Serbian Cultural Club 'St Sava' Inc & Serbian Cultural Club Limited v Roads & Traffic Authority of New South Wales

KEY ISSUES: Compulsory Acquisition of Land :- compensation - market value - highest and best use - loss attributable to disturbance - whether applicants' claims inconsistent - whether compensation for loss attributable to disturbance precluded by s 61 of Act - flooding impacts

Environmental Planning and Assessment Act 1979 LEGISLATION CITED: Land Acquisition (Just Terms Compensation) Act 1991 Liverpool Local Environmental Plan 1997

Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259; Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited and Others (1947) 74 CLR 358 ; Commonwealth v Milledge (1953) 90 CLR 157; Constantino v Roads and Traffic Authority of New South Wales (2004) 135 LGERA 365; Fitzpatrick Investments Pty Ltd v Blacktown City Council (No 2) (2000) 108 LGERA 417 ; Gosford Shire Council v Green (1980) 48 LGRA 201 ; CASES CITED: Marshall v Director-General, Department of Transport (2001) 205 CLR 603 ; Mosca v Roads and Traffic Authority (2004) 139 LGERA 28; Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW (1998) 101 LGERA 30 ; Roads and Traffic Authority of New South Wales v Mosca (2006) 146 LGERA 335; Roads & Traffic Authority of New South Wales v Peak [2007] NSWCA 66; Spencer v The Commonwealth of Australia (1907) 5 CLR 418; Woollams v The Minister (1957) 75 WN (NSW) 103

APPLICANTS Mr J J Webster SC SOLICITORS DLA Phillips Fox LEGAL REPRESENTATIVES: RESPONDENT Mr P Tomasetti SC SOLICITORS Henry Davis York

THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

SERBIAN CULTURAL CLUB ST SAVA INC. First Applicant

SERBIAN CULTURAL CLUB LIMITED Second Applicant

ROADS AND TRAFFIC AUTHORITY OF NEW SOUTH WALES Respondent

JUDGMENT Jagot J: A. Introduction 1 On 4 October 2002 the Roads and Traffic Authority (the RTA) compulsorily acquired part of a parcel of land known as 256 Seventeenth Avenue, Hoxton Park for road purposes (namely, the M7). The RTA offered compensation for the acquisition as determined by the Valuer-General. The applicants have objected to the amount of compensation offered in accordance with s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Compensation Act).

2 The first applicant, Serbian Cultural Club 'St Sava' Incorporated, is the owner of the land. The second applicant, Serbian Cultural Club Limited, is the occupier. The first applicant claimed compensation of between $2,425,000 and $2,173,272. The second applicant claimed compensation of between $1,896,292 and $716,035. The RTA claimed that the total compensation assessed in accordance with the requirements of the Just Terms Compensation Act was $538,000.

3 The parties agreed that the first applicant was entitled to an amount of $6,854.32 on account of legal and valuation fees, but otherwise disagreed about numerous matters including: (1) The highest and best use of the parcel before and after the acquisition.

(2) The sustainability on the evidence of the second applicant's claims for loss attributable to disturbance and whether compensation for those claims was excluded by s 61 of the Just Terms Compensation Act.

(3) The sustainability on the evidence of the applicants' claims of alleged flooding impacts by reason of the construction of the M7 and the operation of the Just Terms Compensation Act when assessing compensation for those claims. 4 These issues must be resolved on the evidence and in accordance with the provisions of the Just Terms Compensation Act, in particular ss 55, 56, 59 and 61. Those provisions are as follows: 55 In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division): (a) the market value of the land on the date of its acquisition, (b) any special value of the land to the person on the date of its acquisition, (c) any loss attributable to severance, (d) any loss attributable to disturbance, (e) solatium, (f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.

56(1) In this Act: market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid): (a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and (b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and (c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law. (2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition.

59 In this Act: loss attributable to disturbance of land means any of the following: (a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land, (b) valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land, (c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs), (d) stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired), (e) financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage), (f) any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition.

61 If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of: (a) any financial advantage that would necessarily have been forgone in realising that potential, and (b) any financial loss that would necessarily have been incurred in realising that potential. 5 Despite the irreconcilable approaches of the valuers to the compensation payable to the applicants, the land valuers (Mr Carrapetta and Mr Wood) both relied on sales of en globo parcels for residential purposes to support their conclusions.

6 I undertook an extensive view of the land, its surrounds and the comparable sales in the company of the parties, including the valuers. At each sale, moreover, the valuers were given an opportunity to highlight the relevant parts of their reports.

7 I usually refer to the first applicant or second applicant as appropriate. I also refer to the "club" when it seems more meaningful, by which I mean the second applicant's activity of running the registered club on the land.

8 I also note that both parties objected to certain reports and documents on various grounds. Other than as indicated with respect to the applicants' attempt to rely on the report to the Valuer-General as expert evidence in the proceedings, I have not upheld those objections.

9 Lot 256 in DP 2475, known as 256 Seventeenth Avenue, Hoxton Park (the land), had an area of 11,559m2. It was generally rectangular in shape with a frontage of approximately 76.5m to Cowpasture Road and 158m to Seventeenth Avenue. The land was level with little vegetation. A building of brick and concrete was erected on the land in the early 1970's and used for the purposes of a club (the Serbian Cultural Club), a car park that could also be used for games such as basketball, and a mini soccer field. Access was obtained via Seventeenth Avenue including from the intersection with Cowpasture Road.

10 The RTA acquired 2,216m2 from the land, being a triangular area comprising its north-eastern corner (the acquired land). This included most of the mini soccer field but none of the other improvements. Access remains via Seventeenth Avenue but Seventeenth Avenue is no longer directly accessible from Cowpasture Road. The acquired land was registered as lot 52 in DP 1044841. The residue of 9,343m2 was registered as lot 34 in DP 1044841. Although the acquisition occurred on 4 October 2002, construction of the M7 did not commence near the land until about September or October 2003.

11 When acquired the land was zoned Rural 1(e) - Future Urban under the Liverpool Local Environmental Plan 1997 (the LEP). Use for the purpose of a registered club is prohibited in that zone. Land to the east of Cowpasture Road was developed for residential purposes in the 1990's. The Hoxton Park airport is to the north.

12 Under its constitution the first applicant's objects are to promote Serbian traditions and customs, better knowledge and understanding of these traditions and customs, Serbian history, other moral and political ideals in its members and the community, and to carry out charitable acts as may benefit members and the community. The second applicant is a company limited by guarantee brought into existence by the first applicant for the purpose of being the registered and licensed club entity. The arrangements under which the land is occupied are not documented and were described by both parties as a tenancy at will. The club has operated on the land since about 1978 and continues to operate to date.

13 Mr Rhodes and Mr Sanders, planners, gave evidence to the same effect about a number of material issues. They agreed that the land was affected by cl 18 of the LEP relating to ANEF contours associated with the aerodrome, with most within the 20-25 ANEF contour. They agreed that the land was within an area identified for urban development for a long time. They agreed that the land was part of precinct 3A in the land release program proposed for residential release in October 1992.

14 Release of precinct 3A for residential development was deferred due to the M7 proposal. In July and August 2002 the Council exhibited the Southern Hoxton Park Aerodrome Master Plan for precinct 3A but the Master Plan excluded the land as the route of the M7 affected it. The Master Plan did not come to fruition until well after the acquisition on 4 October 2002, when Amendment No 71 to the LEP was published in the Gazette on 18 June 2004. Under that instrument, most of precinct 3A has been zoned for residential development. The residue is zoned open space. Senior counsel for the applicants did not submit that the open space zoning was causally connected to the M7 project and the applicants' case was inconsistent with any such submission.

15 Mr Rhodes and Mr Sanders agreed that but for the M7 the land would have been zoned 2(a) Residential under the LEP by the acquisition date other than for a small section in the 25-30 ANEF contour that Mr Sanders said would have remained in the 1(e) zoning. As this had no effect on the valuation opinions, it may be dismissed as immaterial. Mr Rhodes concluded a residential zoning would have been in place as early as 1995/1996 whereas Mr Sanders concluded that zoning would have been achieved through the LEP in 1997.

16 Mr Rhodes said that the whole of the land would have been suitable for residential development but for the M7. He also emphasised that the use for a registered club before the 1(e) zone was imposed gave the land the benefit of existing use rights that would have been maintained under the posited residential zone (registered clubs being prohibited in the residential zones). Additionally, Mr Rhodes pointed out that the land would have been subject to cl 10(19) of the LEP permitting development with consent for the purposes of service station, restaurant and/or convenience store being a corner lot with frontage to Cowpasture Road and assumed to be zoned 2(a).

17 Mr Rhodes considered that but for the M7 precinct 3A would have yielded about 2200 developed lots and an additional population of about 7000 people by the acquisition date. To accommodate this release his experience as a planner confirmed that the Council would have carried out trunk drainage works to ensure the land was flood free. Mr Rhodes also expressed opinions about the flood status of the land after the M7 but these depended on the conclusions of Mr Babister, a hydrologist. I am not satisfied that Mr Rhodes (or, indeed, any of the other witnesses but for the hydrologists) had relevant expertise to express independent opinions about flood affectation of the land by reason of the M7.

18 Mr Rhodes described the land as reasonably capable of development for residential purposes, for detached dwellings, small lot housing, integrated development or multi unit housing, as well as being "open to an application for a service station, convenience store and restaurant" under cl 10(19) or an application to change from one non-conforming use to another under the existing use rights provisions of the Environmental Planning and Assessment Act 1979 (the EPA Act) as in force at the acquisition date. With the M7 Mr Rhodes described the residue on which the club continued to be located as screened from Cowpasture Road by the M7 embankment, with a lengthy route for access of some 2.2km. For residential purposes, the M7 embankment blocked the outlook the land previously enjoyed.

19 Mr Turrisi, another planner engaged by the applicants, repeated the opinion that the land had the benefit of existing use rights. He said that nothing would have precluded the club, subject to a merits assessment, from obtaining consent for related uses such as serviced apartments, function centres or the like.

20 Mr Sanders concluded that the majority of the land (but for a small area of 198m2 affected by the 25-30 ANEF contour) would have been zoned for and capable of residential development at the acquisition date but for the M7. Given the surrounding development, he considered that a conventional residential subdivision and single dwellings was the most likely form of development.

21 Mr Babister and Mr Rowbottom, hydrologists, gave evidence.

22 In their first joint report, they agreed that the TUFLOW model showed that, without the M7, the maximum 1% AEP flood level was RL35.56 on the western side of the club building. They agreed that the same model showed a maximum afflux by reason of construction of the M7 of less than 5mm in the 1% AEP flood which was within the available freeboard of 100mm. They agreed that the Council's flood maps did not show the land as flood liable, noting that the LEP defines flood liable land as land so mapped. Using a different model and inputs Mr Babister calculated that the post M7 flood levels in the 1% AEP flood could increase by a maximum of 50mm leaving aside potential blockages. With blockages factored in this increased to 130mm which would inundate the club building. They observed that some minor works to a levee and fencing could reduce this modelled increase to 70mm which would still be within the freeboard.

23 In their second joint report, Mr Babister and Mr Rowbottom provided more information about the design of the levee and identified some minor works to the club building that they considered would be suitable (I infer, assuming that Mr Babister's modelling was plausible). The works to the club building involved providing seals on the lower parts of the external doors and raising two air conditioning units, the total estimated cost being approximately $6000.

24 Mr Babister then prepared his first separate report. He thought a prudent purchaser would rely on the Council's flood maps and conclude the land was not flood liable (even though his modelling showed to the contrary irrespective of the M7). Despite this, Mr Babister said that based on his more recent flood modelling the land was 95% affected by flooding in the 1% AEP flood event with levels ranging from 100 to 700mm after construction of the M7. To develop the residue there would need to be a balance of cut and fill involving a channel around the southern and eastern boundaries of the residue either grass lined (10m wide) or concrete (5m wide) and floor levels of habitable buildings would need to be at least 500mm above the 1% AEP flood level on the land.

25 Mr Babister then prepared a second separate report. In this report, he said that without the levee works he no longer considered the minor flood proofing suggested in the second joint statement as a long term viable solution for the existing building and noted that door seals would deteriorate over time. He identified various options to flood proof the land as used for its club purpose, including a full perimeter bund or raising all entrances, footpaths and recessed areas in addition to the sealing originally suggested.

26 Mr Babister then prepared a third separate report. In this report, he said that a prudent purchaser, after the construction of the M7, would see the drains associated with the road and not accept the Council's maps (in contrast to the prudent purchaser before the M7). He emphasised the importance of considering the potential for blockages as he had done by reference to various documents including the M7 project deed.

27 Mr Rowbottom prepared two reports after the joint reports. In the first, he said that he thought it extremely unlikely that a purchaser of the land at the acquisition date would have commissioned a flood study, particularly given that the Council's mapping did not show the land as flood liable and the time and expense involved in flood studies. He also observed that the documents about the M7 available to the public at the acquisition date disclosed that the M7 would not exacerbate flooding. Further, flood modelling (if carried out) would have shown that the land was affected by flooding irrespective of the M7. In any event, the modelling carried out for the first joint report showed increased flood levels of 5mm (Mr Rowbottom) or 50mm (Mr Babister), both being within the existing freeboard of the club building. In the second, he repeated that, given the low frequency of the flood event, the shallow depth involved and the short duration of the flood, flood seals as originally recommended remained the only appropriate response for the existing building even if the increase was 130mm (Mr Babister's calculation based on assumptions of blockage). This was supported by the fact that the Council's policies did not require any freeboard for commercial buildings. However, he considered it inappropriate to set design levels by reference to assumed blockages.

28 In his oral evidence, Mr Babister agreed that the publicly available documents associated with the M7 were to the effect that it would not exacerbate flood levels. But for the physical presence of the road, with its embankment and drainage, he did not think a purchaser would have made inquires beyond the Council's flood mapping. With knowledge of those structures he held a different view. He described his flood modelling as "one approach". He noted that his flood study had taken more than three months to complete and the modelling component cost about $50,000. He did not know whether a purchaser would have obtained such modelling because of the expense, but would have strongly advised it knowing of the M7 embankment and drains. Both hydrologists agreed in oral evidence that if the surrounding land had been developed for residential purposes at the acquisition date then the associated trunk drainage scheme would have rendered the land flood free.

29 Mr Meredith, quantity surveyor, and Mr Abbott, project manager, agreed the costs of various works relating to flooding. They costed the grass drain at $53,000, the concrete drain at $185,000, the flood seals to the doors of the club building at $12,000 and the raising of all thresholds to the club building at $199,500.

Valuers - business 30 Mr Edmonds and Mr Kelly, who are valuers and accountants, gave evidence.

31 In their first joint report they agreed that the second applicant occupied the land under a tenancy at will. They agreed that if any compensation was payable to the second applicant it was to be on the basis of loss suffered by reason of the compulsory acquisition. They agreed that gross and net profits for 2002 were inflated by unusual poker machines revenue and required adjustment below the audited results. They agreed that adjusted trading losses of the second applicant were decreasing between June 2002 and June 2005. They agreed a schedule of gross and net profits as follows:

Year to June Gross Profit Net Profit/(Loss) $ $ 1999 173382 (65798) 2000 167799 (8984) 2001 210340 9384 2002 160000 (70000) 2003 245665 (50091) 2004 207125 (30187) 2005 188542 1705 2006 16423 (166673)

32 Mr Edmonds considered that the appropriate measure of the second applicant's losses was the change in gross profits suffered and expected to be suffered by reason of the acquisition. He described this as compensation for loss of potential profits or for reducing potential net losses. He concluded that as the first applicant had constituted the second applicant and the two had common interests, the second applicant's tenancy at will was secure in perpetuity. He estimated the loss of net income for 2004 to 2006 as $106,397. He estimated the present value of the estimated loss of net income for 2007 and future net income (in perpetuity) in the amount of $444,254. He also concluded that compensation should include an additional $14,677 for additional advertising expenditure for the year ended 2002.

33 Mr Kelly did not accept that compensation was payable for loss of profits or reducing net losses. In accordance with s 59(f) of the Just Terms Compensation Act, Mr Kelly concluded that: - (i) irrespective of the M7, the first applicant would have terminated the second applicant's tenancy at will in or about early 2006 so future losses were not recoverable, (ii) the second applicant had not acted reasonably by decreasing wages to reflect decreased trade (with bar wages increasing as a percentage of bar sales to 55% in 2003, nearly 98% in 2004 and 77% in 2005), (iii) the closure of the Seventeenth Avenue and Cowpasture Road intersection would have occurred irrespective of the acquisition of part of the land, and (iv) the second applicant received the benefit of the increased advertising by increased profit in that year and thus cannot claim compensation for that cost.

34 Mr Edmonds then prepared his first separate report. In this report he assumed that $45,000 per annum represented the market rental value reflecting amounts shown as rent paid by the second to the first applicant in the accounts. He considered the Bonnyrigg Sports Club as a relevant example of the potential the club on the land would have had but for the M7. He estimated the loss of net income for the years 2004, 2005 and 2006 and into the future in perpetuity assuming increases in turnover of 8% per annum based on the performance of the Bonnyrigg Sports Club. With certain other adjustments, this led to compensation payable to the second applicant of $716,035 according to Mr Edmonds.

35 Mr Edmonds and Mr Kelly then prepared a further joint report. They agreed an amended schedule of total trading and net profits as follows:

Year to June Total Trading Profit Net Profit/(Loss) $ $ 1999 173,382 (65,798) 2000 167,799 (8,984) 2001 198,775 9,384 2002 373,345 142,689 2003 245,665 (50,091) 2004 207,125 (30,187) 2005 188,542 1,705 2006 16,423 (166,673)

36 Mr Edmonds also retracted a number of the matters he agreed in the first joint report.

37 Mr Edmonds then prepared his second separate report. In this report he re-assessed the compensation payable to the second applicant as $1,205,311 plus valuation and legal fees. He did this by reference to Mr Rhodes' evidence that but for the M7 precinct 3A would have yielded an additional population of 7000 people by the acquisition date. In consequence, Mr Edmonds considered the patronage and turnover of the club run by the second applicant would have increased with the potential for expansion of the facilities, leading to the higher compensation assessment. He also considered the compensation payable to the second applicant on a "relocation basis". He assessed this in the amount of $1,896,292 on the basis that the club was no longer viable by reason of the M7 and might have to relocate to alternative premises.

38 Mr Kelly prepared a separate report in response. He noted that, based on Mr Wood's valuation, the whole of the land could have been sold on the acquisition date as a residential development site for $1,520,640. If invested at 5% per annum this amount would have yielded interest of about $76,000 per annum. According to the second applicant's accounts it paid rent to the first applicant of between $43,000 and $46,000 per annum in 2001 to 2003 and no rent thereafter. Mr Edmonds' assumption of a market rental of $45,000 per annum involved a return of 2.96% on $1,520,640. Mr Kelly thus considered the actual use of the land was not its highest and best use. Accordingly, he thought Mr Edmond's analysis of losses was irrelevant to compensation payable to the second applicant.

39 Mr Kelly also noted that the acquired land was a half-sized soccer field. The residue still contained the club building and car park. He considered that the accounts and minutes of meetings showed the club was in financial difficulties between 1999 and 2002 so that any suggestion of expanding the club was impractical. He considered Mr Edmonds' monthly turnover figures unreliable and inconsistent with the accounts when properly analysed. Mr Kelly inspected the Bonnyrigg Sports Club and described it as including a two storey building, a brick gate admission control building with electronic turnstiles, a concrete grandstand with metal roof, a full sized soccer oval and floodlighting. He did not accept that the accounts of Bonnyrigg Sports Club were in any way material to the second applicant's position. He characterised Mr Edmonds' calculations as depending on the accuracy of several critical assumptions (assumed future annual growth of 8%, projected turnover but for the M7, assumed date of certain surrounding development, estimated rent abatement and discount rate of future loss). He concluded that the loss or break even trading position of the second applicant since 1999 showed that it was unlikely to become profitable in the foreseeable future. He characterised Mr Edmonds' approach to the increased turnover by reason of increased population as highly speculative.

40 Mr Kelly noted that, contrary to the instructions relied on by Mr Edmonds about strategies for growth of the club being prevented by the M7, the membership records show the highest increases in new members in the years 2003 to 2005 after the acquisition occurred.

41 Mr Edmonds prepared a third report responding to Mr Kelly's report. In this report he described the value of the whole of the land and the interest that could be earned from investing the sale proceeds as a matter for others. Amongst other things, he agreed the land had residential development potential but considered the rent paid by the second to the first applicant irrelevant to the highest and best use because the applicants were related entities who existed for the benefit of their members. Therefore, he rejected Mr Kelly's analysis on the basis that the applicants did not seek to make profits out of the club but to serve the members. He observed that it was normal for clubs to lease land for below market rates from various entities such as councils and the like.

42 Mr Edmonds and Mr Kelly both gave extensive oral evidence. As part of that evidence Mr Edmonds produced further tables identifying the second applicant's financial position.

43 Mr Edmonds confirmed that he had not valued the second applicant's interest in the land. It would not be possible to do so due to the lack of security of its tenure if considered in isolation from its relationship to the first applicant. As a going concern the club had no goodwill but the value of its poker machine licenses and other tangibles. However, he thought it inappropriate to consider the second applicant's position in isolation given its relationship with the first applicant. The whole entity of the first and second applicant had to be considered, not just the second applicant with a mere tenancy at will. He conceded that the club went through some difficult times before 2000 but said management changes in 2001 meant things were going very well until the acquisition (in fact, the management change occurred in mid 2000 not 2001). He described the rent paid by the second to the first applicant as an artificial amount determined by the first applicant as necessary to fund its cultural and charitable activities that he had assumed to be a market rent.

44 Mr Kelly confirmed his view that the second applicant attempted to make a profit but its records showed it had struggled to do so. The minutes of the meetings of the second applicant led Mr Kelly to conclude that it had trouble paying its debts as they fell due from about January 1999 onwards. His review of those records did not support any inference that the acquisition had impacted upon the second applicant's trading position. He agreed that he had not based his opinions on any hypothesised population increase at the acquisition date but for the M7 and accepted that if those people would have come to the club then obviously its trade would have increased. However, he could not be sure they would come to the club. The club was an ethnic cultural club and would not appeal to everybody. He considered the potential relied on by Mr Edmonds to be speculative. He agreed that the tenancy at will had no value and the club had no goodwill but maintained its tangible assets which would have value. He said he had not conducted any valuation of the club business (in common with Mr Edmonds). He agreed that the club's losses were increasing since the acquisition for which he had no explanation other than the bar wages not being maintained at an appropriate ratio to bar turnover. He thought, however, that there could be "a whole range of reasons" for these losses. It could be associated with the loss of the mini soccer field or could be for other reasons. He accepted that the liquidity of the club was reducing as shown by comparing current assets and liabilities. However, he could not accept that the acquisition had caused this effect as the records showed no reduction in turnover in 2003, 2004, and 2005 and thus did not support any conclusion of reduced patronage. He also noted that the accounts showed no income from the use of or associated with the mini soccer field.

45 Although they had reviewed the second applicant's audited accounts neither Mr Edmonds nor Mr Kelly had any knowledge of a $230,00 loan discovered in the minutes of meetings during the hearing. Mr Kelly, however, did not think the evidence gave a complete (or, I infer, reliable) picture of the second applicant's financial position from 2000 onwards.

46 Mr Dragojevic, the manager of the club since July 2000, gave evidence. He had provided instructions to the applicants' solicitors relied on by Mr Edmonds and a statement. In his instructions he said the club was enjoying solid patronage and growing profits and felt confident about future growth strategies but uncertainties about the M7 prevented growth. When constructed the M7 caused a devastating impact. In his statement he described the mini soccer field as an essential part of the club's operations. The club had lost members, patrons, exposure to Cowpasture Road and direct access as a result of the acquisition. Mr Dragojevic said in his instructions that he understood the second applicant had paid rent to the first applicant and intended to do so again when its financial position improved.

47 In oral evidence Mr Dragojevic said that the loan referred to in the minutes was a loan to the first applicant. He now understood that the payments by the second to the first applicant shown in the accounts as rent were not rent at all but repayments of the loan and other payments to cover the first applicant's expenses (for cultural activities such as Serbian folkloric dancing festivals). He believed this loan was repaid in June 2003. Further, the second applicant had also continued to pay money to the first applicant in 2004, 2005 and 2006 although such payments were not shown as rent or at all in the audited accounts. He described the club as something run simply to "get by", not to make any great profit. He noted that there had been no resolution to close down or relocate the club, although he thought it would have shut down two years ago but for the advance payment of compensation by the RTA to the first applicant on account of the acquisition. This was because the first applicant had donated some of this money to the second applicant over the last 18 months. He described the club's catchment as the local area - Hoxton Park, Liverpool, and Bonnyrigg. Members were the main revenue. Visitors were not a large revenue source. The club had some passing trade before the M7 but not a significant amount.

48 Mr Dragojevic explained the increase in wages criticised by Mr Kelly as a strategy he used instead of employing new staff. He described the club as at the point of locking its doors as the loss of the mini soccer field took away a big aspect of the club. He agreed that membership substantially increased after 2002 due to the advertising campaign. However, new members did not necessarily mean good business as most of them were older and did not have large disposable incomes. Patronage was down. He agreed that before the M7 was constructed trading was so poor the club had to close for business on Sundays. He agreed that the poker machine takings in 2002 were unusually high due to the activities of one or two members. When asked about the minutes he observed that every club has its ups and downs.

49 Mr Carrapetta and Mr Wood, valuers, gave evidence.

50 Mr Carrapetta and Mr Wood first prepared a joint report. They agreed that but for the M7 the land would have been zoned 2(a) Residential under the LEP at the acquisition date. They agreed that if the club represented the highest and best use of the land the added value of the building was $900,000.

51 Mr Carrapetta concluded that the land had a value of $210 per m2 for the land "as a clubhouse site on an 'existing use' basis". He described this by reference to Mr Turrisi's evidence as recognising that the land could be developed for an expanded club, serviced apartments, function centres, roadside service centre, restaurant or mixture of uses. He considered the value of the residue after the M7 had been reduced by 40% on this "clubhouse site on an 'existing use' basis". He assessed a before value on this basis as $3,419,200 and the after value as $1,715,880, giving a difference of $1,703,300. These calculations included the existing buildings at a value of $900,000 in the before situation and $360,000 in the after situation. Mr Carrapetta also added $57,000 for flood proofing of the existing club building giving a total compensation of $1,765,300 (in fact, these figures add up to $1,760,300).

52 Mr Wood concluded that on the basis of the highest and best use being as an en globo residential parcel the land had a value of $180 per m2 less an amount of $12 per m2 for noise amelioration due to the impact of the ANEF contours. After the M7 Mr Wood allowed for decrease in the value of the residue by 10% over the whole of residue. However, he considered that any flood impact would be accommodated by spoil removal for roads and drainage as part of the overall residential development. This gave a before value of $1,941,912 and an after value of $1,404,149 and a compensation assessment of $538,000. Mr Wood also carried out an alternative valuation assuming the applicants' position about the highest and best use being as a club was correct. On these assumptions (with which Mr Wood disagreed) he calculated compensation of $940,000.

53 The valuers prepared a second joint report giving more information about the basis for their opinions, details of the comparable sales on which they relied and their adjustments to those sales.

54 Mr Carrapetta relied on Mr Edmonds' evidence to support his view that the club was a successful operation. The rate of $210 per m2 that he had assessed was based on sales in the area of land for residential development. Mr Carrapetta said these supported a "base" residential rate of $195 per m2. Mr Carrapetta increased this to $210 per m2 on account of the greater potential of the land due to the club building, the club's potential to expand and the land's development potential as identified by Mr Turrisi. He adjusted one of the factors in his principal method of assessment resulting in compensation in the amount of $1,647,500 plus the cost of flood proofing works. However, based on Mr Babister's evidence, Mr Carrapetta no longer considered the amount of $57,000 adequate on that account, but was not able to quantify the additional amount other than to note the works would be costly. He also assessed compensation on an alternative basis that in the before situation the land had this potential over and above any residential use but lost that potential by reason of the M7 rendering the residue a mere residential development site in the after situation. This approach gave compensation of $2,075,250 including a decrease of 20% for injurious affection from the M7 but excluding the costs of flooding works.

55 In this second joint report, Mr Wood said he accepted that the land had existing use rights. There were no comparable sales to clubs that could be relied on. Hence, the method to value the club was capitalisation of the net rental. Adopting a 9% yield, a rent of $43,609 gave a value of $485,000 compared to the value of $1,941,912 as a residential development parcel. Mr Wood noted that for the club to be the highest and best use, the rent would need to be $175,500 per annum on the basis of a 9% yield compared to the value of the land as a residential development parcel.

56 Mr Carrapetta then prepared a separate report. Amongst other things, he clarified that he assessed compensation on a before and after basis assuming that the existing club and the associated potentialities of the land represented the highest and best use, yielding compensation in the amount of $1,647,500 to which the costs and losses associated with flood proofing works had to be added. He assessed these as $219,000 under s 55(d) of the Just Terms Compensation Act (loss attributable to disturbance) and $339,950 under s 55(f) (decrease in value of residue land). He also reiterated his alternative assessment based on a mere residential use in the after situation.

57 Mr Carrapetta then prepared a second separate report including the costs for flooding works both as a development site and as the site of the existing club building. In this report, Mr Carrapetta used the same principal methodology to assess compensation in the amount of $1,990,000 (a before value of $3,427,390 and an after value of $1,437,268). His secondary approach of treating the land as a club with various other potentialities in the before situation and a mere residential en globo parcel in the after situation in this report yielded compensation of $2,442,500. His alternative treating the land as having only residential potential both before and after yielded compensation of $1,151,725.

58 Mr Wood prepared one separate report. He observed that: - (i) increasing residential values by 7.5% to account for Mr Carrapetta's opinion about increased potential was arbitrary and not supported by any sales evidence, (ii) Mr Carrapetta uses both a before and after and piecemeal approach when the before and after valuation, if done properly, should include all diminution in value, and (iii) Mr Carrapetta's approach to the so-called flood affectation was confusing and should be captured in any event by his 40% reduction in value of the residue land.

59 Mr Carrapetta and Mr Wood gave lengthy oral evidence. Much of it repeated their written evidence and the observations they made during an extensive inspection of the land, its surroundings and the comparable sales. I deal with this evidence to the extent that it clarified or added to their reports.

60 Mr Carrapetta said that he did not use any sales of land for a club purpose as clubs generally acquired land during their infancy or expansion periods and the sales he knew of were not in comparable areas. Accordingly, he used the sales of land with residential potential in the area to determine a base rate for the land. From there he asked whether the improvements on the land added value. If they added value, the improvements would be retained given the flexibility provided by the land's existing use rights. He added the 7.5% to the base residential value to reflect this flexibility as others may want to use the land such as clubs, church groups or people who could see the potential of the existing building to be converted or expanded. He gave various examples of such uses including a continental grocery store and fruit shop or two major stores or bottle shop or the like. He had seen similar conversions and expansions elsewhere. If such entities wanted to establish in this area they would have to pay at least the residential land values. Because the land was in fact used by a club at the acquisition date Mr Carrapetta also considered it reasonable to assume the land would appeal to a club. As the existing building added value for those types of purposes, he concluded that the use of the land for club with the additional existing use rights flexibility was the highest and best use of the land at the acquisition date. Mr Carrapetta agreed that this range of uses would mean that the current use by the second applicant would cease. He did not consider the tenancy at will in favour of the second applicant relevant to his assessment of market value because it could be immediately extinguished. The market value of the land was unconnected to the actual use by the second applicant.

61 Mr Wood observed that if there were any sales for a club purpose then he and Mr Carrapetta would have identified them. There were no such sales. He accepted that the land had existing use rights and would have had the capacity for additional uses for a service station, restaurant and convenience store under the assumed 2(a) zoning. Accordingly, people interested in developing land for those alternative purposes might also wish to buy the land. If they did so the price would be dictated by the value of the land as a residential development parcel. The building might add value depending on what the buyer wanted to do with the land. However, he considered the highest and best use was a residential development parcel consistent with the evidence of Mr Rhodes and Mr Sanders and his own assessment as referred to above.

62 Mr Wood was asked questions about the valuation prepared by his office for the Valuer-General. Mr Wood said that he was not the author and had not supervised this report. Nevertheless, he accepted that if a necessary urban use such as a school or church wanted to establish itself in the area, it would be forced to pay residential prices for land. The case would be the same if a club wished to do so. He accepted that the valuation report for the Valuer-General applied sales of 1(e) future residential land to which the depreciated value of the club building was added. This gave a value for the land and buildings greater than Mr Wood's assessment of the value of the land as residential en globo parcel. Mr Wood did not think the authors of the report knew about the club's financial position. He also did not accept that the value of the residentially zoned land could be assumed to be the same as land for a club.

63 Mr Wood noted that leading up to and at the acquisition date in 2002 there was a "mad clamber" for 1(e) future residential land in this area. Prices were generally accepted to be escalating at this time 2% per month. Mr Carrapetta agreed that there was a very strong demand for residential development land particularly from mid 2002 when the shortage of such land in the area was continual.

64 Neither Mr Carrapetta nor Mr Wood had attempted to calculate a fair market rental for a club use of the land.

65 As noted, despite the competing positions about the highest and best use of the land, Mr Carrapetta and Mr Wood relied on sales of land zoned 1(e) Rural - Future Urban and 2(a) Residential. Mr Wood relied on five sales and Mr Carrapetta six. Two of the sales were common - 10 Cowpasture Road, West Hoxton and 50-60 Fifteenth Avenue, West Hoxton. Both valuers also referred to evidence and findings relating to other decisions about compensation in the area associated with the M7. I am not satisfied that the way in which they did so provided any material assistance in resolving the present matter.

66 10 Cowpasture Road, West Hoxton has an area of 15,345m2. It sold in November 2002 for $3,000,000 with a delayed settlement (that is, an unadjusted rate of $194 per m2). The site was zoned 1(e) Rural - Future Urban with part (2,246m2) affected by a proposed road widening. The site is one block to the south of the land and is more elevated and is also a corner site. On rezoning to 2(a), this site also would have the benefit of cl 10(19) of the LEP. Both valuers relied on this sale. Mr Wood considered the sale price showed an influence by reason of the fact that the adjoining owner acquired it. Mr Carrapetta disagreed. A substantial cottage was located on the site when sold. Mr Wood thought the buyer intended at the time to retain the cottage as part of the proposed residential development, but it was later demolished. Mr Carrapetta thought the buyer always intended to demolish the cottage and allowed for its demolition in his analysis. Mr Wood noted that the sale was not subject to the ANEF contours whereas the land was affected. Mr Carrapetta noted that the site was nevertheless affected by light aircraft noise, was zoned 1(e) with a likely delay of 18 months for rezoning to 2(a) and had uncertainty associated with the road acquisition. Mr Wood concluded that the sale showed a rate of $160 per m2 when adjusted whereas Mr Carrapetta concluded that it showed $207 per m2 when adjusted.

67 10 Cowpasture Road is an important sale given its proximity to the land. It is also superior to the land for the reasons given by Mr Wood. It is in a better location and more elevated. It has a superior ambience and setting to the land and is not affected by ANEF contours. It was an adjoining owner purchase and Mr Wood's was correct to make an adjustment on that account. The matters relied on by Mr Carrapetta do not support his conclusion about the relationship between the land and the sale. The sale price does not support any substantial adjustment on account of the 1(e) and prospective 2(a) zoning when considered as part of the overall pattern of sales. The market was clearly confident about the rezoning and its timing, presumably related to the "mad clamber" for residential development parcels in this area around the acquisition date (a description I accept). Nevertheless, I have had regard to that factor. I also consider Mr Wood's adjustment of 10% for ANEF restrictions excessive.

68 50-60 Fifteenth Avenue, West Hoxton has an area of 16,190m2. It sold in October 2001 for $2,500,000 (that is, an unadjusted rate of $154 per m2). It is zoned 2(a) with part unzoned for a proposed road widening (2,166m2). Both valuers relied on this sale. Mr Wood allowed for the time between the sale and the acquisition (10 months at 2% per month) and the road widening, but also observed that it was a good elevated site superior to the land with no affectation by ANEF contours. Mr Carrapetta emphasised the uncertainty associated by the road widening. The valuers agreed that, adjusted, the sale showed a rate of about $198 per m2. I agree with Mr Wood that the sale is superior to the land.

69 Mr Carrapetta relied on the sale of 62 Bernera Road, Prestons. Mr Carrapetta described this sale as involving three transactions. The lengthy cross-examination of Mr Carrapetta about these transactions established that this sale would not be a reliable basis upon which to assess value. Mr Wood did not rely on the sale and, in my view, for good reason given the complexity of the transactions and the fact that the contracts were not available for inspection. I am not satisfied that weight should be placed on conclusions drawn by Mr Carrapetta by reference to this sale.

70 Mr Carrapetta relied on the sale at Ash Road, Prestons. This site has an area of 22,297m2. It sold in November 2002 for $3,450,000. The site is zoned 2(a). Mr Carrapetta concluded it showed an adjusted value of $215 per m2 . He emphasised the transmission line easement, noisy but fringe location and major demolition requirement to support his conclusions. Mr Wood observed that this sale, despite being surrounded by the M7 and Camden Valley Way, did not appear to show any reduced sale price. I consider this sale less reliable than sales closer to the land. I also consider Mr Carrapetta's adjustments excessive and unreliable given the general quality of the sale compared to the land.

71 Mr Carrapetta relied on the sale of 125 Fifteenth Avenue and150 Sixteenth Avenue, West Hoxton. The sale involved two sites purchased together for redevelopment and having an area of 12,140m2 each. Both sites were zoned 1(e) and sold for $2,167,500 each. Mr Carrapetta considered that they showed an adjusted value of $181m2 having regard to the zoning, partial affectation by a transmission line easement and proposed open space acquisition. Mr Wood said that the sales occurred in February 2003 and had to be adjusted for time back to the acquisition date (at 2% per month or 8% in total) giving an adjusted rate of $168 per m2. Mr Carrapetta made no adjustment for time because he considered that factor offset by the proposed acquisition and uncertainty associated with it. I consider this sale reasonably comparable to the land because its location is better, its topography more interesting and varied, although it is affected by a road widening and the topography may increase development costs. Consistent with the approach to zoning above, I have also had regard to the 1(e) zoning of this sale but do not consider that a reason to disregard these sales (contrary to the applicants' submissions).

72 Mr Carrapetta relied on the sale of 35 Fifteenth Avenue, West Hoxton. The site has an area of 12,140m2 and was zoned 1(e). It sold in February 2003 for $2,340,000. Mr Carrapetta noted that it was affected by ecologically sensitive vegetation and showed an adjusted rate of $193 per m2. The extent of affectation by vegetation and its materiality was not clear. When adjusted for time this sale would show about $175 per m2. I take into account the 1(e) zoning on the same basis as set out above.

73 Mr Wood relied on the sale at the corner of Camden Valley Way and Bernera Road, Prestons in March 2002 for $10,000,000. The site is zoned 2(a) and part 5(a) Special Uses - Drainage. It has a total area of 59,800m2. Mr Wood considered that, as adjusted, it showed $183 per m2. Mr Carrapetta disagreed with Mr Wood's adjustments and considered the sale showed $197 per m2 and emphasised the much larger area of the sale compared to the land and its other affectations (drainage and vegetation). Mr Wood considered that developers paid premium prices for larger sites. Mr Wood was cross-examined at length about his adjustments. His answers and the size of this site do not support placing much weight on this sale.

74 Mr Wood relied on the sale at the corner of First Avenue and Hoxton Park Road, Hoxton Park in December 2001. This site was zoned for school purposes but was to be rezoned 2(a) Residential. It has an area of 29,140m2, with parts affected by flooding, vegetation and drainage constraints. Mr Wood described the developable area as good level land in a residential area showing an adjusted rate of $160 per m2. Mr Carrapetta referred to greater constraints than Mr Wood including a lesser developable area, a small road widening, a transmission line easement at the rear, an allowance for demolishing the school improvements and the need for a permit for works in the riparian area. He described it as a sale subject to a lot of questions. Mr Wood noted that he had spoken to the buyer and had based his adjustments on information obtained directly from the buyer and considered this sale very comparable, particularly given its context of surrounding development. I consider Mr Carrapetta has placed too much weight on the negative aspects of this sale but there are questions about the adjustments that indicate that substantial weight should not be placed on it.

75 Mr Wood relied on the sale at Lot 2 Cowpasture Road, West Hoxton in June 2002. The site has an area of 20,800m2 and sold for $2,800,000. Mr Wood concluded that it showed an adjusted rate of $145 per m2. Mr Carrapetta described it as a difficult and complicated sale site. Mr Wood was asked questions about a further payment not shown in the contract. I am not satisfied that material weight should be given to this sale in all the circumstances. D. Submissions For the applicants

76 The applicants submitted that s 55 of the Just Terms Compensation Act identified separate heads of compensation including, relevantly, (a) the market value of the land on the date of its acquisition, (d) any loss attributable to disturbance, and (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. Market value is defined in s 56(1)(a) by reference to the traditional Spencer test (Spencer v The Commonwealth of Australia (1907) 5 CLR 418). Loss attributable to disturbance in s 55(d) is defined in s 59, including s 59(f) - "any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition". Disturbance is thus separately compensable. A claim for disturbance is independent of a claim for market value. Accordingly, in this case the claim for market value and the claim for disturbance have to be considered separately.

77 With respect to market value, both valuers had carried out a before and after exercise. Because the land was not the same in the before and after situations by reason of the Council's actions to rezone the residue for open space purposes, that was inappropriate (Constantino v Roads and Traffic Authority of New South Wales (2004) 135 LGERA 365). Nevertheless, both valuers had done so and the applicants thus had to accept that it was legitimate. In any event, the information could be used to reach the same result albeit using different methods from those the valuers adopted.

78 With respect to disturbance, Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2) (2000) 108 LGERA 417 was critical. Lloyd J described s 59(f) as a "catch-all" provision (at [20]) the ordinary meaning of which should not be read down. This was confirmed by the Court of Appeal in Blacktown City Council v Fitzpatrick Investments [2001] NSWCA 259. Subsequently, in Roads & Traffic Authority of New South Wales v Peak [2007] NSWCA 66, the Court of Appeal had emphasised that although s 59(f) refers to "the land" (meaning the acquired land) "if the actual use of the residue land is so intimately connected with the actual use of the acquired land so that use of the one is dependant on use of the other, then that is sufficient to bring it within s 59 (f)" (at [71]). In this case the acquired land contained the mini soccer field. The use of this part of the land was intimately connected with the club use as Mr Dragojevic and Mr Carrapetta's evidence disclosed. It followed that s 59(f) applied. Separately from the first applicant's claim for market value of the acquired land, the second applicant was entitled to claim its financial costs by reason of the acquisition. Alternatively, one could consider the applicants as in substance a single entity. Either way the claim for disturbance had to be assessed separately from the claim for market value.

79 Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW (1998) 101 LGERA 30 also had to be considered. This showed that the only control over a claim under s 59(f) was s 61 of the Just Terms Compensation Act ("If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of: (a) any financial advantage that would necessarily have been forgone in realising that potential, and (b) any financial loss that would necessarily have been incurred in realising that potential"). It also demonstrated that losses caused by an acquisition extinguishing or causing a business to relocate were recoverable as part of a disturbance claim (at 40). Further, s 61 recognises that the market value of land may be assessed by reference to its present or current use or a higher and more valuable use for which the land has potential. Only if the latter is the basis for assessing market value, does s 61 preclude recovery for the financial advantages and losses necessarily foregone and incurred in realising that potential.

80 Applied to this case the reasoning in Peter Croke meant that the only relevant question was whether the value of this land with the building on it was higher than its value on a residential basis. Section 61 does not require any consideration of the actual use of the land by the second applicant. The applicants put this proposition in a number of ways. They initially submitted that "currently used" within the meaning of s 61 included all the potentialities of this land given its existing use rights under the EPA Act. They later withdrew this submission and said instead that s 61 did not apply if the club use and all other potential uses of the land and building gave a higher value than residential use (which seems to be the same submission). Ultimately, when requested to clarify the submission about s 61, they said that the correct approach to s 61 involved these steps: (1) Step one: assess the market value of the land with the building on it taking into account all of the land's potential at the acquisition date. That is, the potential with the building either as used by the second applicant or by any other potential user (including the potential for the building to be extended or converted to other uses).

(2) Step two: assess the market value of the land disregarding the building and the associated existing use rights and all potential to use, extend or convert the building. (3) Step three: compare the values in (1) and (2). (4) Step four: if the value from (2) exceeds (1) then s 61 applies and excludes any disturbance claim. If the value from (1) is higher than (2) then s 61 does not apply and disturbance is recoverable.

81 Under these steps, the applicants submitted that the reference in s 61 to the current use of land did not exclude "the fact that it is used for an existing use which gives it a higher value". At the least it includes use by any person of the land for a club.

82 According to the applicants, the RTA's submission that clubs generally or this club could not afford to buy this land at the acquisition date should be rejected as there was no evidence to support it. Further, there was no evidence that this club would not have been prepared to pay the market value of the land with the buildings on it in order to maintain itself on the land. This meant that Mr Carrapetta's approach to the highest and best use was correct. In any event, the applicants submitted, the concept of the highest and best use of land was fraught and not "proper terminology". The only question was "whether the value of this property including the building that's on the land has got a higher value than its residential value", which has nothing to do with the highest and best use of the land but concerns the "the highest and more valuable use". Alternatively, a minimum value of the land would accord with that assessed by Mr Wood's office on behalf of the Valuer-General (some $2.34 million in the before situation). Either way the land and building was worth more than the pure residential value so s 61 did not apply. The second applicant's claim was not excluded by s 61.

83 Mr Edmonds' assessment of the compensation payable to the second applicant should be accepted. The records showed that adjusted net losses had increased consistently since the acquisition. This pattern can only be explained by the acquisition.

84 Mr Carrapetta's analysis of a value of $195 per m2 on the basis of a residential use and $210 per m2 on the higher and more valuable basis as a club site with existing use rights and the flexibility offered by cl 10(19) of the LEP should be accepted.

85 With respect to flooding and the claim for injurious affection under s 59(f), Marshall v Director General, Department of Transport (2001) 205 CLR 603 established that the dispossessed owner had to be compensated for the damage, prospective and actual, to the residue (at [20] and [33]).

86 Finally, with respect to general matters, where a genuine doubt relevant to value remains it should be "resolved in favour of a more liberal estimate" (Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited and Others (1947) 74 CLR 358 at 373 - 374).

87 The RTA submitted that once the many and varied tendrils associated with the applicants' claims were properly confined, the valuation exercise required was straightforward and the essential propositions underpinning it could be clearly identified.

88 The case had proceeded on the basis that the applicants were separate albeit related entities. The applicants could not claim to be a single entity in closing submissions. In any event, s 61 operated whether there was one entity or two (see Peter Croke).

89 Section 61 of the Just Terms Compensation Act was clear. In Peter Croke s 61 did not apply because market value (based on the highest and best or most valuable use of the land) was the actual use made by the tenant. This case was different.

90 The applicants' position appeared to be that the Court should: - (i) value the land on a residential basis, but (ii) because a club, school or church or some other user might wish to establish themselves on the land, add to that residential value the value of the building which those other users might wish to use, (iii) thereby find that the value for those other uses is greater than the residential value, and (iv) conclude that the highest and best use of the land is the club use. Although a difficult argument to follow, it was clearly wrong. The applicants had failed to recognise what was happening in the market at the acquisition date. People were not trying to buy land for clubs or other uses in the area. It was a bull market for residential development land. The sale assumed by s 56(1)(a) is hypothetical not fictitious. Evidence about what the market was actually doing informs the hypothetical exercise. The market would not have included clubs and others vying for this land but buyers of en globo residential land, as the sales evidence demonstrated. It would be totally unrealistic and lacking in logic to assume that clubs could compete in this very strong market for residential development land.

91 Mr Carrapetta's evidence involved shifting grounds and confusion. His evidence appeared to conflate club uses with a wide range of other uses (service stations, restaurants, fruit shops, bottle shops etc) but maintained that all were within the existing club use. The confusion had to be stripped away.

92 Section 56(1)(a) of the Just Terms Compensation Act requires any increase or decrease in value caused by the carrying out of or the proposal to carry out the public purpose to be disregarded. Consistent with the approach in Woollams v The Minister (1957) 75 WN (NSW) 103; (1957) 2 LGRA 338 and Roads and Traffic Authority (New South Wales) v Mosca (2006) 146 LGERA 335 the surrounding precinct 3A should be assumed to be developed for residential purposes (about 2200 lots) because, but for the M7, it would have been. That assumption, once made, had to be consistently maintained. If maintained, it is obvious that there could be no flooding issue because such a scheme would have included trunk drainage rendering the land flood free. The approval for the M7 made clear that it could not have adverse flooding impacts on sensitive lands and, on the required assumption, this land would have been zoned 2(a). This cut across all of the debate about flooding. Moreover, if there were any flooding impact it would have to be addressed under s 55(f) not s 59. The costs of addressing any flooding impact are not recoverable. Those costs are not necessarily the same as the decrease of the value of the residue, as cost does not equal value. Recovery is limited to any reduction in market value including by injurious affection. Section 55(f) expressly directs attention to value at the acquisition date, which necessarily involves the perception of the market.

93 In any event, the land was never shown as flood liable land on the Council's mapping. The buyer and seller posited by s 56(1)(a) and s 55(f), in the market then existing, would have assumed the land was not flood liable. In Gosford Shire Council v Green (1980) 48 LGRA 201 the Court of Appeal held that the relevant knowledge was limited to that available at the date of acquisition.

94 The highest and best use of the land must also be determined disregarding the M7. The abundant sales evidence disclosed the high demand for en globo residential land in this area. Land was purchased for this purpose and old improvements demolished so as to exploit the residential development potential. It was clear that the highest and best (or most valuable) use of this land was for residential subdivision and development consistent with what had occurred generally in the released areas. It is also relevant in this context that the 2(a) zone permitted a wide range of uses. To achieve this highest and best use, the second applicant's tenancy at will would necessarily end. The applicants' four steps did not accord with s 61. Section 61 applied and excluded the second applicant's claim. Further, Mr Carrapetta's various uses were also inconsistent with any continuing occupation by the second applicant.

95 The evidence did not support any inference that the club could continue indefinitely or expand. Despite many discussions between Mr Edmonds and Mr Kelly and their inspection of documents produced by the applicants, the explanation of the loan in 1997 to the first applicant only emerged during Mr Dragojevic's evidence. Further, Mr Dragojevic's evidence disclosed that the so-called rental payments by the second to the first applicant were in fact loan repayments and other contributions to the first applicant's expenses. The loan repayments ceased in 2003 but other payments, not shown in the accounts at all, were apparently made in 2004, 2005 and 2006 to cover the first applicant's expenses and charitable donations. The records do not show any identifiable and quantifiable impact on the second applicant's trading position by reason of the M7.

96 The applicants had not proved facts fundamental to their claims. For example, there was no evidence about the mini soccer field being rented out, what the rent was, any licence fees, or any additional financial return to the club by reason of use of the mini soccer field. Indeed, membership substantially increased after the acquisition. Mr Kelly's consistent opinion that the club was not profitable should be accepted. Mr Edmonds' evidence was unsatisfactory. For example, the Bonnyrigg Sports Club was obviously different and gave no support to Mr Edmonds' opinions.

97 The applicants' attempts to use the report commissioned by the Valuer-General as a further alternative basis for their claim should be rejected. It was within the tendered documents as part of the background only. Its authors were not witnesses. They proceeded on the basis of material not in evidence. They could not be cross-examined. Mr Wood's approach was different. All expert valuation evidence was filed and served in accordance with Court directions.

98 The comparable sales supported Mr Wood's analysis, which should be accepted.

E. Conclusions Fundamental difficulties with the applicants' claims 99 It was common ground between the parties that but for the M7 the land would have been zoned Residential 2(a) and surrounded by other land developed or largely developed for residential purposes at the acquisition date. Despite this, the parties were at odds with respect to most other issues affecting the applicants' entitlement to compensation. I am satisfied that the applicants' claims face many difficulties for two independent reasons. First, and regrettably, the claims were based on largely unrealistic and unreliable evidence. Secondly, important parts of this evidence cannot be reconciled with the provisions of the Just Terms Compensation Act.

100 Mr Edmonds' evidence about the second applicant's losses was unpersuasive for a number of reasons. First, he accepted Mr Dragojevic's instructions and statements at face value without bringing to bear the essential critical faculties that make expert evidence useful. Mr Dragojevic was not the manager of the club before 2000. As events in the hearing indicated, he either did not know or did not appreciate the need to inform Mr Edmonds about all relevant circumstances. For example, it became apparent from the minutes of the meetings that a loan had been raised in 1997 and repaid in 2003 but Mr Edmonds and Mr Kelly knew nothing of this despite their review of the audited accounts. In his statement Mr Dragojevic said that the second applicant had paid rent to the first applicant until 2002 and thereafter infrequently but intended to do so again, the implication being that the second applicant could not pay rent at present due to impacts associated with the M7. Mr Edmonds assumed a market rental of $45,000 per annum based on the same accounts and factored into his assessment a rent abatement due to the M7. However, when Mr Dragojevic gave evidence it became clear that the payments shown as rent up to 2003 were in fact repayments of the loan and the second applicant had made other payments to the first applicant in 2004, 2005 and 2006 not reflected in the accounts. Moreover, and contrary to Mr Edmonds' approach, it would be unrealistic to expect a person in Mr Dragojevic's position to give instructions and make statements reflecting an objective and dispassionate view of the second applicant's real circumstances. Comparison between his instructions and statements and the minutes of meetings of the second applicant shows that Mr Dragojevic was not an objective and dispassionate observer of the club's financial history and circumstances.

101 Secondly, Mr Edmonds did not give sufficient weight in forming his opinions to the minutes of meetings of the second applicant. Those minutes are telling. They are a contemporaneous record of the position of the second applicant. For example, in March 1999 the minutes recorded that business was not good and music on Thursday nights had to be cancelled. In April 1999 the second applicant's financial problems were referred to again. In December 1999 there was a reference to two people not having been paid their full entitlements but the difference being paid out when trade improved. In February 2000 there was a reference to the possibility of raising funds by a loan from members. One month later they decided that three members of the board had to see the bank about the club's finances. In June 2000 the minutes recorded that from Monday to Wednesday there were so few people the club should close on Mondays and open Sundays. In July 2000 the second applicant paid $5000 back to the former manager. Mr Dragojevic became the manager thereafter according to the minutes. In January 2001 the minutes referred to the need for functions to keep the club open on Sundays. In February 2001 the cooks left because they could not make enough money in the club's kitchen. By April 2001 the minutes recorded that the board was wondering when the manager would be putting his money-making schemes into action. In August 2002 the blue payphone was cancelled because it was not "feasible". The board also decided to close the club on Sundays except for functions. In other words, the minutes show a club struggling to attract members and make ends meet from at least 1999 onwards, consistent with Mr Kelly's evidence.

102 Thirdly, the financial records, properly analysed, supported the bleak picture painted by the minutes (even though the financial records are obviously unreliable). When the abnormal takings from poker machines are removed from the 2002 year (as I consider they should be consistent with the original agreement between Mr Edmonds and Mr Kelly) then the records show the club made net losses more often than not. They support Mr Kelly's opinion that the second applicant's loss or break even trading position since 1999 meant it was unlikely to become profitable in the foreseeable future.

103 Fourthly, I am not satisfied that the assumed increased population in precinct 3A would have necessarily created any materially different trading position for the second applicant. As Mr Kelly said, Mr Edmonds' approach to increased trade by reason of assumed increased population was highly speculative. The second applicant's main trade came from members not visitors. Membership of an ethnic cultural club is more likely to appeal to members of the particular ethnic community. The Bonnyrigg Sports Club is only 5km away and has superior facilities including a full sized soccer field and grandstand. Much would have depended on effective management and marketing. Yet Mr Dragojevic said the club had always been run to serve the members and basically "get by", which does not suggest any great capacity to tap into potential new markets. All of these factors are strong indicators against the assumptions made by Mr Edmonds. Accordingly, the fact that Mr Kelly did not base his opinions on the assumed increased population is immaterial.

104 Fifthly, the various assumptions in Mr Edmonds' reports about the club's future operations were also speculative. The application of a growth factor of 8% per annum based on the Bonnyrigg Sports Club was not justified by any reasonable comparison between the two in terms of location, facilities, and likely appeal. Nor, for the reasons already given, can it be justified by the assumed surrounding development of precinct 3A.

105 Sixthly, and as Mr Kelly said, Mr Edmonds' approach to the alleged impacts of the M7 on the second applicant's business were not borne out by the second applicant's records. Mr Dragojevic said in his statement that the club had lost members as a result of not being able to host soccer tournaments. However, the records showed that there were more new members after construction of the M7 than before and turnover or total sales were unaffected. Decreasing liquidity, as Mr Kelly said, could be explained by a number of factors but not decreasing membership or patronage. Further, and as the RTA submitted, there was a lack of cogent evidence about the financial relationship of the club's operations to the mini soccer field. None of the contemporaneous documents showed the frequency of use, hiring or licensing fees or the relationship between use of the facility and sales. Mr Dragojevic's evidence about the relationship between the use of the mini soccer field and the financial position of the club was anecdotal and lacking in detail. Mr Carrapetta's statement that the mini soccer field was "intimately connected" with the club's operations appeared to be a bare attempt to recast a statement of principle by the Court of Appeal into a factual assertion in the particular case. Such connection as the Court of Appeal had in mind in Peak is not proved by mere assertion of this kind.

106 Finally, and again consistent with Mr Kelly's evidence, Mr Edmonds' approach to increased advertising costs was unsustainable. The second applicant had the benefit of the money it spent in the form of turnover.

107 For these reasons (and irrespective of s 61 of the Just Terms Compensation Act) I do not accept Mr Edmonds' evidence. In its final form (after a number of significant changes of position along the way, each of which increased the claims) Mr Edmonds' evidence involved an unsatisfactory and unconvincing combination of speculation, assertion and lack of regard for important material highlighted by Mr Kelly inconsistent with Mr Edmonds' thesis.

108 Although I do not accept Mr Kelly's approach to the issue of closure of the intersection of Seventeenth Avenue and Cowpasture Road, that did not impact on the essence of his analysis. His approach to the second applicant's dire trading position and criticisms of Mr Edmonds' opinions were cogent, realistic, supported by the available records and persuasive. On Mr Kelly's evidence, which I accept, the second applicant was unlikely to be able to continue trading regardless of the M7 and the M7 appears to have had no demonstrable impact on its trading position.

109 The second applicant's claims for compensation on three alternative bases (the residue land can no longer be economically used as a club and will be forced to relocate by reason of the M7, loss of future profits assuming the surrounding land had been developed for residential purposes, and loss of future profits assuming the surrounding land in its actual state at the acquisition date) are unsustainable on the evidence. The claims were founded on Mr Edmonds' opinions about the trading position of the second applicant before the M7 and the impacts of the M7 upon that trading position which I have rejected above. This evidence, and that of Mr Dragojevic, did not withstand scrutiny and fell far short of satisfying the requirements of s 59(f) (namely, that the financial costs be reasonable and a direct and natural consequence of the acquisition) and s 59(c) (financial costs reasonably incurred in connection with the relocation of those persons) of the Just Terms Compensation Act. Accordingly, the evidence has not established any claim on the part of the second applicant for loss attributable to disturbance. The second applicant made no claim for market value under s 55(a) of the Just Terms Compensation Act and on the evidence its interest in the land (a mere tenancy at will) would have no market value.

110 There was another fundamental difficulty confronting the claims of the second applicant, namely, their inconsistency with the claims of the first applicant. This requires consideration of the basis upon which the market value of the acquired land must be assessed consistently with s 56(1)(a) of the Just Terms Compensation Act.

111 The requirement that market value be assessed by reference to the highest and best use of land is too well entrenched to need repetition here. In the context of market value, highest and best use means the most beneficial or valuable use to which land may be put. The adaptability of the land and any improvements are relevant to this assessment. But, as the RTA submitted, the assessment (while hypothetical) is not fictional. It cannot be carried out divorced from the reality of the market at the acquisition date.

112 Mr Carrapetta's approach to the valuation task, particularly his evidence about the highest and best use of the land, was unpersuasive for a number of reasons. Although aware of: - (i) the very strong market for residential land in the area, (ii) the shortage of and demand for en globo residential land, and (iii) the form of development that had in fact been carried out in the other areas already released, including at least one site that also had the prospective benefit of cl 10(19) of the LEP, Mr Carrapetta appeared to conceive of the market at the acquisition date as comprising clubs, prospective developers of service stations, restaurants, convenience stores, fruit shops, bottle shops and the like all ready and able to compete with residential developers for this land at higher than residential prices. Mr Carrapetta's evidence was that if such users wanted to establish on the land they would have to pay residential prices and, indeed, would be willing to pay more because of the existing use rights and the building. But his evidence failed to establish that such users were capable of, or had any interest in, competing for this land in circumstances where land in the area was attracting premium prices for residential development due to demand exceeding supply. Such evidence as he gave about the prospect of (as opposed to the theoretical potential for) development of the land by these classes of users involved uninformative and unconvincing speculation and assertion.

113 Mr Carrapetta did not give adequate weight to the evidence about the actual market for land in the area at the acquisition date. Nor did he take sufficient account of important facts. Registered clubs were permissible in some rural and most industrial zones, as well as the business zones, and one open space zone under the LEP. The 2(a) zone was relatively liberal in terms of permissible uses (including child care centres, health consulting rooms, motels, and multiple dwellings). One of the sales (10 Cowpasture Road) would also enjoy the flexibility of cl 10(19) of the LEP on rezoning to 2(a). Yet the overwhelming demand for residential development, as reflected by the comparable sales, was the driving force in the market. These fundamental factors were not adequately recognised in Mr Carrapetta's evidence or the applicants' submissions. They were inconsistent with the assumption underlying the evidence and submissions to the effect that the value of this land with the building for club and other purposes exceeded its value as an en globo residential parcel. The underlying assumption was that potential users of the building would be interested in or capable of competing with the residential developers in their "mad clamber" for residential land in this area at the acquisition date rather than simply going elsewhere. The applicants' submissions that they would not go elsewhere because registered clubs were only permitted in business and rural zones was unpersuasive. First, and as noted, registered clubs were permissible in many industrial zones and one open space zone as well. Secondly, the evidence simply did not support any particular demand by clubs or other non-residential users not sufficiently accommodated elsewhere. Finally, Mr Wood's acceptance that the building was worth $900,000 if the highest and best use of the land was as a club site, did not support this assumption. It was contingent on the conclusion that the club was in fact the highest and best use of this land, a proposition Mr Wood consistently rejected.

114 The applicants' submission that there was no evidence that a club or this club would not pay more for the land than its residential value given its existing use rights and the building was misconceived. As to this particular club, there was ample evidence that it was struggling financially as identified. Suggestions that it could have expanded and added to the building but for the M7 were unrealistic. As to clubs (or other potential users generally) it was not for the RTA to disprove an assumption or assertion, unconnected with and unsupported by the reality of the market at the acquisition date, that prospective users other than residential developers would pay more than residential prices for the land because they might be able to exploit the existing use rights, the flexibility of cl 10(19) of the LEP and the building. It was for the applicants (or the first applicant at least) to put forward cogent evidence in support of this proposition. The applicants failed to do so.

115 In contrast, Mr Wood gave reliable opinions about the market for the land at the acquisition date, and its highest and best use. His opinions were consistent with the evidence about the development that had occurred under land releases in the area, the sales evidence, the evidence of strong demand for and inadequate supply of residential land in the area at the acquisition date, as well as the fact that a sale of a parcel involving the same potential benefits as the land in terms of uses under cl 10(19) of the LEP was at a price reflective of the market for residential land in this area at the time.

116 There were other major difficulties in Mr Carrapetta's evidence. He appeared to maintain that the highest and best use of the land was the current use by the second applicant, but then included within that use all of the potential uses referred to above as though they were part of the current use. This may have been a result of a concern about s 61 of the Just Terms Compensation Act but, in my view, further confounded his evidence. I do not accept that "existing use rights" or "potential to be developed under cl 10(19) of the LEP" were or could be "purposes" for which the land is currently used. Mr Carrapetta said he based his approach to the highest and best use of the land on Mr Turrisi's evidence. However, Mr Turrisi's evidence was limited. He considered that applications could have been made for the various uses and had prospects of favourable consideration by the Council (or, at least, a prospect of favourable recommendation). Applications can be made and might be favourably recommended for a whole range of land uses in many zones including the 2(a) zone under this LEP. Assessment of the market called for application of valuation expertise to the facts about the market at the acquisition date. Mr Carrapetta's evidence, as the RTA submitted, failed to appraise the market realistically at the acquisition date.

117 The applicants' attempt to rely on the report to the Valuer-General in closing submissions was inappropriate for the reasons advanced by the RTA. Mr Wood was not the author of the report. He did not supervise its preparation. The authors were not called to give evidence. They were not available to answer any questions about their methodology or conclusions. They did not agree to be bound by the requirements for expert witnesses when preparing the report. It would be wrong, in these circumstances, to attempt to use that report as yet a further alternative case on behalf of the applicants.

118 For these reasons the applicants have not established their propositions about the highest and best or highest and most valuable use of this land. Mr Carrapetta's evidence about that issue was unconvincing and I do not accept it. I am satisfied on the evidence that the highest and best (that is, most beneficial or most valuable) use of this land at the acquisition date was as an en globo residential parcel zoned 2(a), ripe for development for residential purposes by conventional subdivision and single dwellings, consistent with the pattern of development that had otherwise taken place in the area under earlier land releases. This is not to say that existing use rights (which, resolving all doubts in the applicants' favour, I accept, despite the possibility that the club use might have been made subject to cl 10(13) of the LEP) and capacity to exploit cl 10(19) of the LEP would be irrelevant to the market at the acquisition date. It is merely to recognise that their potential relevance involves an issue of fact to be resolved by reference to the evidence about the market and the sales.

119 It is now necessary to deal with the separate problem of the inconsistency between the applicants' claims. Land is defined in the Just Terms Compensation Act to include an interest in land (s 4(1)). Further, an owner means any person who has an interest in land. Section 37 vests in owners a right of compensation where their interest is "divested, extinguished or diminished" by compulsory acquisition. Div 4 of Pt 3 of the Just Terms Compensation Act prescribes how the value of that interest is to be assessed and the compensation payable in connection with the divestment, extinguishment or diminution of that interest. Mr Edmonds estimated compensation payable to the second applicant on the basis of an assumption that the second applicant's tenancy at will would continue in perpetuity by reason of the relationship between the applicants. The first applicant, however, did not maintain the assumption about the second applicant's tenancy at will continuing in perpetuity when it came to its own claims. Instead it maintained, through Mr Carrapetta's evidence, that market value had to be assessed assuming the tenancy at will could be terminated immediately on sale. Leaving aside s 61 of the Just Terms Compensation Act, the applicants' claims were inconsistent and irreconcilable. In Peter Croke, Bignold J referred to The Commonwealth v Milledge (1953) 90 CLR 157 at 164 in a passage that makes the same point about disturbance outside the specific context of s 61 of the Just Terms Compensation Act.

120 The applicants' submissions about the operation of s 61 were unpersuasive. First, Bignold J in Peter Croke (at 43-44) concluded that in any case where market value was based on the realisation of potential that necessarily terminates (or postulates the termination of) the actual use by the occupier, s 61 operates to prevent the maintenance of the inconsistent claims whether or not they were by a single or multiple applicants. He recognised that this might have a significant effect on the claims of parties between themselves but characterised this as an outcome of the legislation and a function of the close relationship between the claimants in that case. Those observations are apt in the present matter. Mr Carrapetta's oral evidence disclosed that his approach was in truth dependent on an assumption that the second applicant's tenancy at will would cease on sale. The references in the evidence and submissions to the second applicant continuing and expanding its use were unconvincing on any reasonable assessment of the second applicant's trading position and capacity to exploit the assumed increased population that would have lived in the area but for the M7. If the approach to s 61 in Peter Croke is applied, then the section necessarily operates to preclude the second applicant's claim.

121 Secondly, the applicants' four-step approach to s 61 bore little resemblance to the requirements of the provision. Section 61 is engaged where the market value of land is assessed on the basis that the land has potential to be used for a purpose other than that for which it is currently used. The applicants' steps involved comparison between: - (i) the land with the building, existing use rights and all its potential uses for various purposes and (ii) the land without the building, existing use rights and associated potential. This exercise is unconnected with the requirements of s 61. In any event, even if the steps were correct as matter of principle their application to the facts depended on that part of Mr Carrapetta's evidence rejected above.

122 Thirdly, although I accept that there is scope for debate about the meaning of "used for a purpose" in s 61 and, in particular, whether that confines the use to the precise use by the occupier of the land (reflecting the approach in Milledge before s 61 and in Peter Croke) or use for that purpose as understood in the planning context, the potential ambiguity is a moot point in this matter. For the reasons given the applicants' evidence did not establish that the market value of the land should be assessed on the basis of a purpose of "club" or "club with existing use rights and the benefit of cl 10(19) of the LEP" (the latter of which, as I have said, cannot fall within the description of current use for a purpose at all).

123 The market value of the land should be assessed on the basis that the land had potential to be used for the purpose of residential subdivision and development. This is a purpose other than that for which the land is currently used. It follows that compensation is not payable in respect of any financial advantage that would necessarily have been forgone or any financial loss that would necessarily have been incurred in realising that other potential. The existing club use of the land would necessarily have been terminated in order to realise the land's potential for residential subdivision and development. Accordingly, compensation as posited by Mr Edmonds on behalf of the second applicant would be excluded irrespective of the fact that I have rejected his evidence.

124 Although I consider the approach of both parties to the question of flooding raised difficulties, the applicants' claims in this regard can be resolved on the facts.

125 Insofar as the market value of the land before acquisition is concerned, I accept that the buyer in the sale hypothesis under s 56(1)(a) would have relied on the Council's flood maps and determined that the land was not flood liable land.

126 Insofar as the market value of the residue after acquisition is concerned, I do not accept that the buyer in the sale hypothesis under s 56(1)(a) would have carried out an expensive and time-consuming flood study as conducted by Mr Babister. This is so whether the M7 is treated as a mere proposal to carry out a public purpose at the acquisition date (as in fact it was) or is treated as having in fact been carried out at that date (which it was not). In other words, I do not accept that a buyer would carry out such a study even if the M7 embankment and drain adjoining the residue were assumed to exist at the acquisition date. Although Mr Babister would have advised the buyer to obtain a flood study, Mr Rowbottom would not. Given the conditions of approval of the M7 about flooding (conditions 134 and 142 in particular) and the likely time and cost involved in conducting a flood study, I am satisfied that a buyer would accept that flooding was not a material concern when assessing the residential development potential of the residue. In other words, I do not accept the applicants' case that a buyer would consider the land flood free before the M7 but flood liable after the M7.

127 Insofar as the applicants' case involved claims for compensation based on an allegation of increased flooding that they said had to be determined as a matter of fact irrespective of the views of the hypothetical buyer, I do not accept that the applicants could properly maintain, on the one hand, that the land was flood free before the M7 and, on the other hand, flood affected after the M7. If, as at least part of the applicants' submissions maintained, the question of flooding had to be determined by reference to actual damage to the residue (and not as part of the hypothetical transaction called up by s 56(1)(a) of the Just Terms Compensation Act) then an assessment of actual damage would involve comparing the true position before and after the M7. As Mr Rowbottom said, the true position before the M7 was that the land was flood affected in the 1% AEP event. Accordingly, Mr Babister's evidence identifying the flood affectation of the land after the M7 did not establish the impact on flooding caused by the M7 because it failed to compare the flood levels on a meaningful basis.

128 The various works Mr Babister identified as necessary to render the residue land flood free and capable of development cannot, on the evidence, be properly brought within either s 55(f) (any 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) or s 59(f) of the Just Terms Compensation Act (any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition). They are not referable to the former because s 55(f) concerns the value of the land and is thus dependent on the market's approach to the issue. I have found that the market would have treated the land and the residue as not affected by any material flooding issue in both situations. They are not referable to the latter because s 59(f) requires the costs to be reasonable and causally connected to the acquisition. Neither requirement was satisfied on Mr Babister's evidence because he failed to factor into his analysis of required works that the land was affected by flooding irrespective of the M7.

129 In any event, even disregarding all the information available that would have indicated to a buyer that the M7 would not materially exacerbate the flooding as referred to by Mr Rowbottom, I found the applicants' evidence and submissions about flood impacts on the residue land and the works said to be necessary to render it flood free for the purposes of residential development unconvincing. Mr Babister's flood study involved but one possible approach to flood modelling. Other approaches were available, including the type of modelling carried out for the M7 itself. This modelling exercise showed a far lesser impact than modelled by Mr Babister (between 0 to 50mm afflux caused by the M7). Mr Rowbottom's evidence of a 5mm increase in flooding in the 1% AEP event (based on alternative modelling) and that assumptions about blockage should be used to test sensitivities rather than set design levels was persuasive. The minor amount of additional fill that would be required to address any such issue for the residue bore no resemblance to the extensive and expensive works Mr Babister recommended for any future residential development of the land. Accordingly, I do not accept Mr Babister's opinions about this issue.

130 Insofar as the applicants' case involved compensation for works said to be necessary to flood proof the existing building and its surrounds, I do not accept Mr Babister's evidence that such works were reasonably necessary having regard to a number of factors. First, Mr Rowbottom's evidence that door seals were the most appropriate and cost effective flood mitigation measure was persuasive. Given the low frequency, depth and duration of the flood impacts on the land arising from Mr Babister's modelling, his recommendations for flood mitigation works were excessive and unreasonable. Secondly, and as noted, Mr Babister overlooked the flooding of the land irrespective of the M7. Accordingly, the applicants' evidence failed to establish that costs would be reasonably incurred to flood proof the building within the meaning of s 59(f) because such works or some part of them may have been required irrespective of the acquisition. Thirdly, and in any event, compensation for upgrading the existing building would be inconsistent with the basis upon which the market value of the land must be assessed. The residential subdivision and development of the land pre-supposes the demolition of the existing building.

131 Therefore, the applicants have not established a reliable evidentiary basis upon which to found their claims for compensation by reason of alleged flooding impacts by the carrying out of the public purpose (s 55(f)), as a direct and natural consequence of the acquisition (s 59(f)) or any decrease in the market value of the residue (s 56(1)(a)). For this reason, it is unnecessary to deal with the competing submissions about the availability of claims under these provisions with respect to flooding. It is also unnecessary to deal with the internally inconsistent way in which Mr Carrapetta dealt with the flooding issue in his evidence. Assessment of compensation

132 Given my findings above, it is necessary to focus on Mr Carrapetta's alternative approach assuming that market value is to be assessed on the basis of the highest and best use of the land being an en globo residential parcel. On this basis, Mr Carrapetta concluded that the land had a value of $195 per m2.

133 Mr Wood concluded that the sales showed a value of $180 per m2 which had to be reduced by $12 per m2 on account of noise amelioration (calculated as 18 dwellings with additional costs of $7,700 each). The market demand in the area at the acquisition date was for residential land. Mr Wood was correct to recognise this fact and place little, if any, weight on existing use rights and cl 10(19) of the LEP. I consider that the more reliable sales, as analysed above, supported Mr Wood's conclusion of $180 per m2 for the land. The land was inferior to many of the sales in terms of elevation and ambience. As noted, I do not consider the zoning difference between some of the sales (being zoned 1(e)) and the land (assumed to be zoned 2(a)) warranted any substantial adjustment. The market was clearly confident that the 1(e) land would be rezoned within a reasonably short period (18 months has been suggested). For these reasons, I do not accept Mr Carrapetta's higher rate of $195 per m2 as sustainable on the evidence. Nevertheless, I also consider that Mr Wood's further adjustment on account of the ANEF contours was excessive. In the market at the time I do not accept that such a large adjustment would have been made having regard to the whole of the sales evidence.

134 It is necessary to resolve all genuine doubts in favour of the dispossessed owner. With particular regard to this principle and: - (i) the sales compared to the land, (ii) any possible market perceptions about additional flexibility in the residential development potential of the land by reason of existing use rights and cl 10(19) of the LEP, (iii) the assumed 2(a) zoning of the land compared to the zoning of some of the comparable sales as 1(e), and (iv) the excessive adjustment made by Mr Wood on account of the ANEF contours, I adopt a rate of $180 per m2 as the value of the land disregarding any decrease in value caused by the carrying out of and proposal to carry out the public purpose.

135 Mr Wood considered that the M7, by reason of its location adjoining the residue with the drain and large embankment, decreased the value of the residue. He allowed a 10% reduction in value over the whole of the residue. Mr Carrapetta allowed 20% over the whole of the residue on his alternative residential basis and referred to an allowance of 17.5% in another matter involving a lesser degree of affectation (Mosca v Roads and Traffic Authority (2004) 139 LGERA 28). This agreed percentage, however, was held to apply for a distance of 100 metres only not the whole site.

136 I accept that the particular characteristics of the M7 immediately adjoining the land mean that a materially higher percentage than Mr Wood's allowance is not outside the range of reasonableness. Resolving all doubts in the dispossessed owner's favour, I allow a deduction of 20% on account of the decreased value of the residue as a whole. This allowance includes all impacts of the M7 on the residue, including its general proximity, its appearance, as well as the characteristics of the embankment, walkway and associated drainage system

137 Consistent with my findings and the rejection of many of the applicants' claims as unsustainable on the evidence, compensation is determined in accordance with the Just Terms Compensation Act as follows:

First applicant: Market value of land taken (s 55(a)): (2,216m2 x $180 per m2) = $398,880 Legal and valuation fees (s 55(d)): Agreed at $6,854.32 Decrease in value of residue (s 55(f)): (9343m2 x $180 per m2 less 9343m2 x $144 per m2) = $336,348 Total compensation: $742,082.32

F. Orders 138 I have assessed the applicants' entitlement to compensation in accordance with the Just Terms Compensation Act as $742,082.32 for the first applicant and nil for the second applicant. The parties are directed to agree the form of the orders that should be made in the proceedings including regarding costs (if possible) and file those orders with my Associate within 14 days. If agreement cannot be reached about costs then the matter may be listed for argument on that issue. The exhibits may be returned.

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