Schwartz v Wollondilly Shire Council, Bjorkland v Wollondilly Shire Council

Schwartz v Wollondilly Shire Council, Bjorkland v Wollondilly Shire Council - [2006] NSWLEC 681 - NSWLEC 2006 case summary — Zoe

[19]

12 A number of town planning instruments were relevant to the case. Picton Flood Policy adopted May 2000 Aims and objectives 13 The primary objective of the Picton Local Flood Policy is to reduce the impact of flooding and flood liability on individual land owners and occupiers and to reduce private and public losses resulting from flooding. To achieve this the Policy outlines its aims as follows: (a) to alert the community to the extent and hazard of flood liable land in Picton; (b) to inform the community of Council's policy in relation to the development and use of flood liable land in Picton; (c) to define a designated flood for the Town of Picton; (d) to encourage development and construction which is compatible with flood hazard; (e) to reduce the risk and implications of flooding to existing areas in Picton; (f) to inform the community of flood warning and evacuation procedures; (g) to ensure, whenever possible, that buildings and services required for evacuation and emergency needs are sited 1 metre above the 1% flood level; and (h) to reduce social disruption and damage caused by floodwaters, by the promotion of flood awareness in the community and the provision of advice on the most appropriate means to flood-proof existing properties in flood affected areas. 14 This policy categorised land in the Picton town centre according to its flood hazard. The front sections of the Applicants' properties on Argyle Street where the existing buildings are located are defined as low hazard flood fringe. The policy states such land is subject to only shallow inundation and development is unlikely to alter flow paths. 15 The rear of the land is categorised as low hazard floodway. The policy states that low hazard floodways contain flow paths where a significant volume of water flows during floods. In considering applications for development in these areas Council requires that the development be designed to maintain the operation of these flow paths. The policy states: (i) New development may be permitted provided adequate information is provided to Council by a competent engineer indicating that the proposed development will be unlikely to significantly increase the 5% AEP and 1% AEP flood levels or peak flood flow velocities on adjacent properties and that the proposed building can withstand the likely conditions experienced during the Designated Flood without suffering significant damage. (ii) Any portion of a building or structure subject to inundation should be constructed of flood compatible (flood damage resistant) materials. (iii) In the Residential 2(a) zone the floor level of any development shall be erected at least 0.5m above the Designated Flood level and Council shall require the submission of a surveyor's certificate on forming up of the structure certifying that the level of the floor is not less than the required floor level. (iv) In the Commercial 3(a) and Special Uses 5(a) zones the same conditions as in 7.2(b)(i) to (iii) High Hazard Flood Fringe shall apply. (v) Minor extensions may be permitted without raising floor levels, provided Council is satisfied that the cumulative effect of such extensions is not significant. (vi) Filling will only be permitted if compensatory works such as excavated floodways, are provided to ensure that there is no adverse effect on flood levels. (vii) Fencing must comply with Council's guidelines for the erection of fencing. 16 Regarding subdivision, cl 7.5 of the Flood Policy states: In general, subdivision of land within the extent of the Designated Flood is not favoured by Council because of the likelihood of increasing the future potential for flood damage. However, subdivision of land which is classified Flood Fringe may be permitted provided the applicant satisfies Council that the proposed subdivision:

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Town planning experts 30 Mr Paul Hume gave evidence for the Council and Mr Falson for both Applicants. While different reports were prepared for each matter the issues raised are common to both matters and I deal with them together. (a) Heritage issues 31 The planners agreed that the existing buildings on the sites and the adjoining lots are not identified as items of environmental heritage under Schedule 1 of Wollondilly LEP 1991. Nor are the buildings identified as potential heritage items by the Wollondilly Heritage Study inventory 1991 compiled by JRC Planning Services. A review of that inventory was referred to on the Council's website at the date of acquisition. 32 On the basis of the Council's letter dated 9 May 2005 (sent after date of acquisition) to one of the Applicants, Mrs Schwartz, the review process referred to above may include an assessment of the heritage significance of the main buildings on the Schwartz land. I allowed the letter into evidence despite it being dated after the date of acquisition on the basis that it reflected the Council's view at the date of acquisition if the mooted review took place. In the present circumstances it could not be said that a "Schedule 1" listing of the buildings is certain and imminent, however it is reasonable to assume that it will be considered for listing within this review. On the basis that the main buildings on the Applicants' lands were, theoretically of heritage significance, this would be unlikely to preclude development of the subject site on the western (rear) side of the proposed laneway on heritage grounds. With respect to the remainder of the land on the eastern (front) side of the proposed laneway, the planners did not consider that any form of further development would be totally precluded on heritage grounds. 33 The planners disagreed on whether any potential heritage significance would restrict redevelopment of the lands. Mr Falson considered that pre-acquisition, Council's LEP 1991 and DCP 27 clearly indicate that the area generally is of heritage significance and that any proposed development of the front of the sites would need to account for heritage considerations such as a general assessment of existing and desired streetscape character. It is clear from the LEP and DCP provisions that future development would need to be harmonious in size and scale with surrounding properties. Development of the subject sites whilst not being precluded would need to account for symmetry of existing scale that includes height and separation of buildings. Mr Hume considered heritage values would not impede development. (b) Carparking and Access 34 The rear portions of the site are identified for "proposed public car parking area/laneway" in DCP 27 Picton Commercial Area. The planners agreed the DCP was unclear as to whether the carparking was separate from or able to be integrated with development of the respective lots. 35 Mr Falson considered that public parking applies to parking available for use by the general public on Council owned land, and private parking is that provided ancillary to commercial development on private land. Further, a development approval was granted on nearby land that included private parking on site but not on land identified on Map 1. Mr Falson considered there is no requirement in a pre-acquisition scenario to provide parking only on the area identified in Map 1 of the DCP. The only access to the car parking available pre-acquisition is via Argyle Street. 36 Mr Hume considered the purpose of the public parking area on DCP 27 Map 1 as it applies to the subject site and adjoining land, was to provide "customer" parking servicing commercial development in a manner contiguous with the proposed laneway under DCP 27 and other "public" parking areas on adjoining sites, in order to provide one contiguous parking area. This is not to say that private parking, such as staff or resident parking, should be restricted to that area. Relying on vehicular access from Argyle Street, public car parking as nominated by Map 1 to DCP 27 would require the provision of an access corridor in the order of 50m in length. (c) Extent of commercial development 37 The planners disagreed on the extent of commercial development which would be assumed by a prudent hypothetical purchaser to be able to be undertaken on the properties. Mr Falson considered main street frontages more desirable for commercial activity than rear laneway frontage behind a main commercial area, however the land to the rear of the existing building (in the section acquired by the Council) is desirable for commercial activity given its proximity and potential for access to Argyle Street. 38 In a pre-acquisition scenario the lands that are less subject to flooding and closer to Argyle Street would be more attractive for commercial development. Part of those more desirable lands have been resumed for the proposed laneway. 39 Mr Falson considered that DCP 27 would be assumed by a hypothetical purchaser to apply. 40 Mr Hume, for the Council, maintained his view that the most likely pre-acquisition development scenario would be commercial development limited by the degree of public street exposure to Argyle Street. Development of the mid and rear sections of the block would need an access laneway 5m - 6m wide and consequently sterilise that section of the Argyle Street frontage. This opinion is based on his knowledge of the historical development of commercial land in the Picton commercial area. 41 In his evidence Mr Hume adopted the Council's argument it would be public knowledge that the acquisition of the Applicants' lands for the laneway had two purposes, traffic management and the need to link the laneway with the Walter Street car park, and also to activate the commercial area along the laneway. He further assumed the Russell Olsen concept plan for the laneway would be available to a prudent purchaser. This would mean a purchaser would be aware that the Council was considering two way traffic flow with parking on one side and a pedestrian footpath. In the post-acquisition scenario, Mr Hume considered that the provision of two additional street frontages via the proposed laneway and the potential freeing up of additional frontage to Argyle Street would be highly beneficial to the potential commercial development of the site. In his opinion, these opportunities would more than compensate for the loss of commercially zoned land consumed by the proposed laneway. The proposed laneway frontages are considered by him to be higher value commercial land than land lacking street frontage.

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Section 55(c) severance, section 55(f) injurious affection Bjorklund 49 The Bjorklund claim is in part based on s 55(f), that there is injurious affection to the remaining land as a consequence of the carrying out, or the proposal to carry out, the public purpose. There are a number of factors which Mr Large considered a prudent hypothetical purchaser would take into account in the after situation which suggest this. 50 The severing of the land does not provide new title to the rear lot but divides the existing lot into two parts. Developable, less flood prone land was acquired. There is the loss of a single large developable lot. The owner will have to apply for subdivision consent with attendant fees if separate lots are to be obtained. DCP 27 has not been extinguished or amended in relation to requiring the rear land for carparking and would still be considered relevant by a prudent hypothetical purchaser. He also considered that there was loss to the value of the residue parcel due to the poor market demand for commercial development in Picton. 51 How readily the existing buildings could be redeveloped given their age and potential heritage significance is also in issue. The buildings are not heritage listed but a prudent hypothetical purchaser viewing the Council's website would find out there was a review of the list of heritage items planned. 52 Mr Large adopted Mr Dobrow's concerns in relation to greater security risks resulting from rear laneway access, loss of privacy, amenity, and the fact the rear land is more flood affected. Schwartz 53 The Schwartz claim is in part based on loss due to severance under s 55(c). In the after situation Mr Dobrow considers the rear section of land is less valuable to a prudent hypothetical purchaser because it is severed from the valuable front block, it will be a greater security risk as it opens up access to the rear land, has limited development potential due to 75 per cent being categorised as low hazard floodway, and the less flood affected land has been resumed for the laneway.

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54 Further, there is the risk of not gaining consent from the Council for development on the rear lot given the provisions of the Council's flood policy. Due to flood evacuation requirements, the potential to gain development consent to subdivide the rear land is reduced. 55 In oral evidence on 26 May 2006, Mr Dobrow raised seven points for consideration which he also referred to in his reports. These were: 1. Mr Dobrow considered that the floodway resulted in additional risk that a prospective purchaser would have to allow for when making a development application on the subject land. The need to provide for the safe evacuation of people from the rear residue lot would make the granting of development approval highly unlikely, although not impossible. In order for development of the rear land to occur, the Council would require the relative level ("RL") of the laneway to be above the one percent annual exceedance probability ("AEP") to allow for the proper flood evacuation of people and vehicles. This would increase the cost of development, because of the requirement to fill the land, making the cost potentially prohibitive for any prospective developer. If the laneway is to be built at the existing ground level, Mr Dobrow considered that the prospect of developing the rear land in isolation without the ability to properly address flood evacuation issues is remote. 2. Mr Neskovski gave insufficient attention to the prospect of obtaining the cooperation of adjoining land-owners regarding access to the land. 3. The commercial decision making process has to be taken into account in that a prospective purchaser would have regard to the fact that there are leases in place which would preclude development. 4. Mr Neskovski has given insufficient regard to when the laneway would be completed. This would weigh in the mind of a potential purchaser. Mr Dobrow argued that the amount a purchaser is prepared to pay is affected by uncertainty in what they are acquiring. 5. Mr Hume has applied the Russell Olsen plan in error. This plan has a different front and rear land area, a different access route and a different floodway line to that which the Court is currently considering before it. Mr Neskovski has deferred to Mr Hume and therefore continued this error. 6. Disagreement with Mr Neskovski over level of current demand for commercial property which Mr Dobrow considers is poor in the area. 7. There is a flexibility issue on the site, in that a potential purchaser would be forced to develop a further building envelope or footprint in a much smaller and constrained area.

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57 Mr Large divided the Bjorklunds' land into three equal sections of 668m2 each, valued at $375/m2 (front), $300/m2 (mid) and $150/m2 (rear) in the before and $375/m2 (same), $200/m2 for 379m2 (taking out resumed land area) and $75/m2 in the after. The total before is $551,100 and after is $376,400 resulting in $174,700 as the overall reduction in value of the Bjorklunds' land after acquisition. 58 Mr Dobrow divided the Schwartz land into three different areas as front 1,000m2, midsection 541m2, and rear 513.73m2. These he valued at $350/m2, $250/m2 and $200/m2 in the before situation. In the after situation the front was valued at $350/m2 (same), midsection partly $250/m2 and partly $150/m2 (total 173.97m2 as resumed land area removed), $75/m2 for the rear land. The total before is $587,996 and after $432,375 a total of $155,621 as the overall reduction in value for the Schwartz land after acquisition. Council on valuation 59 The Council's valuer, Mr Neskovski, disagreed with the Applicants' valuers that there is injurious affection or loss due to severance caused to the remainder of the land as a result of the acquisition of part of the Applicants' lands. Mr Neskovski considered the residue lands would increase in value (betterment) as a result of the public purpose being carried out. The Council is constructing a public laneway between Cliffe Street and Menangle Street west approximately 14.5m wide which will provide for two way traffic flow with parking on one side of the laneway without pedestrian footpaths. 60 In relation to the after scenario Mr Neskovski, relying on Mr Hume, planner, noted that the lands are zoned Business 3(a) and are developable despite their flood categorisation under the Flood Policy. There is no impediment to development by virtue of part of the land being categorised as low hazard floodway. DCP 27 is considered to have little application. Part of the Council's purposes in carrying out the acquisition includes commercial "activation" of the rear section. He therefore considered that the construction of Waltons Lane across the Applicants' land would enable the two rear blocks to become commercially "activated" so that these would be more valuable in the after scenario. There would be additional street frontage on both sides of the proposed laneway. In addition there would be betterment to the Argyle Street frontage because this could be fully utilised. His general view of the Picton commercial area is that the shopping precinct would remain reasonably strong due to its relatively good sized population base.

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67 The Council argued the laneway was to assist in traffic management for the Picton commercial area and also to provide commercial opportunities for the rear sections of commercially zoned land which would front the 14.5m wide laneway for which the Applicants' lands were acquired. 68 In relation to severance under s 55(c), that loss has arguably been quantified by the agreement on market value for the acquired portion. The most significant component of the loss argued by Mr Large and Mr Dobrow is the removal of the most developable parcel of land but that is taken into account in the assessment of market value of the acquired portion. All that remains for assessment is the value of the residue land. 69 The issue is whether there is a loss or decrease in the value of the residue land because of the severance of that land into two sections for the purpose of constructing a laneway. The Council argued that the reasons given for the decrease by the Applicants' valuer were circumstances which existed before and after the acquisition and cannot therefore be said to result from the severance of the land. Subdivision costs are the same in the before and after situation. Flood evacuation issues and development costs are the same for the rear land in the before and after situations. The planners agreed that the Picton Local Flood Policy does not preclude development of the rear land. 70 The demand for redevelopment has been taken into account in the market value of the acquired land which includes an allowance for market demand. The fact there are vacancies in the commercial area in Picton is common in the before and after situations. 71 While security concerns were raised by Mr Dobrow and adopted by Mr Large there is no market evidence to demonstrate this, common sense suggests otherwise given that there would now be pedestrian access as the area in unfenced and open at the rear, and the proposed laneway is likely to be lit at night, or at least the situation is the same in the before and after situation.

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76 As already indicated the valuers adopted different areas for the front, mid and rear sections. There was no particular argument put forward to support any one of the different approaches to the areas above another. I consider that generally Mr Neskovski's areas are the most straightforward to apply and I will broadly adopt his approach to the areas of land considered but as will become clear I do not intend to adopt all his valuation figures. The prudent hypothetical purchaser on the after value 77 The valuers broadly agreed on the before value of the two properties, but disagreed in relation to the after scenario. I must therefore consider what a prudent hypothetical purchaser would be likely to consider in that context. 78 In terms of what a prudent hypothetical purchaser would be likely to be informed about at the date of acquisition, and what advice they might receive, the Court must consider what inquiries a reasonably informed hypothetical purchaser would make. The Court's role is to decide how the hypothetical purchaser acting prudently after obtaining the advice of relevant experts, would have assessed the potential for development and hence the amount he or she would be prepared to pay for that potential. In Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2004] NSWLEC 315, Talbot J considered how the mind of a prudent hypothetical purchaser should be assessed, and stated at [119] that: Having regard to the whole of the evidence, particularly the expert evidence of architects and town planners, it is highly probable that the hypothetical purchaser would have received conflicting advice about the potential yield, in terms of residential units, that could be achieved from the site. It is unlikely, however, that the same purchaser would have had the benefit of the far-ranging and wide scope of advice and competing argument of the type that has been made available to the Court through the presentation of evidence by a plethora of experts and voluminous submissions by counsel. Nevertheless, the purchaser would, in my view, have had the benefit of over-arching assessments of the potential for the site that would have identified the range of possibilities and the associated degree of risk. It is necessary, therefore, that the Court balance the evidence made available to it by having regard to the practical context of the willing but not anxious purchaser dealing with a vendor of the same mind. 79 In Bautovich v The Minister administering the Environmental Planning and Assessment Act 1979 [2004] NSWLEC 389, Talbot J again considered this issue, stating at [63] that: Repeating what I said in Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2004] NSWLEC 315, unreported, the Court's role is not to determine what would have been approved, but rather to decide how the hypothetical purchaser acting prudently after obtaining the advice of relevant experts familiar with and experienced in developments of residential subdivisions, would have assessed the potential for the development of the subject land. 80 The Council planning documents readily available to a prudent hypothetical purchaser are the LEP and DCP 27, which continues in force, and the Picton Local Flood Policy. It is likely a purchaser would obtain a s 149 certificate and look at the current s 94 contributions plan in force.

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83 A history of matters before the Council leading up to the acquisition is set out at par 22-28. This suggests the identification of the need for the laneway was the result of a traffic study prepared by Gabites Porter in 2001. The Director of Services reported to Council in its business paper dated 9 December 2002 about the intended laneway (see par 26) and referred to the traffic management aspects and that a pedestrian thoroughfare with have trees and streetscape improvements were contemplated. This is the only publicly available statement of the Council's intentions. There is a budget allocation in the Council's budget for 2003/2004 for the "north-west carpark" project. There is no reference to the project in the relevant s 94 contributions plan. 84 The Council discussion in May 2002 and the Russell Olsen plan on which Mr Hume and consequently Mr Neskovski relied, were confidential. Mr Hume assumed the plan would be publicly available. The Russell Olsen plan has not been directly implemented because the acquisitions were to provide for a wider laneway further to the east than the laneway depicted on the Russell Olsen plan. These cannot be assumed to have been available to an inquiring purchaser at the Council at the relevant time, but it does seem likely that a purchaser reviewing these minutes would make further inquiries. When asked in cross-examination what his further advice to a purchaser would have been at the date of acquisition, Mr Falson stated that he would have said that the Russell Olsen plan was conceptual, that the timing of the construction of the laneway was unknown and that balanced against that future potential was the loss of developable land in the centre of the respective blocks, which I consider likely to be the approach taken by a prudent hypothetical purchaser. 85 A purchaser would be aware that the Council was considering extending Walton Lane through the Applicants' properties but not details of the proposal or the timeframe for its completion. A purchaser would be mindful that DCP 27 was in force. The full extent of the development potential would be unknown and matters such as whether developer contributions would be required in the future also unknown. It follows that I do not accept Mr Hume's and consequently Mr Neskovski's assumptions about the likely development potential of the rear lands being obvious to a prudent hypothetical purchaser.

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Heritage/streetscape 88 In relation to heritage matters, Mr Falson, planner, suggested that the LEP provisions relating to heritage items, while not directly applicable because the existing buildings are not heritage listed, were likely to be considered in any development application for the lands but I agree with Mr Hume that those provisions (cls 30 to 35) would not apply. As Mr Hume stated the s 149(2) and (5) certificates at the date of acquisition would not have indicated buildings of any heritage significance nor did the Wollondilly Heritage Study in 1991 indicate any heritage significance of the existing buildings. Further the Picton Town Centre concept plan adopted by the Council after 2000 does not refer to any suggested heritage significance of the buildings. The likelihood of a heritage review as referred to on the Council website, even informed by the letter of May 2005 which I allowed into evidence, goes no higher than establishing that the existing buildings would be included in such a review. A potential heritage listing under the LEP is not a consideration which a prudent hypothetical purchaser would be concerned about. 89 The DCP also identifies that its objectives are to ensure that commercial buildings are compatible with the "main street" character of Picton, s 2(i) and states that commercial buildings must be harmonious with the scale and size of surrounding properties. While there is no basis for the hypothetical purchaser to assume that existing buildings on the Applicants' lands are likely to be heritage listed as at the date of acquisition, I agree with Mr Falson that a purchaser would consider there would be likely to be some limits on the type of development able to be undertaken on the land in terms of size and scale but any such impediment I do not consider substantial. I also note that DCP 27 states that commercial development should be adjoining, suggesting it would be preferable if the whole of the Argyle Street frontage was developed. 90 In the after scenario the Applicants' valuers assume that there is limited scope for development of the Argyle Street frontage because of the older buildings now on the lands, and the probability that the Council would want to preserve these due to their heritage and/or streetscape significance, but I do not consider that a prudent hypothetical purchaser would consider that to be a substantial impediment to redevelopment. Market demand at date of acquisition 91 Both Applicants' valuers have argued that market demand for commercial development at the date of acquisition was poor so that while the highest and best use identified by Mr Hume by reference to the planning instruments and other documents such as the Russell Olsen plan (which was confidential in any event) was two storey commercial development along the laneway, there was no such demand for this development at the date of the acquisition. Both Mr Large and Mr Dobrow argued that a purchaser would be reluctant to demolish the existing buildings and rebuild because a substantial income stream would be lost for a lengthy period with no guarantee of commercial success in the market as at August 2002. The Council countered in its argument that if the market demand was poor that situation is the same in the before and after situation, in other words, it is not a factor that ought be taken separately into account. Further, the determination of market value on the basis of comparable sales was undertaken by all the valuers and Mr Large conceded in cross-examination that comparable sales include comparable market conditions. 92 The Applicants' valuers adopt the same figure of $375/m2 in both the before and after scenarios for the front section. It is therefore unclear to me why this argument is relevant apart from being a reason why I should not adopt Mr Neskovski's higher figure of $400/m2 in the after scenario. Given that generally market demand is a matter taken into account in relation to comparable sales and given the figures applied by the valuers I do not consider this is a relevant consideration.

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Claim for loss of trees (special value) 108 Mr Dobrow considered that there were two significant trees located in the rear yard of the property which are protected by the Council's Tree Preservation Policy and which would be removed upon construction of the laneway. His view is that these trees add substantial amenity to the property both for the lessee's enjoyment of the property and add value to the leasing marketability of the property. He allowed $2000 for the loss of these trees under s 55(b) of the Just Terms Act: special value. Section 57 of the Just Terms Act defines "special value" as: …the financial value of any advantage, in addition to market value, to the person entitled to compensation which is incidental to the person's use of the land. 109 Mr Neskovski argued that there should be no amount for loss of trees allowed under s 55(b) because the site is not residential but commercial and therefore, in any redevelopment, the trees would be removed. 110 Generally if the before and after method is applied matters related to special value to the owner of the proposal should be taken into account in that context. In the case of Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575 Callinan J gave a description of "special value" in the context of compensation under s12C of the Darling Harbour Authority Act 1984, where a claim was to be dealt with as if it were under s124 of the Public Works Act 1912, stating at 654: The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction of some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it. … There will in practice be few cases in which a property does have a special value for a particular owner. Obviously neither sentiment nor a long attachment to it will suffice. The special quality must be a quality that has an economic significance to the owner. 111 While concerned with an earlier legislative regime than the Just Terms Act this is applicable here. I do not consider this part of the Schwarz claim should be upheld as the requirement that the trees have a financial value to the Applicants over and above market value has not been satisfied.

At a glance

Court

Decision date

Before

Source

Judgment (62 paragraphs)

Cases Cited (3)

Cited By (2)