Smith v Roads and Traffic Authority of New South Wales [2005] NSWLEC 438 | Case summary

(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." 68 Section 55 provides a statement as to the matters which are relevant to the determination of the amount of compensation. The starting point is "the market value of the land on the date of its acquisition." This statement is faithful to the object in s 3(1)(a). 69 Market value is defined in s 56(1). It embodies the classic statement of a hypothetical sale - "a willing but not anxious seller to a willing but not anxious buyer" and requires the hypothetical sale price to be determined disregarding three matters. 70 The first matter to be disregarded is "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" (section 56(1)(a)). This is not a complex statement although the facts relevant to any case may be complex and create difficulties in its application. To my mind, (and I do not believe Walker Corporation requires me to determine otherwise, although Basten JA raises some doubts see [39]), in relation to matters of zoning, s 56(1)(a) requires that (a) a zoning imposed to facilitate the public purpose, and, (b) a zoning which has been maintained to facilitate such a purpose is to be set aside, when, in either case, the facts make plain that but for the proposal to carry out the public purpose some other zoning would have been imposed. A decision must then be made as to the zoning which the land would have had at the date of acquisition so that the development potential of the land, if any, can be identified and the market value, unaffected by the proposal to acquire the land, determined. Only then will the compensation be just. The question raised by the respondent is whether this approach to the problem is correct. 71 Section 56(1)(b) requires any increase in the value of the land caused by the carrying out of improvements for the public purpose for which the land is to be acquired to be disregarded. Section 56(1)(c) requires that any value attributable to an illegal use of the land must also be disregarded. 72 As I have indicated s 56(1) has been considered and applied by this Court in many cases. It has also been considered by the Court of Appeal. The decision in Perry being of particular relevance. The position before the Environmental Planning and Assessment Act 73 It is convenient to commence the analysis of the relevant decisions with consideration of the decision of the High Court in San Sebastian, a case decided pursuant to s124 of the Public Works Act 1912 (NSW). Section 124 provided that compensation for land which has been compulsorily acquired should be assessed without regard to any alteration to the value of the land arising from the establishment of any public works upon, or, for which the land was resumed. Jacobs J who wrote the judgment, with which the other members of the High Court agreed, identified that the provision stated in statutory form a principle which has been developed in the cases independently of any statute - the Pointe Gourde principle: see Point Gourde Quarrying and Transport Co Ltd v Sub-Intendant of Crown Lands [1947] AC 565. 74 Jacobs J recognised that because the valuation of land in the ordinary case is based upon market value, if the proposed public purpose has become public knowledge before resumption "the market value at the time of resumption will probably reflect by way of increase or decrease the possibility or likelihood of resumption for that public purpose. Therefore that value cannot be accepted." p 205-206 75 Section 124 was enacted long before statutory planning. In San Sebastian the High Court was confronted by the problem of the impact of a prospective change in the zoning to facilitate the development of public housing which operated to deny the land any potential for commercial development. Prior to its acquisition the owner had been pursuing a proposal to develop the land for a private hospital. 76 Jacobs J solution to the problem was expressed in the following terms: "With the actual market value at the time of resumption as the starting point it is then necessary to determine whether that value has been depressed or elevated by the market's foreknowledge of the possible or likely purpose and consequent resumption. It is therefore inevitable in such circumstances that the public purpose has to be taken into account in the process of valuation but it can be taken into account only for that purpose. "p 206 (emphasis added) 77 Jacobs J recognised that there may be difficulties in applying these principles when planning legislation imposed restrictions on the use of land. However, his Honour said: "Where there is a direct relationship between the restriction on land use and the proposed establishment of the public works the effect on value of the zoning or restriction ought to be ignored." p 206 78 Whether compensation should be paid on the basis that the land was "zoned" for the public purpose, his Honour said depended upon "knowing whether there was any connection between the zoning (for the public purpose) and the subsequent resumption." p 207 79 Jacobs J also addressed the problems which had been considered in The Minister v Stocks & Parkes Investment Pt Ltd (1972) 129 CLR 385, a case decided after statutory planning had been adopted in New South Wales. The difficulty in that case was that there was a planning scheme which would ultimately control the use of the land which was still in the course of preparation at the date of acquisition. In these circumstances, Jacobs J said "the question may arise whether, irrespective of any public purpose existing or anticipated, the planning scheme would be likely to zone the lands in a way which in a general sense was related to the kind of purpose for which the land might be resumed. At the stage of preparation of a planning scheme zoning for such purposes is a possibility which cannot be ignored. At the same time a particular designation in a proposed planning scheme which reflects an intended use for a public purpose cannot be ignored." p 207 80 In Stocks & Parks the relevant land was resumed for a State school within a large area which was undergoing detailed planning so that it could be released for urban purposes. The High Court held that although the proposal to establish a State school had to be ignored, because the planning process had not been finalised the market value of the land had to reflect the possibility that the land being suitable for the purpose may, nevertheless, be zoned to facilitate open space or a school. In other words when valuing the land it was necessary to identify the judgment which the market place would have made about the potential of the land, but always leaving aside any potential for its use for a purpose of the State. For this reason in San Sebastian Jacobs J said when speaking of Stocks & Parkes "in the circumstances it was proper to take the proposed zoning of the land into account not because the site was intended for a public purpose but because the zoning was part of the overall planning of the area which did not envisage that the land would be used for residential subdivision." p 209 Of course, if the only impediment to the land used for residential subdivision was a desire to see it used for a public purpose, being a purpose of the State or Local Governmen t, the position would have been different and the land would have been valued in a manner which reflected its residential potential. 81 In his reasons for judgment Jacobs J refers to the hypothetical circumstance of land which was zoned open space, which may have depreciated its value, without the intent or anticipation that it be required for a public purpose. In these circumstances his Honour suggests that s 124 would not have protected the land owner who would have to accept compensation at the lesser value, even if, as would often be the case in a "greenfields" location, there was little to distinguish it from surrounding land which had been zoned residential, except, perhaps that it was in a central location or was otherwise readily accessible from the land to be released. I consider this problem further below in light of the legislative changes which followed San Sebastian. 82 In San Sebastian it was apparent that, although previously zoned commercial, the land was likely to be zoned residential under the new planning scheme when made. Jacobs J said that when identifying the elements relevant to the value of the acquired land the important factor was "what would have led up to such a variation of the Planning Scheme. If independently of the proposed resumption for the purpose of public housing the land was found likely in the varied scheme to have been zoned residential … that would have been a most important finding" and "the fact that the land would probably have been zoned in a manner similar to its proposed zoning under the draft interim development order would only be of significance if, contrary to the facts, that zoning would have been regarded as likely to occur independently of the proposed purpose of public housing and consequent resumption." p 211 The impact of the Environmental Planning and Assessment Act 83 The Environmental Planning and Assessment Act was enacted in 1979, some four years after San Sebastian was finally resolved. It is not difficult to identify that the legislative drafter recognised that with a new system of planning, attention should be given to the formula of words controlling the compensation to be paid to an owner whose land was taken for a public purpose where the land was controlled by a planning instrument. This was done in s116 of the Act, although the formula of words chosen did not deal with all of the significant issues. 84 Section 116 of the Environmental Planning and Assessment Act was in the following terms: 1. " (1) Where land reserved by an environmental planning instrument pursuant to section 26(c) or proposed to be reserved by a draft environmental planning instrument is resumed or appropriated, the value of that land shall be determined as if it had not been so reserved or proposed to be reserved. (2) Where - (a) land reserved by an environmental planning instrument pursuant to section 26 (c) is resumed or appropriated for the purpose for which it is reserved; and (b) that land was at the date of resumption or appropriation used by the claimant as his place of residence, then, in ascertaining compensation payable in consequence of the resumption or appropriation, the Court may award additional compensation in respect of - (c) the amount (if any) by which the cost to the claimant of relocating his residence in other accommodation would exceed the value of the land referred to in sub-section (1), on the assumption that the other accommodation is equivalent to or comparable with the accommodation on the land so referred to; and (d) solatium for the necessity to relocate his residence." 85 Although when determining compensation s 116 provided that a reservation for any of the many public purposes in s 26(c) was to be ignored it did not in terms indicate what assumption if any had to be made as to the potential of the land, including any zoning, when determining its value. This was a significant omission which Hemmings J considered in Pamalco Pty Ltd v Minister Administering the National Parks and Wildlife Act 1974 [No 3] (1991) 71 LGRA 441. His Honour pointed out neither s 116 nor the reasons in San Sebastian explain the nature and extent of the planning controls which are deemed to replace those which must be disregarded. After considering other alternatives his Honour decided that it was appropriate to find that the land "is deemed to be subject to (the) planning controls which would have applied had there never been any intention to resume." p 448 Many cases have been decided on that basis see eg Wimpey Construction UK Limited v The Minister (1983) 53 LGRA 75; Housing Commission of NSW v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378; Brooks v Minister for Planning and Environment & Anor (1988) 68 LGRA 91; Carson v Minister for Planning and Environment (1990) 70 LGRA 215); Griffiths City Council v Polegato & Anor (1990) 20 NSWLR 696; Blacktown City Council v Lasseter (unreported, Court of Criminal Appeal, 5 December 1996). The expression which came into common use was to identify the "underlying zoning." 86 It is important to remember that the Environmental Planning and Assessment Act was an endeavour by the legislature to provide a comprehensive planning system. An attempt was made to recognise and deal with all of the problems which had been experienced in the planning mechanisms formally provided by Part XIIA of the Local Government Act 1919. One identified problem was the impact on a landowner, which could be financially devastating, of having their land "zoned", under the nomenclature of the Act "reserved" for a public purpose, without there being an obligation in the public authority to acquire it. This dilemma was resolved by s 27(1) and s 26(c). The relevant provisions are as follows: 1. " 27(1) Where an environmental planning instrument reserves land for use exclusively for a purpose referred to in section 26 (1) (c), that environmental planning instrument shall make provision for or with respect to the acquisition of that land by a public authority unless the land is owned by a public authority and is held by that public authority for that purpose. 26(c) reserving land for use for the purposes of open space, a public place or public reserve within the meaning of the Local Government Act 1993 , a national park or other land reserved or dedicated under the National Parks and Wildlife Act 1974 , a public cemetery, a public hospital, a public railway, a public school or any other purpose that is prescribed as a public purpose for the purposes of this section, 87 The inclusions of these provisions in the Environmental Planning and Assessment Act not only provided a fair outcome for affected owners but reflected the practical reality of the modernised planning system. Whereas it may have been theoretically possible in San Sebastian to hypothesise that land might be "zoned" for a park or open space without it being, at least ultimately, brought into public ownership, after the new leiglsation this was inconceivable. Even in a "greenfields" site, if land was identified by the planners as suitable for open space or some other public purpose the inevitable expectation was that it would be owned by the "public", either State or Local Government and s 27(1) would apply. This reflected a fundamental objective of the Act, being "the orderly and economic use of land." If a facility such as a private school or, perhaps, a private hospital was contemplated provision was usually made which permitted that facility on land zoned residential or commercial, where a variety of uses would be permissible and the land would have a value in the market place which effected its potential for development for that range of uses. The position may have been different if a planning instrument was made for an already developed area where it would be likely that a "special use" zone would be given to an existing private school, private hospital or similar facility. However, such a "zoning" would be less likely to affect the value of the land where it was already being used for the purpose identified in the planning instrument. The Land Acquisition (Just Terms Compensation) Act 1991 88 Section 116 was itself repealed when the Land Acquisition Act was enacted in 1991. The impact of any "reservation" or zoning for a public purpose is now addressed through s 56(1)(a) which seems to me to be wider than s 116. The market value must now be determined at "the date of acquisition" (s 55(a)) disregarding "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." (s 56(1)(a)) The reference to the date of acquisition is not surprising but is important. 89 With respect to zoning the steps seem to me to be the same as those required by s 116. If the land has been reserved or zoned for a public purpose that reservation or zoning must be set aside. In order to establish the market value of the land at the date of acquisition, disregarding the influence of any reservation or zoning imposed for the public purpose, it is necessary to identify the planning controls which would have been imposed, at the date of acquisition, absent the proposal to carry out the public purpose. In San Sebastian it was necessary to ignore the prohibition which had been imposed on the use of the land for a private hospital and assume that the zoning permitted consent for that use to be granted. The same approach was adopted by Hemmings J in Pamalco. Perry's case 90 The relevant provisions of the Land Acquisition Act were comprehensively considered by the Court of Appeal in Perry , a decision primarily concerned with the steps necessary to identify the "scheme" underlying the acquisition of the relevant property and the relevance of the decisions in Raja Vyrichera Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] AC 302 and Pointe Gourde Quarrying & Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565. However, the analysis of the legislation by Handley JA with whom Powell JA agreed and Hodgson JA generally agreed is of general application. 91 Handley JA identified that s 56(1)(a) embodied both the principle stated in Spencer v The Commonwealth (1907) 5 CLR 418 (found in the first part of the definition) and the principles in the Raja case which are embodied in paragraph (a) of the definition. 92 For the purpose of the present matter it is only necessary to examine his Honour's reasoning in relation to para (a). With obvious approval his Honour identifies the fact that Pointe Gourde was applied in Rugby Joint Water Board v Shore-Fox [1973] AC 202 and again in Fletcher Estates (Harlecott) Ltd v Secretary of State for the Environment [2000] 2 AC 307 where Lord Hope said: "The whole question must be approached upon a consideration of a state of affairs which would have existed if there had been no scheme." p 315 93 Because the land must be valued at the date of acquisition it is at that date that the hypothetical state of affairs must be identified. The effect both direct and indirect of that scheme must be disregarded and the land valued having regard to the hypothetical "state of affairs." 94 It seems to me that this was the task which the High Court required to be undertaken in San Sebastian. Once it had been identified that the proposed zoning of the land as residential "was a step in the resumption process" it had to be set aside and the land valued having regard to the uses which would have been permitted, but for the proposed public purpose. Because, having regard to the facts of that case, it was only necessary to consider whether a private hospital would have been permissible, statements of general application were unnecessary. As Jacobs J acknowledges the appropriate conclusion may have been that, irrespective of the proposal for public housing, the land would have been zoned residential, in which event the land would be required to be valued as residential land. However, as it happened, the trial judge's findings precluded that option and the land was required to be valued on the basis that development at least for a private hospital, could be approved (see the discussion at p 212). 95 In San Sebastian, Jacobs J identified that different parcels of land in a given area may have natural features which dictate their ultimate development potential. However, where land is acquired for a public purpose, it will be in only limited cases where that purpose reflects a purpose for which it would have been zoned but for an ultimate intention to bring it into public ownership. However, even then, experience indicates that when "greenfields" areas are being developed in Sydney an active private market will often exist for land which is flood prone or otherwise of high conservation value which is traded by developers so that they can use it to meet obligations under s 94 of the Environmental Planning and Assessment Act . Furthermore, as s 27(1) makes plain, if land is reserved for the relevant purpose provision must be made for its acquisition. These provisions are part of the integrated process of orderly planning which ensures just compensation for the person whose land is taken to provide for a general community need. 96 Accordingly, if land which would otherwise have had residential potential and would have been zoned for this purpose is identified and acquired for a public park, compensation would be payable reflecting the fact that it would have been zoned residential and ignoring its zoning for a park even though suitable for that purpose. If, however, the land is low lying and without economic development potential its market value would reflect that diminished potential. 97 This analysis seems to me to be faithful to the reasons of Jacobs J in Sans Sebastian and Handley JA in Perry. The decision in Walker Corporation 98 In Walker Corporation this Court was required to determine a claim for compensation for a large waterfront site. The trial judge found that, if remediated (it was known to be contaminated with hydrocarbons) having regard to s 56(1)(a) the site had a market value at the date of acquisition of $60 million. The land had been acquired for use as open space, an objective which the Leichhardt Council had been pursuing over a number of years. Although this proposal was initially opposed by the State Government, the State's position changed, and it was the State which acquired the land. 99 The land had been used for many years as an oil terminal and, consistent with this use was zoned industrial. However, the commercial viability of that use had changed and the owners had sought to change the zoning to facilitate residential development. Being waterfront land on Sydney Harbour and in relatively close proximity to the city, it was highly suitable for this use. 100 The Council had resisted the change to a residential zone and sought to maintain a form of industrial zoning, which Basten JA records was the position adopted "with the apparent intention that any change of use should commit the bulk of the land to open space." 101 As I understand the judgment of Basten JA the primary argument for the Authority in the Court of Appeal was that as the Council was not the authority which either acquired the land or carried out the project its actions, even if they were intended to maintain an industrial zoning to facilitate the open space proposal, were not actions which had decreased the value of the land in the relevant sense. They were not actions taken in the carrying out or proposal to carry out the relevant public purpose, which was the purpose of the State. 102 The land owner took a different position and, again as I understand it, argued that the appropriate finding of fact was that the actions of the Council were part of the carrying out of the public purpose for which the land was acquired. The ultimate submission of the owner was that as the trial judge had found, as a matter of fact, that but for the proposal to create public open space the land would have been rezoned to residential before the date of the acquisition, that ended the debate. 103 It does not appear that these questions were resolved by the Court. Other issues assumed greater importance. 104 Basten JA begins his analysis by identifying that, whatever the common law may have required s 55 and s 56 provide the statutory statement of the approach to be taken to ascertaining the market value of land. His Honour points out that the first step in the process of introducing the qualification provided by s 56(1)(a) is to identify the "scheme for which the property is compulsorily acquired" [34]. 105 However, his Honour points out that there is no reference to a "scheme" in s 56 where the expression used is "the public purpose for which the land was acquired." Basten JA suggests that the statutory expression is more complex, although as the cases to which his Honour refers would seem to demonstrate, it may be that asking the question, "what was the scheme", gives rise to the same factual questions as the statutory formulation. It was the question asked by Handley JA in Perry. 106 As I have already indicated his Honour passes the observation that the statutory formulation does not "in its terms, --- require the disregarding of a failure to do something, which might have resulted in an enhancement of the value of the claimant's land, prior to the date of acquisition"[39]. However, I do not understand his Honour to find that this is not the correct approach to the application of s 56(1)(a) when the facts require it. His Honour says: "In order to apply these principles in the context of the Land Acquisition Act, it is necessary to replace references to "the scheme" with reference to "the public purpose for which the land was acquired". That public purpose, although expressed in the singular, might well be multi-faceted, as the broad functions of the Foreshore Authority in the present case demonstrate. That being said, the cases demonstrate that some care must be given to identifying the relevant purpose, even where lands are resumed sequentially, by the one acquiring authority in pursuit of what may, in broad terms, be described as the component parts of an overall project. Alternatively, the concept of a "scheme" may in some circumstances better equate with a "proposal" for carrying out public purposes. That apparently minor variation in terminology may be significant because s 56(1)(a), as noted above, appears to contemplate on the one hand conduct which constitutes the carrying out of a public purpose and, on the other, the existence of a "proposal" to carry out a public purpose: it does not expressly refer to steps taken in the development of a proposal or steps which are merely preparatory to the carrying out of the public purpose. Nor, in its terms, does it require the disregarding of a failure to do something, which might have resulted in an enhancement of the value of the claimant's land, prior to the date of acquisition." [39] 107 Basten JA commences his discussion of the authorities by reference to Spencer v The Commonwealth (1907) 5 CLR 418 and consideration of Royal Sydney Golf Club v Federal Commissioner of Taxation (1957) 97 CLR 379. The latter case was, as his Honour observes, a decision with respect to the value of land for taxation purposes where it was necessary to assess how the market place would have assessed the value of the land knowing not only of the existing restrictions on development imposed by the current zoning, but also the steps which could have been taken to change that zoning and the likelihood of those steps bringing about the desired result. The valuation exercise required the assessment of the likelihood of the authorities reacting in particular ways being, of course, the exercise which both vendor and purchaser would traditionally undertake in the market place. There is a question whether this exercise is relevant to s 56(1)(a) given that the task required by that Act has traditionally been understood to require the construction of a hypothesis which disregards relevant events which are known to have happened. Of course, once the zoning which would have existed is identified the assessment of market value may require an analysis of the market's view of the prospect or chance of having that zoning changed to a more favourable zoning. I infer that it was for this purpose that his Honour intended to refer to Royal Sydney. The problem of Murphy's case 108 Basten JA draws attention to the discussion in the The Crown v Murphy (1990) 64 ALJR 593 where land was acquired for an environmental park proposed for Mon Repos Beach near Bundaberg. The beach was the site of a world renowned turtle rookery. Prior to the resumption the land was sought to be rezoned to allow subdivision but this was refused because of the detrimental effect it would have on the turtle rookery. 109 The High Court held that one fundamental attribute of the land which affected its value was its relationship with the turtle rookery. In that respect the trial court had found as a matter of fact that the existence of "the turtle rookery adjacent to the land was an attribute of the land which affected its value to the extent that the existence of the rookery itself militated against rezoning." Accordingly, the court held that this fact, which was an attribute of the land, had the consequence that its value had to be assessed on the assumption that the market place would not have attributed any money sum for the prospect of rezoning. 110 To my mind, considerable care is necessary when applying this decision. There will be many parcels of land with inherent characteristics which make them suitable for some public purpose as well as for many private purposes. However, in some cases, of which Murphy is an example, the inherent characteristics of the land have the consequence that in the ordinary course the land would not have been given a zoning which permitted private development. Irrespective of whether the land was to be brought into public ownership required by the public the fact that it adjoined the rookery had the effect that it would not be allowed to develop. 111 However, if the reason which limits the potential of the land is the intention to bring the land into public ownership and use it for a public purpose (the "scheme") the development potential of the site must be assessed without consideration of any influence from that scheme. Accordingly, if the land in Murphy was desired by the resuming authority for no other purpose but to allow public access to view the rookery and the land played no part in the maintenance of the eco-system which included the rookery, and its development would not have adversely affected the rookery, its value would have to be assessed without consideration of the presence of the rookery. 112 The difficulty in applying Murphy is evident in the example related by Basten JA in [63]. The whole paragraph is as follows: 1. " That principle can, however, operate to the disadvantage to the landowner. Land may have a characteristic which diminishes its value, or constrains an increase in value. The value of the land, with all its inherent characteristics, will depend on its physical location, whether there are surrounding developments and a host of other considerations, including social preferences and environmental factors. One may take, by way of example, an hypothetical block of land on the outskirts of an expanding city. The land in question is low-lying, but is surrounded by higher ground. All the land is available for residential development, but the higher ground is developed first because it is seen as more attractive to potential purchasers. The low-lying ground is then identified as part of a flood plain and is found to be subject to inundation after heavy rain. The local council rezones the land to prohibit residential development. The land is capable of commercial development so long as it is drained and the level is raised. A development application is required to be accompanied by an environmental impact statement. Preparation of that statement identifies that portion of the flood plain as having special conservation significance. Accordingly, the council imposes constraints which prevent any significant development and brings the area to the attention of the State authority responsible for environmental protection. The limitations imposed by the council drastically reduce the potential uses of the land and hence its market value. Because of the conservation significance of the site, it is later resumed by the State authority for the public purpose of environmental protection." 113 Provided the circumstances are that the land has been zoned to prohibit residential development because it is inherently unsuitable for residential development, which I assume is the circumstance his Honour has in mind, the example reflects the approach in San Sebastian . The lack of suitability may derive from its potential to flood or its high conservation value or a combination of both. However, if the constraints have been imposed, as his Honour suggests they may have been, not because the land is inherently unsuitable for residential development but, because of its conservation value, and the council believes that the land should be denied its urban potential and brought into public ownership different considerations arise. In those circumstances it would be argued that the "scheme" consists of the desire to preserve the land for the purpose of environmental protection. Any zoning or reservation designed to further that purpose would accordingly have to be disregarded and the land valued having regard to its development potential, albeit as flood liable land requiring significant civil works before it could be used for residential purposes. 114 A situation close to that which his Honour hypothesises occurred in Lalic v RTA [2005] NSWLEC 430. In that case the acquired land was flood liable and I found that for that reason its release for urban purposes had been delayed. However, I was satisfied that by the date of acquisition, disregarding the proposal for the M7 roadway, the land would have been zoned so as to allow for its development for industrial purposes. However, to facilitate that development extensive civil works would have been required. I also found that because part of the land was of high conservation value its natural attributes would have meant that it would not have been permitted to be developed and another part would have been required to be developed as a "flood runner" to manage flood waters during times of flood. The industrial land was given a value which reflected its potential as industrial land and the other lands were valued at a rate which reflected the amount which the council was paying to bring similar lands into public ownership pursuant to its overall planning for the area supported by appropriate plans made pursuant to s 94 of the Environmental Planning and Assessment Act. 115 Basten JA identifies that the trial judge in Walker Corporation determined as a fact that the Council had been resolutely opposed to rezoning the site to permit residential development for many years. His Honour identifies the starting point of that opposition as being 1989. Although the land was only acquired in 2002 his Honour concludes that if the land had been compulsorily acquired in 1991 "it would have been appropriate to assess compensation by reference to the value of the site with its then current industrial zoning, but with an allowance for increased value referable to the prospect that approval might be obtained for residential use." [79] His Honour says that this is consistent with the approach adopted by Kitto J in Royal Sydney Golf Club. 116 It seems to me, with respect, that there may be some difficulties in this analysis. If at 1991 it was determined as a matter of fact that the maintenance of the industrial zoning was because of the desire by the acquiring authority to effect the "scheme" for which the land was acquired, and in the meantime maintain the industrial zone to inhibit redevelopment, it is difficult to see why the industrial zoning should not be notionally set aside and the question asked and answered "what was the inherent potential of the site and how would it have been zoned?" Having answered that question it would then be necessary to identify how the market place would have assessed the value of the land having regard to its identified potential. It may be that without the "scheme" the land may still have retained an industrial zoning and accordingly the valuation exercise may have required the identification of the assumption which the market would have made about the prospect of a rezoning for residential purposes. However, only in this limited respect is the task the same as that undertaken in Royal Sydney Golf Club. In that case the development potential was being considered having regard to existing controls which could not be ignored for the purpose of the valuation exercise. The position seems to me to be quite different when applying s 57(1)(a) where, depending on the circumstances, the existing controls must be set aside and the position "which would have existed if there had been no scheme" established. Applying Walker Corporation in the present case? 117 I turn now to para [86], [87] and [88] of the judgment. 118 The respondent submits that in [86] Basten JA should be understood as finding that the relevant question in the circumstances of that case, when determining the value of the land, was to ask what were the prospects of a zoning for residential purposes in 1989 in order to determine how those prospects have been further diminished by the date of the ultimate acquisition. It is submitted that only that impact is required to be set aside. 119 It seems to me there are difficulties in accepting this submission. 120 In my opinion, his Honour is concerned to ensure that once it has been determined that the zoning which actually exists at the date of acquisition should be disregarded, proper enquiry must be made as to the circumstances which would otherwise have existed at that date. Along with other matters that factual enquiry will be informed by an examination of the circumstances which existed at the time when the relevant public purpose was first initiated. In the circumstances of Walker Corporation his Honour says that it was not apparent from the trial judge's findings that all of the relevant questions including the circumstances which existed in 1989 had been addressed. However, each case will depend on its own facts. As his Honour points out because of the difficulties created by the conflicting views of the relevant authorities about the future of the land, Walker Corporation is an unusual case. And because the land was not given a residential zoning it was obviously relevant to consider the prospects of that zoning from the time the scheme was first initiated. 121 If, as was submitted by the respondent, Basten JA's observations in the identified paragraphs require an approach confined to a determination of the development potential of the land at the date when the public purpose is first known followed by an assessment of the impact of the public purpose on that potential at the date of acquisition, there may be some difficulties. Taking the facts of the present case where the public purpose became public knowledge in the early 1970s the prospect of urban development of the land at that time may have existed but realisation of that potential, if at all, was dependent on later decisions being made which allowed for Alstonville to further develop. The prospects of that happening in the early 1970s were at their highest uncertain and to assess the chance of it occurring extremely difficult. However, by the time the acquisition occurred, I have concluded that the urban potential of the land would have been recognised and, but for the public purpose of the roadway, the land would have been zoned to facilitate urban development. Because s 55 requires the value of the land to be determined at the date of acquisition it seems to me that it is accordingly necessary to identify the development potential including the zoning which would have applied to the land at that date, irrespective of the position which may have existed in 1973. 122 It is true that in [88] his Honour analyses the position by reference to a fact, assumed to be the position identified at the time the proposal was adopted, being that there was only a 25% chance, at that date, of a rezoning for residential purposes. If this chance reflects the fact that the council would have opposed the rezoning because it desired the land for a public purpose it would have to be ignored. If however, the market rated the chance at only 25% because of other inherent characteristics of the land, including its surroundings, the question would have to be asked whether, absent any proposal to acquire it for a public purpose, the prospect of obtaining a rezoning would have remained the same many years later when the land was actually acquired. Traditionally, this task does not require the assessment of a chance but, rather, the identification of the impact of the public purpose and the disregarding of those impacts so as to identify the "state of affairs which would otherwise have existed." It may be that once that exercise has been conducted the identification of the potential of the land, without any impact from the public purpose, requires an analysis of the assessment which the market place would have made of the possibility of maximising the development potential of the land including the prospect of rezoning. This may require an assessment of the percentage chance of obtaining a rezoning which gave the land a greater development potential than the zoning which it is concluded the land would have had but for the public purpose. However, this is a secondary step which is required after the state of affairs which, but for the public purpose, would have existed at the date of the acquisition has been identified. 123 In my opinion, the approach which I have indicated to be traditional is consistent with that required by San Sebastian and the principles approved by the Court of Appeal in Perry . Furthermore, it seems to me it is the only means whereby just compensation can be provided. If, in Walker Corporation, Basten JA has suggested a different approach to the problem in the circumstances of that case care would be necessary in accepting that his Honour has defined a principle of general application. I recognise that if Walker Corporation contains a ratio of general application, even if contrary to San Sebastian, I would be obliged to follow it ( Attorney General (UK) v Heinanman Publishers Australia Pty Ltd & Anor (1987) 10 NSWLR 86 at 189). However, it seems to me that if there is such a ratio it would conflict with Perry and because Perry is consistent with San Sebastian I would adopt an approach consistent with Perry. Applying the law to the facts 124 In the present case it is plain that the relevant land was acquired for the purpose of the motorway. I am of the opinion that by defining the line of the motorway any urban potential of the applicant's land, which included the land acquired and land up to the ridge to the south of the land acquired was lost. I am satisfied that but for the road proposal the urban potential of the land acquired and the land up to the ridge would have been realised and the land rezoned for urban purposes by the time the acquisition took place. This would have occurred in the 1989 Local Environmental Plan and the zoning would have been 2(a) Living Area. 125 I am also satisfied that the imposition of the catchment zone on the balance of the land up to the ridgeline was a consequence of the intention to redevelop the highway in its new location. It could not be justified on any other basis for most of the land does not fall to the catchment which is, of course, a reflection of the existence of the ridge. I do not believe that contamination of ground water would have been an issue. 126 If it be relevant to determine the prospect of a zoning for urban purposes when the highway proposal first became public knowledge some uncertainties are apparent. Although at that stage, no doubt, the market would have assumed that Alstonville would be allowed to grow, its ultimate size would not have been known. However, as I have identified the relevant land was attractive, could be efficiently serviced and was close to the town centre. The prospect of it being released for urban purposes in the early 1970s would, in my opinion, have been assessed in the market place to be a possibility although the timing would have been uncertain. 127 As I have indicated Mr Palmer's opinion was that the applicant's land, including the motorway land, would have been zoned catchment under the 1987 Local Environmental Plan. The applicant's position is that to the point of the ridge the land would have been included in an appropriate urban zone and made available for urban purposes. It was suggested by Mr Connelly that this would have been achieved by a line connecting survey features drawn approximately straight along the line of the ridge. This would have meant that some of the land incorporated in the urban zone would have drained to the catchment. Although this may have presented particular issues in the development of part or all of the lots which may have fallen within the catchment area, I believe that Mr Connelly's approach to the matter is correct. It is the approach which was adopted throughout the Shire when the Local Environmental Plan was being prepared and I am satisfied that it would have been adopted in this location. Individual problems would have been accommodated by confining or conditioning the particular form of any individual development. 128 Consideration was also given in the evidence and submissions to the position of the applicant's land in the event that I came to the conclusion that it would not have been zoned for urban purposes. The applicant submits that in this event it would have been zoned Rural 1(a) to the ridge line with the catchment zone beyond. This would have given a relatively confined area of land which, if given a rural zone, would have been available for more intense agricultural use and some other uses than if it had been zoned catchment. 129 This is a difficult question. However, an indication as to the likely outcome can probably be gauged from what in fact happened. Although the roadway land was zoned 9(a) the balance of the land, even though it did not all fall within the catchment, was given a catchment zoning rather than a small parcel given a rural zoning. To my mind, these areas of the additional land comprising the roadway zone was not such as would have led to a different decision being made. Accordingly, in the event that the land would not have been zoned for village purposes I believe it would probably have been zoned for catchment. 130 The argument which the respondent puts on this aspect is, of course, available to the applicant to reinforce the conclusion which I have reached in relation to the prospective zoning of the relevant land. Rather than exclude land which extended up to the ridge before the catchment from any effective use, in my opinion the planners would have concluded that the logical point for the town to stop on the southern extremity was at the ridge line separating the town from the catchment zone. This is further reason why it is appropriate to conclude that the ridge line would have formed the natural extension of the town, but for the proposed motorway. 131 The questions as now framed seek to draw a distinction between a decision as to the "prospect" of zoning 2(a) Living Area expressed as a percentage chance (said to be the approach required by Walker Corporation ) and the zoning which, on the balance of probabilities, would have existed, but for the road proposal, at the date of acquisition. Having regard to my findings in relation to the relevant events, I am satisfied that at the date of acquisition all of the relevant land would have been zoned 2(a) Living Area. That prospect would have been realised when the 1989 Local Environmental Plan was made. If it be relevant, there was a reasonable prospect of a village zoning in the early 1970s, the uncertainty arising from the question of whether the township would be allowed to significantly increase in size. However, I accept Mr Thorpe when he indicates that but for the roadway it is likely that the land would have been released for urban development by the middle of the 1970s. The critical matter is that once the location of the roadway was fixed any possibility of urban development of the relevant land was lost. 132 I answer the separate questions as follows:

Yes.
At the date of acquisition the prospect of it being rezoned 2(a) Living Area was highly likely and had been since at least 1989. In the early 1970s there was a reasonable prospect of the land being rezoned village.
At the date of acquisition the prospect of it being rezoned 2(a) Living Area was highly likely and had been since at least 1989. In the early 1970s there was a reasonable prospect of the land being rezoned village.
2(a) Living Area.
2(a) Living Area.

Smith v Roads and Traffic Authority of New South Wales

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Judgment (16 paragraphs)

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Legislation Cited (1)

Cases Cited (19)

Cited By (15)