RTA v Muir Properties Pty Ltd

TOBIAS JA McCOLL JA HUNT AJA

Wednesday 21 December 2005 ROADS AND TRAFFIC AUTHORITY OF NEW SOUTH WALES v J L & M M MUIR PROPERTIES PTY LIMITED Judgment 1 TOBIAS JA: Prior to 13 December 2002, JL & MM Muir Properties Pty Ltd (the respondent) owned 17.52 hectares of land having a frontage to the north-eastern side of Windsor Road, Kellyville within the Shire of Baulkham Hills (the respondent's land). At all material times Windsor Road was a "main road" but not a "controlled access road" within the meaning of the Roads Act 1993 (the Roads Act) and, as such, was also a "classified road" within the meaning of that Act. The south-eastern corner of the respondent's land was a few hundred metres to the north of the intersection of Windsor Road and Old Windsor Road. 2 On 13 December 2002, there was published in the Government Gazette a Notice of Compulsory Acquisition whereby the Roads and Traffic Authority of New South Wales (the appellant) acquired approximately 600 linear metres of the respondent's land along the length of its Windsor Road frontage under the provisions of the Land Acquisition (Just Terms) Compensation Act 1991 (the Just Terms Act). The total area acquired was 2.94 hectares (the resumed land). The stated reason for the acquisition was "for the purposes of the Roads Act 1993". 3 The respondent's land relevantly comprised two parcels separated by land zoned Special Uses 5(a) which had been acquired by Sydney Water for the purposes of trunk drainage. After the acquisition of the Windsor Road frontage land, the northern parcel (Parcel A) had an area of 4.847 hectares whereas the southern parcel (Parcel B) had an area of 6.177 hectares. At the date of acquisition Parcel A was zoned Residential 2(a4) under Baulkham Hills Local Environmental Plan 1991 (the LEP). 4 Because Parcel A was zoned for residential purposes, no issue arose with respect to it being injuriously affected by the acquisition of the resumed land. This was because its development was not dependant upon direct access from Windsor Road. Accordingly, the respondent's claim for injurious affection was confined to Parcel B which, at the date of acquisition, was zoned under the LEP as Special Business 3(b) as to 4 hectares adjoining Windsor Road and Open Space 6(a) as to 2.177 hectares to the north of the Special Business land. I shall refer hereafter to the latter as Parcel C and to the Open Space land as Parcel D. 5 On 10 January 2003, the appellant served upon the respondent a compensation notice pursuant to s42 of the Roads Act offering compensation under the Just Terms Act in the sum of $4,875,000. Relevantly for present purposes, the amount of compensation offered did not include any amount for what is known as "injurious affection" under s55(f) of the Just Terms Act. 6 The respondent was dissatisfied with the amount of compensation offered. Accordingly, on or about 3 March 2003 it lodged with the Land and Environment Court pursuant to s66(1) of the Just Terms Act an objection to the amount of compensation so offered. Relevantly, the respondent claimed compensation for injurious affection to Parcels C and D pursuant to s55(f) in the sum of $4,755,000. 7 The compensation proceedings were heard by Bignold J who, on 9 November 2004, awarded the respondent compensation in the sum of $7,985,850 comprising $4,985,850 for the market value of the resumed land determined in accordance with ss55(a) and 56(1) of the Just Terms Act and $3,000,000 for injurious affection to Parcel C pursuant to s55(f). His Honour rejected the respondent's claim for injurious affection to Parcel D. 8 It is against the primary judge's award of compensation for injurious affection with respect to Parcel C that the appellant appeals to this Court. The respondent has cross-appealed with respect to his Honour's decision not to award it compensation for injurious affection to Parcel D. Both the appeal and cross-appeal are confined by s57 of the Land and Environment Court 1979 (the Court Act) to questions of law.

The matters in dispute before the primary judge 9 At the time of the conclusion of the hearing before the primary judge there remained only three issues in dispute upon which his adjudication was required (at [20]). The first was the identification of the public purpose for which the resumed land was acquired; the second was the identification of the assumed underlying zoning of that land for the purpose of determining its market value; and the third was whether there had been injurious affection to Parcels C and D within the meaning of s55(f) of the Just Terms Act. 10 As to the first issue, his Honour found (at [38]) that the particular purposes in terms of the Roads Act for which the resumed land was acquired were, firstly, the widening and upgrading of Windsor Road as a main road and, secondly, the provision of a transitway pursuant to s52A of the Roads Act. His Honour found that the latter purpose involved the whole of the resumed land that abutted Parcels A and C. Of particular significance, he found that the transitway purpose included the denial of access between the proposed transitway and Parcel C. 11 The appellant challenged this last-mentioned finding in its written submissions but it was abandoned at the commencement of the hearing of the appeal. 12 As to the second issue, his Honour found (at [67]) that the assumed zoning of that part of the resumed land which adjoined Parcel A was Residential 2(a4) and that part which adjoined Parcel B was Special Business 3(b) (which was its actual zoning at the date of the acquisition). The appellant did not challenge those findings. 13 The third issue related to whether there had been any injurious affection to Parcels C and D pursuant to s55(f). As I have already noted, the primary judge awarded compensation pursuant to s55(f) in respect of Parcel C which at the date of acquisition was zoned Special Business 3(b) but declined to award such compensation in respect of Parcel D which was then zoned Open Space 6(a). The appellant maintained its challenge to his Honour's finding of injurious affection with respect to the four hectares of commercially zoned land of Parcel C and the respondent cross-appealed against his Honour's refusal to award such compensation in respect of the 2.177 hectares of Parcel D which was zoned Open Space. 14 In the course of his judgment, his Honour construed ss67 and 68 of the Roads Act by holding that the effect of s68(2) was that compensation was not payable as a consequence of an order made by the Minister under s52A declaring the road to be a transitway where that order restricted or denied access to or from the transitway in circumstances where the land for the transitway, being adjacent to the land in respect of which access was denied or restricted, had been compulsorily acquired for that purpose. The appellant originally challenged this finding, but it was also abandoned at the commencement of the hearing of the appeal. 15 Nevertheless, the appellant maintained that in determining whether Parcel C had been injuriously affected by the proposal to carry out the transitway, his Honour had misconstrued ss67 and 68 of the Roads Act. Ultimately, however, the appellant's reliance upon the provisions of the Roads Act in support of its submission that his Honour had erred in awarding compensation for injurious affection were confined to the effect of s67(2)(a) and s70(a) to which I shall return later in these reasons.

The relevant facts and the history of the zoning of the respondent's land 16 In 1964, the respondent purchased 57 hectares of land fronting Windsor Road which at that time was zoned Rural 1(c) Non-urban under the Baulkham Hills Planning Scheme Ordinance. In 1985 that land was zoned Rural 1(a) Non-urban whereas Windsor Road, including that part which fronted the respondent's land and which formed part of the resumed land, was zoned 5(b) Special Uses (Roads). 17 In 1989 the Minister made Sydney Regional Environmental Plan No. 19 with respect to what was referred to as the Rouse Hill Development Area (the RHDA), of which the respondent's land formed part. Associated with the release of the first stage of the RHDA was a Public Transport Strategy Report prepared by Sinclair Knight Buchanan dated March 1990. The report recommended that Windsor Road between Schofields Road (to the north of the respondent's land) and Old Windsor Road (to its south) should become a six lane arterial road and that all arterial roads "should be access denied". However, we were not referred to any part of the report that precisely defined what was meant by that expression and, in particular, whether it was intended to deny access by way of a public road intersecting with Windsor Road. I mention this matter as one of the major planks of the appellant's argument in respect of any injurious affection to Parcel C was that access to that land from Windsor Road would have been denied by the appellant even if there had been no proposal for a transitway. 18 In this regard, it is sufficient to accept for present purposes the appellant's submission that there was a conflict of evidence between Mr A J Rowan, the town planning consultant retained by the appellant and Mr Malcolm Drummond, the consultant planner retained by the respondent. The former maintained that the appellant would have denied access between Windsor Road and Parcel C by way of a public road intersection even if the transitway had never been proposed. The latter, on the other hand, was of the opinion that there was at least a reasonable chance of the appellant in those circumstances permitting such access. One of the appellant's major complaints is that the primary judge did not resolve this conflict. I shall return to this issue below. 19 On 27 February 1991 the Minister made the LEP which was gazetted on 1 March 1991. Generally speaking it was a consolidation LEP. At the time of its gazettal, the respondent's land remained zoned Rural 1(a). According to the statement of evidence of Mr Rowan, when the LEP was exhibited as a draft in June 1990, the respondent made submissions for its land to be rezoned, inter alia, for commercial development. The appellant also made submissions to the effect that the draft LEP should ensure that land fronting those roads which were "access denied" should be provided with alternative access within any development control plan which designed detailed road layouts. It further advised the Baulkham Hills Shire Council (the Council) that the "integrity of arterial roads depends upon complete adherence to this general principle of access denied." 20 According to Mr Rowan's evidence, the Department of Transport (DoT) also made submissions on the draft LEP to the effect that Windsor Road be reserved as a trunk public transport corridor linking Rouse Hill to Parramatta which would be required for "future mass transit options (busways…) if long term demand warrants". It would thus appear that as early as 1990 the State Government authorities were contemplating a form of transitway for the section of Windsor Road with which this case is concerned. However, apparently neither the Council nor the Minister accepted this submission in its entirety. 21 Amendment No. 1 to the LEP was gazetted on 28 June 1991. Relevantly, it rezoned the whole of what are now Parcels C and D as Special Business 3(b). According to Mr Rowan the amendment, although confirming the need for an upgrade of Windsor Road, did not provide for the southern portion of Parcel C (as it was pre-acquisition) to be dedicated to permit future road widening of Windsor Road, although he considered it most likely that the zoning of the Special Business 3(b) land "would not have anticipated direct access to Windsor Road". However, this was Mr Rowan's opinion and was not, apparently, self-evident from the provisions of Amendment No. 1. 22 Draft Amendment No. 52 to the LEP was exhibited in September 1996. As a consequence of correspondence from the Department of Planning to the respondent, Mr Rowan opined that the exposure of Parcels C and D to the arterial road network (particularly Windsor Road) remained a pertinent consideration supporting their original and continued commercial zoning. 23 The original LEP as gazetted on 1 March 1991 contained a definition of "classified road" as meaning a road declared under s4 of the State Roads Act 1986 to be, inter alia, "a main road". Windsor Road had been so declared. Part 3 of the LEP was headed "SPECIAL PROVISIONS". Under the sub-heading "Services", cl 11 provided as follows: "A person shall not carry out development on any land to which this plan applies unless the Council is satisfied that arrangements satisfactory to the Water Board, the Prospect County Council and Telecom Australia have been made for the provision of water, sewerage, drainage, electricity and telephone services to that land." 24 Amendment No. 1 inserted cl 11A into the LEP of which sub-clause (2) was in the following terms: "The Council is not to grant consent to the carrying out of development of any land to which this clause applies [which by sub-clause (1) was the land to which Amendment No. 1 applied] unless the Council is satisfied that arrangements satisfactory to the Roads and Traffic Authority have been made for the making of appropriate payments towards the provision of classified roads to service that land." 25 However, Amendment No. 52 to the LEP which was gazetted on 17 October 1997, deleted cl 11A and inserted in lieu thereof the following as cl 11(2): "(2) A person must not carry out development on land to which [Amendment No.1 or Amendment No. 52] applies unless arrangements satisfactory to the Roads and Traffic Authority for classified roads have been made in relation to that land." 26 As at the date of acquisition, cl 11 of the LEP still appeared under the heading "Services" and was in the following terms: "11.(1) A person must not carry out development on any land to which this plan applies unless arrangements satisfactory; (a) to the Water Board for water, sewerage and drainage; and (b) to the Prospect County Council for electricity; and (c) to Telecom Australia for telephone services have been made in relation to that land. (2) A person must not carry out development on land to which any of the following environmental planning instruments apply unless arrangements satisfactory to the Roads and Traffic Authority for classified roads have been made in relation to that land. Baulkham Hills Local Environmental Plan 1991 (Amendment No. 1) Baulkham Hills Local Environmental Plan 1991 (Amendment No. 52) Baulkham Hills Local Environmental Plan 1991 (Amendment No. 73) Baulkham Hills Local Environmental Plan 1991 (Amendment No. 90) Baulkham Hills Local Environmental Plan 1991 (Amendment No. 97) . " 27 In all probability Amendment No. 1 added cl 44 to the LEP although the evidence as to this is not clear. It was certainly not included in the original LEP. Nevertheless, as at the date of acquisition that clause provided as follows: " Access to a classified road-Urban 44. (1) This clause applies to all land within Zone No 2(a), 2(a1), 2(a2), 2(a3), 2(b), 2(c), 2(d), 3(a), 3(b), 4(b) or 10(a). (2) A person must not carry out development on land to which this clause applies, being land that adjoins a classified road, unless vehicular access to and from the land is made by way of another road (not being a classified road). (3) However, if the proposed development could be carried out on the land concerned but for subclause (2), the Council may, for the purposes of the proposed development, allow permanent vehicular access to and from a classified road, if in the opinion of Council, alternative access to the site of the proposed development is neither practical nor provided by another road (or a proposed road identified in a development control plan)." 28 Notwithstanding that Amendment No. 52 to the LEP included cl 11(2) in its current form, Mr Rowan noted in his evidence that that instrument amended the boundaries of the Special Business 3(b) land, including that of the respondent, by reducing the extent of the land so zoned and the extent of its frontage to Windsor Road. Furthermore, the Road Reservation 5(b) Special Use zone of Windsor Road was reduced in width along the southern portion of the respondent's land, generally following the existing road alignment. Mr Rowan surmised, and it could be assumed, that the frontage land owned by the respondent was no longer required in order to achieve the upgrading of and/or the provision of a public transport corridor within the existing Windsor Road alignment. 29 In 1998 the State Government released its blueprint "Action for Transport 2010". One of the initiatives was the provision of a rapid, bus only, transitway between Parramatta and Mungerie Park by 2010. By March 1999 it was confirmed that DoT contemplated the use of Windsor Road for such a transitway. In July 1999, it made a submission with respect to the public exhibition by the Council of a revised draft development control plan in which it advised that the Government was committed to the development of a Parramatta-Mungerie Park Transitway on the Old Windsor Road/Windsor Road alignment. At this point of time, draft Development Control Plan No 200 - Kellyville/Rouse Hill Release Area (DCP 200) included a notation along the frontage of the Special Business 3(b) land to Windsor Road, including Parcel C, stating "Access Denied". 30 According to Mr Rowan, correspondence relating to a meeting between representatives of DoT, the Council and the respondent in August 1999 included an understanding by DoT of the position of the appellant regarding access to the Special Business 3(b) land as being one of denial of access from Windsor Road. However, when the Council adopted DCP 200 on 18 January 2000, it excluded the "Access Denied" notation to the Windsor Road frontage of the Special Business 3(b) land, including Parcel C. Section 5.4 of DCP 200 as at the date of acquisition contained the following provision: "Direct vehicular access to Arterial and Sub-arterial roads will not be permitted where alternate access is available. Access will not be restricted to any property from Arterial and Sub-arterial roads until such time as alternative access is available."

That provision of DCP 200 was consistent with cl 44(2) and (3) of the LEP. 31 Section 5.4 also contained the planning objectives for the intersection of Old Windsor Road and Windsor Road which, relevantly, provided as follows: "Long Term: the intersection or treatment to Windsor and Old Windsor Road to incorporate either local access or service road to facilitate the orderly development of commercially zoned lands north of Whitehar Bridge." 32 I mention the above provision as it was relied upon by the appellant as amounting to a "proposed road identified in a development control plan" within the meaning of the concluding words of cl 44(3). However, in my opinion, it cannot be so categorised and ultimately the appellant but faintly pressed this submission. It is appropriate to reject it at this point. 33 The balance of Mr Rowan's statement of evidence as to the relevant planning history relates to the various steps taken by the State Government and its instrumentalities and/or the Council to implement the proposed bus transitway in Windsor Road leading up to the acquisition of the resumed land for that purpose. 34 In [2.2.15] of his statement of evidence, Mr Rowan opined that it was reasonable to assume that the principle of "Access Denied" to arterial roads (including Windsor Road) communicated to the Council since inception of the RHDA, clearly comprised part of the strategy for the development of that area. The only support for that proposition nominated by Mr Rowan was a reference to the Sinclair Knight Buchanan recommendation that "all arterial roads … are to be access denied", to the appellant's submission in June 1990 to the exhibition of the draft consolidating LEP, to correspondence relating to the meeting in August 1999 to which I have referred in [30] above and to a council officer's report of December 1999 which recommended what became s5.4 of DCP 200. These last two matters occurred subsequent to DoT's submission in July 1999 that the Government was committed to the development of the transitway on the Old Windsor Road/Windsor Road alignment. 35 The evidence of the appellant's officers on this issue was confined to [12] of an affidavit of Mr Peter Letts, the appellant's Project Manager of its North-West Transitway Project, sworn 6 November 2003, in which he deposed as follows: "The RTA has, since approximately 1996, and as part of both the upgrade of Windsor Road and the Transitway , considered that, upon redevelopment, direct access to Old Windsor Road and Windsor Road from the land adjoining those roads should be denied. The RTA has adopted this policy generally in Western Sydney in respect of new development adjacent to main roads." (emphasis added) 36 Mr Letts was cross-examined on this subject (at Black 3/521 G-M), but the thrust of his evidence was no more than that developers would come in and talk to the appellant about their proposal for accessing the main road network and that the appellant would look at the merit of the proposal and its impact on the road networks and the operation of the transitway. 37 I have already referred to the fact that Amendment No. 1 to the LEP zoned both Parcels C and D as Special Business 3(b). According to Mr Drummond, in 1997 the Council acquired the land generally to the north and north east of the trunk drainage land, which in the meantime had been acquired by Sydney Water, in order to provide a golf course or sporting field complex. Accordingly, by Amendment No. 57 to the LEP, Parcel D which comprised an area of 2.177 hectares, was rezoned to Open Space 6(a) to further this objective of the Council. It was, of course, common ground that that rezoning had nothing to do with the public purpose for which the resumed land was compulsorily acquired. 38 Mr Drummond also gave evidence that the Council had acknowledged prior to the date of acquisition of the resumed land that Parcel D would be acquired by it on the basis of its Special Business 3(b) zoning, that being its zoning immediately prior to its rezoning to Open Space 6(a). Furthermore, he said that in 1998-99 he had attended several Council meetings on behalf of the respondent at which it was proposed that Parcel D would be rezoned back to Special Business 3(b) as the Council had recognised that the cost of acquiring that land at its underlying commercial zoning would be beyond its resources. As at the date of acquisition the Council had not determined whether to acquire Parcel D or to rezone it back to Special Business 3(b).

The decision of the primary judge 39 The respondent's claim to compensation for injurious affection was founded on s55(f) of the Just Terms Act which provided that in determining the amount of compensation to which a person was entitled, regard was to be had to, inter alia, "(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." 40 The respondent claimed that at as a consequence of the proposal to carry out the transitway purpose which involved the denial of access between the transitway and Parcel C, the value of the latter would be decreased. That decrease, so it was submitted, extended not only to Parcel C, but also to Parcel D which had been rezoned in 1997 to Open Space 6(a). 41 The gravamen of the appellant's resistance to this claim was that the acquisition of the resumed land for the purpose of the transitway did not materially change the constraint upon access to Parcel C from Windsor Road as that access would have been denied by the appellant and/or the Council irrespective of the acquisition of, and the proposal to provide a transitway on, the resumed land. Thus the appellant submitted that the effect of cll 11(2) and 44(3) of the LEP would have resulted in any application by the respondent or the developer of Parcel C to provide access thereto by way of a public road intersecting with Windsor Road being refused by the appellant and by the Council in accordance with the long standing policy of the former to deny such access to a main or arterial road. 42 That position was maintained after the acquisition of the resumed land for the proposed transitway which, as his Honour had found, involved the denial of access between it and Parcel C. 43 In considering the appellant's submission on this issue, the primary judge (at [73]) affirmed the proposition that "compensation for injurious affection is payable on account of a denial or restriction on road access that was previously available in respect of lands retained by the owner from whom other land has been appropriated."

So much followed from the joint judgment of Gleeson CJ, Gummow, Kirby and Callinan JJ in Marshall v Director-General, Department of Transport (Qld) (2001) 205 CLR 603 where their Honours observed at 616 [20]: "Once the constructing authority acquires land for a statutory purpose and carries out the statutory purpose, it must, pursuant to s20(1)(b) of the [ Acquisition of Land Act 1967 (Qld)], compensate the dispossessed owner for the injurious effect upon the residual land resulting from the undertaking and the implementation of that purpose, actual and prospective." 44 Accordingly, his Honour considered (at [76]) that that decision supported "the conclusion in the present case that any proven decrease in the value of the [respondent's] retained commercially zoned lands caused by the transitway proposed public purpose (including the denial of access between the transitway and the [respondent's] adjoining retained land) would be recoverable as compensation for injurious affection in terms of the Just Terms Act, s55(f)." (emphasis added) 45 Having concluded (at [82]) that as a matter of principle "any such proven decrease in value was compensable as injurious affection", the question "of principle" then to be answered (at [83]) was "whether (as contended by the [appellant]) the transitway proposal with its absolute denial of access between it and the [respondent's] adjoining retained commercially zoned land, does not involve any additional constraint on the prevailing planning restrictions on access to Windsor Road in respect of any development to the [respondent's] commercially zoned land." (original emphasis) 46 After setting out cll 11(2) and 44 of the LEP as being the relevant planning restrictions, and the relevant provisions of DCP 200 to which I have already referred, his Honour (at [89]) noted that the respondent had submitted that those provisions had to be carefully considered in order to eliminate any of their content which had come into existence as part of the transitway proposed for Windsor Road and at the instigation or urging of the appellant once it had taken the decision in 1999 to promote an expanded Windsor Road to provide the necessary public transport corridor serving the proposed Mungerie Park Sub-regional Centre. 47 That submission, as his Honour noted, was based on the Pointe Gourde principle (Pointe Gourde Quarrying & Transport Co Ltd v Sale-Intendant of Crown Lands [1947] AC 565 at 572) referred to by the High Court in The Crown v Murphy (1990) 64 ALJR 593 at 595 to the effect " 'that restrictions on land use … maintained as a result of consultation with the resuming authority' must be ignored for the purpose of assessing the value of the resumed land." 48 In a joint judgment the Court in Murphy said that that principle applied in cases where there was a direct relationship between the planning restrictions and the scheme of which the resumption was a feature and extended to cases where there was merely an indirect relationship provided that the planning restriction could properly be regarded as a step in the process of resumption. 49 As the Pointe Gourde principle had only ever been stated in the authorities in the context of determining the market value of land compulsorily acquired, the appellant submitted that it had no application to the assessment of compensation for injurious affection in respect of other land owned by the dispossessed owner. The primary judge (at [92]) acceded to that submission observing that the principle now embodied in the statutory definition of "market value" in s56(1)(a) of the Just Terms Act (see Roads and Traffic Authority v Perry (2001) 52 NSWLR 222 at 225 [4]) and which required 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"

was to be disregarded for the purpose of s55(f). In its Notice of Contention the respondent challenged that conclusion. 50 As I have observed, the main thrust of the appellant's submission before both the primary judge and in its written submissions before this Court was that there was no evidentiary basis for an award of compensation for injurious affection to Parcel C because precisely the same planning controls applied to that land both before and after the date of acquisition. Accordingly, there was no causal link between the acquisition and any alleged decrease in the value of Parcel C. 51 The primary judge responded to this submission (at [96]) by observing that the contention overlooked the fact that the respondent's claim to injurious affection was not founded upon those planning controls but entirely upon the proposed transitway and the consequent total denial of access between it and Parcel C. Accordingly, it was necessary for the appellant, in order to make good its case that there was no injurious affection, to establish that the compulsory acquisition of the resumed land for the purposes of establishing the transitway (at [97]) "did not materially change the existing planning position concerning the denial of access to and from Windsor Road precisely because the denial of access involved in the transitway proposal was already achieved by the operation of the relevant planning principles." (original emphasis) 52 His Honour then found (at [98]) that prior to the acquisition those planning provisions did not operate to "absolutely deny" access between Parcel C and Windsor Road but recognised the "possibility" of any development of Parcel C having direct access to Windsor Road in the event that the Council, as the consent authority determining any development application with respect to Parcel C in accordance with its zoning, was of the opinion that "alternative access to the site of the proposed development is neither practical nor provided by another road (or a proposed road identified in a development control plan)" within the meaning of cl 44(3) of the LEP. 53 Furthermore, his Honour considered (at [100]) that cl 11(2) fell very far short of providing an "automatic and unreviewable veto" on direct vehicular access between Parcel C and Windsor Road. 54 The primary judge (at [103]) then referred to the oral testimony of Mr Drummond concerning his "sanguine opinions" with respect to obtaining the consent of the Council for the development of Parcel C with direct vehicular access to Windsor Road had the transitway not been proposed and to the appellant's submission that that evidence should be rejected. His Honour considered that that submission "essentially misses the mark". He continued: "That mark is that it is the decisive and final effect of the declaration under the Roads Act that the transitway proposal with a denial of access between it and the [respondent's] retained commercially zoned lands (rather than the more debatable effect (and operation) of the relevant planning provisions) that causes a decrease in the value of the [respondent's] retained commercially zoned lands by virtue of the absence of a means of access necessary and appropriate to support the type of commercial development that may be carried out conformably to that zoning under the LEP." (original emphasis) 55 It is appropriate to interpolate at this point that the appellant submitted that his Honour's rejection of its submission upon the basis that it missed the mark was in error. The appellant had submitted to his Honour that Mr Drummond's evidence should be rejected particularly as he had conceded in cross-examination that he was not as confident by the time he concluded his evidence as he had at its commencement that the Council and/or the appellant would have agreed to direct access to Parcel C from Windsor Road if the proposal for the transitway was ignored. That evidence, when taken in conjunction with that of Mr Rowan to the effect that, in his opinion, irrespective of the proposal for the transitway, access would have been denied by the appellant and supported by the Council because of the planning principle that direct access from a main or arterial road to adjoining land should not be permitted, was critical in determining whether the value of Parcel C had decreased by reason of the denial of access resulting from the acquisition of the resumed land for the transitway or whether the latter had no greater effect on the value of Parcel C than would have been the case had no such transitway been proposed. 56 It was accordingly submitted by the appellant that in the determination of both the "before" value and the "after" value of Parcel C, it should be assumed on the basis of the evidence of Mr Rowan that access from Windsor Road would be denied with the consequence that there would be no additional decrease in the value of Parcel C by reason only of the acquisition of the resumed land for the transitway. However, it was contended that the primary judge in the passage from [103] of his judgment which I have recorded in [54] above had only addressed the "after" value of Parcel C and had ignored its "before" value. 57 In a case such as the present it was thus necessary, so it was submitted, for his Honour to determine the value of Parcel C had there been no acquisition of the resumed land for the purpose of a transitway and its resulting denial of access, and to contrast that with the value of that land after acquisition for that purpose. It was the difference, if any, that constituted injurious affection: the contention of the appellant being that there was no such difference as direct access from Windsor Road would be denied in both cases. 58 I mention the appellant's submissions to this Court on this issue at this point because at [106] and following, his Honour went on to consider what he referred to as "the factual basis" for the respondent's claim for compensation for injurious affection. In this context, the respective valuers for the parties, Mr Large for the respondent and Mr Wood for the appellant, ultimately agreed that the Special Business 3(b) zoned land (Parcel C) should be valued at $350 per m² upon the basis that direct access was available to that land from Windsor Road and $250 per m² for the Residential 2(a4) zoned land (Parcel A), a difference of $100 per m². 59 Although his Honour maintained that the quantification of the amount of compensation payable for injurious affection was "an extremely difficult matter", he was inclined (at [119]) to think that Mr Large's estimate of the decrease in the value of Parcel C by $100 per m² was a reasonable measure of that decrease in that after the acquisition of the resumed land and the denial of direct access from Windsor Road due to the proposed transitway, Parcel C was in effect limited in terms of its development potential to the same potential applying to the Residential 2(a4) land (Parcel A) which, apparently, and unlike the Special Business 3(b) land, was not dependant upon direct access from Windsor Road. 60 However, his Honour then remarked (at [119]) that "[w]hereas this is a plausible approach, I am doubtful whether it is reasonable to conclude that in the before value it can be simply assumed that access from Windsor Road to any commercial development of the [respondent's] lands would have been granted by the Council and agreed to by the [appellant]." (emphasis added)

He then continued (at [120]): "Although such a possibility existed (both legally and factually), I do not think it is reasonable to proceed to quantify injurious affection on the basis that there would be no risk in obtaining development consent to a development that enjoyed direct access from Windsor Road. In short, there needs to be factored into the estimate an element of risk." (original emphasis) 61 In the foregoing circumstances, his Honour was not prepared, without qualification, to adopt Mr Large's quantification of $4 million (4 hectares of commercially zoned land at $100 per m²) as representing the decrease in the value of Parcel C by reason of the proposal to carry out the transitway. He therefore considered that that figure should be discounted by 25% to produce a decrease of $3 million in the value of Parcel C as a consequence of that proposal. He accordingly assessed the compensation for injurious affection to Parcel C in that amount. 62 As to the 2.177 hectares of Parcel D which had been rezoned at the behest of the Council as Open Space 6(a), his Honour (at [117]) concluded that "[I]n my judgment, the [respondent] has established its claim to compensation for injurious affection in terms of the Just Terms Act, section 55(f) in respect of the retained commercially zoned land of four hectares but not in respect of the retained open space zoned land." (original emphasis) 63 His Honour's rejection of the respondent's claim for injurious affection in respect of Parcel D was the subject of its cross-claim upon the basis that he had erred by failing to provide any reasons for the rejection of that claim.

Did the primary judge err in law in his determination of the respondent's claim for compensation for injurious affection to Parcel C? 64 In its written submissions the appellant submitted that cl 11(2) of the LEP had the effect of prohibiting the development of Parcel C in accordance with its Special Business 3(b) zoning unless the appellant was satisfied that arrangements for classified roads had been made in relation to that development. It submitted that the sub-clause should be construed as extending to the satisfaction of the appellant with any proposal to provide direct access from a classified road (which included Windsor Road) to Parcel C upon which it was proposed to carry out the development. It further submitted that the primary judge had erred in construing that provision as falling "very far short" of investing the appellant with an "automatic and unreviewable veto" with respect to the provision of direct vehicular access between Parcel C and Windsor Road. 65 The appellant also submitted that the effect of cl 44 of the LEP was such that, in the circumstances of the case as they were assumed to be prior to the acquisition and ignoring any proposal for the transitway, the Council would not have exercised its discretion under s44(3) to permit vehicular access to Parcel C from Windsor Road as there was alternative access available which could be provided by another road or a proposed road identified in a development control plan.

The effect of cl 44 of the LEP 66 It is convenient to deal firstly with this last submission. At the date of acquisition of the resumed land cl 44(2) had no application as there was no other road not being a classified road which was available to provide vehicular access to Parcel C. Further, for the reasons to which I have already referred in [32] above, DCP 200 did not identify a proposed road which would provide alternative access to Parcel C within the meaning of the words in parentheses in cl 44(3). 67 An attempt was made by an officer of the appellant during a lengthy break in the hearing before the primary judge to devise an alternative road which would provide appropriate access to Parcel C from the intersection of Old Windsor Road and Windsor Road. His Honour referred to the plan of this proposal at [112] and [113] of his judgment in terms which indicated that the proposed road should be rejected as being inappropriate and impractical and, importantly, not one in respect of which there was any evidence that the appellant would ever have approved it. In fact, the warnings on the plan made it clear that the proposed road did not represent the appellant's preferred option for access from Windsor Road to any land (including Parcel C) located north of the intersection of Windsor Road and Old Windsor Road. 68 Accordingly, there was no error of law by his Honour in recognising (at [98]) the "possibility" that direct access from Parcel C to Windsor Road would be granted by the Council pursuant to cl 44(3) of the LEP. The reality was that an analysis of the appellant's written submissions filed in the appeal resolved that they were in truth based on his Honour having committed an error of fact rather than of law. 69 Accordingly, in its oral submissions to this Court, the appellant took a slightly different tack to that in its written submissions. This was reflected in it seeking and being granted leave to amend its Notice of Appeal. The essence of its case on appeal was now encapsulated in a new ground 4 which was in the following terms: "The trial judge erred in law in failing to address, or failing adequately to address, the case made by the appellant in the Court below, namely that the Applicant's claim to compensation for injurious affection was to be determined as nil because the planning controls and restrictions upon access (provided for by clauses 11 and 44 of the Baulkham Hills LEP and otherwise) that applied to the land irrespective of the transitway operated cumulatively to impose an impediment to direct access from the Applicant's Special Business 3(b) land to Windsor Road that was materially the same as the impediment imposed by the proposal for a transitway."

Did the primary judge fail to address the "before" value of Parcel C when determining whether it had been injuriously affected? 70 The thrust of this new ground of appeal, as developed in oral argument, was that the primary judge's legal error was his failure to address or address adequately the appellant's case that because of the planning controls (cll 11 and 44 of the LEP) there was no material difference in the "before" value of Parcel C and its "after" value. 71 The appellant acknowledged that there was a conflict in the evidence between Mr Drummond on the one hand and Mr Rowan on the other as to the possibility, or more accurately the likelihood, of the appellant and/or the Council agreeing to the provision of direct access from Windsor Road to Parcel C when determining the value of that land in the "before" equation: that is, upon the assumption that the transitway was disregarded. It was submitted that his Honour ignored the conflict in that evidence which it was necessary for him to address and resolve (according to the appellant, in favour of Mr Rowan) in order to determine the "before" value of Parcel C. In this context it may be noted in passing that during the course of the argument before this Court, clarification was sought as to whether Mr Rowan's evidence (as distinct from that of Mr Drummond) excluded the possibility of access to Parcel C from Windsor Road via an intersecting public road in the "before" situation. None was forthcoming. 72 It was thus submitted that in [103] of his judgment his Honour had only addressed the "after" value of Parcel C and not its "before" value which was the aspect of the relevant equation to which the appellant's submission, referred in [103] and rejected by his Honour as "essentially miss[ing] the mark", was directed. 73 As I have observed, it seems to me that the appellant was forced into this change of tack in its oral submissions given that its written submissions (for which senior counsel for the appellant was not responsible) concluded by asserting that, on the evidence, there were no circumstances which would justify the Council (in the situation existing before the acquisition) exercising its discretion to allow direct permanent vehicular access from Windsor Road to Parcel C so that his Honour had erred in proceeding on the assumption that there was a substantial chance (or at least a possibility) of such access being permitted. It was no doubt recognised that that submission gave rise only to a question of fact and not a question of law. Hence there arose the necessity for the appellant to submit that his Honour simply had not addressed, by reference to the evidence, the requirement that he assess the possibility of the chance of the respondent or the developer of Parcel C being able to provide direct access therefrom to Windsor Road in determining its "before" value. Had his Honour ignored the "before" value of Parcel C then no doubt legal error would have been demonstrated. However, in my opinion he did address that issue although in a manner that involved legal error. 74 The primary judge had (at [98]) found that there was the "possibility" of the development of Parcel C with direct access to Windsor Road if the Council held the opinion, as the relevant consent authority, referred to in cl 44(3) of the LEP. It is apparent that this "possibility" was directed by his Honour to the "before" value of Parcel C as he did not regard the relevant planning provisions as operating to "absolutely deny" access between Parcel C and Windsor Road. On the other hand, he found (at [100]) that the operation of the Roads Act with respect to the proposed transitway would provide an "automatic and unreviewable veto" on direct vehicular access between Parcel C and Windsor Road, this being the basis on which "after" value of Parcel C was required to be determined. 75 Nevertheless, the appellant submitted that his Honour's finding at [98] of his reasons was confined to a legal or theoretical "possibility" and that he did not address the conflicting planning evidence in order to determine the prospects of that "possibility" becoming a reality in the "before" valuation exercise. In my view, there is substance in this argument because of the erroneous manner in which the primary judge determined the discount factor for risk. I refer further to the appellant's contention at [86] and following. 76 Notwithstanding the foregoing, in my opinion it follows from [119] and [120] of his Honour's judgment, the relevant parts of which I have recorded in [60] above, that he did recognise the necessity to determine the "before" value of Parcel C and, in so doing, whilst acknowledging that the possibility existed both legally and factually of providing direct access from that land to Windsor Road, he also recognised that there was a risk of not obtaining consent to such access which had to be, as he put it, factored into the estimate of the injurious affection which he had, subject to that element of risk, determined as being $100 per m². 77 Although it is necessary in coming to the above conclusion to pick and choose from various parts of the judgment, nevertheless when one reads [97] to [100], [103], [106], [112] to [113] and [118] to [120] and considers them as a whole, one can confidently conclude that, insofar as his Honour recognised the necessity to determine the "before" value of Parcel C and to reflect in that value the risk of direct access not being approved, no error of law has been demonstrated.

Did the primary judge err in his application of the discount factor? 78 However, in my opinion his Honour approached the relevant discounting exercise to take account of the element of risk in a manner which was contrary to proper valuation principle: cf Melwood Units Ltd v Commissioner of Main Road [1979] AC 426 at 432 D-E; Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156 at 177G. 79 The error of principle committed by the primary judge was in his application of the 25% discount to the $4 million representing the decrease in the value of Parcel C by reason of the proposed transitway as determined by Mr Large. What was to be discounted for the risk of not obtaining consent to a commercial development of Parcel C that enjoyed direct access from Windsor Road, was not the differential between the "before" and "after" value of that land without that risk but the "before" value itself. There was no risk associated with the "after" value in that his Honour had found as a matter of fact that direct access from the transitway to Parcel C would be absolutely denied. But that was not the case, as he found, with respect to the "before" situation with the consequence that the discount for risk had to be applied only to the "before" value. 80 The difference as a matter of principle is significant. The effect of his Honour's application of the 25% discount was to reduce the differential in value and, therefore, the amount of injurious affection, from $4 million to $3 million. On the other hand, had his Honour applied the discount of 25% to Mr Large's figure of $350 per m² for Parcel C (that figure having been determined upon the basis of direct access from Windsor Road being available), then the rate per square metre in the "before" valuation would have been reduced from $350 to $262.50 per m². The resultant difference per square metre in the "before" and "after" valuation of Parcel C would be only $12.50 per m² which, when applied to Parcel C's area of four hectares, would result in injurious affection in an amount of $500,000. 81 It is true that, had his Honour approached the discounting exercise in the manner which I consider to have been in accordance with valuation principle, he may or may not have adopted a discount rate of 25%. For that reason, it will be necessary for this issue to be remitted to the Land and Environment Court for further consideration. 82 An alternative approach to discounting the "before" value by 25% would have been for his Honour to determine that a prudent hypothetical purchaser of Parcel C would have reduced the purchase price he or she otherwise would have paid for that land in the "before" exercise by the whole or part of what he or she estimated it would cost to provide alternative access other than from Windsor Road. In [122] of his judgment, the primary judge refers to the figure of $3 million resulting from his application of the 25% discount as reflecting Mr Large's rough costings of providing alternative, acceptable access to that land to enable it to be developed for commercial purposes. 83 On the basis of four hectares, $3 million converts to $75 per m². If that amount was deducted from Mr Large's figure of $350 per m², then the resultant discounted "before" value of Parcel C would be $275 per m² or a differential of $25 per m² which, over an area of four hectares, would result in injurious affection to Parcel C in the amount of $1 million. 84 The foregoing approaches seem to me to be two possible approaches which are consistent with principle. It would be a matter for the primary judge as to which he accepted and there may be others. Furthermore, it would be a matter for him as to what discount figure, be it a percentage or a rate per m², should be adopted. Whichever approach is adopted, it must, as the respondent submitted, be upon the basis of determining what discount for risk a prudent hypothetical purchaser of Parcel C would apply to the price he or she would otherwise pay for that land. That price had been determined by his Honour at $350 per m² being the price that such a purchaser would otherwise pay if direct access was a foregone conclusion in the "before" valuation exercise. The appropriate discount factor is obviously a matter of fact which can only be determined by the Land and Environment Court. 85 However the appellant also submitted that it was not open to the primary judge to, in effect, adopt a discount factor of 25% in determining the risk of not obtaining the consent of the Council or the concurrence of the appellant to direct access from Windsor Road to Parcel C in the "before" valuation. His Honour stated his basis for the adoption of 25% in [122] as generally reflecting Mr Large's rough costing of providing alternative access to Parcel C to enable it to be developed for commercial purposes. Again, this submission has merit.

Was it necessary for the primary judge to resolve the conflict between Mr Rowan and Mr Drummond? 86 It is in this context that the appellant submitted that his Honour had failed to resolve the conflict in the evidence between Mr Rowan and Mr Drummond and which, so it was contended, was reflected in [103] of the judgment where his Honour considered that the appellant's submission based on Mr Drummond's testimony "essentially miss[ed] the mark". 87 In other words, the appellant contended that in order properly to determine a discount rate to reflect the risk of not obtaining the consent of the Council or the concurrence of the appellant to the provision of direct access from Windsor Road to Parcel C in the "before" valuation exercise, it was necessary for his Honour to resolve the conflict between Mr Drummond who opined that there was some risk only and Mr Rowan who maintained in effect that there was 100% risk. Not having resolved that conflict, his Honour's adoption of a risk factor of 25%, unrelated as it was to the evidence of either Mr Rowan or Mr Drummond, was mere guesswork with no proper evidentiary basis to support it and thus constituted an error of law. 88 In my opinion, there is merit in these submissions. As I have noted in [82] above, the only evidentiary support relied on by the primary judge for the discount he adopted was Mr Large's rough costings of providing alternative access to Parcel C other than directly from Windsor Road. But that evidence was used by his Honour to support the figure of $3 million for injurious affection in a discounting exercise that I have found to involve legal error. Accordingly, it does not provide any evidence to support the discount rate of 25% which his Honour acknowledged to be "a very difficult and problematical matter". 89 In the foregoing circumstances, his Honour's adoption of that rate lacked any evidentiary basis and, therefore, constituted an error of law. The proper approach was, as the appellant submitted, to determine an appropriate discount rate which the prudent hypothetical purchaser would have applied to the "no risk" purchase price he or she otherwise would have paid for Parcel C in the "before" valuation exercise by reference to the evidence of Messrs Rowan and Drummond, depending on which of their opinions, with or without qualifications or variations, he accepted.

The effect of cl 11(2) of the LEP 90 The issue which arises on the construction of cl 11(2) is whether it extended to authorising the appellant to deny access to land from a classified road such as Windsor Road. Although cl 11 is headed "Services", by virtue of s35(4) of the Interpretation Act 1987, it does not in the circumstances form part of the LEP. Nevertheless, in my opinion sub-clause (2) has to be read in the context of sub-clause (1). Furthermore, it needs to be read in the context of the specific provisions of cl 44 which expressly deal with vehicular access to and from land which adjoins a classified road. It is to be noted that under cl 44(3) a discretion is vested in the Council to depart from the prohibition in sub-clause (2) and that cl 11(2) vests a form of discretion in the appellant, that is, whether to be satisfied or dissatisfied with the "arrangements … for the classified road". 91 Nevertheless, I consider there to be a strong case for construing cl 11(2) as inapplicable to "arrangements" relating to the provision of direct access from the land to be developed to an adjoining classified road. Rather, in its context the sub-clause is directed to arrangements satisfactory to the appellant in respect of the infrastructure which may be required in respect of a classified road as a consequence of the carrying out of development on adjoining land. For example, if traffic lights are required to be installed or a slip lane, then these are the types of services in respect of which satisfactory arrangements must be made with the appellant "for the classified road" before the development is carried out. 92 In the foregoing respects, the appellant in its oral submissions in reply conceded that cl 11(2) was directed to the making of satisfactory infrastructure arrangements for the relevant classified road. As I have remarked, I have severe reservations as to whether such "arrangements" are capable, as a matter of construction of the sub-clause, of extending to an absolute denial of access to the classified road from adjoining land. 93 Although the respondent submitted before the primary judge that cl 11(2) should be so construed, his Honour did not acknowledge the argument and appears to have proceeded, as did the planning witnesses, upon the basis that the "arrangements" referred to in that provision could include a proposal for direct access from Parcel C to a classified road such as Windsor Road. Accordingly, the issue was addressed by those witnesses and the primary judge upon the basis that, at the very least, cl 11(2) did not absolutely prohibit such access but required the appellant to agree to its provision before development was carried out upon adjoining land. It is further to be noted, and was so submitted by the respondent, that neither cl 11(1) nor (2) in their current form imposed a prohibition upon the Council granting consent to a proposed development. Rather, the provisions of that clause only operated by requiring the Council to impose a condition on any such consent in terms of the two sub-paragraphs. 94 That this is so is demonstrated by contrasting the provisions of cl 11A(2) of the LEP to which I have referred in [24] above, and which commenced with the words "The Council is not to grant consent to the carrying out of development of any land to which this clause applies unless …",

with the opening words of the current provision - "A person must not carry out development on land … unless …",

thus enabling the Council to grant a consent to the carrying out of development subject only to the provision of an appropriate condition to reflect the requirements of cl 11(2). 95 Accordingly, in my opinion, even putting to one side my tentative view that cl 11(2) is not directed towards access to or from classified roads, the primary judge did not err in finding that that clause did not constitute an absolute prohibition on the provision of direct access from Parcel C to Windsor Road. Again, it depended on the "possibility" of the appellant permitting a form of access which was "satisfactory".

The effect of ss67(2)(a), 70(a) and 138 of the Roads Act 96 I should note one further submission by each of the parties. That of the appellant was that even in the "after" situation, it was open to the appellant to consent to the construction of access to or from the transitway pursuant to s70(a) of the Roads Act. Further, the Minister, when making an order declaring Windsor Road to be a transitway pursuant to s52A, was required by s67(2)(a) to specify points along the transitway at which access might be gained to or from other public roads. His Honour made no mention of these provisions, and they were not referred to in the appellant's written submissions on the appeal. Nor was it suggested that any of the expert witnesses addressed the possibility of any such consent in the circumstances being granted or of the Minister specifying a point along the frontage of Parcel C for the access to any public road which might be constructed to intersect with the transitway. Accordingly, I would reject any submission based upon them. 97 That of the respondent, made in the context of cl 11(2), related to the provisions of s138(1)(e) of the Roads Act which provided that a person must not connect a road to a classified road other than with the consent of the appropriate roads authority. If that authority were a council then any such consent could not be given except with the concurrence of the appellant: s138(2). The respondent submitted that as a consequence of s138, any development application relating to Parcel C providing for direct access to Windsor Road in respect of which the consent of the appellant was required under that provision, constituted integrated development within the meaning of s91 of the Environmental Planning and Assessment Act 1979 (the EP&A Act). In the event that the appellant refused to grant approval under s138 which was otherwise required in order for the development to be lawfully carried out, then pursuant to s91A(4) of the EP&A Act the consent authority must refuse consent to the development application. 98 However, so the respondent submitted, the applicant for development consent could appeal to the Land and Environment Court against the refusal of that consent by the Council which, as a consequence of s39(6A)(b) of the Court Act, was not bound to refuse the application merely because the appellant had refused its consent under s138 of the Roads Act. 99 The point of this submission as I understand it, was that it would be open to the Land and Environment Court on appeal to grant consent to the development of Parcel C with direct access to Windsor Road notwithstanding the refusal of such consent by the appellant under s138. In my opinion this submission is correct. However, it is only of assistance to the respondent on the assumption that cl 11(2) of the LEP does not empower the appellant to refuse its consent to such access. If it does notwithstanding my tentative view to the contrary, and consent is refused, then although the Council or the Land and Environment Court on appeal would be empowered to consent to the development, it could not be carried out.

Conclusion with respect to the appeal 100 For the foregoing reasons, in my opinion the primary judge erred in law in the respects to which I have referred. However, it is only necessary that the "before" valuation exercise be referred back to the Land and Environment Court for determination in accordance with these reasons for judgment.

The respondent's notice of contention 101 As I understand the respondent's argument on the issue raised by its notice of contention, it was submitted that his Honour's decision with respect to its claim for compensation for injurious affection should be affirmed upon the basis that the Pointe Gourde principle referred to in Murphy applied to s55(f). Accordingly, to the extent to which cl 44 was included in the LEP and DCP 200 was adopted by the Council at the instigation or urging of the appellant after it had taken the decision in 1999 to promote an expanded Windsor Road to provide the necessary public transport corridor to service the Mungerie Park Sub-regional Centre, they should be disregarded. 102 As the primary judge correctly observed, the Pointe Gourde principle is now encapsulated in sub-paragraph (a) of the definition of "market value" in s56(1) of the Just Terms Act. As a matter of construction, that provision is confined to the determination of "market value" which, as a statutory expression, is referred to only in s55(a) of that Act. However, given the nature of the "before" and "after" valuation exercise called for by s55(f), I see no reason why, as a matter of valuation principle, the Pointe Gourde principle has no part to play in the determination of the issue of injurious affection under s55(f). In its oral submissions in reply, the appellant properly conceded as much. 103 It is often the case that when only part of a dispossessed owner's land is compulsorily acquired, a "before" and "after" valuation exercise of the whole of that owner's land is conducted. In other words, the market value of the land before acquisition is determined (including the acquired land) as is its value after acquisition (excluding the acquired land). In this way the difference between the two values determines not only the market value of the acquired land but also captures any injurious affection to the retained land by reason of the acquisition for the public purpose. This approach will also, in an appropriate case, capture any loss due to the severance of the dispossessed owner's land by that acquisition. 104 In proceeding according to that approach, there has never been any doubt that the Pointe Gourde principle is applied in the "before" valuation exercise. In other words, the "before" value is determined on the basis of disregarding any decrease in the value of the land arising out of the purpose of the compulsory acquisition and any steps in the scheme leading to that acquisition. It is only in the "after" value that any decrease by reason of the proposed implementation of the public purpose for which the resumed land was compulsorily acquired is taken into account. 105 In the present case a slightly different approach was adopted. The market value of the resumed land was determined separately from the claim for injurious affection to Parcels C and D of which the resumed land originally formed part. Nevertheless, in determining that claim the conventional "before" and "after" values required determination. So far as the "before" value was concerned, it was common ground that any decrease in the value of Parcel C due to the purpose for which the resumed land was acquired, namely, for a transitway, was to be disregarded. That of itself was a recognition of the application of the Pointe Gourde principle. 106 In the foregoing circumstances, the submission of the respondent that the application of that principle in the "before" valuation exercise extended to any planning steps taken at the instigation or urging of the appellant as part of the scheme of which the acquisition of the resumed land was a feature, must be correct. Whether cl 11(2) and/or cl 44 were inserted into the LEP as part of the scheme for the transitway raises a question of fact for the Land and Environment Court to determine. The primary judge did not address that factual issue as he rejected its underlying legal basis. In so doing he was, in my opinion, in error.

The respondent's cross-appeal 107 With respect to the respondent's cross-appeal, the primary submission was that his Honour had (at [117]) rejected the claim for injurious affection with respect to Parcel D without giving any reasons for that decision. Reliance was placed upon the decisions of this Court in Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247; Mifsud v Campbell (1991) 21 NSWLR 725 and Beale v GIO of New South Wales (1997) 48 NSWLR 430. Absent any sufficient reasons it was impossible, so it was submitted, for the respondent/cross-appellant to know the basis upon which his Honour had rejected that claim. 108 The appellant/cross-respondent in its written submissions conceded that his Honour's reasons for judgment were open to the criticism that they did not adequately expose all of his Honour's reasoning for the conclusion expressed at [117]. I would go further and accept the respondent/cross-appellant's submission that he gave no reasons and, therefore erred accordingly. Nevertheless the appellant/cross-respondent contended that the cross-appeal was doomed to fail for the following reasons. Firstly, his Honour referred to the competing evidence on the issue in terms of the evidence of Mr Large who included the 2.771 hectares of Parcel D as being injuriously affected, whereas Mr Wood rejected any such claim. Secondly, the cross-appellant never clearly articulated a principled reason why the Open Space land comprising Parcel D should be treated as though it was zoned Special Business 3(b) for the purpose of assessing compensation for injurious affection. Thirdly, the tenor of his Honour's questioning of Mr Large on this issue indicated that he was alive to the inadequacy of Mr Large's evidence in this regard. Fourthly, in any event the claim had not been established. 109 It is apparent from Mr Large's evidence referred to in the respondent/cross-appellant's submissions that the basis of the claim for injurious affection to Parcel D was as follows. In the event that that land was not acquired by the Council and was rezoned Special Business 3(b), then it would suffer the same affectation as Parcel C which his Honour found had been injuriously affected by the proposal for the transitway. Alternatively, if the land was acquired by the Council, then it would be required to pay compensation therefor upon the basis of its underlying zoning of Special Business 3(b) which was displaced when it was rezoned Open Space 6(a). The inchoate right to compensation in respect of the proposed acquisition of Parcel D by the Council would be affected if it were to be valued upon the basis of its underlying zoning, but without the benefit of access through Parcel C to Windsor Road. 110 Accordingly, it followed that the value of Parcel D would be decreased by reason of the proposal to carry out the transitway with its denial of access from Windsor Road to Parcel C and that that decrease would be direct in the event that Parcel D was rezoned to Special Business 3(b). At the very least, it would be indirectly affected as the denial of access from Windsor Road would decrease its market value in accordance with its underlying Special Business 3(b) zoning for the purpose of any compensation claim which the respondent/cross-appellant would have against the Council when and if it was compulsorily acquired. 111 In other words, Parcel D could not be hypothetically developed for commercial purposes unless it could be accessed through Parcel C from Windsor Road. If it could not, its maximum development potential would be residential, as his Honour had found to be the case with Parcel C as injuriously affected by reason of the acquisition for the proposed transitway. 112 In my opinion, there is substance in these submissions. It is true that the respondent/cross-appellant relies upon the evidence of Mr Drummond to the effect that the Council had agreed to pay compensation in respect of its acquisition of Parcel D upon the basis of its previous zoning of Special Business 3(b). The appellant/cross-respondent submitted that there was no indication that his Honour accepted that evidence. This is also true but merely points up the lack of reasons of the primary judge in coming to his conclusion that the respondent/cross-appellant had not established its claim for compensation in respect of that land. His Honour's assertion to that effect tells one nothing as to the reasons why the claim had not been established either in fact or in law. Furthermore, given the provisions of s56(1)(a) of the Just Terms Act, the market value of Parcel D, if compulsorily acquired by the Council, would be determined by disregarding the decrease in the value of that land caused by the carrying out of that purpose, it being undisputed that its rezoning as Open Space 6(a) was to facilitate its acquisition for the very public purpose for which it was rezoned. 113 In the foregoing context, the evidence of Mr Drummond's discussions with the Council as to the basis upon which it would pay compensation for the acquisition of Parcel D and which occurred prior to the date of acquisition of the resumed land and unrelated thereto, would be factual material which the hypothetical prudent purchaser of Parcel D in the "before" valuation exercise would be entitled to take into account when determining what he or she would pay for that land notwithstanding its then zoning as Open Space 6(a). 114 In the course of argument we were referred to [3.34] of Brown's Land Acquisition, 4th ed, at pp141-142. The author cites the decision of Hardie J in Commercial Banking Co of Sydney Ltd v Penrith City Council (1970) 19 LGRA 366 as authority for the proposition that in assessing compensation for the resumption of land, any claim for loss sustained by the dispossessed owner by reason of that land being injuriously affected by a prior rezoning for a purpose other than that for which the land was resumed and which gave rise to a claim under s342AC of the Local Government Act 1919 with respect to that loss, could only be relevant to the extent that in assessing compensation for the resumption, it was necessary to estimate the loss suffered by that owner in being deprived of his or her associated injurious affection claim with respect to the land so resumed. 115 The theory behind that proposition is that a hypothetical prudent purchaser of the land so resumed would take into account the possibility of his or her being able to make a claim for the prior injurious affection caused by the rezoning in arriving at a figure for the value of the land taken. 116 The relevant principle was stated by Hardie J in these terms (at 369-370): "The points raised by counsel for the defendant in support of the submission that the plaintiff, not having given a formal notice of claim, had at the date of resumption no enforceable right to recover damages sustained by the change in zoning, raises some very important and difficult questions. This, however, is not an action for injurious affection. If the plaintiff had at the date of resumption a clear right to injurious affection or an arguable one, then that is a matter for consideration relevant to the determination of compensation in these proceedings, as the resumption deprived the plaintiff not only of the land but the attached or associated right to compensation under [the relevant provision to the Local Government Act]." 117 Because the claim for injurious affection due to the rezoning of the land had not actually been made as at the date of its compulsory acquisition, it is referred to as an inchoate claim for compensation for injurious affection. In the present case, the relevant inchoate claim would be for compensation for the market value of Parcel D on its ultimate compulsory acquisition by the Council for the purpose for which it was rezoned to Open Space. The basis of that claim was the entitlement of the respondent to have that market value determined upon the assumption that that rezoning was to be disregarded in accordance with the Pointe Gourde principle as now reflected in s56(1)(a) of the Just Terms Act with the consequence that it would be valued in accordance with its underlying zoning of Special Business 3(b). However, that value would have been decreased by reason of the proposed transitway due to the denial of access to Parcel D through Parcel C from Windsor Road. 118 When determining the "before" value of Parcel D for the purpose of the respondent's claim for injurious affection, the prudent hypothetical purchaser of that land would, subject to an appropriate discount for risk, assume that he would have an inchoate claim for compensation for the future acquisition of Parcel D by the Council based on its market value determined in accordance with its underlying Business Special 3(b) zoning but which could only be developed for commercial purposes if access was available through Parcel C from Windsor Road. 119 On the other hand, the "after" value of Parcel D (like that of Parcel C) would be determined on the basis of the same underlying zoning but without that access. 120 Accordingly, I can see no reason in principle as to why Parcel D should not have sustained a decrease in its value by reason of the proposal for the transitway where that decrease is reflected in the value of that land for the purpose of any inchoate claim for compensation against the Council. In my opinion there is a clear nexus between the acquisition of the resumed land for the purpose of the transitway and the consequential denial of access from Windsor Road to Parcel C, and its effect upon the value of Parcels C and D to the extent to which each is to be valued in accordance with the fact (Parcel C), or on the assumption (Parcel D), that it is zoned Special Business 3(b). 121 Accordingly, for the foregoing reasons, in my opinion his Honour erred in law in failing to give any reasons for rejecting this aspect of the respondent's claim for compensation for injurious affection which in my opinion, at least as a matter of principle, should have been accepted. Obviously, there are some factual issues which will need to be resolved in respect of any such claim and these must be remitted to the Land and Environment Court for determination.

Conclusion 122 It will be apparent from the foregoing that, on a number of bases and notwithstanding that they were not advanced in the appellant's written submissions except as to the 25% discount rate, the appeal succeeds. Further, in my opinion, the respondent succeeded on its notice of contention and on its cross-appeal. So far as the costs of the appeal and cross-appeal are concerned, there are three possibilities. The first is that each party should pay its own costs of both the appeal and cross-appeal. The second is that the respondent should pay the costs of the appeal and the appellant the costs of the cross-appeal. The third is that the appellant should pay the costs of both the appeal and cross-appeal upon the basis that it has succeeded on the appeal primarily, although not wholly, because of matters that were raised by the Bench during the course of argument and that it has otherwise failed on the thrust of its main submissions including its written submissions, parts of which were abandoned at the commencement of the hearing. In all the circumstances, I consider the first option to be the one preferred. 123 Accordingly, I would propose the following orders: (a) Appeal allowed; (b) Cross-appeal allowed; (c) Set aside so much of the orders made by Bignold J on 9 November 2004 as determined that the injurious affection to the respondent's retained land was the sum of $3,000,000. (d) The respondent's claim for compensation for injurious affection under s55(f) of the Land Acquisition (Just Terms Compensation) Act 1991 with respect to the whole of the 6.177 hectares retained by it after the acquisition by the appellant of Lot 2 in DP 1043755 and Lots 18, 19, 26 and 27 in DP 1031575 be remitted to the Land and Environment Court for redetermination in accordance with these reasons for judgment; (e) Each party to pay its own costs of the appeal and cross-appeal.

124 McCOLL JA: I agree with Tobias JA. 125 HUNT AJA: I agree with Tobias JA. **********

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