproduce an understanding of "principles" derived by way of loss upon the spare terms of ss.49 and 63 of the 1845 Act (considered by the Privy Council in Pointe Gourde)".[63]

The Court further observed in Walker Corporation, caution is required in construing modern Australian legislation by reference to 'principles' derived from case law built up from various jurisdictions in which there are in force statutes in the same or similar terms.[64] It follows that it is the precise terms of the relevant statutory provisions which the Court is required to apply.[65]

146 I take the decision in Walker Corporation to underscore the following considerations of general application:

(a) In each case, it is the duty of the court to give effect to the purpose of the relevant resumption and compensation legislation, applying the ordinary and natural meaning of the words of the legislation as the primary guide to the understanding of that purpose; [66]

(b) Judicial decisions on similar or identical legislation made in jurisdictions outside the hierarchy of the court in question, are guides to, but cannot be decisive as to, the meaning of legislation within the court's jurisdiction.[67]

(c) Subject to such refinements as may be revealed in individual pieces of legislation, the fundamental principles of Point Gourde, as explained by Jacobs J in San Sebastian, continue to endure in statutory form and remain relevant. In Victoria, this is achieved by s 43(1)(a) of the LAC.

147 Applying these approaches to the legislation before it, the High Court in Walker Corporation determined that s 56(1)(a) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW), had a particular construction. The concept of "Market Value" for the purposes of the Act was defined by s 56(1)(a) to require that: "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" be disregarded. It was held that the sub-section, in its context, linked "the proposal" to the resuming authority and reflected a policy to disregard only the increase or decrease in value for which the resuming authority itself was responsible.[68] In the case before it, the High Court determined that "the proposal" for the public purpose in question, was that of the Foreshore Authority, and not that of the relevant local government council or the State government, or some aggregation of the policies of those parties. It was held that, in these circumstances, s 56(1)(a) did not require the disregard of any change in value referable to the actions of the council.

148 As submitted by Mr Love, Point Gourde has been considered and applied in Australia in a number of decisions since Walker Corporation.[69] In the re-hearing of Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority[70] before the Land and Environment Court following the handing down of the decision of the High Court in the matter, Biscoe J encapsulated the effect of the decision when he said:[71]

The statutory definition of market value in the chapeau to s 56(1) reflects the classic test of market value in Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418, while s 56(1)(a) reflects the principle in Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565. However, it is the terms of the legislation that are determinative: HCA at [47], CA 2 at [10].

149 Section 43(1)(a) of the LAC reflects in statutory form the Pointe Gourde principle.[72] During the Second Reading Speech in relation to the Land Acquisition and Compensation Bill, of 8 May 1986,[73] reference was made to the Australian Law Reform Commission, Lands Acquisition and Compensation, Report No. 14.[74] The Report noted:

The provisions mentioned above are a statutory expression of a judicially devised rule,[75] often referred to as the Pointe Gourde principle from the statement made by the Judicial Committee of the Privy Council in Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands:

It is well settled that compensation for the compulsory acquisition of land cannot include an increase in value which is entirely[76] due to the scheme underlying the acquisition.

Nonetheless, it is desirable that any statutory formulation of the measure of compensation specifically refer to the principle ... An appropriate statutory provision would require disregard of any increase or decrease in the market value of the acquired land arising from the carrying out, or the proposal to carry out, the public purpose for which the land was acquired.

150 As a matter of construction of s 43(1)(a) of the LAC, in the event that the provision applies, what is directed to be disregarded is "any increase or decrease in the market value" of the subject land which arises from the events described.

151 Section 43(1)(a) of the Victorian LAC is in different terms to s 56(1)(a) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW). Section 56(1)(a) of the New South Wales legislation provides that:

market value ... means the amount that would have been paid for the land ... disregarding ... (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 [Emphasis added]

It is to be noted that the words "caused by" are used in the New South Wales provision as opposed to the words "arising from" used in the Victorian provision.

152 In the context of arbitration clauses, the expression arising from has been held to convey a meaning equivalent to the expressions "arising out of" or "arising in connection with".[77] In Sydney Harbour Foreshore Authority (No 2),[78] the New South Wales Court of Appeal observed that arising from requires a less direct causal connection than the term in the New South Wales Act, "caused by".

153 Another significant difference between the compensation legislation in New South Wales and Victoria lies in the nature of the definition of compensation in each state. Section 55 of the Land Acquisition (Just Terms Compensation) Act 1991 provides:

1. 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 the land on the date of its acquisition,

(b) any special value of the land to the person on the date of its acquisition,

(c) any loss attributable to severance,

(d) any loss attributable to disturbance,

(e) solatium,

(f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.

[Emphasis by underlining added]

154 The inclusion of the word "only" in s 55 in the NSW legislation requires that "the amount of compensation" must be assessed under that statute only by reference to the listed matters which follow. The equivalent provision in Victoria, however, provides a broader notion of "compensation" by providing for an inclusive, rather than an exclusive, regime as follows:

41 General principles on which compensation is to be based

(1) Except as otherwise provided in this Part, in assessing the amount of compensation payable to a claimant in respect of an interest in land which is acquired under this Act, regard must be had to the following factors-

(a) the market value of the interest on the date of acquisition;

(b) any special value to the claimant on the date of acquisition;

(c) any loss attributable to severance;

(d) any loss attributable to disturbance;

(e) the enhancement or depreciation in value of the interest of the claimant, at the date of acquisition, in other land adjoining or severed from the acquired land by reason of the implementation of the purpose for which the land was acquired;

(f) any legal, valuation and other professional expenses necessarily incurred by the claimant by reason of the acquisition of the interest.

[Emphasis by underlining added]

155 In my opinion, the construction of s 56(1)(a) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) determined by the High Court in Walker Corporation, to the effect that only the increase or decrease in the value of the land caused by the resuming authority was to be disregarded, does not apply to s 43(1)(a) of the LAC.

156 In adopting this construction of s 43(1)(a) of the LAC, I bear in mind the duty of the Court to give effect to the purpose of the legislation by applying the ordinary and natural meaning of its words as the primary guide to the understanding of that purpose, and I also bear in mind that s 56(1)(a) of the NSW legislation considered by the High Court in Walker Corporation, is materially different to the Victorian in the manner I have described. I also bear in mind that the concept of "compensation" in the Victorian Act, provides greater scope that its NSW counterpart.

157 However, in each case, it remains a question of fact under s 43(1)(a) of the LAC in Victoria as to whether there was any increase or decrease in the value of the land "arising from the carrying out, or the proposal to carry out," the relevant public purpose. Provided a court is satisfied that the diminution or enhancement in value "arose out of" or "arose in connection with" the carrying out or the proposal to carry out the public purpose in question, the change in value brought about is to be disregarded in assessing the "before" value of the land. There is no warrant, in my opinion, for departing from this basic test when considering the facts of an individual case.

158 The fact that it was the conduct of a party other than the resuming authority which had the relevant effect, for example the conduct of a local government Shire Council in introducing an amendment to a planning scheme to protect a proposal of another public authority, is not necessarily a disqualifying factor, although it may be relevant in determining whether the necessary nexus is present.

159 At the same time, s 43(1)(a) of the LAC does not, in my opinion, permit a claimant to go back in time and select a potential which the land may then have had, and claim compensation simply because the public proposal was later introduced and as a result the potential was never realised. The mere fact that, as a matter of chronology, a public purpose proposal is later advanced and the potential was never attained, is not sufficient in itself to establish the necessary nexus, namely the loss of the attribute which "arose out of" or "arose in connection with" the proposal. As a matter of proof, more would be needed.

160 Further, as Osborn J observed in Murdesk Investments Pty Ltd v Roads Corporation,[79] the application of the Pointe Gourde principle may give rise to the question whether land is to be deemed to be subject to planning controls which would have applied but for the proposal to carry out the public purpose giving rise to the acquisition. His Honour cited McClellan CJ in Smith v Roads and Traffic Authority of New South Wales, where the Chief Justice at Common Law said:

In simple terms (it is possible to express the problem in more complex and possibly less helpful ways) the approach which has been traditionally adopted involves the following steps:

(1) identify the zoning of the land at the date of acquisition;

(2) determine whether that zoning was imposed or retained in order to facilitate the implementation of the public purpose for which the land was acquired.

If the answer to question (2) is yes, that zoning is notionally set aside, and the potential of the land and ultimately its market value is assessed by determining how the land would have been zoned, at the date of acquisition, but for the proposal to carry out the public purpose.

161 Thus, if the relevant zoning or control was introduced in order to facilitate the implementation of the public purpose for which the land was acquired, thereby causing a decrease in the value of the acquired land, the planning restriction will be disregarded under s 43(1)(a) of the LAC.

162 It is on the basis of these principles that Mr Love's case must be analysed.

163 Mr Meredith, an expert accountant engaged by the Corporation gave evidence as to the value of Mr Love's hypothetical quarry and landfill sited on the WA658 land founded upon a discounted cash flow ("DCF") methodology.

164 DCF is a valuation tool often used by analysts to evaluate the attractiveness of investment in an asset. A discounted cash flow analysis projects the cash flows an investment will generate in future years, then applies a discount rate to the cash flow stream to derive a present value for the investment. The discount rate is intended to reflect the risks inherent in achievement of the cash flow, in particular, revenue.

165 As Osborn J said in Roads Corporation v Love,[80] the use of DCF for the purpose of the valuation of land in court proceedings has not been free from controversy.

166 In Albany v Commonwealth ("Albany"),[81] Jacobs J rejected the application of DCF to the valuation of vacant land suitable for subdivision, observing that he was "not satisfied that this could be an acceptable method of valuation".[82] His Honour observed further:

The process of discounted cash flow is one which is known as a method of estimating present value of a capital asset in accounting processes. It is not a process which had previously been used by any of the plaintiff's valuers in the valuation of land ---

There is no evidence that the application of this method has either in theory or in experience produced results consistent with methods of valuation based on comparable sales or on that method of valuation upon the basis of hypothetical subdivision which has, where necessary, been applied in the past---

It would appear to be necessary in projections based on discounted cash flow to take account of rises in costs and likely rises in prices obtained. Rises in cost for the purposes of the analysis have been estimated at six per cent per annum and rises in prices at eight per cent per annum. It is hardly necessary to remark that the basing of a present price upon projections of this kind could be very dangerous without allowing for a wide margin of error by means of a heavy discount factor---

However, I would not consider it safe to adopt the indicated figure as a correct valuation of the lands, because I am not satisfied of the suitability in this case of a method of valuation based on discounted cash flow.

167 However, Jacobs J in Albany expressed no opinion upon the question as to "whether or not, in other circumstances and in other cases, a method of valuation by way of discounting the anticipated cash flow is a proper method of valuation of land".[83] Further, Jacobs J accepted the valuation of part of the land used as a quarry on the basis of a capitalisation of the minimum annual royalty payable to the owner by the quarry operator pursuant to licence as being "the correct approach".[84]

168 In Roads Corporation v Love,[85] Osborn J applied Adelaide City Corporation v City of Port Adelaide Enfield,[86] where the Full Court of the Supreme Court of South Australia considered the assessment of the capital value of a waste management centre for rating purposes. Debelle J (with whom the other members of the Court agreed) analysed the DCF method in the following terms: [87]

The discounted cash flow method values the land by valuing the business conducted on the land. It is, in truth, the value of the land and the profits derived from conducting a business on the land. That is demonstrated by Mr Smithson's evidence as to the manner in which he made his valuation. He calculated the revenue and expenditure over the known life of the Wingfield dump based on the revenue and expenditure of the WWMC. He then discounted those calculations back to a present value, the discount rate reflecting the risks inherent in the cash flows, in particular, revenue. His assessment allowed for the cost of the land itself and for the costs of closing the site, rehabilitation costs and other costs to be incurred after the site had closed. That realised what he believed to be the price an owner-operator would pay for the land. Significantly, the valuation assumes, as Mr Smithson acknowledged, that the purchaser would obtain a licence for the land. In that sense, it is a valuation of the price which would be paid for the land and the business with a licence to carry on that business. It is not, therefore, an assessment only of the price to be paid for the land.

The discounted cash flow method is useful for valuing shares and other assets. It is also useful when valuing land to be used either as a quarry or as land to be used for waste disposal and, in particular, the latter. As already mentioned, land used for waste disposal usually has little intrinsic value, particularly if already used for that purpose. As the value of the land lies in the ability to earn income from the land, the price of the land is essentially determined not by any intrinsic value of the land but by the use to which the land can be put and the income derived by the owner of the land from that use, be that income royalties or, in the case of the owner-operator, profit.

As mentioned earlier, the income to be derived from the land is, of course, often a factor affecting value. It has a particular significance in a case such as this where little capital expenditure is required to operate the business. In this case, both valuers ignored the relatively insignificant improvements on the land. In addition, the evidence shows that the necessary equipment can be hired. In other words, land used for this purpose is able to generate revenue without significant costs in addition to the purchase price. If purchased by the owner-operator, the discounted cash flow method has a particular utility. It is, however, generally recognised that care should be taken when using the discounted cash flow method and the resulting valuation should be checked against other methods of land valuation. A judgment must be made as to value and the result checked against other available evidence of value. In this case, notwithstanding that he primarily relied on the discounted cash flow method, Mr Smithson used the sales of comparable land in Victoria as a check. Ms Carolan also used those Victorian sales as a check.

The discounted cash flow method is useful in cases such as this where there is a finite life of the business and the income and expenditure are known. It is also useful when valuing a business such as this which is a going concern. It is less useful when other assets or capital expenditure are involved. But the evidence is that little, if any, capital expenditure is required to operate the business. The method is also useful because the quantity of fill which can be dumped on the site is known. The purchaser is not simply buying the land. He is buying the land with the capacity, subject to obtaining a licence, to run a like business earning like profits. The utility of the discounted cash flow method is emphasised by the fact that the land has a relatively low value of itself.

169 Debelle J concluded that, by reason of a number of factors, there were few risks attached to the operation of the business being valued, the only risk noted as being in obtaining the relevant licence. In this respect the Court found that, before purchasing the land, a prudent purchaser would have made inquiries to determine the likelihood of obtaining a licence, and acknowledged that the discounted cash flow provided "a valuation of the business including the licence".[88]

170 In Adelaide City Corporation, the factors considered by the Full Court to support the utility of the discounted cash flow method being applied in the particular circumstances of that case were:[89]

(1) the hypothetical purchaser would be buying land already used for waste disposal;

(2) as the use was an existing lawful use of land, the purchaser would not have to obtain planning approval;

(3) the purchaser could himself conduct the business subject to obtaining a licence;

(4) the purchaser would be aware that the site is the largest landfill site in the Adelaide metropolitan area taking about 55 per cent of metropolitan Adelaide domestic waste and 50 per cent of commercial and industrial waste from the Adelaide metropolitan area;

(5) there are a diminishing number of operational landfill sites in the Adelaide metropolitan area;

(6) the site is close to the Adelaide central business district and therefore has a local, as distinct from personal, goodwill which attaches to the land and enhances its value;

(7) the site has a finite life;

(8) the purchaser would have been able to gain access to the accounting records of the vendor; and

(9) the operation of the dump required little capital expenditure because it was not necessary to incur substantial costs to establish the business such as the cost of buildings in that plant and equipment would be hired.

171 In Roads Corporation v Love,[90] Osborn J distinguished Adelaide City Corporation v City of Port Adelaide Enfield on a number of grounds, noting that "the Adelaide City case was concerned with the valuation of land which had been used for the purpose of dumping rubbish since 1974 firstly by private contractors and then between 1987 and 1999 (the date of valuation) by the Adelaide City Council. Conversely, the landfill business hypothesised in Mr Love's claim did not exist".[91] His Honour further observed:[92]

It may be observed that the facts before the South Australian Court were fundamentally different from those before me:

(a) the finite life of the operation, the income and expenditure of an existing operation are not known;

(b) the quantity of fill which can be dumped on the site can be estimated, but is not known and depends on the extent of future extraction, the terms of relevant approvals, and operational compaction rates;

(c) the land is not of relatively low value.

In the article by SJ Brown to which Debelle J refers, the learned author observes:

"It is important for expert witnesses to rely on verifiable evidence in projecting cash flows. Discounted cash flow analysis makes explicit items which conventional capitalisation methods subsume as being taken account of in the discount rate. While having the advantage of ensuring that all relevant considerations are analysed, discounted cash flow analysis requires that such considerations which are extrapolated and projected are based upon evidence available to the expert witness as at the date the valuation is made."

172 In Roads Corporation v Love,[93] Osborn J also considered Collex Pty Ltd v Roads and Traffic Authority ("Collex").[94] In that case, Talbot J was concerned to value loss of air space from part of an existing landfill site following a compulsory acquisition. The authority acquired an area of some 4.5 hectares from a 35 hectare site. At the date of acquisition the landfill had planning approval to accept 430,000 tonnes of solid waste per annum. His Honour surveyed relevant authority and concluded:[95]

Although Courts have clearly experienced difficulty from time to time in accepting the DCF method due to the unreliability of the assumptions made for the purpose of the analysis, it is nonetheless a method which can be accepted where the special facts and circumstances pertaining to the subject land make it appropriate to do so.

173 Osborn J analysed Collex and its application to the case before him, noting that "The fundamental difficulty confronting the use of the DCF in the present case is the question of whether reliable financial information is available".[96]

In the Collex case, the DCF analyses put forward on behalf of the plaintiff were founded on the evidence of Mr Reed, a qualified geologist with 31 years in the quarry industry and 16 years in the landfill industry. On the basis of the evidence available to him, Mr Reed formulated appropriate assumptions in relation to:

• development approval for quarrying and landfill operations;
• extraction and landfill scheduling;
• handover of quarried airspace to Collex;
• landfill compaction and landfill densities;
• types of fill able to be placed in the Horsley Park landfill;
• landfill forecasts (tonnes per annum);
• tip fees for landfill, before and after EPA levy;
• landfill revenue;
• operational costs - labour, operating, maintenance and fuel;
• administration costs -royalties, provisions, other, premises and general overheads;
• fixed costs - depreciation, insurance, rates and taxes etc;
• capital expenditure - pre-payment, establishment etc;
• discounted cash flows - discount rates;
• risk and sensitivity analyses.

In assessing the net present value of the projected operational cash flow of the landfill operation assuming that no land had been resumed, Mr Reed adopted a before tax discount factor of 12 per cent on the basis of experience with similar valuations over the previous five years. In projecting the net present value of the projected operational cash flow in the 'after' situation he relied on the opinion of Mr Lonergan (who also gave evidence in that case). Mr Lonergan adopted a weighted average cost of capital in the range of 8.41 per cent to 8.74 per cent after tax. Mr Reed adopted a midpoint of 8.6 per cent. Talbot J recorded:

In a written joint statement Mr Lonergan and Mr Holt express the opinion that the methodology adopted by Mr Reed is a widely used and accepted valuation methodology and is the appropriate methodology to use in assessing the loss caused by the resumption. Furthermore the DCF approach is the most theoretically sound valuation methodology where reliable financial information about future events is available.

The fundamental difficulty confronting the use of the DCF in the present case is the question of whether reliable financial information is available.

[Emphasis added]

174 In the Collex case Talbot J concluded on the facts of the case before him:[97]

After giving due consideration to the various criticisms raised by [the valuer for the respondent] and appreciating the reluctance demonstrated by courts to accept the DCF methodology I nonetheless propose to adopt the overall joint opinions and advice given by the applicant's witnesses in the circumstances of this case where there is a significant degree of consistency about the operation of what is essentially a low risk business. I adopt the DCF method as the primary method of valuation. That approach carries with it the advantage of eliminating the relevance of a number of possible variables and adjustments such as a betterment factor or possible deferral of the price of the airspace as these matters are taken into account by the DCF calculation. The comparable sales analysis provides considerable assistance as a check method to show a result relevantly consistent with the DCF outcome.

175 As observed by Osborn J Roads Corporation v Love:[98]

It can be seen that his Honour [in Collex] applied the DCF methodology in circumstances where there was a significant degree of consistency in the evidence about the existing operation of what he found to be "essentially a low risk business". Further, he did so in circumstances where comparable sales analysis provided considerable assistance as a check method. His Honour's decision at first instance was upheld on appeal. The appellant did not challenge the adoption of the DCF methodology as such.

The observations of Hodgson JA in dissent under the heading "How did this conflict with commonsense occur", however point up the sensitivity of DCF analysis to potential error in critical inputs.

[Emphasis added and references omitted]

176 Osborn J also said in Roads Corporation v Love, by way of summary of that part of his reasons for rejecting Mr Love's contention to the effect that were it not for the acquisition of the subject land, the value of the site to the hypothetical purchaser would have reflected a price for the site's landfill potential:[99]

(a) It is one thing to apply a DCF methodology to the value of the landfill potential of land where landfill is a going concern, but quite another to apply it to the valuation of a hypothetical business.

(b) If the DCF method is to be relied on the assumptions must be satisfactorily grounded in evidence.

(c) The present case is not comparable to either the Adelaide City or the Collex case.

(d) I do not accept capital or operating expenditure, waste flow or gate prices can be predicted with the confidence with which they could be for an established business.

(e) I do not accept Mr Lonergan's [Mr Love's expert witness] assessment of the appropriate discount rate. I prefer that of Mr Meredith [the Corporation's expert witness].

(f) I do not accept critical assumptions which favour Mr Love made by both Mr Lonergan and Mr Meredith with respect to waste stream, compaction, gate price and costs.

(g) The results of the DCF method fall to be discounted further to reflect the probability of obtaining land use approvals which I have assessed as low (no more than 10 per cent).

(h) I am satisfied the DCF analysis is not sufficiently reliable in respect of critical parameters to demonstrate a positive value for the proposed landfill (even if it is assumed Mr Meredith erred as to post-closure costs and taxation).

(i) Such conservatism as may be involved in Mr Lonergan's assumptions do not alter my opinion.

[Emphasis added]

177 Mr Herdman is a Land Valuer and Chartered Mineral Surveyor by profession, specialising in the discipline of quarry, mining and waste management valuations. Further details as to Mr Herdman's qualifications and experience follow in these reasons. He was engaged by Mr Love to give evidence. He valued Mr Love's hypothetical quarry and landfill sited on the WA658 land founded upon a capitalisation of future earnings methodology ("CFE").

178 The CFE method in relation to the valuation of real property involves the multiplication of the actual or anticipated annual net or annual gross returns delivered from the subject property by an appropriate factor.[100]

179 In their work "Land Valuation and Compensation in Australia", the learned authors observe:[101]

The capitalisation rate ... should, wherever possible, be derived from market transactions. Prices paid for investment properties and the ratios existing between those prices and net annual returns reflect the market's assessment of risk, the nature and physical condition of the property, prospective net earnings, the extent to which existing improvements contribute to the best economic use of the site. And future depreciation of those improvements.

...

The actual or hypothetical net annual earnings of various enterprises can be used as valuation guides in cases where more direct evidence of value is not available.

180 In my opinion, the CFE methodology employed by Mr Herdman suffers from the same shortcomings in this case as those identified by Osborn J Roads Corporation v Love,[102] in relation to the DCF methodology, especially where his Honour highlighted the sensitivity of this kind of accounting analysis to potential error in critical inputs.[103]

181 The present case, insofar as it is founded on a CFE methodology (Mr Herdman for Mr Love) and a DCF methodology (Mr Meredith for the Corporation) needs to be approached with appropriate reservation. Here there is no operating quarry or landfill; there is no established business; and no information relating to a trading history of sales, production, profitability of a quarry or any similar trading information relating to a prospective landfill. There is consequently a real issue as to the existence of reliable evidence as to the appropriate inputs employed in these methodologies, such as selling price, volume of production, Opex[104] and Capex.[105]

182 Section 40 of the LAC Act provides for loss attributable to disturbance as a category of potential pecuniary loss. Section 40 defines the expression as follows:

loss attributable to disturbance means any pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of-

(a) the service upon the claimant of a notice of intention to acquire, where the Authority has refused or failed to give consent to the carrying out of improvements to the land in respect of which that notice has been served or the effecting or obtaining of any sales, transactions, licences or approvals in respect of that land; and

(b) the fact that an interest of the claimant in that land has been divested or diminished, being a pecuniary loss for which provision is not otherwise made in this Part.

183 Any loss attributable to disturbance is a recognised head of compensation under s 41(1)(d) of the LAC. However, it is to be noted that s 41(1)(d) is not limited by words equivalent to those found in s 41(1)(a) namely "on the date of acquisition".

184 Loss attributable to disturbance is therefore relevantly defined to mean any pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of the fact that an interest of the claimant in land has been divested or diminished, being a pecuniary loss for which provision is not otherwise made in Part IV of the LAC Act.[106] An interference with access, for example, may potentially give rise to a claim of this type.[107]

185 The application of the requirement that the relevant pecuniary loss be suffered as a "natural, direct and reasonable consequence" of the divestment of an interest in land, may give rise to difficult questions of fact.[108]

186 The expression "the natural, direct and reasonable consequence" is to be understood by the use of three adjectives in combination, to invoke a very close and limited connection between the event giving rise to a right to compensation and the financial loss suffered.[109]

187 The notion of disturbance loss is "drawn very much from common law principles".[110] As Batt J said in Halwood Corporation Limited (Scheme Administrator Appointed) v Roads Corporation,[111] the common law principles apply to causation except as modified or supplemented by statute.

188 A "reasonable consequence" within the meaning of the statutory definition requires the application of an objective test. As Osborn J observed in Roads Corporation v Love:[112]

... in Melbourne City Link Authority v Teford Pty Ltd, Batt JA with whom Tadgell and Chernov JJA agreed, proceeded on the basis that the question of whether a consequence is a "reasonable consequence" within the meaning of the statutory definition requires the application of an objective test.[113]

189 The claimant must demonstrate an actual loss by the incurring of actual monetary expenses.[114] In Roads Corporation v Melbourne Estates,[115] Gobbo J observed:

It will be a question of fact in each case as to whether the expenses were in fact about to be incurred.

190 Thus, even if the claim is objectively reasonable, without actual loss being established, no compensation is payable.[116]

The amount of compensation may be increased by such amount, not exceeding 10 percent of the market value of the land, by way of solatium as is reasonable to compensate the claimant for intangible and non-pecuniary disadvantages resulting from the acquisition.

192 Section 44 (2) of the LAC Act provides that an assessment of solatium is to take into account "all relevant circumstances applicable to the claimant". However, it also specifies, in an inclusive fashion, seven considerations to which regard must be had. They are:

the interest of the claimant in the acquired land;

the length of time during which the claimant had occupied the land;

the inconvenience likely to be suffered by the claimant by reason of removal from the land;

the period of time after the acquisition of the land during which the claimant has been, or will be, allowed to remain in possession of the land;

the period of time during which, but for the acquisition of the land, the claimant would have been likely to continue to occupy the land;

the age of the claimant; and

where the claimant at the date of acquisition is occupying the land as the claimant's principal place of residence, the number, age and circumstances of other people (if any) living with the claimant.

193 The principles relating to awards of solatium under s 44(2) of the LAC Act were summarised by Osborn J in his judgment in Roads Corporation v Love[117] ("the Cooper Street proceeding"). I respectfully adopt his Honour's observations from which the following principles may be gleaned:

(a) the phrase "intangible and non-pecuniary disadvantages" is a broad one and capable of flexible adaptation to changes in land use and community values over time;

(b) whilst it may be correct to conceive of solatium as, for example, a sum of money paid, over and above the actual damages, as a solace for injured feelings, and apt to describe an award of some amount to cover inconvenience and in a proper case distress caused by the compulsory taking, such conceptions are no substitute for the statutory provision in s 44(1) of the LAC Act, which may in some circumstances be wider;

(c) solatium is not an amount awarded for provable loss to which the claimant is entitled and does not include any of the factors covered by other heads of compensation under the LAC Act;

(e) section 44 (1) should be construed with all the generality that its words permit;

(f) what is contemplated is the discretionary award of a lump sum in circumstances justifying such award;

(g) section 44(1) does not require an award of a percentage of market value, but questions of proportionality to market value are not necessarily irrelevant, although this is not to suggest that there should be any necessary relationship between market value and solatium;

(h) the fundamental task is to assess an appropriate lump sum amount, although it is open to express an award of solatium by reference to a percentage of reduction in market value.

194 In the present case, as in the Cooper Street proceeding, Mr Love submitted that the applicable ceiling was 10 percent of the market value of the whole of Mr Love's land in the "before scenario". In contrast, in the present case as in the Cooper Street proceeding, the Corporation submitted that the ceiling was 10 percent of the market value of the land that was actually acquired. In the Cooper Street proceeding, his Honour did not need to resolve that issue,[118] as the amount that he determined was under both ceilings.

195 Section 5A(2) of the Valuation of Land Act 1960 ("the VLA") gives statutory recognition to the proposition that the best evidence of market value will ordinarily be evidence of comparable sales either before or after the acquisition.[119]

196 The question whether a sale of land is sufficiently comparable to provide a satisfactory basis for the determination of value, is primarily a question of fact to be assessed by an expert valuer.[120] Regard may be had to evidence of events subsequent to the acquisition as confirming or tending to confirm the foresight which the hypothetical purchaser would have had at the relevant date.[121] Evidence of a sale of the land itself at a date close to that which is in issue may permit a direct inference of value to be drawn.[122]

197 In the present case, sales evidence is relevant at two different levels: on Mr Love's case in determining whether a purchaser of land for a future quarry and landfill use would purchase land for levels of value corresponding to or exceeding future industrial values in the area; and on the Corporations' case in determining market value based upon future industrial use.

198 As to comparable sales evidence, in his recent judgment in the Cooper Street proceeding, Osborn J cited[123] the well known passage from the judgment in Brewarrana v Commissioner of Highways (No 2), where Wells J stated:[124]

It is general valuation practice for sales characterized as comparable sales to be used as bases for the valuation of lands said to be similar. But allowances must always be made before such sales can be so used. No two parcels of land are identical in all respects: the sale price of any given piece of land is not necessarily the price at which it ought to have been sold, or the same thing as its true value. Before using any allegedly comparable sale, therefore, the valuer must consider whether, having regard to the circumstances (using that word in its broadest sense) appertaining to the parcel of land in question, and to the transaction of sale, there are sufficient similarities to the circumstances appertaining to the subject land and to the notional sale presupposed by the test formulated in Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418 and in later cases to warrant a court's reasoning from the sale price paid under the allegedly comparable sale, with or without other evidence, to a value for the subject land. Adjustments must, of course, be made every time reasoning of that kind is undertaken. For example, in relation to the land itself and the circumstances appertaining to it, it may be necessary to consider such matters as topography, location, size, shape, slope, view, land use (actual and potential), scope for, and difficulties of, development, services and amenities; and in relation to the transaction of sale, the valuer must weigh such things as the character, business and relationships of the parties, their motives, the terms and conditions in their contract of sale, and any other special considerations that induced or may have induced them to conclude the contract at the selling price agreed, as well as the dates when the contract of sale and the transfer were concluded or effected. I do not for a moment pretend that I have been exhaustive. What I am concerned to emphasize is that, as I understand the evidence, and according to the inferences that I feel I can safely draw from it, there is no hard and fast rule by the application of which a valuer may, whatever the circumstances, draw the line that clearly separates the sales that are comparable from those that are not. It is, in my view, all a matter of degree: some adjustment is always necessary; too much adjustment will render it unsafe to use a sale, subject to such a degree of adjustment, for the purpose of the reasoning process in the comparable sales method. Just where the line is to be drawn is, it seems to me, the very sort of question that is fit for the expert valuer to determine; the assessment of the risks of adjustment is peculiarly within his sphere of skill. The valuer must use his skill to winnow out the element of comparability if it is there, and use it with discretion. It is perhaps worthwhile adding that just because a sale is excluded from use in the comparable sales process of reasoning, it does not necessarily follow that it must be discarded from all consideration. The evidence in this case suggests strongly to my mind that, at the initial stages, a valuer will almost certainly look at all known sales in potentially relevant areas, if for no other reason than to discern patterns of prices and changes in price levels over important periods. He will, while doing so, also be culling possibly comparable sales for further consideration. The process, seen as a whole, is not unlike that of using items of circumstantial evidence that possess varying degrees of cogency and weight.

199 Whilst s 5A(2) of the VLA gives implicit statutory recognition to the comparable sales method of valuation, there is no obligation imposed by the VLA or by the LAC Act for a valuer, court or tribunal to determine market value by reference to that methodology. The task will often be a complex one and may require the consideration of alternate approaches to the determination of market value, particularly in the case of compulsory acquisition where the requirement to determine and value according to highest and best use often occurs in the context of a hypothetical construct.

200 In Boland v Yates Property Corporation Pty Ltd,[125] Callinan J described the task in such cases and also the range of valuation methodologies that might be employed to implement that task. The full text of his Honour's observations are worth citing in full:

1. All statutes authorising resumptions in Australia effectively require that the relevant compensation court calculate the value of resumed property as if it were sold on the date of its acquisition by the resuming authority. Necessarily, the exercise to be undertaken by the valuers and lawyers representing the parties and the court in finding the likely price on such a notional sale is a highly artificial one, involving many uncertainties and matters of judgment upon which professional and lay minds may and frequently differ, as the varying judgments and different reasoning so far in this case dramatically demonstrate. The exercise undertaken in the courtroom is not only highly artificial but also entirely theoretical and divorced from the sentiment and emotion which can play a part in a decision to buy or sell, even occasionally a decision by a successful investor or business person. Sometimes some people very effectively, and perhaps without being able to offer rational reasons for doing so, will intuitively make successful investments in property. Others may rely entirely upon detailed economic investigations and projections. Corporations proposing to make investments in land or other property would certainly be expected by their shareholders and financiers to make feasibility studies which involved such investigations and projections.

1. Isaacs J put the matter even more strongly. His Honour said that the hypothetical parties should be regarded as not anxious to trade and as being (Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418 at 441):

"perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property".

1. The comprehensive language used by Isaacs J is clearly capable of embracing matters with which perhaps courts of today have become more familiar, such as the value of highly restrictive or very advantageous planning approvals, the changing value of money over time and opportunity cost. So too computerisation has in modern times enabled the testing of financial projections to different sensitivities, of time, interest rates, changing values of money, different occupancy rates and other contingencies both favourable and unfavourable relatively easily and inexpensively.

1. It is now settled, and for good reason, that a dispossessed landowner should be compensated for the value of his or her land on the basis of its highest and best use. In current times, except in the case of non-controversial uses such as perhaps a single dwelling in a residential zone or a corner shop on a site zoned for that purpose, many uses, and most commercial ones require the prior approval of vigilant planning authorities, compliance with often stringent planning controls and the need to meet and refute objections by objectors, including commercial, competitive objectors in political, administrative and legal forums. These may not be the only hurdles that a developer has to leap. ...
2. An intending prudent developer of a project such as the respondent here had in mind would inevitably require investigations, studies, plans and information of the kind to which I have referred and which would necessarily involve the services of professionals such as town planners, engineers and others, not only perhaps to obtain, or enhance the chances of obtaining, planning approval but also to place itself in a position to satisfy financiers if it has to borrow to complete the development, and prospective tenants or licensees that a tenancy or a licence in it would be an obligation worth incurring.

1. It should also be firmly kept in mind that valuation practice, like legal practice, cannot be an exact science. Both require the exercise of judgments and the forming of opinions, often on matters in respect of which certitude is impossible and uncertainty highly likely.

1. In one important matter the approach of the Full Federal Court is to be preferred to that of the Court of Appeal of New South Wales, although recourse to North American authority (The City of Halifax v S Cunard & Co Ltd [1975] 1 SCR 458; Municipality of Metropolitan Toronto v Loblaw Groceterias Co Ltd [1972] SCR 600), if relevant, was not necessary to make good that approach, as local experience is to a similar effect. The approach of the Court of Appeal would seem to exclude altogether the possibility of a sound valuation based upon, or having regard to the profits that the property if developed might yield. There is no legal principle that purports to, or could close for all times the categories of methods of valuation which might be acceptable in a particular case. ... the fact that valuations were usually required only for the purpose of levying taxation, meant that early valuations were simple and relatively unsophisticated exercises. Valuation practice is, however, like legal practice an evolving discipline.
2. As time has passed different types of businesses, different uses to which property may be put, changing financial markets, and more sophisticated and different methods of obtaining financial information and applying financial criteria call for flexibility, resourcefulness and different methods of making valuations. Two typical examples should suffice. Large "drive-in" shopping malls containing discount department stores, speciality shops, municipal libraries, restaurants, cafés, department stores, large supermarkets and numerous picture theatres were unknown when Spencer's case was decided. To value one, either when fully developed or in prospect, requires that the closest consideration be given to the income stream that such an establishment could be expected to generate and for how long it might do so. Similarly sophisticated techniques may be involved in the valuation of large city buildings or sites approved for their erection taking account of incentives offered to tenants and the incidence of tax payable by both parties. Often the owner of land which has been approved for a development will not undertake the development but will sell it to an investor or developer. The point is that the land with the approval attached to it becomes the prize and it would be unthinkable that the price for the prize would not be fixed in such a way as to reflect the return that the development when completed would yield. There is no reason to suppose that the price for the site of an approved but as yet undeveloped market should be very differently calculated.
3. It is not as if the valuation of a notional capital asset by reference to its expected income generating capacity is by any means a novel concept in the courts. Daily, courts in this country and elsewhere value what has been described as something in the nature of a capital asset, a person's capacity to earn income, by reference to his or her likely earnings over a period in the future taking account, subject to discount for contingencies, of that person's as yet unrealised but realisable prospects in life (Parker v The Commonwealth [1965] HCA 12; (1965) 112 CLR 295 at 308 to 311 per Windeyer J; Husher v Husher [1999] HCA 47; (1999) 73 ALJR 1414; 165 ALR 384).
4. Wells J recognised the availability of different methods of valuation in Bronzel v State Planning Authority ((1979) 44 LGRA 34 at 38):

"... I am not disposed to reject any method of valuation adopted by either valuer on the ground that it is not worth considering; it seems to me that if Spencer's case ... is to keep its practical worth in this jurisdiction, this Court should be slow to reject any method that, in expert hands, is capable of yielding a result within bounds that are not unreasonable. The limitations of every method must, of course, always be kept clearly in mind. I am of the opinion that the approach likely to result in the most direct and reliable resolution of the outstanding differences between the valuations is to consider the particular features of each valuation that are capable of yielding to adverse criticism".

1. It is unlikely that in 1907 courts would have encountered a discounted cash flow method of valuation, another method which looks to, among other things, nett proceeds receivable in the future from a development not as yet undertaken. Its availability was acknowledged by Jacobs J in this Court in Albany v The Commonwealth ((1976) 12 ALR 201 at 207).
2. If a court is prepared to entertain, as this Court did in Eastaway v The Commonwealth ([1951] HCA 80; [1951] HCA 80; (1951) 84 CLR 328 at 340 to 341), a claim for compensation on the basis of increased hypothetical profits from a proposed modernisation and enlargement of the claimant's business, there is no reason why a claim based upon the likely nett returns from a proposed but as yet unconstructed development should not similarly be entertained.
3. This Court itself has in any event clearly accepted what has been described as the hypothetical development method of valuation (Australian Provincial Assurance Association Ltd v Commissioner of Land Tax [1942] ALR 156; Dymock's Book Arcade v Federal Commissioner of Taxation of the Commonwealth of Australia (1937) 4 The Valuer 403 at 406 per McTiernan J). The method was described by Starke J in Australian Provincial Assurance Association Ltd v Commissioner of Land Tax ([1942] ALR 156 at 158):

"In the present case the valuation has been made on what has been variously described as the hypothetical building or development basis. The parties agree that the building upon the land does not return the rental that might reasonably be expected from it. So the rental from that building is discarded, and it is assumed that the land is vacant. The erection of a new building on the land is envisaged, providing office accommodation, which is the best method of obtaining the advantages that the land possesses. Accordingly a building is planned to obtain the full benefit of those advantages. Its cost is estimated, the gross annual rentals or receipts from it are estimated, and from these rentals or receipts are deducted various annual outgoings and interest charges which are also estimated to obtain the net receipts. The capital value of the land is then ascertained by capitalising the net receipts at some given rate of interest, and in this case, I may add, the parties were content to work upon a 4½ per cent basis. The unimproved value of the land is then deduced by deducting from the capital value so obtained the cost of the erection of the building. Adopting this method of ascertaining the unimproved value of the assessed land, I find as a fact that its unimproved value on the 30th June, 1939, was the sum of £76,154".

1. The method is neither novel nor especially difficult, and, as with all methods requires the making of value judgments.
2. In Turner v Minister of Public Instruction ([1956] HCA 7; [1956] HCA 7; (1956) 95 CLR 245) all the members of the Court (Dixon CJ, Williams, Fullagar, Kitto and Taylor JJ) accepted the appropriateness of a like method in the case of resumed subdivisible, but as yet unsubdivided land.

201 The valuation evidence called in the present case comprised an important and contentious aspect of the litigation. In this regard, the following general observations are to be made as to valuation evidence.

202 As Osborn J observed in Roads Corporation v Love,[126] a valuer like any other expert must reveal the factual and intellectual basis of an opinion. The general principle, as stated by the New South Wales Court of Appeal in Makita (Australia) Pty Ltd v Sprowles[127] is that:

In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of "specialised knowledge"; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be "wholly or substantially based on the witness's expert knowledge"; so far as the opinion is based on facts "observed" by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on "assumed" or "accepted" facts, they must be identified and proved in some other way; it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert's evidence must explain how the field of "specialised knowledge" in which the witness is expert by reason of "training, study or experience", and on which the opinion is "wholly or substantially based", applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight. And an attempt to make the basis of the opinion explicit may reveal that it is not based on specialised expert knowledge, but, to use Gleeson CJ's characterisation of the evidence in HG v R, on "a combination of speculation, inference, personal and second-hand views as to the credibility of the complainant, and a process of reasoning which went well beyond the field of expertise". [Citations omitted]

203 In Smith v Eurobodalla Shire Council,[128] McClellan AJA (with whom Mason P and Santow JA agreed) said:

There is no doubt that the foundation for an expert's opinion must be adequately proved. This will include the evidence necessary to qualify the person as an expert in the relevant field and proof of the facts in respect of which the expert is requested to give an opinion. As Heydon JA acknowledges, this can give rise to difficulties in areas such as land valuation where, in many cases, the available market evidence is limited and the expert's judgment must be based upon accumulated experience. Sometimes when evidence of comparable sales is not available, alternative but less satisfactory methods of valuation may be utilised. (Various methods are discussed in Alan Hyam, The Law Affecting the Valuation of Land in Australia, 3rd ed, p 113ff). But there will be many cases, particularly in relation to sales of "unique" property, where this may not be possible and a valuer will be required to exercise his or her judgment having regard to the objective material which is available, however inadequate. If there is simply no direct market evidence in relation to a particular property, this does not mean that a valuer cannot express an opinion as to its value. As McClure J points out in the Full Court of the Supreme Court of Western Australia case in Western Australian Planning Commission v Arcus Shopfitters, Makita does not mean that an opinion will be excluded where the objective material is not complete "but the valuer must reveal as far as possible the reasoning process actually employed so as to enable the court to evaluate the evidence and the expert's conclusions." [Citations omitted]

204 Two further observations were made by Osborn J in the Cooper Street Proceeding:[129]

A valuer may express an opinion of value which is founded in part upon hearsay but he cannot give hearsay evidence of disputed facts which lie outside his own personal knowledge.[130]

Regard may be had to evidence of events subsequent to the acquisition as confirming or tending to confirm the foresight which the hypothetical purchaser would have had at the relevant date.[131]

205 Each of the principles of expert valuation evidence referred to in this section are adopted and applied in these reasons.

(a) at the relevant date, what were the prospects of obtaining planning permission to extract stone:

(i) in the area comprising the pipe line easement and to the east of the pipe line easement; and

(ii) below the water table in respect of any part of the WA658 land;

(b) at the relevant date, what were the prospects of obtaining planning permission for the use of the land as a solid inert waste landfill.

207 The question of highest and best use may involve enquiry into the probability of planning permission being obtained for such use. In relation to the assessment of potential planning outcomes in a resumption case, the observations of Osborn J in the Cooper Street proceeding provide a helpful framework for the analysis. His Honour said:[132]

Insofar as the claim for market value is concerned, the task in considering planning approval potential is not to decide whether planning approval would in fact have been granted, but whether and if so how, a hypothetical purchaser at the relevant date would have taken the prospects of obtaining approval into account as affecting the value of the land.[133]

I respectfully adopt this approach in the present case.

Requirement for a Permit and Work Authority for a Quarry and Landfill

208 At the date of acquisition, the WA658 land was partly within a "Rural Zone" (RUZ, clause 35.01 of the WPS) and partly within a "Special Use Zone 4 - Extractive Industry" (SUZ4, clause 37.01).

209 At that date, the use of the land for extraction (which includes quarrying) required a planning permit. The use of the land for landfill also required a planning permit.

210 The grant of planning permission is governed by the Planning and Environment Act 1987 (the "PE Act") and the relevant planning scheme, in this case the Whittlesea Planning Scheme (the "WPS").

211 Running parallel with the requirement for planning permission in the case of a proposed quarry development is the requirement that a work authority, incorporating an approved work plan, be approved by the Minister in accordance with the EID Act.

212 Section 17 of the EID Act requires the applicant for a work authority to carry out an extractive industry lodge a work plan with the department. Section 19 provides that a person who proposes to carry out an extractive industry may apply to the Minister for a work authority. Section 19(2) provides:

(2) The Minister must only grant the work authority if he or she is satisfied that the applicant has -

(a) a work plan approved under section 17; and

(b) entered into a rehabilitation bond under section 33; and

(c) complied with any relevant planning scheme and obtained any necessary planning permit under that planning scheme; and

(d) obtained all necessary consents and other authorities required by or under this or any other Act; and

...

213 Section 20 of the EID Act permits the Minister to impose conditions to which a work authority is subject. Section 21 provides that the work authority remains in force for the period for which the carrying out of an extractive industry is permitted upon the land under the relevant planning scheme or a planning permit.

214 The Environment Protection Act 1970 (the "EP Act") provided for the declaration of State environment protection policies.[134] In this case, the State Environment Protection Policy (Siting and Management of Landfills Receiving Municipal Waste) is a relevant policy.

215 At the relevant date, s 19A of the Environment Protection Act 1970 provided, in effect, that, before premises could be operated as a landfill, the occupier had to obtain a works approval from the Environment Protection Authority.

216 Additionally, the EP Act governed the creation and operation of regional waste management groups and the preparation and content of regional waste management plans.

217 Section 57 of the P & E Act permits any person who may be affected by the grant of the permit to object. In the case of Mr Love's 1998 quarry permit application, there were a total of 56 objections, including from the Northern Hospital, Epping Plaza Shopping Centre, Epping Primary School and a neighbour, Mr Scanlon.

218 Section 60 specifies the matters which a responsible authority must consider before deciding on an application for a planning permit. At the relevant date, s 60(1) provided:

Before deciding on an application, the responsible authority-

(a) must consider-

(i) all objections and other submissions which it has received and which have not been withdrawn; and

(ii) any decision and comments of a referral authority which it has received; and

(iii) any significant effects which the responsible authority considers the use or development may have on the environment or which the responsible authority considers the environment may have on the use or development;

(b) if the circumstances appear to so require, may consider-

(i) any significant social and economic effects of the use or development for which the application is made; and

(ii) any strategic plan, policy statement, code or guideline which has been adopted by a Minister, government department, public authority or municipal council; and

(iia) any amendment to the planning scheme which has been adopted by a planning authority; and

(iii) any other relevant matter.

219 The objectives of planning in Victoria, to which s 60(1)(b) of the P & E Act makes reference, include provision for the fair, orderly, economic and sustainable use and development of land and to enable the orderly provision and co-ordination of public utilities and other facilities for the benefit of the community.[135]

220 An applicant for a planning permit may apply to VCAT for review of a decision by a responsible authority to refuse to grant a permit (s 77 P & E Act); or for a failure of the responsible authority to grant the permit within the prescribed time (s 79), which is 60 days from the lodging of the application where there has not been a request for further information in relation to the permit;[136] or for review of any condition in a permit which the responsible authority has issued or decided to grant (s 80). An objector may apply to VCAT for review of a decision of the responsible authority to grant a permit (s 82). An application for review to VCAT in such circumstances is a hearing de novo conducted by the Tribunal in the exercise of jurisdiction conferred by the PE Act. Section 84B sets out the matters that the Tribunal is required to take into account in determining an application for review. Under s 84B(2), those matters include any relevant planning scheme and the objectives of planning in Victoria.

221 Basil Natoli ("Mr Natoli") is a well qualified Geologist with almost 40 years' experience. He was called by Mr Love to give expert evidence.

222 Mr Natoli holds a Diploma in Geology from the Royal Melbourne Institute of Technology. His professional experience is as follows: Principal consultant, Bell, Cochrane & Associates Extractive Industries from 1984 to present; Principal Consultant, Sand and Stone Services Pty Ltd from 1983 to 1984; Geologist with the Readymix Group (re-named as BMG Resources in 1981) from 1972 to 1983; and Geologist with EA Webb & Associates Pty Ltd consulting geologists from 1971 to 1972. Mr Natoli is a member of the Australasian Institute of Mining Metallurgy, and a Fellow of the Institute of Quarrying.

223 Mr Natoli is also very familiar with Mr Love's land, including the WA658 and 149 land, having acted as a consultant to Mr Love for several decades.

224 All of the evidence before the Court as to the extent of the resource on the WA658 land arises from drilling and testing performed by Mr Natoli. Based on that work, Mr Natoli has prepared various estimates of the resource over time.

225 To a large extent, there is no disagreement between Mr Natoli and the Corporation's expert geologist, Mr McLellan, as to the extent of the resource, as indicated by Mr Natoli's work. As will appear below, the disagreement between the experts principally arises as to the quality of the resource.

226 Mr Natoli's report dated 21 March 2008 sets out the final results revealed by his 2007 and 2008 drilling and testing. The report revealed the following tonnages, each as an "indicated" resource:

(a) 4.8 million tonnes in the upper flow, all of it above the water table;

(b) 3.6 million tonnes in the lower flow above the water table;

(c) accordingly, a total of 8.4 million tonnes above the water table;

(d) 45.2 million tonnes in the lower flow below the water table;

(e) accordingly, a total of 48.8 million tonnes in the lower flow;

(f) an overall total resource of 53.6 million tonnes;

(g) of the overall total of 53.6 million tonnes, there are 22.6 million tonnes, the extraction of which requires the moving the gas pipe line.

227 The Corporation conceded that the hypothetical purchaser at the relevant date is to be taken to have known of the above tonnages, even though they were only identified after the relevant date. That is because the Corporation accepted that the hypothetical purchaser would have carried out drilling and testing of the nature of that in fact was carried out by Mr Natoli in 2007 and 2008, and accordingly by the relevant date would have come to know the same facts as to the resource size that Mr Natoli determined.

228 With regard to the "after" situation, Mr Natoli's report identified the following tonnages, using a 200 metre buffer from the freeway, being the buffer distance accepted by Mr Natoli and Mr McLellan in their joint reports:

(a) 2.6 million tonnes in the upper flow, all of it above the water table;

(b) 1 million tonnes in the lower flow above the water table;

(c) accordingly, a total of 3.6 million tonnes above the water table;

(d) 7.7 million tonnes in the lower flow below the water table;

(e) accordingly, a total of 8.7 million tonnes in the lower flow;

(f) an overall total resource of 11.3 million tonnes.

229 Mr Natoli's 21 March 2008 report includes a "before" and "after" quarry design. The before quarry design contemplates the extraction of 53.25 million tonnes out of the 53.6 million tonne resource. The difference is the amount lost in the siting or operation of the quarry facilities.

230 Mr Natoli's quarry design as shown in his 21 March 2008 report is critical to the resolution of issues in the proceeding (the "March 2008 work plan"). Mr Love's case is founded upon it. Mr Love's valuer, Mr Herdman proceeds on the basis of it in his valuation (including his landfill valuation).

231 Mr Natoli's 21 March 2008 report sets out the following estimates:

(a) of the 53.25 million tonnes of extractable basalt in his quarry design, 7 percent (or 3.73 million tonnes) is "weathered basalt"; and

(b) his "before" quarry design will involve the removal of 1.06 cubic metres of over-burden and inter-burden (the 53.6 million tonne resource estimate does not include this material).

232 Accordingly, Mr Natoli's 2008 quarry design, on which Mr Love bases his market value case, contemplated the extraction of some 53.6 million tonnes of basalt, of which approximately 8.4 million tonnes would be above and approximately 45.2 million tonnes would be below the water table.

233 Further, Mr Natoli's drilling and testing in 2007/2008 led him to the view that 22.6 million tonnes of the total 53.6 million tonnes of the basalt resource was underneath the gas pipe line easement and could only be extracted if the pipe line was moved. Mr McLellan expressed no disagreement with this position.

234 As such, the extraction of Mr Natoli's total resource estimate of 53.6 million tonnes and the quarry plan built upon that programme, contemplated and required:

(a) conducting a quarry operation below the water table; and

(b) the moving of the moving of the gas pipe line and quarrying the existing gas pipe line easement, including land to the east of the actual pipeline.

235 Further, these are the critical assumptions on which Mr Love's valuer, Mr Herdman, relied and proceeded.

236 In short, Mr Love's claim is built upon the foundation that he would have had in place planning approval to quarry for an unlimited period, and in an area below the water table and which included land comprising the gas pipeline easement and to the east of the gas pipeline easement. A central question in the case therefore becomes, were these assumptions well founded?

ASSESSMENT OF PLANNING PROSPECTS FOR QUARRYING ON THE WA658 LAND

237 As at the date of acquisition, 11 February 2002, pursuant to the admission made by the Corporation, consequent upon my ruling of 2 June 2010,[137] it is to be assumed that there was a planning permit in place in respect of Mr Love's WA658 land to quarry it for basalt, upon the terms and conditions contained in the report of the planning panel of October 1998.

238 For the purposes of the assessment of compensation in this proceeding, the Corporation accepts that, were it not for the Bypass proposal, the hypothetical purchaser of Mr Love's land, at the relevant date, would have known that the assumed planning permit had issued for the conduct of a basalt quarry on the WA658 land, but subject to the limitations recommended by the quarry permit panel, and would have anticipated that a work authority would issue for the same use and be subject to the same limitations. Those limitations were:

(c) no quarrying east of the gas pipeline easement.

239 Mr Love, however, contends that, but for the proposal for the bypass through his land, a permit and work authority would have issued without the limitations referred to by the quarry permit panel, so as to permit quarrying below the water table and to the east of the gas pipeline easement on the WA658 land, and it may be inferred, free of the time frame restriction, in accordance with the March 2008 work plan prepared by his consulting geologist, Mr Natoli.

240 Mr Love asks the Court to accept that, but for the proposal for the Bypass through his land, a permit and work authority would have issued without the limitations referred to by the quarry permit panel. He says further that these approvals would have been in place in early 1999, or in the alternative, by the relevant date, being 11 February 2002.

241 In the alternative, Mr Love contends that a successful application could later be anticipated to remove the restrictions recommended by the panel so as to permit quarrying in accordance with the March 2008 plan.

242 Indeed, Mr Love's expert valuer, Mr Herdman assumes that an operating quarry producing at 700,000 tonnes of crushed rock per annum was in place from the date of acquisition as expressed in his calculation of value based on the capitalisation of future earnings methodology. He assumes for this purpose that not only by that date were all the necessary approvals obtained for the quarry, but it was also operating in accordance with Mr Natoli's March 2008 work plan, with bund walls constructed, plant and equipment in place, production commenced, markets established and sales of all extracted rock being achieved in accordance with his assumed level of production, that is, achieving sales of 700,000 tonnes per annum of crushed rock.

243 The Corporation, on the other hand, contests the proposition that, whether by application of s 43(1)(a) of the LAC Act or otherwise, it is permissible to "wind back the clock" to 1999 or to a time prior to the relevant date, and assume the construction of a notional quarry business owned by Mr Love and operating on the WA658 land at the relevant date. It submitted that s 43(1)(a) of the LAC Act is not capable of achieving the outcome for which Mr Love contends. There is no basis in the legislation, it was said, to assume historical facts which did not in fact occur. There was no quarry established and operating on Mr Love's land at the date of acquisition, whether in accordance with the limitations recommended by the quarry planning panel or otherwise. There was also no void on the land or operating landfill.

244 This may be contrasted with the position as to the existence of a planning permit, notionally issued with conditions in accordance with the limitations prescribed by the quarry permit panel, which is to be assumed for the purposes of this proceeding by reason of the admissions made by the Corporation as found by the Court in its ruling of 2 June 2010 (the "notional permit").[138]

245 In my opinion, in order to satisfy s 43(1)(a) of the LAC Act on the case he advanced at trial, Mr Love would have to demonstrate, as a starting point, that the failure to obtain planning and works approval for the full development of his quarry, free of the restrictions recommended by the quarry planning panel, arose from the proposal to develop the freeway through his land. He would then have to demonstrate that the failure to obtain such planning and works approval caused a decrease in the value of his land, which ought to be disregarded in the "before" valuation.

246 The first point is that there was no planning restriction at all imposed on Mr Love's land which had the effect of confining any future quarry on his WA658 land to a period before 2025 or thereabouts, and to a site above the watertable and to the west of the gas pipeline easement. The only instrument which dealt with this issue was the report of the quarry permit panel. Although this report contained carefully reasoned findings and well considered recommendations, it did not impose conditions on the use of Mr Love's land which had any legal effect. As a matter of history, the relevant Minister subsequently refused to issue a planning permit for the quarry, and the panel's recommendations never crystallised into enforceable permit conditions.

247 Furthermore, even if the limitations recommended by the quarry permit panel could be regarded as imposing an "informal" restriction on the usage of the land, for the reasons which follow, the limitations were not introduced in order to facilitate the implementation of the freeway project. There was therefore no relevant nexus proven to exist between the quarry panel permit limitations and the freeway proposal.

Whether the Quarry Permit Panel's Limitations "Arose from" the Craigieburn Bypass Proposal?

248 I can find nothing in the evidence which points to the quarry permit panel imposing any limitations on the proposed quarry permit which in any way arose from the implementation of the freeway project. The reasoning of the panel pointed to no such consideration being taken into account.

249 The report of the quarry permit panel was issued and dated 18 October 1998. It was on 28 October, ten days later, that the Corporation released for public comment a planning assessment report relating to the proposed Craigieburn Bypass. It listed five options, none of which included any part of Mr Love's land. It was not until 21 February 2001 that the final route for the bypass was determined, when the Premier announced that Option Y through Mr Love's land had been selected.

Planning Instruments Before the Planning Permit Panel

250 In addition to the WPS as it stood then, there were other planning instruments of importance before the Quarry Planning Permit Panel. They were the Epping Bulge Position Statement (1995); the Cooper Street Precinct Strategy (October 1996); and the Amendment L143 Planning Panel Report (October 1997). Each of these will be considered in turn.

251 In 1995 the City of Whittlesea published a position statement for an area known as the "Epping Bulge" ("the 'Epping Bulge' Position Statement").

252 This was then a largely undeveloped area generally to the west and north of the existing Epping urban area. The unfortunately named "Epping Bulge" included Mr Love's land at 410 Cooper Street, Epping.

253 Policy statements within the position statement included the observation that land to the south of Cooper Street and extending north to O'Herns Road should be "investigated and developed primarily for a range of employment (including industrial) purposes". These amounted to urban uses. The statement recommended that "new uses that demand long term and large buffer distances or that prohibitively restrict future building and/or development, should be carefully considered".

The Cooper Street Precinct Strategy (October 1996)

254 The Cooper Street Precinct Strategy is an important document in the case. The strategy was adopted by council in August 1996. It proposed urban uses in the form of an industrial/employment precinct along the Cooper Street corridor between Epping and the Merri Creek.

255 On 17 June 1996 the City of Whittlesea published an issues paper calling for submissions on a draft strategy for land use in an area defined as the "Cooper Street Precinct". Mr Love's land was situated in the centre of the Cooper Street precinct.

256 On 15 July 1996 Mr Love's planning consultants, KLM (Mr Kraan), delivered a submission to the Council's consultants on the draft strategy for the Cooper Street Precinct. It extolled the virtues of extractive industry generally and of a proposal to extend quarrying on Mr Love's land in future. It said that the eastern section of Mr Love's property had been the subject of extensive geological investigations in late 1995 to determine the nature and quality of the basalt rock resource within the property. The submission proceeded to explain that these investigations had been done by Bell Cochrane and Associates, extractive industry consultants (Mr Natoli's firm). The investigation work included a conductivity survey, percussion drilling and diamond drilling. It had also included testing of drill core samples, plotting of drilling and test results and calculation of volumes of basalt and overburden materials. In summary, the submission made on behalf of Mr Love concluded that the geological investigations revealed an "indicated mineral resource" in the central eastern area of some 15.1 million tonnes of basalt rock and an "inferred mineral resource" of 3.6 million tonnes of basalt in the far eastern section.

257 On 17 June 1996, the Cooper Street Precinct Strategy Issues Paper was prepared by Tract Consultants Pty Ltd for the cities of Hume and Whittlesea. The strategy was intended to establish a framework for the future planning and development of the nominated study area which included Mr Love's land. The issues paper referred to the proposed location of the former F2 freeway reservation from its alignment along Merri Creek to a location to the east of Alvies tip. Mr Kraan made submissions in response to the issues paper on Mr Love's behalf. The final version of the Cooper Street Strategy is dated October 1996. At the date of acquisition, it was a reference document in the Municipal Strategic Statement of the Whittlesea Planning Scheme.

258 Key outcomes described in the Cooper Street strategy were:

• improving the likely attractiveness of Cooper Street as a location for industry and other employment generating activities;
• an assessment of zoning and land use opportunities;
• a recommended land use and zoning pattern and associated development controls;
• in particular, streetscape and urban design guidelines cognisant of development staging and general objectives of employment generation and amenity improvement;
• recommended "gate way" treatment; and
• an ultimate cross-section (including landscaping) for Cooper Street.

259 The land use plan within the Cooper Street strategy divided the study area into precincts. Mr Love's land was divided into two portions, divided by the gas easement. The eastern portion was nominated as precinct B3, while the smaller portion to the west, adjoining existing extractive industrial land, was nominated as precinct B4. In relation to the eastern portion, the strategy stated that:

The western end of this precinct should retain its rural zoning in short to medium term in order to buffer extractive and tipping uses to the west. It is acknowledged that there is some potential for extraction on the western edge of this land. It is recommended that extraction be generally limited to the more accessible resource within precinct B4.

260 Whilst precinct B4 was identified for extractive industry, the Cooper Street strategy provided a number of conditions to its use:

New areas for extraction are appropriate provided that it can be demonstrated that:

• use will not impact on the visual amenity of Cooper Street, both during extraction and from land forms resulting from extraction;
• the use can be commenced in the short term and completed within 20 to 30 years when it is anticipated other uses will surround the site.

261 The strategy was adopted by Council in October 1996. Its purpose was to establish a framework for future planning and development within the study area which extended from the Hume Highway to High Street, Epping to the north and south of Cooper Street. The strategy was prepared by independent planning consultants in association with economic and traffic consultants. The strategy was overseen by a steering committee of Hume and Whittlesea City Council staff. The strategy was the subject of public consultation through the publication of an issues paper in July 1996 and meetings with various interested parties.

262 The strategy proposed an industrial/employment precinct along the Cooper Street corridor between Epping and the Merri Creek. It sets out a vision for Cooper Street, which includes the creation of a vibrant living and working community and promoting the precinct as a gateway to the northern metropolitan growth areas. Principles underlying the plan included:

• Existing disparate land uses and activities in the Cooper Street Precinct need to be revitalised to create a high-quality environment. ...
• A rationalisation of the existing zoning pattern and land uses to facilitate significant private and public investment within the region needs to occur. ...
• New development within the Precinct must achieve the aims of high quality design, provision of local employment opportunities, and protection of recognised natural features in the area.

263 The strategy overview noted that Cooper Street was an important arterial road performing major gateway and interface functions for the City of Whittlesea and the City of Hume and will become more significant over time with future development in the north of Melbourne. The principles acknowledged the expectation that the Cooper Street carriageway will be duplicated from single to two lanes in each direction. The overview included the following statement:

The amenity of much of the industrial land within the municipalities is poor, particularly along Cooper Street, and creates a negative image which may deter possible investors. Improvements in amenity and the provision of more attractive locations for industry along such main roads is essential. In part, this will be able to be coordinated through the adoption of strategic policies and detailed (sic) for the Cooper Street precinct.

264 The strategy also acknowledged the history of extraction and landfilling in the area, noting the following of relevance:

Ongoing urban development ... has encroached upon the areas zoned for extractive industry putting pressure on the existing operations and calling into question the need to ensure any future operations are comprehensively planned and managed.

265 The strategy identified the primary land-use opportunities for the area falling within the City of Whittlesea as including industrial or employment generating activity. The strategy noted the need for the introduction of a major industry or category of uses capable of acting as a catalyst to stimulate further independent growth.

266 In clause 4.1, the Land Use Strategy plan contained in the strategy, figure 3, summarised the recommended land use directions for the study area. The land use for the Love land is shown as "Future Industrial (medium term)" and "Future Employment (Long Term)". The table to the plan noted the "key features of the plan". It included "recognize and build on the industry and employment strengths of the area" and "Limit extractive industry/tipping activity in the area to currently active sites".

267 The strategy included the strategic aim of creating local work opportunities for the growing residential areas in northern Melbourne. The document identified recommended future land uses for the study area, noting:

The proposed activities endeavour to maximise employment uses along Cooper Street. These range from office/commercial/mixed use development which compliments the High Street/Cooper Street node, through to broad acre industrial uses proposed for the currently rural areas of Cooper Street.

...

In summary, the proposed zoning of land for urban purposes (subject to servicing infrastructure) would encourage a broad spectrum of employment based uses to be facilitated in the region.

...

Extractive industries are retained in areas directly east of the Merri Creek, where there is potential for combined economic benefit from extractive uses whilst limiting conflict with adjoining land uses. It is acknowledged that extractive industry provides benefits to the local area in terms of associated businesses and employment opportunities.

268 The strategy anticipated that the land north of O'Herns Road will be developed for residential purposes. The strategy sought to protect that potential and called for particular attention to be paid to necessary buffer distances between industry and residential development given that the land to the north was not presently zoned residential.

269 Section 5.0 of the strategy set out an assessment of urban and non urban issues and opportunities for the localities of a precinct by precinct basis. Mr Love's land fell into precincts B3, B4 and B5. The boundary between precincts B3 and B4 was the gas pipeline easement, such that B3 included the land to the east of the easement and B4 included the land to the west of the easement.

270 The statement of issues and opportunities for B3 included the following:

This precinct retains opportunity for development as high-quality general industrial estate encouraging large scale developments in a well landscaped environment which can maximise use of the flat topography of the land.

...

The western end of this precinct should retain its rural zoning in the short to medium term in order to buffer extractive and tipping uses to the west. It is acknowledged that there is some potential for extraction on the western edge of this land. It is recommended that extraction be generally limited to the more accessible resource within precinct B4. The majority of land within precinct B3 should be protected as potentially high quality industrial land, not prejudiced through extractive and subsequent filling uses. Any extraction sites should be screened with appropriate landscaping and litter control measures. ...

271 The statement of issues and opportunities for B4 included the following:

This area currently includes an existing waste disposal site and quarrying activities with similar topography and existing landform as in Area A5. Waste disposal and quarrying activities will remain in the medium to long term for the site, i.e. 20-30 years. New areas of extraction are appropriate provided that it can be demonstrated that:

• the use will not impact on the visual amenity of Cooper St, both during extraction and from landforms resulting from extraction;
• the use can be commenced in the short term and completed within 20-30 years when it is anticipated other uses will surround the site; and
• extractive operations are well managed.

...

The zoning of this land should continue to facilitate extractive and filling uses acknowledging that these users provide employment and economic opportunities of the local area. Opportunities exist to use final unfilled quarry floor levels are long-term industrial activity in preference to tipping usage should be considered.

272 Precincts C1 and C2 were situated immediately to the north of precincts B3 and B4 respectively. Precinct C1 was identified as good-quality conventional residential development to consolidate a community around Epping. The strategy noted that the interface between this residential area and industrial or employment opportunities south of O'Herns Road would require careful attention to design detail with reference to a "green link south of O'Herns Road" to buffer industrial uses from residential development. Precinct C2 was identified as remaining rural for the foreseeable future.

Amendment L143 Planning Panel Report (1 October 1997)

273 Adjoining Mr Love's land to the east on the Cooper Street frontage is 360 Cooper Street, Epping.

274 Amendment L143 to the Whittlesea Planning Scheme proposed the rezoning of the land at 360 Cooper Street from General Farming B to Reserved General Industrial. There were objections to the proposal, including an objection by Mr Love, and the matter proceeded to a panel hearing. The panel reported on 1 October 1997.

275 The panel took the view that the strategic context for the proposal was set by the adopted strategic planning policies of the Council, being the City of Whittlesea General Plan, the Epping Bulge Position Statement and the Cooper Street Precinct Strategy, as well as the then recently exhibited draft Municipal Strategic Statement and new planning scheme.

276 The panel concluded that the City of Whittlesea General Plan, the Epping Bulge Position Statement, the Cooper Street Precinct Strategy and the draft Municipal Strategic Statement all supported the development of land in Cooper Street for industrial purposes at sometime in the future. The panel recognised that industrial development would ultimately occur on the subject site, being 360 Cooper Street, Epping, and surrounding areas. The panel concluded, however, that the proposal was premature prior to resolution of a number of matters including resolution of the form of the new planning scheme; a finalised option for the F2 freeway alignment; and issues concerning the provision of services to the subject land and area. Accordingly, the panel recommended that the Amendment be abandoned.

277 The Council of the Shire of Whittlesea did not adopt the recommendation of the panel and submitted Amendment L143 to the Minister for Planning. The Council advised the Minister that it desired the amendment to act as a "circuit breaker" and that the government needed to support the proposal to enable economic development and job creation. A ministerial briefing note dated 30 October 1997 stated that "The panel's main concerns are about the premature nature of the amendment in the absence of a range of services, drainage, road networks, the final F2 freeway alignment and the new format Planning Scheme". The Minister deferred consideration of the Amendment.

278 I am satisfied that the issue of the F2 freeway alignment, which was one of the panel's concerns, was resolved by setting aside a 150 m strip within the 360 Cooper Street property, adjacent to its western boundary with Mr Love's land. At the time there were a number of new alignments being considered for the freeway. One of the proposed alignments would have passed through 360 Cooper Street. The predecessor to the Corporation, VicRoads, accepted that if that alignment was chosen, it could the sited within the 150 meter wide strip.

279 The Council continued to press for Amendment L143 to be adopted. The Minister subsequently approved the rezoning of the land, with the 150 m strip retained in a General Farming zone. Otherwise the land comprised in Mr Scanlon's land at 360 Cooper Street was rezoned for urban use as industrial land. Amendment L143 was gazetted on 9 February 1998.

280 Mr Love contended, and the evidence of his valuer Mr Herdman proceeds on the premise that, if there had been no proposal for the Bypass, then the L143 land would not have been rezoned from a rural zone to an industrial zone. On the other hand, it was the Corporation's case that, if there had been no Bypass proposal, then the whole of the Scanlon land including the 150 metre wide strip would have been rezoned "industrial" prior to the relevant date.

281 I accept the position advanced by the Corporation, that if there had been no Bypass proposal, then the whole of the Scanlon land, including the 150 metre wide strip, would have been rezoned "industrial" prior to the relevant date.

282 The only part of Amendment L143 which arose from the Bypass proposal was the retention of the 150 metre wide strip as rural land for use as a possible alignment for the freeway, if that route was to have been subsequently selected.

283 The question is whether, as at the relevant date 2 February 2002, the retention of the 150 metre wide strip as rural land by Amendment L143 for possible use as the future freeway alignment, a step which clearly arose from the freeway project, caused any and what alteration in the value of Mr Love's land, which ought to be disregarded in the "before" valuation by application of s 43(1)(a) of the LAC?

284 I am satisfied that the retention of the 150 metre wide strip may have had the effect of decreasing the value Mr Love's land as from the date of the gazettal of Amendment L143 on 9 February 1998. The prospect of the freeway alignment on the Scanlon land, adjacent to the eastern boundary of Mr Love's land, was likely to have been signalled to any prospective purchaser of the Love land by the retention of the 150 metre wide strip as rural land. Accordingly, any such decrease in value should be disregarded for the purposes of assessing the market value of his land pursuant to s 43(1)(a) of the LAC Act. However, there was no evidence advanced of any such decrease in value.

285 Accordingly, the market value of Mr Love's land calls to be assessed as it was as on the acquisition date, with an Industrial zoning on the Scanlon land to within 150 meters of the eastern boundary of Mr Love's land.

286 However, VicRoads, a predecessor of the Corporation, in its capacity as a referral body, advised the Quarry Permit Panel "for information purposes" that:

The proposed development could be affected by one of a number of alignments being considered for a future freeway connection between the Metropolitan Ring Road at Thomastown and the Hume Freeway at Craigieburn by an advisory committee appointed by the minister for Planning and Local Government.

287 Nevertheless, VicRoads indicated that they had no objection to the proposal for a quarry permit subject to specified conditions being included on any permit issued. Although one of the suggested conditions provided for a sufficient setback from Cooper Street to allow for a future road widening which was then in contemplation, none of the conditions suggested by VicRoads included any reference to the future freeway connection, or made the permit subject to the alignment of the future road.

288 The Council, however, delivered a submission to the panel dated 4 August 1998 supported by a resolution which said:

1. Take the position that it will not support the proposed use and development of the subject site for the purpose of an extractive industry (rock quarry) on the following basis:
   1. The proposal is premature given that the alignment of the future Hume Freeway (F2) has not been determined at this stage;
   2. The proposal is exempt from the preparation of an Environmental Effects Statement given that environmental issues will be examined as part of the Hume Freeway Advisory Committee.
   3. The timing for extraction is not consistent with the Cooper Street Precinct Strategy;
   4. The proposal is not appropriate for this location having regard to existing and proposed surrounding land uses;
   5. The proposed buffers around the site are insufficient;

The future use of the quarry has not been determined at this stage.

1. Write to the Minister for Planning and Local Government advising of Council's position with regard to the application.
2. Present Council's position to any panel appointed to consider submissions on their application.

289 The panel considered in some detail the contention of the Council and others that the bypass alignment ought to be determined prior to any decision being made permitting extractive industry on Mr Love's land. However, it concluded on this issue:

The panel considers that it is not essential to await a final outcome on the location of the Hume freeway connection between the Metropolitan Ring Road and Craigieburn before deliberating upon the planning application before it. Ample planning information exists to explore the proposal and its planning inter-relationships with not only the Council strategic objectives but also possible options for the Hume freeway connection.

290 The issue which was central to the deliberations of the panel was the length of the period of proposed operation of the quarry on Mr Love's land. The panel expressed the view that: "It is apparent that the issue of length of operation was [of] major concern to both the council and a majority of objectors". This concern focussed upon the extent to which Mr Love's proposal would be consistent with the time frame set for quarrying operations in the Cooper Street Precinct Strategy. The panel described the issue in the following terms:

The key issue to possible time constraints is whether there is a phase in urban development in a growth area at which quarrying activity is viewed as being incompatible with a highly developed urban form and that a time has arrived for quarrying to relocate in areas more distant from highly developed urbanised areas.

291 As to strategic planning considerations, the panel concluded that: "... in long term strategic deliberations a high degree of credibility should be given to the Cooper Street Precinct Strategy and some degree of recognition should be give to the Epping Bulge achieving residential status".

292 In the end, the panel's position on the life of any quarry on Mr Love's land was driven by the importance it placed upon the Cooper Street Precinct Strategy and the timeframe for the cessation of extractive industry in the neighbouring area being limited to 2026 or thereabouts. For these reasons, the panel took the view that a consistent timeframe could be achieved for the life of any quarry on the WA658 land by limiting the operation to the stone resource situated above the water table and to the west of the gas pipeline easement.

293 As to the limitation restricting extraction to the resource situated above the water table, the panel noted under the item "Life of quarry & future use" in its summary table, that: [the] "Concept of quarrying below groundwater level [was] not supported". It said further on this subject in the body of its report:

Life of the quarry and future use

The panel noted that concept of quarrying below groundwater level (which was not part of the proposal before the panel but which was an ultimate aspiration of the applicant) more than doubled the proposed operation time span for the quarry and would result in quarry operations continuing until the year 2058.

Quarrying only to the west of the gas transmission easement, above the water table, would give a year of termination which would generally accord with the Council Cooper Street Precinct Strategy, namely 2026.

The estimated yield from the initial permit application proposal was 7 million tonnes of basalt. A western quarry operation would yield 4 million tonnes whilst a quarry operation which ultimately extended below groundwater would yield 15 million tonnes.

294 In its appraisal of strategic planning considerations, the panel advised of its views in the following terms:

The panel formed the view that it was necessary to allow some portion of the basalt resource which still existed north of Cooper Street to be won, but by the year 2025 or thereabouts quarrying should cease. It was likely that by that time the demands for urban development in Epping would be significant in extent and could form a significant element of metropolitan strategy.

The panel believe that a balancing of strategic objectives would favour the need to ensure that metropolitan urban growth is not inhibited. The endorsement of a modified quarry operation to the west of the gas transmission line is viewed by the panel as providing a reasoned inter-relationship with strategic objectives and also ensuring that sound performance measures are in place to deal with not only the existing situations but also likely future strategic outcomes.

The panel further believes that in the interests of aiding both the rehabilitation program and also limiting the length of quarry operation that no quarrying should occur below groundwater level.

The implementation of such an approach results in the panel being prepared to endorse a quarry operation which enables quarrying to occur above the groundwater level and to the west of the gas transmission easement.

295 Accordingly, the limitations recommended by the quarry panel to which any permit issued in relation to the extraction of stone on Mr Love's land should be subject, had a very clear purpose. They were designed to work so as not to inhibit future urban growth in the area by setting a timeframe for the cessation of future quarrying at 2025 or thereabouts, consistently with the Cooper Street Precinct Strategy. The limitations had nothing to do with facilitating the implementation of the freeway project.

296 Accordingly, I am not satisfied that by reason of the introduction of those limitations, there was any decrease in the value of the Mr Love's land arising from the proposal to carry out the freeway project.

297 Further, it is not open to disregard the report of the quarry permit panel issued and dated 18 October 1998 and the findings and recommendations made by the panel in that report, either pursuant to s 43(1)(a) LAC Act or on any other basis. In particular, these matters are taken to have fallen within the knowledge of any properly informed hypothetical purchaser of Mr Love's land on the relevant date.

Amendment C12 Planning Panel Report for Epping North (October 2001)

298 Following the delivery of the Quarry Planning Permit Panel report in October 1998, in August 2000, Amendment C12 to the Whittlesea Planning Scheme was exhibited. Amongst other matters, the Amendment proposed to incorporate the Epping North Strategic Plan into the planning scheme; to incorporate two local structure plans; and to rezone part of the land within the strategic plan area from Rural Zone to Residential 1 Zone. The strategic plan area includes the land on the north side of O'Herns Road between Epping Road and Vearings Road in the west. This included the land immediately north of Mr Love's land.

299 The panel appointed to review the Amendment published its report in October 2001 (the "Amendment C12 planning panel report for Epping North"). The panel noted that the only outright objection to the Amendment came from Mr Love. In response to Mr Love's submissions about the constraints that urban development will place upon the expansion extractive industry operations and new extractive industry, the panel responded that the Council's policies supporting urban development within the strategic plan area and the Cooper Street employment precinct meant that new extractive industry and expansion of existing operations would not be supported.

300 The panel appreciated a conflict between Council's policies for urban growth and the protection of stone resources in the area. In assessing net community benefit, the panel noted the policy direction of the Council to support progressive urban development of the area for residential and employment purposes, and the tacit endorsement of the policy at State government level through approval of the new format Whittlesea Planning Scheme, where these policy intentions were articulated.

301 The panel observed that the policy direction had been set appreciating that some stone resources in the area would not be made available for future extraction, but recognising that there are adequate alternative resources in the general area, including potential resources identified by the Extractive Industry Interest Area north of Donnybrook Road. In this regard, the panel said:

The panel considers that the community benefits which will flow from the policy directions for urban development set by the Council will outweigh the disbenefits (sic) associated with not exploiting all known stone resources within the area, particularly those owned by Mr Love. In overall terms, the panel considers there will be a net community benefit resulting from the urban development of Epping North and the Cooper St Employment Precinct.

It is the Council's responsibility as planning authority to set policy directions for the municipality, provided they do not conflict with the SPPF. As the panel has discussed earlier in this report, it does not consider that the policy directions evidenced by Amendment C 12 do conflict with the SPPF or other planning policy relating to green wedges. Provided the policy directions set by the Council are well founded and strategically based, is not appropriate for the panel to reject that policy on the grounds that it is opposed by some people or may disadvantage some people. As noted above, the concept of net community benefit should be applied in resolving such conflicts.

302 Amendment C12 was gazetted on 13 September 2002.

303 It must be taken that any well informed purchaser of Mr Love's land on 11 February 2002, would have known of the Amendment C12 planning panel report for Epping North published in October 2001 and its contents.

Prospects of Obtaining a Full Planning Permit in the Future

304 Further, I am satisfied that, as at 11 February 2002, an informed purchaser, having full knowledge of all relevant matters affecting the WA658 land, would have understood that the prospects of obtaining a planning permit in the future, which was free of the limitations imposed by the quarry permit panel, were negligible.

305 The prospects were in fact negligible for the reasons which follow.

Status of a Planning Permit Panel's Recommendations

306 A planning permit panel's recommendations in the planning process are of considerable weight.

307 1 July 1998 the Acting Minister for Planning and Local Government exercised his power under s 97B(1) of the Planning and Environment Act 1987 (the "P & E Act") to direct the responsible authority (City of Whittlesea) to refer the application for Planning Permit No. 704078 to him for determination.

308 Objections had been received to Mr Love's application for the planning permit to quarry the WA658 land. Accordingly, the Minister was required under s 97E to refer the matter to a panel appointed under the P & E Act. Section 97E, by sub-ss (2), (3) and (4), provides:

(2) The panel must consider the objections and submissions referred to it and give any person who made an objection or submission referred to it a reasonable opportunity to be heard.

(3) The panel may give any other person affected a reasonable opportunity to be heard.

(4) The panel must report its findings to the Minister setting out the panel's recommendations on the application.

309 Pursuant to s 97F of the P & E Act, the Minister who called the matter in is required to consider the report of the appointed panel before deciding upon the disposition of the application. Section 97F provides:

97F. Decision of Minister

(1) After considering the report of the panel (if any), the planning scheme and any matters to be considered under section 60, the Minister may-

(a) grant the permit; or

(b) grant the permit subject to conditions; or

(c) refuse to grant the permit on any ground he or she thinks fit.

(2) Once the Minister has decided in favour of an application, the Minister must issue the permit to the applicant.

310 Mr Robert Maclellan ("Mr Maclellan"), was called as a witness by Mr Love. Mr Maclellan is senior executive consultant and barrister and solicitor. He is a former Member of the Legislative Assembly of the Parliament of Victoria. From March 1976 to April 1982, and again from approximately October 1992 to approximately October 1999, Mr Maclellan was a Minister of the Crown for the State of Victoria. In that capacity, he was the Minister for Transport from approximately August 1978 to April 1982; the Minister for Planning from 6 October 1992 to 3 April 1996; and the Minister for Planning and for Local Government from 3 April 1996 to 20 October 1999. He was also the Shadow Minster for Planning from 3 May 1991 until 6 October 1992. He said in his evidence that he was the longest serving Minister for Planning in the State of Victoria.

311 He said in his evidence about the importance of a report prepared by a planning panel:

Now, can I say I don't think you and maybe possibly His Honour Cavanough understand how seriously I regarded the work of a panel.

...

If a panel was appointed, then you didn't arbitrarily rewrite its recommendation. If you didn't want to have a panel handle a matter, you called the matter in and determined it yourself. Maybe that's what you mean by political. Now, if you entrusted the panel to deal with the matter, then you gave enormous weight to the recommendation of the panel.

312 Although in this case Mr Maclellan was referring to a planning panel appointed under s 24 of the P & E Act which was considering an application to amend a planning scheme, I infer that precisely the same considerations would apply to a planning panel appointed to consider and make recommendations in relation to a permit application which had been called in by a Minister and then referred to a panel under s 97E for a report, such as the quarry permit panel appointed in this case.

313 Mr Maclellan swore the following in his affidavit dated 7 May 2010:

1. In paragraph 22 of my previous affidavit, I refer to, amongst other things, my approval of Amendment L143 to the Whittlesea Planning Scheme. I say further that:
   1. I am certain I would have made a different decision about Amendment L143 if a proposal to realign the proposed Hume Freeway between Craigieburn and the Western Ring Road ("proposed Craigieburn Bypass") had not been under consideration in February 1998. In particular, in the absence of the proposed Craigieburn Bypass, I would not have approved a rezoning of the entire area of the land the subject of Amendment L143 from a farming zoning to an industrial zoning. Instead, it is most likely I would have refused to rezone any part of the land the subject of Amendment L143. that is because, in the absence of any proposed Craigieburn Bypass, I can see no persuasive grounds upon which I might have declined to accept the recommendation of the panel that Amendment L143 be abandoned. The panel made that recommendation on the basis (as is set out in the Ministerial Briefing which forms part of exhibit "RRCM-4" to my previous affidavit) that it would have been premature to consider rezoning the land the subject of Amendment L143 until the following infrastructure issues, amongst others, had been resolved:
      1. Preparation of a floodway management plan for the site and surrounding area;

ii Preparation of a sewer reticulation strategy for the area;

iii Preparation of a road network plan for the area; and

iv Provision of a plan for the duplication of Cooper Street.

Alternatively, even though I was not aware at the relevant time of any need for industrial land in the area in which the land the subject of Amendment L143 was located, I accept that it is possible that I might have approved a rezoning of some smaller portion or portions of the land the subject of Amendment L143 for industrial development in order to enable the Council and the proponent to "test the market" for industrial land in that area;

1. I am certain that I would not have approved any rezoning or development of the land the subject of Amendment L143 that I thought might detrimentally affect the potential to extract basalt from land owned by the Respondent, Mr Love ("Love land"). I am certain of that because:
   1. As I stated in paragraph 7 of my previous affidavit, I have been aware from around August 1997 that Mr Love had applied for planning approval for an extended area of basalt quarry of the Love land;
   2. At that time, Victoria was in short supply of available quarry sites and, following the recession which Victoria had experienced in the early 1990s, I then considered that quarries which could produce materials for use in road construction and concrete manufacturing were essential to the economic recovery of the State;
   3. At that time, on the basis of my experience as Minister it appeared to me that there was an oversupply of industrial sites immediately following the recession. I had formed that view because much of my time was then taken up making decisions as Minister to rezone industrial land for residential use. Consequently, at that time, I considered that there was no pressing urgency for new industrial land to be made available around Melbourne. By contrast, I then considered that quarry land was extremely precious and that it was my obligation to the community, pursuant to Government policy at the time, to ensure competition in the quarry industry and the protection of stone resources from potentially inconsistent nearby land use changes;
   4. In my opinion at all relevant times, Mr Love's proposal for a basalt quarry on the Love land was a particularly good one because the general area around the Love land had been quarried for many years and extractive industry was still operating in that area. In addition, I considered that Mr Love's proposal for a basalt quarry was merely an extension of quarrying operations that had been ongoing and successful on his family's land over many years.

1. In paragraph 24 of my previous affidavit, I refer to, amongst other things, the "call in" of Mr Love's quarry permit application. I say further that:
   1. Whether or not there had been a proposed Craigieburn Bypass that might have affected the Love land, I would have "called in" Mr Love's quarry permit application because, in my opinion at all relevant times, determination of that application was:

1. Beyond the scope and competence of local government authority;

1. The fact that Mr Love's quarry permit application was "called in" by an Acting Minster is indicative of the importance placed upon that application by the Government at that time, as it was then uncommon, in my experience, for an Acting Minister to "call in" any permit application;

1. Even in the absence of a proposed Craigieburn Bypass that might have affected the Love land, I am certain that a panel would have been appointed to consider, and report to me about, Mr Love's quarry permit application. I am certain that because, to my knowledge at that time, such an application raised many technical issues for consideration. Those issues typically included, among other things, noise, quarry size, hydrology and surrounding land uses;

1. Based on my experience, as Minister dealing with such applications, had there not been a proposed Craigieburn Bypass that might have affected the Love land, I would then have expected that the planning process for this permit would have been completed much sooner than proved to be the case, because the issues concerning my decision whether or not to approve the application would have been much less complex, the Bypass issues being absent from the panel's consideration of the matter. In addition:
   1. I am certain that Mr Love's quarry permit application would still have been "called in" very close to the time at which the application was received;
   2. I am very confident that a panel would have been promptly appointed to consider the application;
   3. Absent the matters relating to the freeway and Amendment L 143, I expect that the panel would have been able to consider and report on the application within a shorter space of time than proved to be the case; and
2. If at that time there had not been a proposed Craigieburn Bypass that might have affected the Love land, then I expect that I would have made a decision within 30 days of having received the panel's report. Consequently, even assuming that I would not have received the panel report until the end of October 1998, it is highly likely that I would have decided to grant Mr Love's quarry permit application by late 1998 or in January or February 1999, at the latest.

1. If no proposal for the Craigieburn Bypass had then had the potential to affect the Love land, I would certainly have approved Mr Love's quarry permit application. In doing so, I would have been likely to do so in a manner consistent with any recommendation made by a panel appointed by me to consider Mr Love's quarry permit application.
2. If there had not been an option for the Craigieburn Bypass in the vicinity of the Love land or the land the subject of Amendment L143, I would have expected to receive a very different report from that report and very different recommendations from the recommendations contained in that report concerning the conditions to which any permit granted in respect of the Love land should be subject. That is because, amongst other things:
   1. For the reasons I have stated in paragraph 3 of this affidavit, my decision in relation to the land the subject of Amendment L143 would have been different. Consequently, Amendment L143 would almost certainly have been irrelevant to my decision; and
   2. The possible impact of any alignment of the Craigieburn Bypass would have been irrelevant to my decision; and

1. In the event that such a panel considered these issues without regard to the proposed Craigieburn Bypass, or to Amendment L143, the only limitations on the area of any quarry I approved on the Love land would at that time, as I understand, have been those required by the presence of the gas pipeline on the Love land and the need (if any) for buffers within the Love land. I am unable to comment on whether there was or was not a need for any such buffers as I would have determined that based on the recommendation of the panel.

314 The Corporation objected to Mr Maclellan's affidavit on the basis that the subject matter was not properly the subject of expert opinion both because Mr Maclellan was not qualified to express the opinions proffered and because the opinions expressed were matters of conjecture only and were not properly the subject matter of expert evidence.

315 Pursuant to s 76 Evidence Act 2008 evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. However, an exception is created pursuant to s 79 in respect of opinions based on specialised knowledge. If a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge.

316 Mr Love submitted that Mr Maclellan in his affidavit did express opinions based on specialised knowledge and that Mr Maclellan was in a position to give the evidence set out therein.

317 In my opinion, the matters referred to in Mr Maclellan's affidavit are admissible other than: the matters referred to in paragraph 3(a) and the substantive part of 3(b) (with sub-paragraphs (i)-(iv) being admissible); paragraph 4(a), (c), (d) and (e), and paragraph 5.

318 The admissible portions of Mr Maclellan's affidavit may be admitted as opinions based on specialised knowledge which Mr Maclellan possessed.

319 As to paragraph 3(a) and the substantive part of 3(b) (with sub-paragraphs (i)-(iv) being admissible), these paragraphs are predicated on the basis of "if a proposal to realign the proposed Hume highway ... had not been under consideration in February 1998". As such, the opinions which follow venture into the field of speculation upon a factual basis which has not been established and did not accord with reality. Planning decisions are subject to a range of competing interests and political pressures. A change of circumstances may redefine the landscape of these interests and pressures. For these reasons, paragraph 3(a) and the substantive part of 3(b) are ruled inadmissible, with sub-paragraphs 3(b)(i)-(iv) remaining admissible.

320 As to paragraph 4(a), (c), (d) and (e), and paragraph 5, these paragraphs are predicated on the basis of "whether or not there had been a proposal for the Craigieburn Bypass" (paragraph 4); and "if no proposal for the Craigieburn Bypass then had the potential to affect the Love land" and "if there had not been an option for the Craigieburn Bypass in the vicinity of the Love land or the land the subject of Amendment L143"(paragraph 5). As such, the opinions which follow also venture into the field of speculation upon a factual basis which has not been established and did not accord with reality. As earlier stated, planning decisions are subject to a range of competing interests and political pressures. A change of circumstances may redefine the landscape of these interests and pressures. For these reasons, paragraph 4(a), (c), (d) and (e), and paragraph 5 of Mr Maclellan's affidavit are ruled inadmissible.

321 The effect and weight to be given to Mr Maclellan's evidence, so far as it is admissible, are considered later in these reasons.

322 In this case, the quarry permit panel engaged in a formal hearing process. It conducted public hearings between 14-17 September 1998, before handing down its report on 18 October 1998. The report is extensive and detailed. It runs to 139 pages.

323 The panel took in submissions from the Department of Natural Resources and Environment (DRNE); The City of Whittlesea; VicRoads; Gas Transmission Authority; Melbourne Water; Aboriginal Affairs Victoria; the Environment Protection Authority; Mr Love; Mr Scanlon; Northern Hospital; Residents Working Group; Pacific Shopping Centres Australia; Merri Creek Management Committee; Estate of Moffat McKee and seven other natural persons.

The Substance of the Quarry Permit Panel's Report

324 The quarry permit panel's report focussed entirely on the issue of Mr Love's application for a planning permit to quarry his WA65 land. It dealt thoroughly with all of the issues of substance on that subject presented to it by the various parties before it.

325 Accordingly, the report became an authoritative guide as to how any future planning application for a quarry on the site may be dealt with. Any future purchaser of Mr Love's land would be likely to give the report of the quarry permit panel considerable weight.

The Position Taken by the Council in Submissions to the Quarry Permit Panel

326 The position taken by the City of Whittlesea before the quarry permit panel, as earlier referred to, was that no permit should issue to Mr Love for a quarry.

327 However, in response to a request from the panel, the Council tendered a list of conditions which it contended should be imposed if a permit was to be granted.

328 The conditions advanced by the Council accorded directly with the recommendations made by the quarry permit panel, namely, that the following limits to extraction should apply:

• Extraction only to occur on land to the west of the gas transmission pipeline;
• Extraction to occur above the water table so as to allow the future option of constructing buildings on the worked area;
• Extraction to be commenced and completed within 25 years of the date of the permit.

329 The position taken by the Council at this time, also provides a strong indication as to how it would have approached any future application for a planning permit to quarry the WA658 land, if it was faced with any application to extend, vary or substitute the notional permit. This too must be taken to have been known by any prospective purchaser of Mr Love's land.

The New Format Planning Scheme for Whittlesea (the MSS and SPPF)

330 An application for a permit is assessed against the relevant policies and controls within the planning scheme, including the objectives and provisions of the relevant zones, any relevant particular provisions, and State and local policies.

331 The new format planning scheme for Whittlesea was introduced on 8 July 1999. It was the subject of a report of a panel and advisory committee dated May 1998. Under s 7 of the P & E Act, planning schemes must include and specify separately State standard provisions and local provisions. The local provisions must include a municipal strategic statement (if the area of the planning scheme includes the whole or part of a municipal district).

332 Under s 12A of the P & E Act, the municipal strategic statement (the "MSS") must include the strategic planning, land use and development objectives of the planning authority; the strategies for achieving the objectives; and the general explanation of the relationship between those objectives and strategies and the controls on the use and development of land in the planning scheme.

333 The Whittlesea Planning Scheme includes the Local Planning Policy Framework ("LPPF") which in turn contains the Municipal Strategic Statement ("MSS") and statements of local policy.

334 The LPPF is intended to identify long term directions about land use and development in a particular municipality and to provide the rationale for zones, overlays and particular provisions in schemes. Decisions on permit applications are to be assessed by reference to the relevant Local Planning Policy Framework.

The MSS sets the strategic planning framework for each municipality for the next 20 years and beyond. The statement encapsulates significant planning policy directions for the municipality and in turn provides the strategic basis for statutory land use controls. [139]

336 The Cooper Street Strategy came to be included in the MSS as a reference document as at the acquisition date.

337 The Whittlesea Planning Scheme also includes the State Planning Policy Framework ("SPPF") which sets out the relevant statements of State policy. The SPPF covers strategic issues of State importance.

338 Section 7(4) of the P & E Act provides that, if the appears to be an inconsistency between different provisions of a planning scheme, the scheme must, so far as practicable be read so as to resolve the inconsistency. Subject to that, the State standard provisions prevail over local provisions and a specific control over land prevails over a municipal strategic statement or any strategic plan, policy statement, code or guideline in the planning scheme.

339 Clause 65 of the Whittlesea Planning Scheme contains a list of decision guidelines of general application. The following are of relevance to any application for use and development of land as a quarry:

65.01 Approval of an application or plan

Before deciding on an application or approval of a plan, the responsible authority must consider, as appropriate:

• The matters set out in Section 60 of the P & E Act.
• The State Planning Policy Framework and the Local Planning Policy Framework, including the Municipal Strategic Statement and local planning policies.
• The purpose of the zone, overlay or other provision.
• The orderly planning of the area.
• The effect on the amenity of the area.
• The proximity of the land to any public land.
• Factors likely to cause or contribute to land degradation, salinity or reduce water quality.

340 Clause 52.09 of the Whittlesea Planning Scheme sets out particular provisions that apply to extractive industry. The clause sets out objectives, as well as decision guidelines to be considered in relation to an application for extractive industry.

341 As at the relevant date, being the date of acquisition, extractive industry and the long term protection of stone resources was specifically recognised in key planning instruments.

342 By clause 11.02 it is a goal of the SPPF, a goal of planning in Victoria is to foster net community benefit and sustainable development.

343 The SPPF includes clause 17.09, extractive industry, which sets out the objective of identifying and protecting stone resources, general implementation measures and geographic strategies. Clause 17.09 provides:

17.09 Extractive industry

17.09-1 Objective

To identify and protect stone resources accessible to major markets and to provide a consistent planning approval process for extraction in accordance with acceptable environmental standards.

17.09-2 General implementation

...

Planning schemes must not prohibit extractive industry in non-urban zones, except if it is prohibited by an Act of Parliament.

The provisions of the Planning and Environment Act 1987 and the Extractive Industries Development Act 1995, the Environment Protection Act 1970 relevant State environment protection policies and the Flora and Fauna Guarantee Act 1988 should be applied to extractive industry activities in a timely and co-ordinated manner

Provision for buffer areas between new extractive industries and sensitive land uses should be determined on the following principles:

• Clearly defined buffer areas appropriate to the nature of the proposed extractive uses, which are to be owned or controlled by the proponent of an extractive industry, are specified in an application for permit.
• Performance standards for the buffer areas are set out in accordance with requirements of the Extractive Industries Development Regulations 1996 or a work authority or a permit and have regard to the zoning of the land surrounding the extractive industry.
• Activities within land zoned for public use may be taken into consideration in determining the buffer areas.

Provision for buffer areas between existing extractive industries and sensitive land uses should be determined on the following principles:

• The buffer areas are determined so that appropriate limits on effects can be met at the sensitive locations using practical and readily available technology.
• The required buffers are taken into consideration if a change of land use in the vicinity of the extractive industry is proposed.
• Land within the buffer areas may be used for purposes that are not adversely affected by the extractive industry.

17.09-3 Geographic strategies

The long-term protection of stone resources in Victoria is to be generally in accordance with:

• Provisions and recommendations expressed in Extractive Industry Interest Areas, Melbourne Supply Area Geological Survey of Victoria, Technical Record 1996/1 (Department of Natural Resources and Environment 1996) for stone resources in the Melbourne Supply Area.
• The concept of the Extractive Industry Interest Areas expressed in Extractive Industry Interest Areas, Melbourne Supply Area Geological Survey of Victoria, Technical Record 1996/1 (Department of Natural Resources and Environment 1996) for the remainder of Victoria. (Note: Extractive Industry Interest Areas will be progressively defined across Victoria by the Department of Natural Resources and Environment)"

344 Within the Local Planning Policy Framework, clause 21.04 of the Municipal Strategic Statement ("MSS") sets out the Council's vision and overall land use planning objectives. Clause 21.06-2, Managing Urban Growth, and clause 12.06-4, Employment and Economic Development, address the urban development of Cooper Street. Clause 21.06-6, Rural Land Use, addresses rural land use within the municipality.

345 Clause 21.06-4 of the LPPF, Employment and Economic Development, contains the objective of creating a better jobs/housing balance and achieving greater diversity in employment opportunities. The clause has as its object to:

redress the apparent imbalance in both the potential to create additional jobs and greater diversity in the employment sectors, the City must focus on strategies which:

• maximise retention of as much of the local resident industrial owner occupier market as possible in the short term;
• attract the maximum number of local industries to service the growing local population;
• substantially increase the range and quality of sites; and
• differentiate future large scale industrial estates based on local conditions and other comparative advantages.

346 Clause 21.06-4 of the LPPF provides that Council's strategies for achieving the objective include:

• Progressively increase the supply of land zoned for employment purposes.
• Pursue a greater diversity in economic investment in the municipality by supporting the following:

→ Employment generating industries within the Cooper Street Precinct; ...

• Protect future industrial activity within the Cooper Street Precinct by ensuring that non industrial land uses that would adversely affect industry viability are discouraged from encroaching on the area.
• Provide adequate separation and buffer areas between sensitive land uses and offensive or dangerous industries and extractive industry to ensure that adverse environmental effects, nuisance or exposure to hazards does not affect existing and future residents.
• Maintain and improve the aesthetic appearance of existing employment areas at Bundoora, Thomastown and Epping.
• Ensure that all new employment areas have regard to high quality urban and landscape design and appearance.
• ...
• Focus on planning for the concept of integrated business parks in Cooper Street and Mernda/Doreen.

347 The clause further provides that the specific actions for implementation include:

• Implement the Cooper Street Precinct Strategy pending the finalisation of the alignment of the Hume Freeway.
• Following definition of the Hume Freeway alignment review the Cooper Street Precinct Strategy as required and pursue rezoning of land in accordance with the Strategy.
• ...
• Oppose the establishment of unsightly industries and storage yards which are a disincentive to investment in key employment corridors such as Cooper Street, High Street and McDonalds Road.

348 The clause also lists the Cooper Street Precinct Strategy as a reference document in the planning scheme.

349 Mr Love called Phillip Borelli ("Mr Borelli") a town planner. Mr Borelli, graduated with honours from RMIT with a Diploma of Applied Science (Town Planning) in 1981. Mr Borelli has practised his profession since 1976. Mr Borelli's current memberships include the Planning Institute of Australia and the Victorian Planning and Environmental Law Association.

350 Mr Borelli's opinions on the issue of a permit for extraction on the WA658 land expressed in his evidence were that:

(a) the SPPF supported the use of the site for extractive industry, provided:

(i) the activity could be well managed so as not to create any unreasonable environmental impacts; and

(ii) the use would not unreasonably restrict the available supply of land in the region for urban industrial purposes;

(b) there is nothing in the local planning policies that would suggest that the appropriate planning outcome would be to refuse an application for extractive industry on the site:

(i) clause 21.04 of the LPPF advocates the management of urban growth in a manner that maximises beneficial relationships between compatible land uses. Co-location with other quarries and landfill sites makes it a suitable candidate site for a similar use;

(ii) clause 21.06 of the LPPF encourages employment generating industries in the Cooper Street precinct (acknowledging that industrial development would provide more employment);

(iii) encroachment of residential and other sensitive non-industrial uses into the area is discouraged (LPPF clause 21.06-4), therefore, continued separation of incompatible uses in this area can be expected;

(iv) the site is not in an area designated in the planning scheme as having high quality landscape or other rural attributes or features of significance that would militate against its use and development for extractive industry;

(v) the community plan at clause 21.04 of the LPPF encourages sustainable development. Extraction of the basalt resource, or a substantial part, before the land is used for another purpose is consistent with this;

(vi) the reservation about new extractive industry in clause 21.06-8 of the LPPF was in the context of uncertainty about the route of the freeway and the extent of the land to be zoned for residential purposes in Epping North. The western extent of the residential area was known by the relevant date. If the freeway had not been routed through the subject land, there would have been no reason to refuse extractive industry on these grounds;

(vii) the Cooper Street precinct strategy indicated new areas of extraction were appropriate provided they were well managed, did not impact on the visual amenity of Cooper Street and could be commenced promptly to allow completion within 20 to 30 years. Extractive industry on the site could meet these conditions; and

(viii) the use is expressly contemplated by the "Special Use 4 Zone". The rural zone purposes include promotion of economic development compatible with rural activities.

351 Mr Borelli considered that it would have been appropriate to restrict the use and development of the future quarry to ensure it did not have any unreasonable impacts on the environment or nearby uses. In his report of 18 February 2005, he adopted the restrictions on quarrying recommended by the quarry permit panel, including limiting extraction to the west of the gas pipe line.

352 In relation to the concern of the Whittlesea Council that quarrying would affect the future use and development of the area for industrial or employment generating uses, Mr Borelli referred to his instructions that the quarrying operation would still be financially viable on the basis of the restricted area of extraction and the reduced time frame recommended by the panel.

353 Mr Borelli concluded that there had been no material change in circumstances between the time of the quarry permit panel report and the relevant date that would have changed the likely outcome of a fresh application, except for the selection of the freeway route.

354 However, in his later report of 1 October 2007 Mr Borelli took issue with the view that the land east of the gas pipeline could not have been used for extractive industry. He relied on the view that the Cooper Street precinct strategy supported new areas of extraction in this location provided the use would not impact on visual amenity of Cooper Street, the use could be commenced in the short term and be completed within 20 to 30 years when it was anticipated that other uses would surround the site, and the use was well managed.

355 Mr Borelli reviewed the quarry panel's reasons and took the view that the recommendation to restrict quarrying to the west of the pipeline was based on the potential freeway alignment on or near the site. To the extent that the panel's reasons were based on proximity of industrial development on the adjoining land to the east at 360 Cooper Street, Mr Borelli was of the view that the industrial zoning had been affected by the freeway alignment, that absent the freeway the land would not have been rezoned for many years.

356 Mr Borelli accepted that extraction would have been required to occur from the north-east to the south-west and would be limited in effect to 2026 or thereabouts.

357 In his third report, dated 25 June 2008, Mr Borelli referred to Amendment L50 to the old format Whittlesea Planning Scheme which recommended rezoning of land in Summerhill Road, Donnybrook to allow extraction of basalt. The proponent of the amendment was the Department of Manufacturing and Industry Development which submitted that the quarry was needed to meet community demand. The panel accepted that there was a significant community benefit, notwithstanding council opposition. Mr Borelli believed the panel's findings supported the prospect of a permit for Mr Love's land because his land adjoined existing quarries and was closer to the market for stone and was therefore better placed to deliver product at lower cost.

358 In his third report, Mr Borelli expressed the view that, had a planning permit been granted for extractive industry on the subject land before the relevant date, the land to the east of the gas pipe line may have had a different zoning (such as the "Special Use 4 Zone") by 11 February 2002.

359 In the "after" situation, Mr Borelli was of the opinion that, that as almost all of the proposed extraction area west of the pipe line was within 300 metres of the freeway reserve, its potential for extractive industry was ended. Further, planning policies for extractive industry seek to ensure that operations are not visible from the public realm including roads. The elevated freeway in this area meant it would not have been practical to screen the operation from the freeway.

360 In his oral evidence, Mr Borelli disputed that he had changed his view from his first report to this second report as to the extent of extraction that would have been allowed at the relevant date. In his first report he had accepted the recommendations of the panel as appropriate. In his second report, he said that a permit for extraction would issue for the east of the pipe line. Under cross-examination, he denied that he had changed his view. Nevertheless, it would appear that he had changed his position.

361 Mr Borelli accepted that the time frame for extraction would be limited to 25 years and that extraction and any landfill would need to be completed by 2026.

362 In relation to the prospect of obtaining, at the relevant date, a permit for extraction beyond the scope of that recommended by the quarry permit panel, Mr Borelli accepted that:

(a) there was risk that, at the relevant date, a permit would not have been granted to allow extraction below the water table. He said that he would have advised a hypothetical purchaser that a specialist panel that considered this issue only three years earlier than the relevant date and recommended against it. He said he would have advised the purchaser that the grant of a permit on these terms would be risky. He said that it was not impossible, but it would extend the life of the quarry and the responsible authority would have to be convinced that the issues raised by going below the water table could be managed appropriately; and

(b) at the relevant date, there was risk that the Victorian Civil and Administrative Tribunal would refuse to extend the quarry permit beyond the scope recommended by the quarry permit panel.

363 Mr Borelli accepted that there were a number of matters that he would have told a hypothetical purchaser, at the relevant date, as to the prospect of getting a permit extended beyond the recommendations of the quarry permit panel, including:

(a) in October 98 the quarry permit panel considered an application for extraction to the east and to the west of the pipe line, albeit above the water table, and only recommended extraction to the west and above the water table, and limited extraction to 25 years;

(b) the planning scheme's MSS contains strong statements in support of the urban development of Cooper Street, including precinct B 3;

(c) the MSS strongly supported residential development north of O'Herns Road (subject to buffers and spreading from east to west in a staged development);

(d) the planning scheme required the implementation of the Cooper Street precinct strategy;

(e) as to the prospect of extractive industry on the western side of precinct B 3, he accepted that reasonable minds might differ as to the interpretation of the land use aspirations set out in the strategy in relation to B 3. The Tribunal might interpret the direction within the strategy for precinct B3 differently. (That is, to not allow extraction to the east of the pipeline);

(f) had the purchaser been contemplating extractive industry on the gas pipeline land and immediately to the east of it, Mr Borelli would have drawn attention primarily to the timeframe of development in the Cooper Street precinct and indicated that the application, and extraction from that land, would need to occur as quickly as possible; with extraction starting on the east land heading back to the west, and from the north to the south;

(g) the purchaser would have to provide buffers, probably, on its land;

(h) the C 12 panel report in terms of support for the urban development both north and south of O'Herns Road would have a significant impact on any aspiration to extract more of Mr Loves' land and would have an implication in terms of the need for a buffer;

(i) the clear thrust of strategic planning for the area was against the long term sterilization of Mr Love's land by extraction. The time frame for extraction would be limited to 25 years.

364 In relation to the rezoning of the Scanlon land, Mr Borelli accepted that, had the rezoning of part of the land not occurred in February 1998, the L143 panel believed it would become industrial land, well within the life of the quarry permit. He accepted that the L143 panel's recommendation for abandonment of the amendment was not because the land was strategically unsuitable for industrial development.

365 Mr Borelli accepted the statement by the C12 panel that essentially buffers for new extractive industries must be provided on land owned or controlled by the proponent and that provisions for buffer areas between existing extractive industries and sensitive land use, such as residential land use, must be taken into consideration when there is a proposed change of land use in the vicinity of the extractive industry.

366 Mr Borelli said that the cost of in seeking to extend the quarry permit beyond the limited permit recommended by the panel would have been easily in excess of $200,000.

367 Mr Love also called Jacob Hendrik Kraan ("Mr Kraan"). He is the Principal of KLM Gerner Pty Ltd trading as FOCUS Creative Development Solutions, Town Planners, Project Managers, Environmental Consultants and Development Consultants. Mr Kraan is a qualified Town Planner and holds a Bachelor of Agricultural Science with Honours and a Masters of Urban Planning. Mr Kraan is a member of the Royal Australian Planning Institute and the Victorian Planning and Environmental Law Association. Mr Kraan's company has corporate membership of the Urban Development Institute of Australia.

368 Mr Kraan was of the view that a permit would have issued in the "before" for extractive industry for the whole of the WA658 land.

369 He considered that the quarrying of the land would have been consistent with the relevant State Planning Policy Framework (SPPF) because:

(a) it would respond to the needs of community by providing stone in a price competitive manner;

(b) it could be carried on at the site in a controlled manner with little if any affect on natural ecosystems and cultural heritage;

(c) it assists in the conservation and use of a natural resource to support environmental quality and sustainable development over the long term;

(d) it can be conducted in a manner consistent with environmental objectives of clause 15;

(e) it can be established with adequate separation distances and buffer areas to ensure no off-site effects;

(f) it will be carried on in appropriate zones, namely the rural zone and the "Special Use 4 (Extractive Industry) Zone";

(g) it will be located in an area of like industry, namely quarries and landfills;

(h) it will occur in an excellent location with significant strategic advantages in terms of close location to Melbourne and consumer markets, very good access to major road networks; and very little residential land in its general vicinity;

(i) it was consistent with the clause 17.09 specific policy for extractive industry in the protection and wise use of stone resources accessible to major markets.

370 Mr Kraan was of the view that as extraction can only occur where the resource is found, land use planning should give preference to extractive industry over industrial, commercial or residential land use, which are not physically restrained to particular locations.

371 In relation to the Local Planning Policy Framework (LPPF), in Mr Kraan's opinion:

(a) the location of a quarry on the subject land is consistent with the objective under clause 21.0 4-2, managing urban growth, of managing urban growth in a manner that maximises beneficial relationships between compatible land uses. The site was located within an area that was being used for quarrying and landfill operations; and

(b) clause 21.06-4, employment and economic development, has the objective of creating a better jobs/housing balance and achieving greater diversity in employment opportunities. Mr Kraan was of the view that a quarry and subsequent landfill on the site would provide employment opportunities and that the progressive rehabilitation of the quarry can be undertaken in such a manner that the subject land could be used for industrial uses in the longer term.

372 In relation to the application of the Cooper Street precinct strategy, in his first report of March 2005, Mr Kraan sets out his view that extractive industry could be carried out in accordance with the conditions required by the Cooper Street precinct strategy, namely that the use would not impact on the visual amenity of Cooper Street; the use could be commenced in the short term and completed within 20 to 30 years when it was anticipated that other uses would surround the site; and that extractive operations would be well managed.

373 In his report of September 2006, Mr Kraan put the view that in the absence of the bypass scheme and with the proper application of performance criteria, extraction could take place as proposed in the 1997 application or the 2000 work authority proposal.

374 In his report of May 2008, Mr Kraan said that quarrying would not necessarily be required to cease by about 2025. He referred to clause 52.09 of the Whittlesea Planning Scheme which provided that permits for extractive industry must not include conditions which require the use to cease by a specified date unless either the subject land is situated in or adjoins land which is being developed or is proposed to be developed for urban purposes, or such a condition is suggested by the permit applicant.

375 In Mr Kraan's view, as the land immediately to the east of the northern half of WA658 was owned by Mr Love and was zoned rural, a planning permit could not include a time limit on extraction in this area. Further, his opinion was that, as the land adjacent to the southern half of WA658 was zoned rural for 150 metres, a time limit could not be placed on a planning permit for extraction in this area.

376 On this issue, there was a difference of opinion as to the interpretation of clause 52.09. In the opinion of Mr Borelli, Council could have imposed a time limit on a quarry permit under clause 52.09 if it had a genuine concern about the encroachment of urban development.

377 Mr Kraan sought to downplay the weight of the Cooper Street precinct strategy. He founded this view on the fact that it was not a document which had been incorporated into the planning scheme and had not faced the public scrutiny of a formal amendment process. Rather, it was used as a reference document.

378 In Mr Kraan's view, the quarry permit panel placed too much weight on the Cooper Street precinct strategy and insufficient weight to clause 17.09 of the State section of the planning scheme (SPPF). He was of the opinion that the panel's recommendation restricting quarrying to the west of the gas pipe line was based, in part, on the need to avoid the impact of blasting on future industrial buildings to the east. In his view, the panel did not address other alternatives to meet the ground vibration criteria at the eastern boundary.

379 To minimise the prospect of conflict with sensitive residential uses, Mr Kraan believed that extractive operations could begin in the north eastern part of the extraction area and work southward, with quarry faces also oriented southward.

380 Mr Kraan was of the belief that the quarry permit panel's recommendation that quarrying not take place below the water table was based on timing constraints in the Cooper Street precinct strategy and the panel's view that it would be more appropriate to rehabilitate a quarry with a floor that was above the water table. Mr Kraan took issue with that recommendation on the basis that quarrying below the water table should be based on a detailed technical examination and not a cursory view of timing and rehabilitation issues. He noted that the application before the panel did not seek permission to quarry below the water table.

381 Mr Kraan stated that it was always Mr Love's intent to quarry below the water table at a subsequent stage of the quarry and that this would have required a varied work authority and an amended planning permit. He regarded both as having a high prospect of success.

382 Mr Kraan took the view that amendment L50 provided an appropriate guide to good planning in respect of extractive industries in locations close to the metropolitan area.

383 Mr Kraan said that, if the refusal of the quarry permit application in 1998 is disregarded, a permit for quarrying would have issued about two months after the 1998 panel report and that a permit for landfill would have issued within three to six years after the issue of the quarry permit. He expected that the land east of the pipeline would have been zoned "Special Use Zone (Extractive Industry Schedule)" at the relevant date, or at least been the subject of an amendment to the planning scheme to that effect. He regarded this as consistent with the recommendations of the report of the panel and advisory committee for the new format planning scheme.

384 As to the prospect of a quarry permit being granted in the "after" situation, Mr Kraan believed that it is very unlikely that planning approval would be granted for anything but perhaps a small area of the land not taken up by the acquisition and the buffers to the freeway. The elevated freeway pavement at the Cooper Street over-pass and the elevated O'Herns Road overpass would make effective screening of the quarry in the "after" situation difficult. Mr Kraan referred to a report for the Hume Freeway which stated that the buffer distance that would be required between the area of extraction and the freeway would be in the order of 300 metres. In light of this, Mr Kraan inferred that any planning approval would require extraction to be set back some 300 metres from the freeway.

385 He also is of the view that, from a technical aspect, the buffer could be much less than 200 or 300 metres as management and mitigation measures could be implemented to ensure that performance-based criteria for blasting, noise, dust and the like can be complied with much lesser setbacks. However, he expected that a buffer in the order of 300 metres would be sought by Council and also possibly the Corporation to protect visual amenity. He believed that earthen bunding and tree/shrub planting would be needed to achieve the desired visual screening, and that this, for maximum effect, would be located in close proximity to the extraction area.

386 Mr Kraan was unsure of the WCC's attitude to a quarry permit application in the "after" situation, although he thought it could well be positive given that the freeway would form the western boundary of the urban area. He also thought that there may be reservations regarding the visual amenity impacts of a quarry in close proximity to the freeway and its interchanges.

387 In his oral evidence, in relation to the prospect of getting a permit on terms other than those recommended by the quarry permit panel, Mr Kraan said:

(a) He accepted that the State Planning Policy Framework (SPPF) sets out policies in respect of principal land uses and that there was no priority or precedence amongst land uses;

(b) He accepted that the objectives and strategies contained in the planning scheme that deal with the development of the Cooper Street area and the Epping North area to the north east of O'Herns Road encouraged urban uses and did not encourage new extraction. He accepted that the strategies that encourage urban use of the Cooper Street precinct call for Mr Love's land to be available within the timeframe anticipated by the strategy;

(c) He accepted that the MSS within the planning scheme contained specific encouragement for the urban development along Cooper Street and for the Epping North area, and that it did not provide encouragement for new extractive uses;

(d) He accepted that the Cooper Street Strategy offered no encouragement for new extraction within precinct B3, rather that it did not prohibit it. He acknowledged that his view as to the prospects of obtaining a permit for extraction were based on the text in the precinct strategy relating to precinct B4;

(e) He accepted the view put by the quarry permit panel that extraction below the water table would introduce more complex issues for rehabilitation than a void above the water table;

(f) He accepted that the quarry permit panel formed the view that limiting extraction to one side of the pipeline would result in a single excavated area and would more quickly allow the land to be made available for urban purposes. He accepted that two excavated strips of land lying 100 metres apart posed a more difficult challenge to the eventual urban development of the land;

(g) He accepted that the quarry permit panel did have regard to the State strategic objectives for extraction and that the panel formed the view that there was a balance to be achieved between the extraction of the stone resource and the protection of the urban growth strategies;

(h) He accepted that the quarry permit panel's conclusions were not based solely on performance measures - whether the blasting or other off-site effects of a quarry could be managed. He accepted that the panel relied on strategic land use planning considerations in recommending that extraction be limited. These were important considerations for a prospective purchaser considering the prospects of a permit to extract beyond the limits recommended by the panel;

(i) He accepted that the land form that would result from the proposed quarry was a relevant consideration in determining whether a permit would be granted. The quarry proposed in the Natoli work plan would result in a void up to 60 metres deep - the equivalent of an 18 storey building. The floor of the void would be up to 45 metres below the water table;

(j) He accepted that, if at the time of the application for a permit, the land was earmarked for future urban use, it would be very difficult to get a permit unlimited in time or depth - that is, the permit required for the Natoli work plan; and

(k) He acknowledged that his view as to the prospects of obtaining a permit for extraction was based on the text in the precinct strategy relating to precinct B4.

388 In relation to the life of a permit for extraction:

(a) Mr Kraan acknowledged that in his written submission on behalf of Mr Love in response to the Cooper Street issues paper, he submitted that the strategy should be amended to allow extraction of stone to be completed within 30 years. The view initially put by Mr Kraan in his first report was that extraction on Mr Love's land would be limited to 30 years;

(b) Mr Kraan accepted that there was less prospect of getting an extraction permit unlimited in time, as required for extraction under the 2000 work plan, than one with a finite limit as recommended by the quarry permit panel; and

(c) Mr Kraan accepted that a permit for the extraction of the whole of the resource was in conflict with the timeframe of the Cooper Street precinct strategy.

389 The Corporation called Robert Milner ("Mr Milner"). He is the General Manager of Planning at Coomes Consulting Group Pty Ltd and holds an honours diploma in Town and Country Planning from Liverpool Polytechnic. Mr Milner has been in practice as a town planner since 1977, working in the areas of strategic studies, land use and development approvals and advice, appeal and panel hearings, and communication, consultation and facilitation. He also said in his evidence: "

I have extensive experience in the development and implementation of outline development plans, structure plans and strategic matters in both Epping North and the City of Whittlesea.

390 Mr Milner accepted that, as at the relevant date, a planning permit would have issued for the use of part of the land for extractive industry. He said that this is supported by strategic planning at a local level and State policies at the time that the quarry permit application was made.

391 However, in his view, a permit issued at the relevant date for extractive industry would have been limited to the land to the west of the pipeline easement. Extraction of a larger area would have extended the time frame for extraction beyond timeframes envisaged for the Cooper Street precinct strategy. Further, restriction of any quarrying operation to the western side of the gas pipeline easement was consistent the uses identified to the northern side of O'Herns Road by the strategy. Extraction to the east of the easement would have affected the amenity of future residents with the potential to sterilise the area for urban uses in the long term.

392 In the opinion of Mr Milner the permit to quarry the WA658 land would have issued subject to the following further conditions:

(a) he accepted the quarry permit panel's view that set-backs of 200 metres from the existing Cooper Street road reserve and O'Herns Road would be required to adequately protect potential future development from lasting impacts of the quarry. He said that adequate bunding and landscape buffers could also be provided within the set-backs to minimise detrimental visual impact of the quarry;

(b) he adopted the quarry permit panel's recommendation limiting extraction to above the water table. He did so on the grounds that this best correlated with completion of extraction within an appropriate time frame under the Cooper Street precinct strategy, and on the basis that extraction below groundwater level would add complexity and time to rehabilitation programs, particularly to bring the site to a standard on which buildings can be constructed;

(c) he said that, had a permit being granted, a sunset clause would have been applied, allowing the extractive use for a period of 20 years from the issue of the permit with a review at the conclusion of that time. He believed that, although it was not recommended by the quarry permit panel, such a condition would have been appropriate given the provisions of the Cooper Street strategy and the need to ensure blasting was complete within the vicinity of O'Herns Road prior to the commencement of any residential development. Providing for a review after 20 years, would have permitted the rate of surrounding urban development to be taken into account in an assessment of any further extension; and

(d) a review at the end of that 20 year period would only have extended the permit, at a maximum, to the time frame within the Cooper Street precinct strategy, that is, to 2026.

393 Mr Milner noted that the subject site is contained within two precincts under the Cooper Street precinct strategy, precincts B3 and B4, which are separated by the gas pipe line easement. It was Mr Milner's view that, while the strategy did not preclude extractive industry in precinct B3, it did not support it; rather it referred to the western land acting as a buffer from existing extractive and tipping uses, with a recommendation that such uses generally be limited to precinct B4. He also noted that the gas pipe line easement had been used by the strategy as a boundary between residential and rural uses to the north of O'Herns Road and, more broadly as a boundary between urban and non-urban uses.

394 Mr Milner did not agree with Mr Borelli's view that the State Planning Policy Framework (SPPF) objectives for extractive industry competed with the identification by the Local Planning Policy Framework (LPPF) of the WA658 site as being within an area designated for future urban uses. Mr Milner referred to clause 14 of the SPPF which relates to settlement and which requires responsible authorities to plan urban areas for at least 10 years population growth. Mr Milner did not see any particular conflict regarding the use of the land. He noted that the relevant panel considered the new format planning scheme and was aware of the resource on Mr Love's property; that it did recommend greater protection of the municipality's stone resource; and that it nonetheless recommended that the Cooper Street precinct strategy be included in the MSS.

395 Mr Milner preferred the view that State and local policy should be accorded equal and complementary weight and only where there is a clear contradiction should the scheme be read down with the State policy carrying greater weight. He said that the role of local policy, adopted and referenced in the local section of the planning scheme, is to provide a finer level of interpretation and application of State policy having regard to the particular opportunities, constraints and attributes presented by specific sites and locations within a municipality. In his view, it is appropriate that a planning authority might find that, having regard to all relevant matters, it is a preferable policy position to encourage the use of land for an urban purpose despite the presence of a proven valuable stone resource. He noted that the planning scheme does not provide that the extraction of valuable stone resources have priority over other land uses.

396 In particular, Mr Milner did not agree with Mr Kraan's view that extraction of a high quality resource should be preferred over industrial, commercial or residential uses. Mr Milner noted that the Council was aware of the resource on Mr Love's land but nonetheless in its preparation and support of the Cooper Street precinct strategy, it did not consider extraction of the resource to be an over-riding priority, but rather considered it appropriate to balance urban uses and extractive industry by reference to the uses identified in the relevant precincts of the strategy. The panels considering the quarry permit, amendment L143 and the new format planning scheme also came to the same view.

(a) the location of the gas pipeline easement provided an appropriate buffer from industrial land to the east of the southern area proposed for extraction and aligned with proposed uses to the north of the site along O'Herns Road;

(b) had the Bypass alignment not been under consideration, the entirety of 360 Cooper Street would have been zoned for industrial purposes at the relevant date. Accordingly, an appropriate buffer needs to be considered;

(c) in the absence of the pipeline easement, if it was to be relocated as proposed in the 2000 WA application, a buffer distance of 200 metres to the eastern boundary of the site would have been appropriate;

(d) the gas pipeline easement forms the boundary between areas B 3 and B 4 as described in the Cooper Street precinct strategy; only the B4 precinct is identified for extractive use. The strategy acknowledges the resource available to the east of the easement, however prefers to maintain the area for alternative uses. The boundaries of B 3 and B 4 correspond with strategic planning to the north of O'Herns Road, which provides for potential future residential to the east of the easement and a rural corridor to the west. As at the relevant date, planning for the residential area to the north of O'Herns Road had substantially progressed: Amendment C 12, proposing the incorporation of the Epping North strategic plan which identified future residential area to the north of the site, had been considered by a panel in October 2001. The panel report dated October 2001 supported the identification of the area immediately to the north of the site for future residential development and the immediate rezoning to residential of land further to the east.

398 Mr Milner referred to the following statement from the Cooper Street precinct strategy in relation to precinct B3:

This precinct retains opportunities for development as high-quality general industrial estate encouraging large scale development in a well landscaped environment which can maximise use of the flat topography of the land.

The western end of this precinct should retain its rural zoning in the short to medium term in order to buffer extraction and tipping uses to the west. It is acknowledged that there is some potential for extraction on the western edge of this land. It is recommended that extraction be generally limited to the more accessible resources within Precinct B4. The majority of land within precinct B3 should be protected as potential high-quality industrial land, not prejudiced through extractive and subsequent filling uses.

399 In response to Mr Kraan's view as to the prospect of extracting stone beyond 2026, Mr Milner noted that neither Mr Kraan nor Mr Borelli properly weigh up the competing interests in relation to community benefit arising from any extension of the opportunity to quarry stone from the WA658 land. He noted that they appear to assume a community benefit would be derived from maximising the extraction of the stone, however, they did not evaluate the manner of excavating and filling the void, how long it would take, how successful the exercise would be, or the cost to the community of not realising the economic benefits and jobs that would otherwise be provided on the land if it was to be used in accordance with the Cooper Street strategy.

400 As to the "after" situation, Mr Milner believed there was a high prospect of a planning permit issuing for extractive industry because:

(a) the prospect of some additional extractive industrial activity was foreshadowed for precinct B 4 in the Cooper Street strategy;

(b) the land for extraction would be separated and buffered from the intended emerging industrial uses on land east of the gas pipe line;

(c) the new freeway would provide a long term boundary to extractive activity; and

(d) extractive activity west of the pipe line would be adjacent to land currently used for extraction and filling.

401 Mr Milner believed that an extractive industry operation in the "after" situation would be effectively and appropriately screened from motorists viewing the quarry from the elevated Cooper Street over-pass, the at-grade bypass and the elevated O'Herns Road over-pass through a proposed vegetation screen of a width of some 10 metres to 15 metres along the perimeter of the site.

402 In oral evidence, Mr Milner considered the situation in which it is assumed that a permit had issued shortly after the quarry permit panel had given its report and in accordance with its recommendations. He was asked what he would have advised a prospective purchaser at the relevant date as to the prospects of obtaining a permit to extract to the east of the pipeline, to extract below the water table and to extract over a longer period of time than 2026. He said that he would have given the prospective purchaser a very cautious view that they would not get the extensions if they had sought them on these three items.

403 As to the contention put by Mr Love that, within planning policy hierarchy, the State planning policy relating to extractive industry would outweigh local policy relating to the urban development of Cooper Street, Mr Milner said that there was not necessarily a conflict between state policy for extractive industry and the Cooper Street precinct strategy. Within the State planning policy framework, there was no conflict between extractive industry land use policy, and urban land use policy. Rather, the two competing uses for land (extraction and urban development) have to be weighed up, having regard to the broader policy context.

PROSPECT IN THE "BEFORE SITUATION" OF A QUARRY OPERATION BEYOND THE SCOPE OF THE QUARRY PANEL REPORT

404 Taking the land as it was on the relevant date, 11 February 2002, with a notional planning permit in place to conduct a quarry on the WA658 land, having been issued within a reasonable time after delivery of the Planning Panel's report of October 1998, but with such permit being subject to the restrictions recommended by the quarry permit panel, I am required to determine whether the land possessed another attribute at that time - namely, the prospect in the future of obtaining an extension, variation or substitution of the notional permit so as to enable quarrying to proceed on the WA658 land free of the restrictions recommended by the quarry permit panel.

405 I prefer the evidence of Mr Milner to that of Mr Borelli and Mr Kraan as more accurately reflecting the intent and thrust of the various planning instruments that are applicable.

406 In my opinion there was no reasonable prospect of obtaining any planning permit for the subject land beyond the confines of the notional permit assumed for the purposes of this case.

407 The consistent planning direction set by the City of Whittlesea, which was responsible authority for the administration of the Whittlesea Planning Scheme, was to develop the land in the Cooper Street precinct, including Mr Love's land, for urban uses, including industrial uses.

408 The direction of the Council was very clear, as reflected in the following planning instruments: the Local Planning Policy Framework (LPPF); the Municipal Strategic Statement (MSS); the "Epping Bulge" Position Statement, and the Cooper Street precinct strategy. It was also reflected in its submissions to the quarry planning permit panel.

409 The Council's direction was also reinforced by the L143 panel report which considered land usage in the area, including land usage of the subject site.

410 In my assessment, the provisions of the State Planning Policy Framework (SPPF), insofar as they referred to the importance of protecting stone resources within the State for extraction, in this case yielded to the local and site specific provisions of the Local Planning Policy Framework (LPPF) and its various components, including the MSS and the Cooper Street Precinct Strategy.

411 For the responsible authority to have taken the course suggested by Mr Love, and issued a permit to allow quarrying on the WA658 land beyond the limits set by the quarry permit panel, either initially shortly after the panel delivered its report in October 1998, or subsequently, by an extension granted after the relevant date of acquisition, would have run directly counter to the well established planning strategy set in place for the future development of the City of Whittlesea in this area.

412 In arriving at this conclusion as to the planning evidence I take into account the fact that it was Mr Macllellan's view, based on his experience as Minister, that there was an oversupply of industrial sites immediately following the recession and there was no pressing urgency for new industrial land around Melbourne. He also considered that quarry land was "extremely precious" and that public policy was such that there was a need "to ensure competition in the quarry industry and the protection of stone resources from potentially inconsistent nearby land use changes".

413 I also take into account the fact that the general area around the Love land had been quarried for many years and that, as at the relevant date, quarrying operations on WA149 on the Love land were ongoing.

414 Nevertheless, although these factors may have been persuasive in considering the issue as to whether or not a planning permit for a quarry operation would have issued at all by the relevant date, I am not persuaded that these factors, on the balance of probabilities, would have resulted in the issue of a planning permit for a quarry on the Love land on terms more favourable than the report of the quarry permit panel.

415 Furthermore, a prospective hypothetical purchaser of Mr Love's land as at the acquisition date, if considering a future quarry operation on the site, would have been likely to have given the planning instruments and panel reports to which I have referred, considerable weight. In determining a market price to pay on the acquisition date, the hypothetical purchaser, with full knowledge of the relevant facts and acting with reasonable commercial prudence, in my opinion would have discounted completely any prospect of obtaining an extension, variation or substitution of the notional permit so as to enable quarrying to proceed on the WA658 land free of the restrictions recommended by the panel, and would not have factored in any premium in the purchase price to allow for this contingency.

416 Accordingly, at the relevant date, the prospects of obtaining planning permission to extract stone from the WA658 land:

(i) in the area within the gas pipeline easement and to the east of the pipeline easement; and

(ii) below the water table in respect of any part of the WA658 land

must be disregarded in any assessment of the market value of Mr Love's land in the "before" situation. Further, the time limit for completion imposed on the notional permit issued would have also been consistent with the findings of the quarry permit panel, resulting in the notional permit expiring in or about 2025.

Net Community Benefit and Sustainable Development

417 Mr Love put the contention that no proper assessment of net community benefit had been undertaken because there was no detailed economic analysis, and in particular no economic analysis of the competitive advantages to the market for stone derived from a basalt quarry on the WA658 site.

419 The Whittlesea Planning Scheme does not require any form of economic analysis, in the assessment of either a planning permit application or a proposed amendment to the planning scheme.

420 In particular, an assessment of net community benefit required under clause 11 of the Whittlesea Planning Scheme does not require an economic analysis of proposals or their affect on any particular market. It merely requires that a proposal be assessed against policies that are relevant to the proposal. However, no relevant policy in this case calls for an economic analysis.

THE PROSPECT OF CONDUCTING AN EXTRACTIVE INDUSTRY IN THE "AFTER" SITUATION

421 As to the prospect of a quarry permit being granted for the WA658 land in the "after" situation, I accept the evidence of Mr Kraan to the effect that it would be very unlikely that planning approval would be granted for anything but perhaps a small area of the land not taken up by the acquisition and the buffers to the freeway. In respect of any such small area, I am not satisfied that it would be commercially viable to conduct a quarry operation on such a limited site.

422 I do not accept the evidence of Mr Milner to the effect an extractive industry operation in the "after" situation could be effectively and appropriately screened from motorists viewing the quarry from the Bypass once it had been constructed.

423 The planning regime in Victoria provided extensive controls for the development and management of landfill sites within the State.

424 Division 2A of Part 9 of the Environment Protection Act 1970 (the "EPA Act") provided for the setting up of waste management groups for various regions. Pursuant to s 50H(1) the functions of a regional waste management group are to facilitate and foster best practices in waste management by, amongst other things, preparing and maintaining a regional waste management plan.

425 Division 2B of the EPA Act governs regional waste management plans in the following manner:

(a) Section 50R(1) requires that a regional waste management group prepare and submit to the Environment Protection Authority (the "EPA") a draft regional waste management plan.

(b) Section 50R (3) requires that the draft plan must include a schedule listing all existing and prospective landfill sites within the region; an evaluation of the suitability of prospective the landfill sites listed in the schedule for the depositing of waste; a schedule showing a proposed sequence for the filling of available landfill sites for at least the next 10 years, and a program for replacing existing landfill sites; and

(c) Section 50RE (4) provides that the EPA may refuse to issue a works approval for a new waste management facility within a waste management region if the facility was not provided for in the relevant regional waste management plan.

426 On 1 July 2002, s 50RE(4) of the EPA Act was amended. Prior to the amendment, the section provided:

The Authority may refuse to issue a works approval for a new waste management facility within a waste management region if the facility is not provided for in the relevant regional waste management plan.

The Authority must refuse to issue a works approval for a new landfill within a waste management region if the landfill is not provided for in, or is inconsistent with, the relevant regional waste management plan.

427 A relevant State environment protection policy published pursuant to s 16(1) of the EPA Act is the State environment protection policy (Siting and Management of Landfills Receiving Municipal Wastes) ("the landfill SEPP"). The policy took effect from 1 July 1991.

Municipal Waste' includes putrescible wastes and solid inert wastes from manufacturing, commercial, processing and service industries and waste generated within residential dwellings, but does not include liquid wastes, night-soil, or grease trap waste.

In making land use planning decisions and implementing planning schemes, special attention should be given to this policy.

In the implementation of this policy, special attention should be given to statements of policy contained in planning schemes made under the Planning and Environment Act 1987.

The Authority may require at any time a municipal council or Regional Refuse Disposal Group to provide it with a Waste Management Plan which shall include:

(a) a waste minimisation and resource recovery program;

(b) a replacement schedule for all existing sites under its management and control;

(c) an evaluation of the suitability for deposition of municipal waste of potential landfill sites available to it;

(d) a schedule showing a proposed sequence for the filling of available landfill sites over the long term (minimum 10 years);

(e) a list of all equipment and facilities which are or will be necessary for the maintenance of operating standards required by Schedule A of this policy;

(f) a statement of group policy on how it is proposed to maintain the provisions of this policy, where the municipal council is a member of a Regional Refuse Disposal Group; and

(g) a program for upgrading existing landfill sites to meet the requirements of this policy.

The Authority shall require the Waste Management Plan, or part of the Plan, to be amended at any time where it is not satisfied that the Plan provides adequate long term waste management and protection of beneficial uses from landfill sites which are privately operated and those operated by municipal councils and regional refuse disposal groups.

429 The landfill SEPP requires an evaluation, not only of the subject site in the context of an application for use and development for a landfill, but also requires that the application be considered in the regional context.

430 In October 2001, the EPA adopted a statement of policy entitled "Best Practice Environmental Management, Siting, Design, Operation and Rehabilitation of Landfills" ("the BPEM"). The document described itself as:

a source document for best practice environmental management (BPEM) measures for landfills. It gives direction on the best practice siting, design, performance and rehabilitation standards for landfills commensurate with the risk they pose to the environment, and provides a guide to the measures required to meet legislative objectives ...

The appropriate siting of a landfill is the primary environmental control, so a preliminary investigation of all possible landfill sites should be conducted to identify those sites with the best potential to be developed for landfilling.

...

An investigation of the sites that have the best potential the landfilling is conducted in two steps:

• a broad approach to identify all potential sites for new facilities from a broader group of all possible sites; and
• a ranking of the potential sites in terms of their preference for use as a landfill.

The investigation is conducted by the Regional Waste Management Group (RWMG) in the development of the Regional Waste Management Plan (RWMP), and will result in a ranking of preferred waste disposal sites within and adjacent to the Region. This ranking should be used in the development of planning strategies for municipalities within the Region, and the development of new landfills should be in accordance with this ranking.

EPA may refuse to issue a works approval for a landfill if the site is not provided for in the relevant RWMP, or not provided for within a reasonable timeframe.

EPA will require this section of the guideline to be implemented in each RWMP at its next review. Where a landfill is not provided for in a RWMP, or is to be developed before the next review of the relevant RWMP, this section is to be implemented in the developmental stage of the land. This section should also be implemented by planning authority in their planning around current or future landfill sites.

432 Clause 4.1 of the BPEM, Screening for Potential Land for Sites, provides a hierarchy of matters to be considered when screening for potential landfill sites. The first in the hierarchy is community needs. Clause 4.1.1, Community Needs, provides:

A landfill should not be located where it is not needed for the disposal of a community's waste. Regional Waste Management Groups are responsible for providing a framework for the orderly development of waste management facilities for both the public and private sectors, and ensure that a reliable system of waste management, including landfill air space, is maintained within the Region.

433 At the relevant date, clause 18.10 of the State section of the Whittlesea Planning Scheme (SPPF), was in the following terms:

18.10-1 Objective

To assist control of the generation, transport and disposal of wastes so as to prevent pollution and land degradation.

18.10-2 General implementation

The siting and management of waste disposal facilities must be in accordance with State Environment Protection Policy (Siting and Management of Landfills Receiving Municipal Wastes) and relevant regional waste management plans.

434 In May 1997, the Northern Regional Waste Management Group ("the NRWMG") published a regional waste management plan for the northern region. The plan sets a waste strategy for the next 24 years for the region.

435 The NRWMG consists of the northern metropolitan municipalities of Banyule, Darebin, Moreland, Hume, Whittlesea and Nillumbik. It published the NRWMG Regional Waste Management Plan in May 1997. It was accepted by the EPA on a conditional basis.

(a) Waste disposal objectives which included the "Consolidation of landfilling into a reduced number of sites, providing optimal scales of operation, and leading to better utilisation of space as quantities of waste decline under the waste minimisation programs."

(b) The plan identified existing operating landfills and noted that, after filling existing sites, the Pioneer Wollert site will take the region's municipal waste until at least 2020.

(c) Waste Management, Overview: "The overall supply of landfill capacity in Melbourne is sufficient in the medium term and the Northern Region is well catered for in the longer term also."

Based on the data and studies detailed in this Plan, disposal of wastes to landfill within this Region for the predicted future will rely on the utilisation of the existing airspace in both municipal and private existing operations and then at a limited number of new sites yet to be licensed but all of these sites are to be included in the Regional Plan.

...

The Strategy involves the orderly and economic filling and closure of existing operations leading to a situation in about 2003, where only a small number of efficiently operated sites will be utilised.

In establishing a Disposal Plan for this Region the following are considered appropriate outcomes:

• Long-term planning for the number, location and timing of landfills at the regional level.
• Consolidation of landfilling into a reduced number of sites, providing optimal scales operation, and leading to better utilisation of space as the quantities of waste decline under the waste minimisation programs.

(f) The plan identified seven sites that might have non-municipal landfill potential in the future.

437 The May 1997 plan noted, with regard to municipal waste, that, after filling in any existing sites, the Hanson Wollert site would be host to all of the region's municipal waste until at least the year 2020. The plan deals, amongst other things, with solid inert waste and solid inert landfills in detail. The plan did not list Mr Love's WA658 land as the site for a future landfill.

438 In mid-2001, the NRWMG published a draft Prospective Landfill Site Schedule. This was to be submitted to the EPA as an amendment to the existing plan. The schedule noted that, in August 2000, the NRWMG had invited expressions of interest for the use of sites that had potential for use as landfills. The NRWMG received responses in relation to eight sites. Those sites were assessed against criteria derived from the Landfills SEPP.

439 The sites set out in the draft Prospective Landfill Site Schedule did not include any site on Mr Love's land.

440 The schedule included an assessment of air space consumption in operating landfills during 1999/2000, and stated that, based on the results of that assessment and assuming that one existing site is only used for limited purposes, "the airspace capacity available in the existing landfills is sufficient for at least the next 10 years and likely to be 25 years".

441 In his affidavits and reports, Mr Borelli did not review the relevant planning controls and policies relating to a landfill on Mr Love's land. He agreed with the view that a solid inert landfill would have been a practical and desirable use of the land following on from its use for extractive industry, if that proceeded. He said that opportunities for landfill operations close to Melbourne are scarce and generally insufficient to meet demand from councils and other generators of landfill products. His view was that filling and compacting the land would enable it to be used for other purposes that would contribute to or complement the longer term urban development for the area.

442 Mr Borelli did not comment on the prospect of landfill approval in the "after" situation.

443 In his oral evidence, Mr Borelli accepted that the Cooper Street precinct strategy contained a key direction in relation to precinct B4 that even if a new extractive site opened up it could not be assumed that landfill would be an appropriate further use; rather an industrial use of the quarry floor might be appropriate.

444 Mr Borelli, like Mr Kraan, did not make any assessment in his affidavits or written reports of Mr Love's landfill proposal by reference to the regional considerations required under clause 18.10-2 of the Whittlesea Planning Scheme. However, he accepted, as did Mr Kraan, that the regional waste management plan, the Landfill SEPP and the BPEM were all relevant to the assessment of the prospects of obtaining a planning permit for landfill on the WA658 site.

(a) the landfill SEPP required that a new landfill site be assessed in the context of the regional waste management plan and an evaluation of different sites, and directs that, in planning permit applications, regard be had both to the regional plan and to a regional assessment of available sites;

(b) the BPEM required that, in considering the buffer appropriate to a landfill, regard be had to the anticipated zoning and land use changes that would occur during the life of the landfill, as well as existing land uses;

(c) at the relevant date, the NRWMG policy supported limiting the number of landfill sites, and the Group's view was that there was no identified demand for a new solid inert waste landfill site. The regional plan contains the objective of consolidation and reduction in the number of landfills;

(d) it is unlikely that the EPA would grant works approval if the site was not identified on the regional plan.

446 Mr Borelli accepted that, in advising a prospective purchaser at the relevant date, he would have advised that any application for a permit had to be considered on the basis of need on a regional basis and that this was a very important criterion. He accepted that, at the relevant date, the regional need was being met by existing landfill sites.

447 Mr Borelli contended that the criterion of need under the BPEM did not preclude a new site being approved if it could be established that the new site was better located than the existing sites.

448 Mr Borelli would have advised the hypothetical purchaser in February 2002 that it could not obtain a permit for a landfill at that time if the use was not going to commence for 15 to 20 years.

449 Mr Kraan believed that a planning permit would issue for the use of the air space created by the quarry on the subject land for a solid inert waste landfill. In his view, the landfilling operations could be conducted progressively in the worked out sections of the quarry while extraction is occurring in other areas of the quarry.

450 Mr Kraan had regard to clause 52.10 of the Whittlesea Planning Scheme which defines the minimum physical distance between uses with adverse amenity potential and sensitive uses. He noted that the clause specifies a threshold distance of 200 metres for sanitary and garbage disposal in a landfill or recycling and composting centre and that there is no threshold distance specified for a solid inert waste landfill. He regarded this as supporting his opinion that a permit for solid inert waste landfill would be likely to issue.

451 He did not venture any opinion as to whether any landfill operation should cease by a particular date. When asked to assume that there was no time limit for the completion of extractive industry operations, or alternatively that extractive industry operations were to be completed within 25 years of approval, Mr Kraan expressed the view that the likelihood of a permit for an inert waste landfill utilising existing air space was very good.

452 Mr Kraan did not carry out an assessment of the affect of clause 18.10-2 of the State section of the planning scheme on the prospects of obtaining a planning permit for a landfill and did not assess the considerations that arise under the landfills SEPP or under the regional waste management plan. Nor did he assess the issue of need for a solid inert waste landfill.

453 As to the prospect of a landfill in the "after" situation, Mr Kraan doubted that, as the land area available for extraction would be limited by buffers required by the freeway, there would be sufficient floor space available for landfilling to occur concurrently with extractive activities. He thought that, if there were water quality and groundwater issues to be resolved, the engineering solutions might not be viable due to the limited scale of the possible landfill operation.

454 Mr Kraan did not assess the prospect of a landfill permit by reference to the regional considerations required by clause 18.10-2 of the planning scheme, nevertheless he accepted in oral evidence that it was necessary to do so.

(a) the BPEM required an assessment of all possible sites and then consideration of a hierarchy of aspects, starting with "Community needs". A consequence of the assessment process was that there may be many quarry voids that would never get a landfill permit;

(b) the regional plan set out a disposal plan involving long term planning for a number of locations, timing of landfills at a regional level, and consolidation of landfilling into a reduced number of sites. Mr Kraan accepted this carried with it the clear message for any prospective landfill operator that there would be a number of voids competing for a limited number of permits;

(c) the Bolinda Road site and the Cooper Street south site had a greater prospect of obtaining a permit for landfill in 2002 because they were already listed in the draft prospective landfill site schedule;

(d) landfill permits would be decided by reference to regional considerations;

(e) there was no need for a new landfill in the region as at 2002;

(f) the local strategies within the planning scheme discourage landfilling on the Love land. He accepted that, in 2002, the timeframe set out in the Cooper Street precinct strategy would have made it difficult to obtain a permit for a landfill that would not start for 15 to 20 years.

456 Mr Milner, the town planner called by the Corporation, challenged the view that inert landfill on the WA658 land would have been a practical and desirable use of the land following on from any use for extractive industry and the view that filling and compacting the land would enable it to be used for other purposes that would contribute to or complement the longer term development envisaged for the area. He referred to part of the Cooper Street strategy which stated:

Opportunities exist to use final unfilled quarry floor levels for longer term industrial activity in preference to tipping usage should be considered.

457 Mr Milner was of the opinion that, as at the relevant date, there was negligible prospect of approval being granted for landfill for solid inert waste in either the "before" or "after" situation, for the following reasons:

(a) waste management is a metropolitan and subregional issue. The proper process of deciding when and how land is used for waste management is through the orderly identification and management of regional opportunities, integrated with land use policy. The northern region waste management plan served that role and was developed during the late 1990s, arriving at a series of recommendations and a prospective landfill sites schedule in 2001;

(b) despite lodging a permit application for extraction on WA 658 at the time that the plan was being developed, Mr Love did not propose the site to the NRWMG as a potential landfill site. Rather, he only proposed WA 149 for putrescible waste;

(c) the relevant strategic land use strategy, the Cooper Street precinct strategy, seeks to establish the Cooper Street corridor as a high quality, attractive industrial and business environment. It recognizes a need to resolve stone extraction and landfill operations, but the tenor of the strategy is to progressively diminish the role and presence of such uses;

(d) the extraction of the whole of the WA 658 quarry would involve the removal of 53 million cubic metres of rock and could take at least 30 to 40 years and the filling could take up to 80 years. Any commitment to extraction and filling on this scale would have been contrary to both the intent of the regional waste strategy and the Cooper St precinct strategy; and

(e) it is unclear when it is proposed that filling would cease on Mr Love's land if he was to apply for planning approval for a landfill. It is also unclear as to what the impact of filling would be on any future use of the land for industrial purposes.

458 Mr Milner noted that that a high demand for the use of the site for landfill would need to be demonstrated and that such demand was not evident.

459 Mr Milner said that the filling of the land would give rise to uncertainty as to the attractiveness of the land for the high quality industrial estate proposed by the strategy. Further, if quarrying was to cease in 2026, no estimate was provided as to when the filling of the land, and its settlement to a structure and density suitable for urban development, would occur. He noted that, while the proponent could state in theory at what rate extraction of stone might occur, he had no similar control over the use and completion of an inert fill, which would be influenced by market considerations such as price and other similar filling opportunities in the region.

460 If approval for a solid inert landfill was to be granted, Mr Milner believed that it would be subject to conditions requiring completion by 2026; set-backs in accordance with the permit granted for extraction (200 metres from O'Herns Road, 200 metres from Cooper Street and 40 metres from the western edge of the gas easement); precautions to ensure there was no contamination of groundwater; and landfill on the site would be staged to occur from the north to the south.

461 Mr Milner believed that the existing access at Cooper Street would be appropriate for both extractive and landfill activity.

462 In Mr Milner's opinion, a solid inert waste landfill would only have been permitted to the west of the gas pipe line easement. If a planning permit had been approved, the proponent would have to demonstrate that the extraction and landfill could occur prior to and cease by 2026 and that by then the rehabilitated site would be appropriate for future industrial uses.

463 Mr Milner believed that the prospects of a landfill being approved in the "after" situation were negligible, for the same reasons as were applicable to the prospects in the "before" situation.

464 In oral evidence, Mr Milner responded to Mr Love's amended case that a landfill would start within 15 to 20 years from extraction commencing. In Mr Milner's opinion, the prospects of obtaining a permit for a solid inert landfill would diminish with the passage of time, mainly because urban development would have had greater time to establish itself, both to the north and to the east. Having a solid inert landfill adjacent to urban development would be likely to be strongly discouraged.

465 Roger Parker ("Mr Parker") is a Senior Geotechnical Engineer and a Principal of Golder Associates Pty Ltd, Melbourne. Mr Parker is a Member of the Institution of Engineers Australia; Australasian Institute of Mining and Metallurgy; Victorian Planning and Environmental Law Association; and a Life Member of the Waste Management Association of Australia. Mr Parker states his professional history as follows: Principal and National Manager for Environmental Services, Golder Associates Pty Ltd, Melbourne from 1986 to present; Senior Geotechnical Engineer, then Associate and Manager, Golder Associates Pty Ltd, Perth from 1979 to 1985; Geotechnical Engineer and Senior Geotechnical Engineer, Golder Associates Pty Ltd, Melbourne from 1976 to 1979.

466 In considering the prospects of obtaining a works approval, Mr Parker referred to the 2002 draft amendment to the northern regional waste management plan. This sets out the solid inert waste landfill capacity in the northern region in 2002. The 2002 draft refers to six then operating landfills in the region which then had estimated closure dates ranging from mid-2003 to beyond 2010. One of the sites described is:

Pioneer (now Hanson) Wollert, with 9,895,000 m³ capacity with a further 20,000,000 m³ coming on line over next 40 years, and estimated closure beyond 2010.

467 Mr Parker said, that at the relevant date, additional solid inert waste landfill capacity was probably not required in the northern region and that additional capacity may have been justified only by about 2010 or beyond. He noted that, in fact, additional capacity is not supported in the current metropolitan waste and resource recovery strategic plan (Sustainability Victoria, 2009).

468 Mr Parker said it was unlikely that the EPA would have accepted an application for a works approval at the relevant date if the works to construct a landfill were not likely to commence for at least 10 years. He noted that s 19CA(1) of the Environment Protection Act 1970 allowed the EPA to specify an expiry date in a works approval, and that the two works approvals granted for Melbourne in 2001/2002 both contained expiry dates of two years from the date of issue.

469 Mr Parker's experience, at about the relevant date, was that the EPA would not formally accept a works approval application for a solid inert waste landfill at Bolinda Road, Campbellfield until the site was included in the Northern Region Waste Management Plan (NRWMP). The site on Mr Love's land was also not included in the NRWMP.

470 In relation to the prospect of operating a solid inert waste in a void below the water table, Mr Parker noted that s 4.1.4 of the BPEM recommended that landfills should not be located below the regional water table. At that date the BPEM did not have statutory force but was an adopted policy of the EPA. In Mr Parker's experience, the EPA required compliance with the BPEM requirements or required the proponent to show that an alternative approach provided equivalent or greater protection to human health and the environment.

471 In Mr Parker's view, from an engineering perspective, it would have been possible to adequately design a landfill with lining systems below the regional groundwater elevation but that, given the depth of pit below the water table, substantial dewatering or depressurisation measures may be required to facilitate construction of the liners. The feasibility of construction of a landfill and basalt quarry at a significant depth below the water table would needed to be assessed.

472 Mr Parker expected that the EPA would have required one or more of the following safeguards before permitting landfill below the water table on Mr Love's land:

(a) addition of geo-membrane liners (possibly on the base and lower parts of the pit walls) to reduce the potential for leachate to discharge to groundwater;

(b) continued long term operation of a groundwater depressurisation system to reduce the regional groundwater head surrounding the landfill; and

(c) additional groundwater monitoring locations at an increased monitoring frequency.

473 Mr Parker said that, in response to the enquiry of a hypothetical potential purchaser of the Love property in February 2002 when there was no quarry, no void for landfill purposes and any prospect of a landfill was at least 10 years into the future, he would have advised:

(a) once quarrying activities had been undertaken in part or in full, a potential end use of the quarry hole could be for a solid inert waste landfill, and possibly as a putrescible waste landfill;

(b) to operate the site as a landfill would require a works approval and subsequent licence from the EPA and a planning permit;

(c) it is unlikely that the EPA would accept an application for works approval at that time because the works were not likely to commence for at least 10 years. He noted that s 19CA(1) of the Environment Protection Act 1970 allowed the EPA to specify an expiry date in a works approval, and that the two works approvals granted for Melbourne in 2001/2002 both contained expiry dates of two years from the date of issue;

(d) a purchaser of the property should commence discussions with the Northern Region Waste Management Group ("NRWMG") with a view to having the site listed on the northern region waste management plan;

(e) the purchaser should also consider future potential landfill design considerations in the design and staging of the quarrying activities on the site. The purchaser should also start collecting relevant environmental information that would assist in the preparation of a works approval application at a later date.

474 As such, Mr Parker would have advised a potential purchaser that, while the use of a future quarry hole for a landfill was a possible end use, it would be premature to attempt to progress a works approval at that time.

475 Mr Parker would have advised the prospective purchaser that, given the existing supply of the solid inert waste landfills in the northern region and the fact that WA658 was not listed on the NRWMP, it is unlikely that a works approval would have been granted at the relevant date.

476 As to the proposal to backfill the site to the water table to allow a solid inert waste operation to be conducted above the water table, Mr Parker said:

(a) he was not aware of any proposal in Victoria involving such a large amount of backfill to raise the floor for a landfill;

(b) the EPA would want to see enough of the backfill in place to know that it was practical to achieve a landfill operation before it would grant a works approval. The EPA would not grant works approval where construction of the proposed works was 10 years in the future;

(c) fill material must be natural soil or rock and it must meet certain chemical criteria that are quite strict, unless it is in naturally occurring concentrations;

(d) it would be difficult to convince the EPA that the significant back filling of more than 10 million cubic metres was part of the works to be allowed under a works approval;

(e) it would be difficult to be confident that the fill required could be obtained at a reasonable price. The demand for this site would dominate the market place in terms of the large volume of fill needed;

(f) the clean fill brought onto the site to raise the level of the void would need to be compacted. It would need to be spread in layers and compacted with a heavy roller;

(g) the cost of rolling would be between $1 and $2 per cubic metre in place;

(h) the fill brought onto the site would need to be tested.

477 As to the prospect of obtaining a works approval, Mr Parker said:

(a) the intent of the Northern Region Waste Management Plan was to plan for consolidation of landfilling to a reduced number of sites providing optimal scales of operation and leading to better utilisation of spaces as the quantity of waste declines under the waste minimisation program;

(b) the regional group was unlikely to consider land for inclusion as a prospective landfill site unless there was an existing void on the land;

(c) the metropolitan waste plan is a 10 year plan. Having been adopted in March 2009, there was no prospect of it being changed until 2019;

(d) there might not be additional sites added to the plan in 2019;

(e) without a void on the site, it is unlikely that the Northern Regional Group would have put WA 658 on the waste management plan;

(f) there was about 359,000 tonnes per annum of solid inert waste in the northern region. The amount of waste being generated overall is increasing; however, the amount of waste to landfill is remaining stable;

(g) if it is some years before there is a sufficient void to use for a landfill, it is very unlikely that a works approval would be granted;

(h) an application for works approval should be made 2 to 3 years before it is proposed to start operation of the landfill because the EPA will be likely put a two year time limit on a works approval within which the use is to commence;

(i) the metropolitan waste plan says that no new sites will be considered before 2019. It makes it clear that there is a substantial airspace capacity in the north and west of Melbourne for many decades.

Assessment of Prospects for Obtaining Planning Approval for a Landfill

478 I prefer the conclusions of Mr Milner and Mr Parker to those of Mr Borelli and Mr Kraan as to the prospects of obtaining planning approval for a solid inert landfill on Mr Love's WA658 land as a sequel to or in conjunction with its use as a quarry.

479 I accept that the landfill SEPP required that a new landfill site be assessed in the context of the regional waste management plan and an evaluation of the different sites, and directs that, in planning permit applications, regard be had both to the regional plan and to a regional assessment of available sites. Any application for a permit had to be considered on the basis of need on a regional basis and that this was a very important criterion. I also accept that, at the relevant date, the NRWMG policy supported limiting the number of landfill sites, and the Group's view was that there was no identified demand for a new solid inert waste landfill site. The regional plan contained the objective of consolidation and reduction in the number of landfills. At the relevant date, the regional need was being met by existing landfill sites. I also accept the view that it is unlikely that the EPA would have granted a works approval if the site was not identified on the regional plan.

480 Finally, the position from the perspective of the hypothetical purchaser in February 2002 was that he could not obtain a permit for a landfill at that time if the use was not going to commence for 15 to 20 years.

481 In my opinion, as at the relevant date, there was negligible prospect of approval being granted for landfill for solid inert waste in either the "before" or "after" situation. The prospect would have been ignored by any reasonable purchaser, possessed of all relevant knowledge, in making an offer to purchase Mr Love's land at the relevant date, in February 2002. Indeed, it would have been commercially imprudent to have allowed any additional sum in the purchase price for the prospects of a future landfill.

482 Mr Love called Darren Herdman ("Mr Herdman") to give evidence as to the market value of his land.

483 Mr Herdman is Director of the Resources and Waste Management Department, Valuation and Advisory Services Division, CB Richard Ellis Australia and New Zealand. Mr Herdman is a Land Valuer and Chartered Mineral Surveyor by profession, specialising in the discipline of quarry, mining and waste management valuations as well as providing complete property management advice to those industries.

484 Mr Herdman is currently a member of the Royal Institute of Chartered Surveyors, a Fellow of the Institute of Quarrying Australia, and a Member and Chartered Professional of the Australian Institute of Mining and Metallurgy. He is a past member of the Mineral & Waste Management policy panel of the Royal Institution of Charted Surveyors (1998-2005) and a past Chairman (1997-2005) of the British Ceramic Confederation Valuation Steering Group. He has a Chartered Mineral Surveyor qualification which is recognised by the Australian Institute of Mining and Metallurgy; the Minerals Industry Consultancy Association; and more recently, the Australian Property Institute. He also holds a Minerals Estate Management BSc (Hons) degree.

485 Mr Herdman deposes in his affidavit of 11 October 2007 that he has "had over 15 years of continual experience consulting and advertising in the extractive industries of the United Kingdom, the United States of America and Australia ... I have been involved with extractive industry compulsory acquisition valuations since 1992. I have also acted as an expert witness in the United Kingdom in both Valuation and Land Tribunal cases".

486 As to his experience on Australian projects in his capacity as a Chartered Minerals Surveyor, Mr Herdman stated:

[S]ince I've been in Australia I have valued the best part of 80 quarries, mines and landfill sites throughout all the states of Australia apart from South Australia. I have acted for major operators, major intermediate operators, both in the landfill sectors and also the mine and quarry sectors which are inclusive of the likes of BH Billiton, Samax, Holcim, Boral and a few other larger major independents throughout the eastern seaboard.

...

These valuation exercises were undertaken for numerous valuation basis. They were in respect of financial reporting, funding on behalf of the major retail banks, internal accounting procedures, insurance and taxation.

487 Mr Herdman came to Australia from the United Kingdom in 2005. He was retained by Mr Love to provide expert opinion evidence on his behalf in 2007, some five years after the relevant date, being 11 February 2002. He was challenged as to his lack of experience and familiarity with Australian conditions as at 2002.

488 In cross-examination as to his land valuation qualifications in Victoria, Mr Herdman said:

Mr Herdman, are you also a valuer, a land valuer?---Yes, I am.

Are you a land valuer recognised in Victoria?---I am.

When did you achieve that recognition?---Well a land valuer in Victoria has to demonstrate that he has the appropriate experience to undertaken land valuations. My professional organisation queried this with the Australian Property Institute when I first arrived in Australia and they confirmed that I had suitable qualifications and experience to undertaken land valuations throughout the State.

489 In his report of 3 October 2007, a "before" value for a basalt quarry on the WA658 land is assessed by Mr Herdman in the sum of $33 million. Removing the future landfill component entirely and adopting Mr Herdman's later revised quarry value in the sum of $31 million reflects a value of $350,520 per hectare for the 88.44 hectares which comprise Mr Love's WA658 land ($31,000,000 ÷ 88.44 ha = $350,520).

490 Both the initial $33 million assessment and the revised $31 million assessment for WA658 are based on a total realisable resource of 53.6 million tonnes of basalt as identified by Mr Natoli's appraisal dated 2 August 2007. The valuation report prepared by Mr Herdman assumed that work authority 658 had been issued and was existent at the date of valuation, and that the results of drilling carried out in 2007 and analysed thereafter would have been known to the hypothetical purchaser at the 2002 relevant date. It was also assumed there would be no geological or hydrogeological issues that would adversely impact upon viability.

491 Mr Herdman's "before" quarry valuation methodology is also premised upon the assumed existence of an operating basalt quarry on the WA658 land on the relevant date producing and selling 700,000 tonnes of basalt per year, with key elements in the calculation being an assumed price of $13 per tonne, a cost of $7 per tonne, and a profit of $6 per tonne capitalised at a rate of 12 percent before tax.

492 The second component of Mr Herdman's WA658 "before" value is that described as "potential landfill". In his October 2007 report, Mr Herdman assessed this element of value to be in the sum of $10.7 million on the basis of a future solid inert waste landfill utilising future air space created by quarrying the WA658 land. The sum of $10.7 million was arrived at on the assumption that landfilling would start 10 years after the commencement of quarrying.

493 However, Mr Love's case changed during the course of the trial. His case put at trial was that a solid inert landfill would be conducted above the water table and would not to commence for 15 to 20 years. Nevertheless, Mr Herdman provided no report or evidence setting out his assessment of value of a solid inert landfill to be conducted above the water table which would not commence before 15 to 20 years. He said he had not considered the value of a future landfill based upon such assumptions.

494 For these reasons, I do not consider Mr Herdman's evidence as to the value of a future landfill because it does not address the case which was finally advanced and the evidence is left in a state of uncertainty.

495 Fundamental to Mr Herdman's methodology was his starting point. Mr Herdman did not value Mr Love's land and its existing attributes at the relevant date. Nor did he value its potential attributes. What Mr Herdman was instructed to do, and what he carried out, was a valuation of a hypothetical quarry and landfill business on the subject land as if both existed at the acquisition date.

496 It is the capitalised loss of profit from such a hypothetical quarry business that Mr Herdman sought to capture in his valuation methodology.

497 He did this on the basis that such a business existed on the relevant date, 11 February 2002, and was being conducted in accordance with Mr Natoli's March 2008 work plan. That is, he assumed a 100 percent certainty regarding planning approvals which would be in place to enable a quarry to be conducted in accordance with Mr Natoli's March 2008 plan. He also assumed the existence of a quarry with internal roads and access to Cooper Street constructed; infrastructure such as offices a weighbridge, and bund walls in place; quarry plant and equipment operating (whether fixed or portable); and production of 700,000 tonnes of rock per annum and an established market for and sales of all of the resource which had been won. In other words, Mr Herdman conducted his valuation on the basis of physical conditions which in fact did not exist.

498 Mr Love, as I understand his submission, sought to put his case through Mr Herdman in reliance on s 43(1)(a) of the LAC. He contended that the absence of a working quarry on his WA658 land as at the relevant date, 11 February 2002, arose from the proposal to carry out the Bypass development over his land. As such, he suffered a decrease in the market value of his land which is represented by the value of the quarry business he would have had, but for the freeway proposal. He submitted the effect of the freeway should be disregarded pursuant to the subsection, resulting in an entitlement to compensation based on the value of the business which he otherwise would have enjoyed.

499 However, I find that there is no basis upon the evidence to find that, in spite of a notional planning permit and work approval being in place within a reasonable time after delivery of the quarry permit panel in October 1998, and absent the Bypass proposal, a quarry would have been in operation as at February 2002 at all, still less achieving levels of production and sales at the rate of 700,000 tonnes per annum.

500 The evidence points to the absence of a productive quarry on the relevant date being caused, not by reason of any inhibition brought about or influenced by the Bypass proposal, but rather it arose as a result of commercial decisions made by Mr Love to proceed in the way he did, and when he did. Mr Love's quarry planning permit application 704078, which was the subject of the quarry permit panel report of October 1998, was for a proposed operating quarry with anticipated annual production of only 300,000 tonnes per annum. It was advanced on the basis that the likely operator would be Mr Kerr's company Conundrum (which operated the WA149 site), and not Mr Love as the owner or operator. It was never part of that proposal, nor of the later August 2000 WA658 work plan, that quarrying would commence immediately or, for that matter, prior to February 2002. What the contemporaneous documents disclose is a proposal that Conundrum would first work out the WA149 site, then the Miller WA445 site and then, finally, the WA658 land. The evidence of Mr Love given in an earlier proceeding (the "Writ Proceeding"), confirmed his anticipation, as it was at the time when he made submissions to the quarry permit panel in late 1998, that there would be no WA658 quarry in operation until between 2013 to 2014.

501 Furthermore, there is no basis in law in this case for assessing the market value of the land at the relevant date by valuing the business of a hypothetical working basalt quarry on the land at that date. No purchaser would assume such a state of affairs. Still less would such a purchaser settle upon the very substantial sum of $31 million, assuming that to be the value of such a business, as the value of the WA658 land on account of such a fiction.

502 The land at the relevant date was farm land with a notional planning permit in place to conduct a quarry enterprise in accordance with the restrictions found necessary by the quarry permit panel. As such, it possessed the possible potential for a quarry, but no more. The market value of the land stands to be assessed on this basis.

503 As Dixon CJ observed in Turner v Minister of Public Instruction (notwithstanding that the case was decided under the sparser terms of a different resumption statute):[140]

[market value is] necessarily affected by all the advantages which the land possessed and these might be a matter of future or even contingent enjoyment. Future advantages or potentialities must not be excluded. At the same time the value of these things must be assessed according to the condition of the land as it stood at the time of resumption: "it is the present value of such advantages that falls to be determined". [Emphasis added]

504 Section 43(1)(a) of the LAC Act does not provide support for the notional presence of an operating quarry owned by Mr Love on the relevant date as assumed by Mr Herdman. Section 43(1) requires that certain "matters" be "disregarded". For present purposes, the matter to be disregarded under s 43(1)(a) is any decrease in the market value of the land which arose from the proposal to carry out the Bypass development on Mr Love's land. A causal link needs to be established between the alleged decrease in value and the proposal.

505 In this case, as a result of my ruling of 2 June 2010,[141] it is to be taken as a fact that, within a reasonable time after delivery of the quarry permit panel's report of October 1998, Mr Love would have had a planning permit in existence to conduct a quarry operation on the subject land on terms in accordance with the report of the quarry permit panel of October 1998. I find further that, within a reasonable time after obtaining such a planning permit, it is likely that a work approval would have issued on terms consistent with the planning permit. However, obtaining planning permission is only the first step in the process of establishing a working and commercially viable quarry. Substantial development of the land would be required before this could be achieved.

506 There is no basis upon the evidence to find that, absent the Bypass proposal, a quarry would have been in operation as at February 2002 at all, still less achieving levels of production and sales at the rate of 700,000 tonnes per annum.

507 Further, there is nothing in the language of s 43(1)(a) or otherwise in the LAC Act that permits the making of a positive assumption that such an enterprise would have existed on the relevant date, absent the Bypass proposal.

508 Nor do the provisions of s 5A of the VL Act support the approach taken by Mr Herdman. Indeed, to make such a positive assumption, as contended for, requiring the assumption of different physical things and conditions to those in fact prevailing at the relevant date, is contrary to the express language of s 5A(3)(c), (d) and (e) of the VL Act.

509 For example, s 5A(3)(d) requires (where it is relevant to an assessment of the value of land) to take into account the natural resources on the land. The approach for which Mr Love contends requires the Court not to proceed by reference to the actual natural resources on the land as s 5A(3)(d) requires, but to assume that there is an operating quarry on the land which is in the process of depleting those natural resources, at least sufficient to support a quarry business with a turn-over of 700,000 tonnes per annum in sales.

510 Section 5A(3)(f) requires potential capacity of the land to yield a monetary return to be taken into account, where it is relevant to an assessment of the value of land. However, the assessment of value, based on such potential, merely involves taking such a future advantage or potential into account. It does not give rise to a prescription that the value is to be determined as if, on the relevant date, the potential had been fully and completely realised - which is a very different thing.

511 There is no direct authority supporting Mr Love's contention that positive facts of the kind he advances are to be assumed for the purposes of assessing market value of land under Victorian legislation. However, some assistance is to be derived from the decision of Gobbo J in Equity Trustees and Agency Co Ltd v Melbourne & Metropolitan Board of Works.[142] In that case, compensation was claimed for financial loss on a "before" and "after" basis pursuant to Part 5 of the P & E Act. It was argued that disregarding the "proposal" meant that earlier historic events associated with the implementation of the proposal ought be ignored. His Honour said:

The Planning and Environment Act 1987 does not, in terms, allow a claim for financial loss to be calculated by reference to an attribute of the land, as a constituent of highest and best use for valuation purposes, which may have been able to have been attained at an earlier point of time but not at the relevant date. It requires, in my view, that the land be considered with all its attributes, existing and potential, at the relevant moment for assessment of value, namely just prior to refusal. It is not open to the claimant, or for that matter the authority, to reach back in time to select an attribute albeit expressed as its then highest and best use, and then seek to apply this at the relevant date regardless of the highest and best use at that date. This principle is inherent in the series of decisions of this Court where, though this argument was not addressed, it was clear that the date of refusal was the relevant date. See Cape Developments Pty Ltd v City of South Barwon [1982] VicRp 102; [1982] VR 1011; City of Nunawading v Day [1992] VicRp 13; [1992] 1 VR 211; Mario Piraino Pty Ltd v Roads Corporation [No 2] [1993] VicRp 9; [1993] 1 VR 130; Studley Developments Pty Ltd v Department for Planning and Urban Growth [1993] VicRp 3; [1993] 1 VR 15.

It was sought to accommodate this principle by arguing that the Court was obliged to exclude the effect of the scheme of acquisition, or by analogy here, the public purpose proposal, in ascertaining highest and best use. This was a legitimate principle recognised and adopted by this Court in the above decisions. See especially the Studley Developments case, at 20, where the "before" and "after" method of assessment of loss is described.

But this principle does not permit a claimant to go back in time and select a potential which the land may then have had, regardless of later events. Even though, as a matter of chronology, a public purpose proposal is then advanced, this does not mean that the proposal has caused other loss of an attribute. To take a mundane example, a land owner may seek to explain the poor condition of his land by reference to the fact that it was not worth his while improving his land when it was about to be acquired, but he cannot sustain an argument that his land would otherwise have been considerably improved if there had not been any acquisition proposal and that his land should be so valued for purposes of assessment of compensation.[143]

[Emphasis added]

512 It is a basic principle of the law of compensation for the compulsory acquisition of land that fair compensation should be given to the owner whose land has been compulsorily taken but the owner is not entitled to receive more than fair compensation.[144] In Transport for London (formerly London Underground Ltd) v Spirerose Ltd,[145] Lord Neuberger observed:

The principle of equivalence which is at the root of statutory compensation, the principle that the owner shall be paid neither less nor more than his loss, save I should add where the legislation otherwise provides.[146]

513 Here, the legislation does not "otherwise provide" and the task of the Court is to apply the language of the statute to the evidence before it: see Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority.[147] Clear and explicit language would be required in a statute which conferred upon a court the task of assuming hypothetical improvements to exist, required the Court then to value them, all for the purposes of compensating the dispossessed owner for something he or she never owned.

514 In the light of the legislation in Victoria, the Court and a valuer are required to value the land upon acquisition date in accordance with the observation of Dixon CJ in Turner v Minister of Public Instruction, earlier referred to.

515 Mr Herdman assumed and assessed loss on the basis of a quarry business as a going concern owned by Mr Love when there was none. I do not accept the outcome of his methodology, in valuing a hypothetical operating quarry business on the WA658 land on 11 February 2002, as reflecting the market value of the land as at that date.

516 On this basis alone, Mr Herdman's evidence must be rejected.

517 Further, critical parameters in the Herdman valuation were not satisfactorily proven and I am not satisfied that they can be reliably acted upon.

518 Mr Herdman adopted an average selling price of $13 per tonne and $7 per tonne as the cost of production. Further, in his opinion, given the quality, quantity and location of the rock resource present on Mr Love's land, which he assumed on his instructions was in fact available to be exploited, the rock would generate sufficient demand in the market to sustain production and sales of at least 700,000 tonnes per annum throughout the life of the reserve, and achieving this performance at least from the relevant date, 11 February 2002.

Assessment of Mr Herdman's Evidence as to Production Capacity

519 The important input of a 700,000 tonne per annum production level in Mr Herdman's analysis was a critical input in his calculation.

520 Being satisfied that the total quantified basalt reserve was of suitable quality to produce a range of products and that the upper flow is capable of producing predominantly VicRoads class 3 or better with the lower flows producing commercial grade products, for the purposes of the valuation exercise, Mr Herdman adopted annual production of 700,000 tonnes per annum in his calculations. This, he assumed, would be the level of production on and from the relevant date, 11 February 2002. He assumed a sales ratio of 70 percent VicRoads class 3 rock or better and 30 percent below. He considered that an annual out-put of 700,000 tonnes could be comfortably achieved with either the installation of a fixed plant or, initially, 500,000 tonnes per annum with the use of a mobile crushing and processing plant. In his opinion, due to the quantity, quality and location of the rock relative to markets, the rock reserve would generate sufficient demand to sustain annual production of at least 700,000 tonnes per annum throughout the life of the reserve.

521 As to the market for his assumed volume of sales, Mr Herdman expressed his belief that Mr Love's resource was ideally situated to both the Melbourne CBD and the northern growth corridor to minimise the cost of transportation and maximise annual sales due to proximity to a progressively growing market place. Direct competition was identified from Readymix at Oaklands Junction (2 million tonnes per annum with capacity for 3 million tonnes per annum), Hanson at Wollert (2 million tonnes per annum), Boral at Epping/Wollert (500,000 tonnes per annum) and Conundrum which Mr Herdman reported to produce in the order of 500,000 tonnes per annum.

522 Mr Herdman, in turn, founded this level of production at 700,000 tonnes per annum on Mr Love's land on the assumption that Mr Natoli's March 2008 work plan was in place at the acquisition date, and operation of the quarry pursuant to the work plan would continue to produce this level of production over its hypothetical life.

523 However, as I have found, Mr Natoli's March 2008 work plan contemplated quarrying in the gas pipeline easement and to the east of the gas pipeline easement. It also contemplated quarrying below the level of the water table.

524 I have found that, for planning reasons, there was no reasonable prospect of obtaining any planning permit for the subject land beyond the confines of the notional permit assumed for the purposes of this case, namely restricted to quarrying west of the gas pipeline easement and above the water table.

525 It follows that a central basis of Mr Herdman's assumption as to a continuous production of 700,000 tonnes per annum from at least the acquisition date, cannot stand. No alternative scenario to justify production at this level was advanced by Mr Herdman. Nor did he offer any calculation of value based on any lesser level of production.

526 Mr Herdman's evidence must therefore be rejected on this basis.

Assessment of Mr Herdman's Evidence in the Light of Mr Kerr's Evidence as to Sale Price and Production Cost

527 Two further inputs in Mr Herdman's calculation of value were sale price and production costs which he adopted for the purposes of his financial model of a hypothetical quarry on Mr Love's land. Both of these inputs used by Mr Herdman do not withstand assessment against the experience of Mr Kerr in operating Conundrum's quarry enterprise on the neighbouring WA149 quarry site.

528 Ronald Kerr ("Mr Kerr") is the Managing Director of Conundrum Holdings Pty Ltd trading as Northern Quarries ("Conundrum"). Mr Kerr's professional history was stated to be: Managing Director, Conundrum Holdings Pty Ltd from 1988 to present; Quarry Manager, R.F. Kerr Quarries Pty Ltd from 1979 to 1988; Readymix [employee], Western Australia from 1972 to 1979. Mr Kerr founded the Construction Materials Processors Association Victoria (CMPA) in January 2000, and was the inaugural chair person of CMPA for three years, and has been its Chief Executive Officer for the last four years.

529 Although his evidence was relied upon by Mr Love in support of his case, the Corporation challenged much of Mr Herdman's evidence on the basis of the commercial experience of Mr Kerr in conducting the WA149 quarry which Conundrum leased from Mr Love situated on western land of Mr Love's property.

530 A view was conducted by the Court of the quarrying operation conducted by Conundrum, early in the trial. The view took place at a time when Mr Kerr's quarrying operation, whilst continuing on WA149, was also being conducted upon the Miller land, the subject of WA445. The primary, secondary and tertiary crushing plants and the pug mill were operating on the Miller land with product being moved out through a weigh bridge and office facilities on the WA149 land and, from there, down to Cooper Street at the south via an access road which links into the Council tip road and a signalised intersection at Cooper Street.

531 At the relevant date, the 1990 lease in favour of Conundrum had expired by effluxion of time, however Conundrum continued in occupation. In the Cooper Street proceeding, Mr Kerr was questioned, at length, and gave evidence in relation to the extended negotiations and dealings between himself and Mr Love in order to secure agreement upon Conundrum's continued occupation and working of the WA149 resource and also Mr Kerr's unsuccessful attempts to obtain what he wanted, namely, a secure long term lease providing for access across Mr Love's land from the Miller land. In evidence in chief, he said that, whilst he had sought permission, by way of example, to quarry through the Miller boundary in 1998, he did not receive such permission from Mr Love until 2004. It was his evidence in chief that Mr Love kept "moving the goal posts" during negotiations between them and that, even as at 2009, there was no formal new lease in place regarding the WA149 land but there was agreement reflected in an exchange of letters providing for Mr Kerr to continue through to 2012.

532 In cross-examination, Mr Kerr confirmed that, from 1997, when he first sought agreement, until 2009, there had been no resolution reached between himself and Mr Love as to the terms upon which he might access the Miller resource by going across Mr Love's land beyond 2012. Whilst that was so, Mr Kerr gave evidence, which was not contradicted, that there were a number of other options by which his company could get the product from the Miller land to market at Cooper Street including through the Alvies land or along Vearings Road.

533 As at the relevant date, whilst the original lease had expired, Mr Love accepted royalties in advance up until June 2002 and the lease, in addition, provided for over-holding in relation to two reduced areas of six hectares and then two hectares.

534 In the Cooper Street case, Mr Kerr said that, as at 2009, the primary crusher had gone to Miller's land, the secondary crusher had gone from Mr Love's land but the tertiary crusher remained together with some fine screening plant and a pug mill. Works to move that equipment onto the Miller land commenced in 2002.

535 Neither party to the proceeding was, in any way, critical of Mr Kerr's evidence given in this case and in the Cooper Street proceeding, which was reproduced and was also relied upon in the present case. He was accepted by witnesses including Mr Martin and Mr Herdman as a competent quarry operator. By inference, the financial results of his quarrying operations on the WA149 and WA658 lands reflect the quality of the resource which he was, at the relevant date, and has, since that time, been able to exploit, including the price he was able to obtain for his product, and the costs of his production.

536 The unchallenged evidence from Mr Kerr is that, in the year 2001/2002, 227,699 tonnes of basalt was sold from production generated on the WA149 land, of which, 45 percent was class 3 and above and 55 percent was below class 3. The unit price achieved for those products was, respectively, $11.75 for class 3 and above and $7.68 for class 3 and below. This was a slight increase from the 2000/2001 year in which prices of $11.57 and $7.57 were achieved by Mr Kerr.

537 So far as sales are concerned, revenue for the 2001/2002 year was $2,187,148 based on 227,699 tonnes of recorded sales, for an average price of $9.60 per tonne. Over the 3 year period, commencing 1999/2000 and up to and including 2001/2002, the average price achieved was $9.32 per tonne.

538 Mr Kerr gave evidence that, in 2001, competition was so fierce that his company was unable to supply rock for the duplication of Cooper Street. Further, the evidence was that the price for quarry product was trending downwards in 1999/2000; 2000/2001; and 2001/2002.

539 Mr Kerr's company did not keep financial records on a site by site basis prior to the 2003/2004 financial years. Accordingly, an accurate statement as to the unit costs of production as at the 2002 relevant date was not available. However, costs of production referrable only to the Northern Quarries' operation on Cooper Street, including both WA149 and WA658 for the years 2003/2004 to 2005/2006 were provided by Mr Kerr. Average operating costs over the three year period were $6.87 per tonne, drawn from Conundrum Holdings' tax returns. Depreciation was not allocated or included in these costs. Indirect costs were also not included because they were consolidated within the accounts. On a year by year basis, the costs of production in 2003/2004 were $6.80; in 2004/2005, $6.07; and in 2005/2006, $7.74 per tonne.

540 Mr Kerr's evidence also identified remaining reserves on the WA445 or Miller land, as being 7,016,087 tonnes remaining as at 30 June 2006.

541 In oral evidence in the Cooper Street proceeding, Mr Kerr described the resource on WA149 as very challenging and exceptionally difficult to work if there were periods of heavy rain. In order to work the resource effectively, his strategy was to work as many faces as possible at the same time to facilitate mixing and blending of product for processing. He explained that, although the quarrying conducted by his company consisted of the top flow, within that top flow, there were two or three flows occurring, some of which are more versicular, some of which are dense and some of which are unsound.

542 Mr Kerr said that due to the WA149 deposit being a very difficult deposit to work, the management of it required a personal commitment of "24/7". He gave evidence that it would have been very difficult for a public company to quarry the resource on WA149.

543 When asked about division of product produced from the quarry, Mr Kerr said that, if he had good material, he would sell it as good material, class 3 and above, because "it provides a better return and that he was not in the game of giving away high quality products for a reduced price". In response to a question from Osborn J, he drew a distinction between the method his company used in working the resource, which involved taking out every ounce of stone possible, with the method of quarrying used by a larger quarry company, such as Readymix, for whom he had previously worked. In the case of the larger companies, the approach was, certainly in the past, to follow a flow and leave behind a lot of medium and marginal materials.

544 As to WA658, when cross-examined in the Cooper Street proceeding, Mr Kerr said that, in 1996, his company engaged contractors to drill, with Mr Love's approval, on the WA658 land but that he also had geological information concerning the Miller property which had previously been the subject of drilling and investigation by Pioneer and he determined to proceed with WA445 instead of WA658. The lease on the Miller land, Mr Kerr confirmed, is at a lower royalty rate compared with the lease of the WA149 land.

545 Mr Kerr gave evidence of two offers which he made to purchase the whole of the extended area of WA149. The first of these was in April 1999 for $1.42 million. The second was in November 2004 for $3.2 million. At the time of both offers, as he said, he was conscious of the potential value of the void on the WA149 land for future tipping. Accordingly, both offers reflected his view of the combined value of rock remaining and actual and future air space.

546 So far as the 16 November 2004 offer to purchase is concerned, Mr Kerr confirmed it was an offer to purchase the whole of the WA149 land, together with the water way easement, going up to the Miller land. At the time of the offer, Mr Kerr had his quarrying plant on the Miller land and his crushing plant on WA149 and he estimated it would have saved over $0.5 million or more if he purchased Mr Love's land given that he did not need to relocate the crushing plant. By that time, the signalised intersection at Cooper Street had been constructed.

Mr Herdman's $13 per Tonne Average Selling Price

547 Mr Herdman's analysis also depended upon an assumption that 700,000 tonnes per annum would be sold at his adopted price of $13 from the first day of the quarry's operation, coinciding with the relevant date. He made no allowance in his calculations for the risk that such an outcome may not be achieved.

548 The adopted selling price of $13 per tonne was based upon an assumed quarry out-put of 70 percent above and 30 percent below class 3 for 700,000 tonnes per annum adopted out-put. In his report, Mr Herdman referenced "market research" as the basis for his adopted average selling price. The source, detail and composition of such "research" was not disclosed and no basis for the adoption of $13 as the selling price was otherwise articulated. In the Cooper Street proceeding, he accepted that a new operator, other than Mr Kerr, would need to price its product at least as low as $11.80 to compete with Mr Kerr. This was based on the assumption made in June 2007, that Mr Kerr's average ex-bin selling price was $11.80 including GST in 2001/2002. In fact, that was not Mr Kerr's average selling price at all. $11.80 was Mr Kerr's price in 2001/2002 for class 3 and above. Mr Herdman made no note of the commercial sales price achieved by Mr Kerr, namely, $7.65 when he made his inquiries in 2007. As the geological evidence shows, commercial grade rock is the dominant resource on WA658. In forming his opinions, Mr Herdman did not distinguish between the quality of the upper and lower flow and also assumed that all rock, including weathered basalt, would sell for an average of $13.

549 There was much criticism of Mr Herdman for his adoption of $13 as the assumed selling price. First, on the basis that $13 could not be justified even in respect of the upper flow by reference to the actual experience of Mr Kerr on WA149 whose average selling price was $9.60 and by other evidence of actual prices in the market. Second, on the basis that whatever transport advantages might accrue to WA658, they were reflected in Mr Kerr's actual selling price. Third, on the basis that $13 assumed a uniform resource across the whole of WA658, including the lower flow below the water table.

550 The evidence in relation to Hanson Wollert produced on subpoena showed a selling price of $9.44 for a large volume quarry producer with an out-put in 2001/2001 of over 1 million tonnes. Mr Herdman sought to distinguish the Hanson Wollert price on the basis that he could not tell, from the information provided, whether the quarry was putting out a large or small percentage of aggregate. He did not know the product mix underlying the ex-bin price of $9.44. However, whilst Mr Herdman relied upon the absence of full financial data as the basis to distinguish the Hanson selling price, he himself produced no such financial data to support either his $13 price or the evidence which he gave in relation to his assumed product mix based on the 70/30 split.

551 The adoption of a selling price of $13 depended, for its acceptance, upon the proposition that the hypothetical purchaser of WA658 would, as did Mr Herdman, assume a "completely different product mix" to that of Mr Kerr on WA149. Although he had not met with Mr Kerr nor asked him about his product mix, in support of his assumed 70/30 split, Mr Herdman proceeded on the basis that Mr Kerr was not obtaining optimal product mix from the available upper flow rock resource. He asserted that Mr Kerr had made a business decision to produce lower grade stone for the market and was in a position to manipulate his product mix between class 3 and above and below. Given Mr Herdman had made no inquiries of Mr Kerr and provided no other hard data or information to support his view, little weight can be placed upon his assertion that a 70/30 product mix would have been achieved in relation to WA658 in the upper flow, thereby leading to a higher price than Mr Kerr's average price of $9.60.

552 In support of the $13 price, Mr Herdman said that product mix was the driving factor. Price, in Mr Herdman's view, depended upon down stream activities. In essence, Mr Herdman contended that a major company or quarry operator, looking for a resource, would be interested in the subject property and would generate a different product mix and at a higher value than Mr Kerr. However, he did accept that, if $9.60, being Mr Kerr's average price, was accepted as representative of the price able to be obtained for the upper flow on WA658, then his assessed value of $33 million would need to come down. Mr Herdman also accepted that he would have to adopt a different product mix to Mr Kerr to get anywhere near a 70/30 ratio. On the other hand, he did not accept that, if Mr Gray's evidence was acted upon, he would be required to reduce his selling price from $13. However, he did accept that, if the Court acted upon Mr McLellan's evidence, then the $13 price would need to come down.

553 The evidence of Mr Herdman as to why he adopted the figure of $13 as his assumed selling price was unsatisfactory and inconsistent with the contemporaneous evidence, in particular, that relating to Mr Kerr's quarry on WA149. When one takes into account the lesser quality of the lower flow, the $13 per tonne price adopted is not established. Mr Herdman was provided with Mr Martin's view and his adopted price of $11 to $12. He did not adjust his price in light of those opinions.

554 I am not satisfied that the important input of a sale price of $13 per tonne was achievable for a hypothetical quarry on the WA658 land and I reject it as a reliable input.

Mr Herdman's $7 per Tonne Cost of Production Price

555 Mr Herdman's calculation of the value of a hypothetical quarry on Mr Love's land also took into account a sole cost of $7 per tonne as the production price. This, too, was a critical input.

556 The October 2007 Herdman report which described cost of production to be in the order of $7 per tonne, produced an average surplus trading profit (EBITDA) of $6 per tonne. The components of the $7 per tonne costs of productions were said to be as follows:

• stripping of over-burden $1 per tonne;
• haul $1.30 per tonne;
• crushing and screening $2.50 per tonne;
• drill and blast $0.70 per tonne;
• sales, load and dispatch $1.50 per tonne.

557 Mr Herdman's report of October 2007 stated that "evidence shows" that costs would be as set out in the table. No documents constituting "evidence" were produced by Mr Herdman in support of his adopted rate of $7 per tonne. When pressed as to the basis of the $7 per tonne, it became clear that it was based upon "extensive discussions" with Mr Robinson, of Boral, and depended upon results from the Deer Park quarry. These "discussions" were not referenced or set out in the report.

558 Elsewhere, in the October 2007 report, likely costs of a fixed plant were identified to be in the order of $25 million. When it was put to Mr Herdman that his calculations did not reflect a land value and that, for a green field site, it was necessary to take off the capital expenditure needed in order to bring about the production, Mr Herdman said that his $7 reflected Capex paid "upfront", depreciated on a rate per tonne basis.

559 Such evidence, namely, to the effect that $7 includes Capex, would require a finding that the reference to EBITDA in the report is in error and that the methodology is not, as the report describes, a capitalisation of EBITDA but rather, a capitalisation of EBIT. There is no basis for such findings.

560 Accordingly, I am not satisfied that the cost of production of $7 per tonne was proven by Mr Herdman's evidence, nor am I satisfied that it took into account the likely costs of the capital expenditure needed to bring about the production.

561 Another key input to Mr Herdman's methodology was the adopted discount rate or capitalisation rate.

562 The rate adopted by Mr Herdman in his "before" quarry value calculation is 12 percent capitalised over a 25 year term.

563 Mr Herdman's October 2007 report does not identify or assert the basis for his selection of 12 percent as the discount rate which he adopted before tax. However, he did refer, in that report, as 12 percent being the rate that:

a major operator looking to buy a quarry as a going concern for a reasonable size and operating in a stable market place, will look at discounting.

564 In his oral evidence, he said that 12 percent was intended to cover the cost of capital and risk and that he had taken the inverse of a business yield to arrive at 12 percent, saying that he did so by an analysis of company transactions carried out when he was compiling the 12 percent discount yield.[148] He also gave evidence that 12 percent was based upon discussions with "industry" and that he undertook a further calculation. Further, that 12 percent was "following the market place" "industry practice".

565 In the course of giving his evidence, Mr Herdman produced a sheet listing various sales of businesses, saying that he had regard to one particular sale transaction in arriving at his 12 percent rate, namely, the Hanson purchase of Pioneer in the year 2000. There was no mention of this transaction as the basis of the 12 percent figure in his written report or in written notes and no such document was produced in response to subpoenas issued on two previous occasions. The document so produced, exhibit "A49", included a 2009 transaction. It was put to Mr Herdman that the document was brought into existence after the Cooper Street trial and it was not relied upon in its current or any earlier manifestation to support the 12 percent which he adopted. These allegations were denied by Mr Herdman.

566 Irrespective of whether the document was or was not in existence and whether the Pioneer/Hanson transaction formed the initial basis for adoption of a pre-tax risk rate of 12 percent, in fact that transaction is so removed from the exercise of valuing a hypothetical quarry on Mr Love's WA658 land that it cannot provide any useful guide as to the risk rate required. The Pioneer/Hanson transaction involved a vast worldwide take-over by Hanson of the assets of Pioneer. As the exhibit itself discloses, the Pioneer/Hanson take over was a $477 billion transaction. There were assets in 16 countries, 600 concrete plants, 120 quarries worldwide, 42 quarries in Australia. The risks of the enterprise were, accordingly, relatively low and were spread widely. The purchase involved a combination of cash and shares and there is evidence that a control premium had been paid. The Grant Samuel independent expert report concerning the take-over was in evidence. It is apparent from that report, that the yields and risks from the Hanson worldwide take-over of Pioneer could not be applied as a guide or basis for a risk rate concerning a green field site on the Mr Love's property. The attempts by Mr Herdman to contend to the contrary were not convincing.

567 Mr Herdman said elsewhere in his evidence concerning this topic that 12 percent reflected the "localised market". Although he ultimately agreed that the risks of a green field site were not the same as those of a going concern, he nevertheless used the going concern adopted rate of 12 percent in both the "before" and in the "after" calculations based on a royalty.

Mr Herdman's Rate Compared with Mr Meredith's

568 Gregory Meredith ("Mr Meredith") is a Chartered Accountant and a Partner at the firm Ferrier Hodgson. Mr Meredith holds a Bachelor of Economics from the University of Sydney. He is a Forensic Accountant with experience in business valuations and discounted cash flow analyses and other business valuation methodologies. He described his skills as understanding "how numbers work" and how values can be derived from financial analysis and analysis of business opportunities.

569 Mr Meredith gave evidence that he considered the 11.46 percent after tax rate of Mr Herdman to be too low and not reflective of relevant risks. Mr Meredith's 14 percent is the product of a detailed risk analysis and includes the following components using the capital asset pricing model ("CAPM"):

570 In the case of Mr Herdman, the basis for selection and adoption of the 12 percent or 11.46 percent after tax equivalent was not built up by the application of the CAPM or in any similar way. The 12 percent pre-tax risk rate was described in Mr Herdman's report as a "reasonable rate for this type of investment" based on the proposition that:

Experience shows that a major operator looking to buy a quarry as a going concern of a reasonable size and operating in a stable market place will look at discounting at 12 percent before tax.

571 Mr Herdman said that he did not think Mr Meredith's selection of 14 percent before tax to be appropriate. He said that it was based upon economic theory and, for that reason, it was inappropriate and made various other criticisms of Mr Meredith's selection of that rate.

572 In his re-examination, Mr Herdman was trenchant in his criticism of Mr Meredith, not only in respect of his adopted risk rate of 14 percent, but also his use of the discounted cash flow methodology.

573 I am not satisfied that the pre-tax risk rate of 12 percent selected and applied by Mr Herdman was properly founded. I prefer the evidence of Mr Meredith that a more appropriate rate would have been 14 percent for a green field site.

574 Adopting DCF methodologies and applying such methodology to the hypothetical quarry on the WA658 land, Mr Meredith concluded that a notional quarry was not viable irrespective of production quantities ranging from 300,000 to 1 million tonnes per annum. In each of the scenarios modelled by Mr Meredith, use as a quarry produced a negative value for the land.

575 The Corporation contends that the product of Mr Meredith's investigation lends support to the views of Mr Dudakov and Mr Brown that the highest and best use of the land is for purposes other than quarrying.

576 In his February 2010 report and later valuation exercises, Mr Meredith adopted different selling prices for his DCF model, based upon Mr Kerr's actual sales prices, namely $11.75 for material of class 3 and above and $7.68 for material below class 3. In his cash flow, he assumed the better quality upper flow would be quarried first. As instructed, he adopted $6.80 per tonne for Opex. He increased both selling price and costs each year. He allowed sums to purchase and then sell mobile plant, later replacing it with fixed plant. In oral evidence, he said that cost to rent mobile plant, if such an approach were adopted, did not lead to a materially different financial outcome.

577 Mr Meredith's ultimate conclusion is stark. When Capex is brought into account and, when all possible scenarios are considered and brought to account, such as the cost of moving the gas easement and the like, all of the cash flows prepared by Mr Meredith resulted in negative values. From whichever perspective one considers the WA658 green field site, in Mr Meredith's opinion, a quarry on the site could not be a viable commercial operation.

578 For example, excluding land tax and assuming 100 percent certainty of all required approvals, Mr Meredith's DCF calculations exhibited to and summarised in his February 2010 report reveal negative values for quarry of between $(3,798,619), assuming 300 tonnes per annum production, and $(11,116,575), for 700,000 tonnes. That is the equivalent of the exercise which, in Mr Herdman's opinion, leads to a positive market value of $33 million. If the resource to be exploited is 53.6 million tonnes and if production is 700,000 tonnes per annum, in his February 2010 report Mr Meredith arrives at a negative value of $(10,320,605).

579 Mr Meredith adopts a conventional DCF methodology in relation to the various "before" and "after" quarry valuation exercises which he has undertaken.

580 For these reasons and having regard to the fundamental flaws in Mr Herdman's evidence earlier discussed, the quarry claim, as it has been advanced by Mr Love, must fail.

581 I am not satisfied that a combined future quarry/landfill operation represents the highest and best use of the WA658 land as at the relevant date.

582 The highest and best use of the land as at the relevant date was and remains future industrial use.

583 As to the market value of Mr Love's land, on the basis that its highest and best use was as future industrial land, the comparable sales method was directly applied by the Corporation's valuers, Mr Brown and Mr Dudakov to set the parameters for their exercise.

584 Although in the case of some comparable sales adjustment needs to be made for the availability and timing of sewerage to service Mr Love's land, there was no challenge as to the comparability of the sales evidence relied upon by Mr Brown and Mr Dudakov.

585 In determining the levels of value for future industrial use for the different components of Mr Love's land, I err in favour of the claimant Mr Love and adopt the higher levels of value which, in this case, are to be found in the opinions expressed by Mr Brown. Those opinions, which appeared in his report of 7 January 2005, are summarised below as follows:

586 There were no competing values for future industrial use contended for by Mr Love.

587 Leslie Brown ("Mr Brown") is a qualified Valuer and Director of m3property (Vic) Pty Ltd, formerly called Landmark White (Vic) Pty Ltd, valuers appointed by the Valuer-General to undertake valuations in respect of an acquisition by the Acquiring Authority, Roads Corporation. Mr Brown holds a Bachelor of Commerce from Melbourne University; and an Associate Diploma of Valuations and a Certificate of Business Studies, Real Estate from RMIT. Additionally, Mr Brown is a Certified Practising Valuer, registered under the Valuation of Land Act 1960, and his professional associations include being admitted as an Associate of the Australian Property Institute and a Fellow of the Australian Property Institute. Mr Brown's work experience includes: Director, m3property (Vic) Pty Ltd from 1988 to present; Manager, Professional Services, Raine & Horne from 1987 to 1988; Senior Valuer, Chesterton International (formerly Henderson's The Property People) from 1985 to 1987; and Administrative Officer and Cadet Valuer and Qualified Valuer, Valuer-General's Office from 1977 to 1985.

588 Mr Brown was instructed to provide valuation advice to the Corporation on 13 December 2001, prior to the acquisition. He met with Mr Love and discussed the implications of the acquisition with him on 10 January 2002. In the course of that meeting, as he reported by letter of 14 January 2002, it appeared to Mr Brown that Mr Love wished to pursue the potential for extractive industry on the land. Mr Brown therefore considered that it may be necessary to obtain planning advice in relation to the highest and best use in question. He sought information which, in turn, was requested from Mr Love, namely, a copy of the WA149 royalty lease, details of the rental income being generated from this activity over the past three to four years, a copy of the extractive industry licence and details of the existing materials relating to the existing operations and that of the adjoining owner, Miller, who, Mr Brown understood, formed part of the overall extraction operations currently existing. Mr Love declined to provide such information.

589 Mr Brown prepared his first report without the information which he sought regarding quarrying activity on Mr Love's land. He went on to prepare a series of reports exhibited to four affidavits sworn between 8 February 2005 and 2 February 2010. In addition, Mr Brown prepared a report dated 29 July 2010 which responded to the provision of further information concerning the purchase of land by Hanson at Wollert and also the need to reconsider issues relating to value following the ruling of 2 June 2010. In that final report and throughout each of his reports, Mr Brown has held the view that the highest and best use of the subject property, in particular of the WA658 land, is for future industrial development.

590 In his first report of May 2002, Mr Brown relied upon comparable sales evidence as the basis for his opinion that the highest and best use of the subject property, in both the "before" and "after" circumstances, was for future industrial development. His first report did not include a valuation of the WA149 land but was on a "before" and "after" basis only in respect of Mr Love's land to the east of Vearings Road. In his initial report, Mr Brown assessed compensation at $2 million but, following a conference of valuers on 18 July 2002, increased his "before" value and his assessment of compensation to $2.45 million.

591 In October 2004, he was instructed to value the whole of Mr Love's land on a "before" and "after" basis, including the WA149 land. He did so, reporting on 7 January 2005 and assessing compensation at $2.5 million. Over time, in particular when Mr Hocking was involved in providing advice on behalf of Mr Love, information was provided to Mr Brown and different scenarios were advanced and considered as to why the land might have a highest and best use as quarry/landfill, so far as WA658 was concerned. On 9 October 2007, Mr Brown swore an affidavit which responded to a request for various valuation exercises and also responded to Mr Hocking's report. That affidavit was not read or relied upon at the trial because Mr Hocking was not called to give evidence by Mr Love and the valuation exercises in question proceeded by reference to the then assumed resource of 15.1 million tonnes. Mr Brown's report of 6 June 2009, also referred to various aspects of reports prepared by Mr Hocking. Those passages were not read or relied upon at the trial.

592 On 6 August 2008, Mr Brown responded to lengthy letters of instruction to express opinions as to values on various assumptions relating to quarry and landfill. The assumptions upon which he was instructed to proceed included an assumption that the rock resource was as reported at that time by Mr Natoli in October 2007 and on the assumption that Mr Martin was accurate in his discussion and analysis of the hard rock market as at the relevant date and also as to competition. Mr Brown was instructed to make assumptions (not based on evidence) as to the cost of plant and equipment, which have since been overtaken by evidence of significantly higher capital costs. In responding to those instructions and upon assumptions including as to Capex of $10 million for a fixed plant, Mr Brown prepared a series of valuation exercises. The methodology which Mr Brown adopted in these exercises is important. The methodology adopted was not dissimilar to the "going concern" approach of Mr Herdman but there was a critical difference. After arriving at an "indicated value going concern", Mr Brown then deducted up front infrastructure works and the value of up front works, plant and machinery in order to arrive at a notional land value.

593 When he gave oral evidence, Mr Brown discussed this area of difference between his methodology and that of Mr Herdman. In the calculations which Mr Brown prepared on the basis of instructed assumptions, he expressed the view that a discount rate for quarry of 15 percent, as a going concern, would not be unreasonable in contrast to the lower rate of 12 percent adopted by Mr Herdman. When cross-examined, Mr Brown said that he saw a distinction between quarry operations that were existing and those that had to be established.

594 The 5 June 2008 report of Mr Brown includes a table summarising calculations undertaken on various assumptions which he was instructed to make broadly corresponding to a hypothetical quarry in accordance with Mr Herdman's approach. Even taking the lower capital costs that he was instructed to assume, Mr Brown concluded that a "before" value, assuming a selling price of $9.61 and a cost of $6.80, selling 1 million tonnes per annum, is $1.8 million and, at 500,000 tonnes per annum, is $1.04 million. These levels of value are well below his industrial levels when translated to a rate per hectare.

595 Further, if one was to compare the results of Mr Brown's "before" calculations with his "after" calculations, taking a quarry with annual production of 500,000 tonnes per annum and assuming a more optimistic selling price of $11.45, with a cost of production of $7, whilst there is a "before" value for quarry on this basis of $6 million, the "after" value is $5.84 million, resulting in a loss of $160,000. This may be compared with Mr Brown's assessment of compensation at $2.5 million on a "before" and "after" highest and best use for future industrial purposes.

596 In his affidavit sworn 2 February 2010, Mr Brown responded to the same instructions given to Mr Meredith to consider potential value for quarry and landfill on various scenarios. As Mr Brown noted, the assumptions he was instructed to make on this occasion in respect of capital expenditure were significantly higher than those originally allowed in his earlier calculations. Nevertheless, based on the information provided, he expressed the opinion that the allowances proposed for capital costs were not unreasonable. He expressed the opinion that a selling price of $9.60 and a cost of $6.80, both of which would be appropriate before land tax, having regard to Mr Kerr's experience, would lead to the conclusion that a quarry operation would have a zero dollar value

597 In the same affidavit, Mr Brown responded to his instructions, which enclosed confidential documents concerning the two purchases by the Barro Group. He analysed those sales. In his report of 29 June 2010, he also considered and analysed the purchase by Hanson of the adjoining land at Wollert. That sale indicated $24,240 per hectare, the Wyndham Value purchase by Barro reflected a rate of $10,900 per hectare overall, Mr Brown's unchallenged analysis of the Point Wilson sale reflected a price of approximately $4,500 per hectare. This land included a licence to extract 133 hectares, subject to an existing sub-licence from Barro to Austrack and in circumstances where, after the purchase, Barro sought an extension of quarrying activities to cover 377 hectares.

598 In his 29 July 2010 report, Mr Brown concluded, in relation to WA658, that, in his view, the highest and best use of the land was for future industrial use. Having considered the Hanson sale, he did not believe it changed his opinion in relation of the subject property but, rather, reinforced his view that quarry operators could not afford to pay urban values for resources of the type of which WA658 is an example. He was cross-examined as to the sale. He was aware it was zoned green wedge, adjoined the Hanson quarry at Wollert and that it was purchased by a nominee company. Quarrying is a permitted use in a green wedge zone. Mr Brown considered Mr Love's land to have far greater urban potential than the Hanson purchase at Wollert.

599 Mr Brown was cross-examined about the price of basalt which was appropriate to adopt. It was put to him that $13, in light of materials shown to him, was not far off the mark. Mr Brown did not agree. Mr Brown considered that Mr Kerr was a very logical purchaser of WA658 if it had potential as a quarry because he had a very strategic vested interest in the area. However, he made the point that others in the development market would be likely to attend a notional auction sale on the relevant date in competition with any quarry operators who might attend. He was of the view that the best price which would be paid for Mr Love's land at such a notional auction would be from a developer, not from a quarry operator. Mr Brown agreed that there were issues with comparable sales, but that the sales, such as they were, supported the proposition that significant sums of money were not paid for properties for basalt quarrying.

600 Mr Brown was questioned about the relative costs advantage of the subject property compared to Wyndham Vale. It was put to that, if $0.14 per kilometre were adopted over 20 kilometres, then $2.80 was the fairly significant transport cost differential. Mr Brown accepted that position. Nevertheless, he remained of the view that if quarry operators were bidders at a notional auction, the land may be of interest to the quarry industry at a certain level of value but, given that land also had potential for industrial development, developer interests may push the bidding to a point beyond that which quarry operators could meet the market.

601 He presented as a careful and thoughtful witness who was responsive to the cross-examiner but who maintained his view that the highest and best use of the land was for future industrial use.

602 Mr Brown did not attribute a separate value to "Clonard" in the "before", treating it as adding no value for future industrial use.

603 Mr Brown was well considered and balanced in the expression of his opinions. He remained of the view in cross-examination that the highest and best use of the land was for future industrial use and that the proper assessment of competition on a "before" and "after" scenario was $2,500,000. I accept Mr Brown's conclusions on these matters.

604 Brian Dudakov ("Mr Dudakov") is a qualified Valuer and a Director of UrbisJHD Valuations Pty Ltd. Mr Dudakov has over 30 years' experience in the valuation of Commercial, Industrial, Residential and other forms of Real Estate throughout Victoria including numerous appearances as an expert witness before the Supreme Court, VCAT (Land Valuation List), County Court, Federal Court and Valuers Qualification Board.

605 Mr Brian Dudakov was originally retained to provide valuation advice in relation to the partial acquisition of Mr Love's land in May 2002. He subsequently prepared a series of reports, some of which are no longer relevant or relied upon because they responded to earlier opinions and reports of Mr Hocking, a valuer not called by Mr Love and whose evidence is not relied upon by Mr Love.

606 In addition to reports exhibited to his affidavit, Mr Dudakov was asked to express his views, taking into consideration the 2 June 2010 ruling. He did so in his report dated 30 July 2010.

607 Mr Dudakov adopted different rates per hectare for different parts of Mr Love's land so as to arrive at his total "before" value for the whole of Mr Love's land of $14,140,000. This reflects an average of $68,243 per hectare. As to 10 hectares of prime land fronting Cooper Street, a value of $200,000 per hectare, or a total of $2 million was adopted. As to the balance of the land comprised in the title to the east of Vearings Road, being 141.2 hectares, a rate of $66,000 per hectare was adopted, resulting in an assessment of $9,319,200. In relation to the 55.89 hectares of land which includes the WA149 occupancy, a rate of $50,000 per hectare was adopted, which results in $2.8 million when rounded out.

608 Mr Dudakov adopts a total "after" value for Mr Love's land of $11.64 million or $63,857 per hectare. Mr Dudakov allowed $2.8 million for the WA149 land, being 55.89 hectares at $50,000 per hectare, which is the same as his "before" value. In relation to the land east of Vearings Road, Mr Dudakov adopted $50,000 per hectare for the Lot 22 of severed land east of the freeway north of the Scanlon property comprising 62.81 hectares, $250,000 per hectare for 5 hectares of prime land with Cooper Street frontage at its inter-section with the Bypass, and $75,000 per hectare for the balance of 57.77 hectares.

609 Mr Dudakov therefore arrived at a market value assessment of compensation payable to Mr Love as $2,500,000 be deducting $11.64 million, being his assessment of the "after" value, from his assessment of $14,140,000 for the "before" value. Although Mr Dudakov's total assessment of compensation is the same as that arrived at by Mr Brown, they do so by different methods of calculation.

610 In his initial valuation report of February 2005, Mr Dudakov set out the comparable sales of industrial land upon which he relied to form his opinions. He was questioned in cross-examination as to his assumptions relating to the availability of sewerage with respect to his future industrial land values. He assumed he had three years delay in his reports. However, he accepted that three to ten years was a more accurate assessment. Nevertheless, such a deferral did not, in his opinion, have a significant impact on value.

611 The third affidavit of Mr Dudakov, of 12 June 2008, responded to Mr Herdman's affidavit and took into consideration the results of the 2007 drilling which were then known. Mr Dudakov noted, in that report, that since his October 2007 report, new evidence has come to light regarding the rock resource, in particular, that, in the "before" scenario, reserves were estimated by Mr Natoli in the order of 53.5 million tonnes on the assumption the gas easement is moved. He noted that, in his October 2007 report, he referred to the fact that none of the sales evidence so far quoted would lead him to the view that quarry operators would be prepared to pay prices above or even commensurate with the value of land for future industrial development which he had assessed for the subject property. Nevertheless, to test the issue, prior to that report, he obtained maps of all the EIIA land and obtained sales datas from the Valuer General within those areas. He prepared and exhibited to his report a schedule based upon a comparison of those matters and concluded that:

• most of the areas identified as being of interest or extractive industry operators were in areas which can generally be described as either rural or on the fringe of metropolitan areas
• there was little in the way of evidence, which would indicate that premiums above and beyond surrounding land values were being paid for land with extractive potential

612 Despite extensive investigations, he was unable to locate a sale of any green field site with extractive landfill potential where a price had been paid for the land which exceeded $100,000 per hectare, let alone Mr Herdman's remarkably high assessed value of $350,520 per hectare. He expressed the opinion that:

• quarry operators are not prepared to pay high prices for quarry land when suitable alternative supplies of land within reasonably close proximity to Melbourne are available at a substantially lower cost;
• the highest and best use for the subject land (with the exception of the land currently occupied by Conundrum) was for future industrial development once rezoning occurred;
• the carrying out of financial analysis to determine the value of the green fields site capable of being developed for quarrying purposes is not appropriate ... simply put, while it is possible to estimate variables such as sale price of product, sale volumes and costs of extraction, there is no evidence which can be analysed to determine the operator's required rate of return for a "green field" site nor how the set up costs are delays are factored into the calculations.

613 Cross-examined in relation to extractive industry interest areas, Mr Dudakov said that the fact there were only a handful of sales shows there was not a hunger to buy land for quarry purposes.

614 On 29 January 2010, Mr Dudakov swore his final affidavit to which his report of January 2010 is exhibited.

615 Mr Dudakov exhibited documents produced on subpoena in relation to that sale and also in relation to another sale, that at Point Wilson where Barro was also the purchaser by contract dated 25 July 2001 but in respect of which Mr Dudakov had provided valuation advice to the vendor, Orica Ltd, for the purpose of establishing an asking price for the land. Mr Dudakov said that the Point Wilson transaction showed that quarry entrepreneurs did not have to pay urban values when they could go outside the urban area and buy cheaper land elsewhere. He acknowledged that the property was a long way from Melbourne CBD. The fact, in his opinion, that Barro purchased land at low value did not support an inference that they would pay $70,000 per hectare for WA658 being his value for the land as a future industrial site. He acknowledged that a purchaser for quarry purposes would take into account any transport cost advantage and do their sums. He said that, having done so, they would work out that it was not feasible to pay the high cost of land in an urban area compared to cheap land outside and bearing the transport costs.

616 Mr Dudakov noted that both sales were contained in the schedule to Mr Hocking's valuation of March 2005 and had been earlier considered and taken into account by him in his October 2007 report. Nothing about these two sales caused him to change his view that the highest and best use of the subject property was for future industrial development with the added potential for some more intensive retail styled premises along the Cooper Street frontage.

617 Mr Dudakov accepted that, if WA658 was up and running, then it may have had a high value as a going concern. However, he said that quarry operators own a good deal of land which is available to them to expand and they do not have a need for additional sites. In his opinion, it was better for a quarry operator to expand to adjoining land where it did not need to acquire or establish new infrastructure. The purchase by Barro of the significant land holding at Point Wilson may be viewed in this manner.

618 Mr Dudakov said that he accepted that a quarry operator may pay more for land closer to the Melbourne Central Business District, but that a quarry operator would not pay a price at the same level as a developer looking to hold the land for future industrial purposes. He considered that Cooper Street had significantly greater potential for a higher and better use than as a quarry development. He expressed the view that it is evident that quarry operators do not pay high prices for land on account of an advantageous location when other land may be purchased very cheaply.

619 In his report of 30 July 2010, Mr Dudakov took into account the purchase by JRH Pastoral Pty Ltd, on behalf of Hanson, of 123.75 hectares of land at Epping in October 2005 for a price of $3 million, reflecting a rate per hectare of $24,242.42. Questioned in relation to this transaction, Mr Dudakov said that the purchaser paid surrounding rural values only. He accepted that the rural land would have included a quarry buffer as a constraint on its rural value, that the land had no permit and that gum trees would have been a constraint on quarrying and certainly a risk issue.

620 After referring to that sale which he noted was well after the relevant date, in a substantially rising market and being land more remote from Melbourne the subject property, in his 30 July 2010 report, he concluded:

I consider that the sale is relevant to the extent that it supports my contention that quarry operators will:

(a) pay a little more than surrounding land values in order to secure sites for future quarrying; and

(b) not have to pay the premium price determined by Herdman because there is ample cheaper alternative land available. Further, it is illustrative that the sale of this property was to an adjoining owner who already had an extensive quarry operation up and running. Notwithstanding, the owner of the sale property could not obtain any significant premium above and beyond its value as a rural property.

621 Mr Dudakov allowed $44,684 in his assessment of compensation for the loss of "Clonard" on the basis that, although the highest and best use is for future industrial purposes, rental income in the meantime is lost.

622 Nevertheless, I accept that Mr Dudakov had undertaken considerable research, particularly in relation to EIIAs and was aware of such sales evidence as was relevant and in existence at the time he wrote his reports. He was particularly familiar with the Barro purchase and the site at Point Wilson, in respect of which he had advised the vendors.

623 I accept Mr Dudakov as an expert who was well versed in the valuation issues surrounding Mr Love's land. In particular, I accept his opinion, in common with that of Mr Brown, that the highest and best use of the subject land at the relevant time was as future industrial land, and that the total "before" value of Mr Love's land on the date of acquisition was $14,140,000 and the total "after" value was $11.64 million, yielding an assessment of compensation at $2.5 million.

624 The sales evidence in this case indicates a level of value which a hypothetical purchaser would be prepared to pay for land with a rock resource to be used and developed as a basalt quarry.

625 The evidence established that quarry operators wishing to expand their operations tend to prefer to purchase adjoining land or land which they already lease together with adjoining land rather than to incur the fresh capital costs of infrastructure involved in the establishment of a new green field site.

626 The pattern of prices in evidence in relation to the sale of potential quarry sites does not support a level of value which could match any value achieved for the land sold for future industrial development. The evidence of Mr Brown and of Mr Dudakov, which I accept, points to the strong likelihood that whilst a quarry operator may bid for the WA 658 land for use as an extractive industry enterprise, that person would be likely to be out-bid by the developer seeking to acquire land for future industrial development.

627 Sales evidence was relied upon by both is Mr Brown and Mr Dudakov as a general guide or indicator concerning the value of "quarry" land, even though such sales were not used as a directly comparable component of their assessments of market value. Section 5A (2) of the V L Act directs the Court, just as it directs a valuer or other person required to determine the value of any land, as follows: