SYDNEY HARBOUR FORESHORE AUTHORITY v WALKER CORPORATION PTY LTD

Environmental Planning and Assessment Act 1979 (NSW), ss 26, 27 LEGISLATION CITED: Land Acquisition (Just Terms Compensation) Act 1991 (NSW), ss 55, 56 Land and Environment Court Act 1979 (NSW), s 57 Public Works Act 1912 (NSW), s 124

Broken Bay Peninsula Pty Ltd v Minister Administering the National Parks and Wildlife Act 1974 [1997] NSWLEC 165 Housing Commission of New South Wales v San Sebastian Pty Ltd (1978) 140 CLR 196 Leichhardt Council v Roads & Traffic Authority (NSW) [2006] NSWCA 353 CASES CITED: Queensland v Murphy (1990) 95 ALR 493 Smith v Roads and Traffic Authority (NSW) [2005] NSWLEC 438 Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (2005) 63 NSWLR 407 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2004] NSWLEC 315

PARTIES: Sydney Harbour Foreshore Authority - Appellant Walker Corporation Pty Ltd - Respondent

COUNSEL: B. Walker SC/A. Galasso SC - Appellant D. Jackson QC/J Webster SC/I. Hemmings - Respondent

SOLICITORS: Deacons - Appellant Minter Ellison - Respondent

LOWER COURT JURISDICTION: Land & Environment Court

LOWER COURT MEDIUM NEUTRAL CITATION: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2006] NSWLEC 138

• 33 - IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40227/06 LEC 30024/03

HANDLEY JA BEAZLEY JA BASTEN JA

21 December 2006 SYDNEY HARBOUR FORESHORE AUTHORITY v WALKER CORPORATION PTY LTD [NO. 2]

On 26 September 2002, the Sydney Harbour Foreshore Authority ("the Authority") acquired an area of land at Ballast Point on Sydney Harbour from Walker Corporation Pty Ltd ("Walker Corporation"). The acquisition was preceded by an announcement by the Government on 19 February 2002 of its intention to acquire the Ballast Point site. At the time of acquisition, the land was zoned industrial under the Leichhardt Local Environment Plan 2000 ("the 2000 LEP"). The land would have had a higher value, if it had been zoned residential, which it never was. Previously, on 6 February 1992, Leichhardt Council sought funds from the Commonwealth and State Government to acquire the land and identified Council's first priority for the site as being "open space". However no funds were forthcoming and the site remained zoned for industrial use until its acquisition.

Proceedings for the assessment of compensation under the Land Acquisition (Just Terms Compensation Act) 1991 (NSW) ("the Acquisition Act") were commenced by Walker Corporation in the Land and Environment Court ("the LEC"). On 9 July 2004, the LEC held, in its first judgment, that the market value of the land was $60 million on the basis that the Council would have rezoned the land "residential" had it not been of the view that the land would ultimately be rezoned "open space". On 27 July 2005, the Court of Appeal set aside the first LEC judgment and the matter was remitted to the LEC to be dealt with according to law.

This appeal was brought under s 57(1) of the Land and Environment Court Act 1979 (NSW) ("the LEC Act") against the second LEC judgment delivered on 4 April 2006 which attributed a 100 per cent prospect of rezoning the land "residential" and thus upheld the previous land value. The critical question was whether the Court below was correct to proceed on the basis that, for the purpose of the hypothetical sale, the land should be treated as zoned residential.

The issues for the determination by the Court of Appeal were, for the purposes of s 56(1)(a) of the Acquisition Act:

(i) whether a decision of a zoning authority not to change an existing zoning, in order to prevent land being developed in a manner inconsistent with a possible future use as public open space, could be part of: (a) the carrying out of the public purpose to allow use as public open space, or (b) the proposal to carry out that public purpose, where the land is later acquired for that public purpose by a resuming authority which did not, at the time of the decision of the zoning authority, have any proposal to use the land for that purpose; and

(ii) if yes to (i), whether the decision not to change the zoning, which prevented the land enjoying an enhanced value that the change would have allowed, could be said to cause a decrease in the value of the land?

Sub-section 56(1) of the Acquisition Act encapsulates the principle that the market of value of the land is the amount that would have been paid if sold at the time of acquisition, by a willing but no anxious seller to a willing but not anxious buyer. To apply that principle one must first identify relevant characteristics of the land. The critical characteristic in the present case is the zoning, which imposes a legal constraint on possible development and hence market value: at [11].

It is necessary to identify the content of any decision made by a statutory authority which is relied upon as constituting "the proposal" or part of "the carrying out of the proposal". The critical step is to determine whether the imposition or retention of that zoning was part of the carrying out of the public purpose or part of the proposal to carry out the public purpose for which the land was required: at [25], [60]. Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (2005) 63 NSWLR 407, applied; Housing Commission of New South Wales v San Sebastian Pty Ltd (1978) 140 CLR 196; Smith v Roads and Traffic Authority (NSW) [2005] NSWLEC 438, considered.

As the zoning authority was resolute over a decade in resisting attempts to have the land rezoned residential, or acquire the land, or rezone the land "public space" for the identified public purpose which would result in its acquisition, it is difficult to understand how the Council was "carrying out" the public purpose by its decision of 6 February 1992: at [32].

The Council, together with other individuals, organisation and trusts, were actively involved in seeking to achieve the dedication of the Ballast Point land as open public space. However, at a time when the State was unequivocally opposed to the idea, it is not possible, as a matter of law, to characterise the lobbying effort as part of "the proposal to carry out the public purpose" for which the land was acquired: at [39].

The precondition for notionally setting aside the industrial zoning in place at the date of acquisition was not established. The Court below erred in law in proceeding on the basis that it could notionally set aside that zoning. The contrary conclusion of the primary judge revealed an erroneous construction of s 56(1)(a): at [64].

1. The value of land may reflect potentialities which have not been realised. A proposal to carry out the public purpose for which the land is later acquired may be seen as likely to prevent that realisation, and hence diminish the value of the land. That decrease must be disregarded: at [18]. Queensland v Murphy (1990) 95 ALR 493, applied.

2. The structure of s56(1)(a) requires the valuer to disregard a change in the value of the land caused by a particular factor. The factor is identified in two ways, but by a composite expression, which despite having disparate elements, should be read as a whole: at [27].

3. Accepting for the purpose of argument, that the resolution passed by the Council to defer consideration of a draft LEP which would have led to the rezoning of the site, was a proposal for the purpose of s 56(1)(a), the primary judge erred by disregarding the Council's inaction instead of identifying the diminution in value caused by that inaction: at [43]. Housing Commission of New South Wales v San Sebastian Pty Ltd (1978) 140 CLR 196, per Jacobs J, applied.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40227/06 LEC 30024/03

HANDLEY JA BEAZLEY JA BASTEN JA

21 December 2006 SYDNEY HARBOUR FORESHORE AUTHORITY v WALKER CORPORATION PTY LTD [NO. 2] Judgment 1 THE COURT: On 26 September 2002 the Sydney Harbour Foreshore Authority ("the Authority") acquired an area of land at Ballast Point, Birchgrove, on Sydney harbour. The acquisition was preceded by an announcement by the Government on 19 February 2002 of a plan to acquire Ballast Point from its private owners and convert the site into a new harbourside park. The press release read in part: "The State Government will now commence negotiations to purchase Ballast Point on the Birchgrove peninsula. Currently, Caltex Petroleum owns the 2.5 hectare site. For some 80 years, Ballast Point has been used as a fuel depot, but the Government now intends to return the land to the public by creating a harbourside park. The acquisition will neatly complete the work begun by former Premier Jack Lang who, in 1926 - directly opposite Ballast Point - returned Balls Head to public ownership. The two headlands will now form permanent green beacons on the western harbour corridor." 2 Although it was true that, as at February 2002, the owner of the site was Caltex, on 27 September 1997, Caltex had entered into an option agreement with a company related to the Respondent, Walker Corporation Pty Ltd ("Walker Corporation") entitling that company or its nominee to purchase the land for the price of $16.5 million. 3 The option agreement required Caltex to undertake remediation works on the land, which had been polluted during many decades of industrial use. The option period ran from three months after completion of the remediation work for a period of three years. Caltex did not undertake the remediation work prior to the announcement by the Government of its intention to acquire the site in February 2002. 4 On 19 April 2002 Walker Corporation as the purchaser nominated under the agreement exercised the option, although the sale was not completed prior to the compulsory acquisition of the land by the Authority on 26 September 2002. 5 Compensation was payable to Walker Corporation for its interest in the land under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) ("the Acquisition Act"). Proceedings for the assessment of the compensation were commenced by Walker Corporation in the class 3 jurisdiction of the Land and Environment Court. The Authority contended that the market value of its interest was $10.2 million; Walker Corporation contended that it was $81 million. The Land and Environment Court held, in its first judgment, that the value was $60 million: see Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2004] NSWLEC 315 ("the first LEC judgment"). 6 The primary dispute has always been how the Court should approach the zoning of the land for the purpose of the calculation of market value required by the Acquisition Act. The first LEC judgment was delivered on 9 July 2004. The Authority appealed to this Court, but did not raise some of the arguments which have been raised in the present appeal. On 27 July 2005 this Court set aside the first LEC judgment: see Sydney Harbour Foreshore Authority v Walker Corporation Pty Ltd (2005) 63 NSWLR 407. 7 An appeal from a judgment of the Court in exercise of its class 3 jurisdiction is limited to an appeal on a question of law: Land and Environment Court Act 1979 (NSW) ("the LEC Act"), s 57(1). Error having been identified in the first LEC judgment, the matter was remitted to the Land and Environment Court to be dealt with according to law. 8 This appeal is brought under s 57(1) of the LEC Act against what will be described as "the second LEC judgment": Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2006] NSWLEC 138. (There was a further decision of the Land and Environment Court in 2004, dealing with compensation for disturbance, which is not relevant for present purposes.)

The statutory scheme 9 Section 55 of the Acquisition Act provides that the amount of compensation to which a person is entitled must be assessed having regard only to specified matters, one of which is "the market value of the land on the date of its acquisition": s 55(a). That concept is further defined in s 56 which provides: 56 Market value (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. 10 Reference to authority and principle may be of assistance in understanding the statutory purpose underlying a provision such as s 56(1) and may give guidance as to its application in particular circumstances. Thus, in a general sense, it is appropriate to note that it constitutes a statement of the Pointe Gourde principle: see 63 NSWLR 407 at [31]. Nevertheless, as the Chief Justice has recently explained in Leichhardt Council v Roads & Traffic Authority (NSW) [2006] NSWCA 353 the focus of attention must be on the language of s 56(1). 11 The introduction to sub-s 56(1) encapsulates the well-understood principle that the market value of land is the amount that would have been paid if sold at the time of acquisition, by a willing but not anxious seller to a willing but not anxious buyer. To apply that principle one must first identify relevant characteristics of the land. The critical characteristic in the present case is the zoning, which imposes a legal constraint on possible development and hence market value. 12 At the time of acquisition, the land was zoned industrial under the Leichhardt Local Environmental Plan 2000 ("the 2000 LEP"). That zoning had taken effect on 22 December 2000. Prior to that, a small parcel of the land was zoned residential, but the bulk of the land was zoned "waterfront industrial 4(c)" under the Leichhardt Planning Scheme Ordinance, created under the Local Government Act 1919 (NSW). 13 At the hearing of the present appeal, something was sought to be made of differences between the waterfront industrial zoning and the industrial zoning under the 2000 LEP. As a matter of form, the earlier Ordinance had adopted the approach that any purpose was permissible with consent, other than those identified as impermissible. The 2000 LEP took the reverse approach, identifying those uses which were permissible. The change in substance, which may well have been inadvertent, was that the new industrial zoning under the 2000 LEP appeared to preclude the limited activity which had been carried out by Caltex on the land immediately prior to the commencement of the 2000 LEP, although existing use rights may have allowed a continuation of those activities. However, nothing turns on either of the changes in the form or substance of the zoning: the critical question is whether the Court below was correct to proceed on the basis that, for the purpose of the hypothetical sale, the land should be treated as zoned residential. 14 The bulk of the land was not zoned residential at the date of acquisition, nor had it been zoned residential at any relevant time. It was common ground that the land would have had a higher value, if it had been zoned residential. Thus, if the maintenance of the industrial zoning by the Council formed part of "the carrying out of or the proposal to carry out" the public purpose for which the land was acquired, it was contended that the difference in value between the land with a residential zoning and the land with an industrial zoning was "caused by" that action of the Council and was to be disregarded, pursuant to s 56(1)(a). 15 The principles expounded in Housing Commission of New South Wales v San Sebastian Pty Ltd (1978) 140 CLR 196 continue to provide assistance in understanding the scope of this provision. The statutory provision in issue in that case, s 124 of the Public Works Act 1912 (NSW), required the value of resumed land to be assessed "without reference to any alteration in such value arising from the establishment of … public works upon or for which such land was resumed". Despite semantic differences, there is conceptual coherence between "the establishment of public works" and "the carrying out of the public purpose". Each provision requires the valuer to disregard any alteration in value. The element of connection in the Public Works Act was identified by the words "arising from", whereas the Acquisition Act uses the term "caused by". The latter term may require a more direct causal connection, but that is not critical for the present case. 16 The language of s 56(1)(a), not unlike that of former s 124, focuses on the carrying out of the public purpose and the proposal to carry it out. These are the matters which may have a relevant effect on market value. They may need to be distinguished from public opinion as to the desirability of the land for that purpose. They connote a degree of immediacy in the activity relied on as affecting the public purpose. There will be matters of degree and judgment involved in assessing particular circumstances, with the benefit of hindsight, knowing the purpose "for which the land was acquired". 17 However, dicta in San Sebastian should not be treated as some abstract statement of legal principle, divorced from the circumstances of the case. Thus, the claim for compensation in that case was brought by a landowner which had submitted development applications which sought to develop land in accordance with the zoning prescribed on 16 July 1971, which had not been determined, prior to the resumption on 18 July 1975. There had been no change in the zoning at the date of resumption: see p 201, par 17. It is clear from the statement of factors relied upon by the principal valuer as demonstrating a depressed market value, that the primary considerations taken into account were the negotiations between Commonwealth, State and local arms of government, which had commenced in December 1972: p 203, par 24 and par 11. When Jacobs J later noted that it was appropriate to treat "the whole subject matter of the establishment of the particular public work" as including "even urging by outside bodies that the public work should be established" he was referring to the imposition of 'green bans' by the Builders' Labourers' Federation in about February 1973. These were referred to among the "other factors" depressing value relied upon by the valuers, at p 203, par 25: see p 213. The relevance of action, whether formal or informal, taken by one or other arms of government acting in common purpose with the resuming authority and the effect of public urging to the same end, is one thing, whereas urging in favour of a purpose, resisted by the resuming authority, is quite another. Further, the context of the comments in San Sebastian regarding such urging, was a consideration of factors affecting market value and thus the factors which would affect the hypothetical seller and buyer. 18 As was noted in the first appeal, s 56(1)(a) does not in terms permit the judicial valuer to have regard to an increase in value which has not accrued at the date of acquisition. Of course, the value of land may reflect potentialities which have not been realised. A proposal to carry out the public purpose for which the land is later acquired may be seen as likely to prevent that realisation, and hence diminish the value of the land. That decrease must be disregarded. This concept was articulated by the High Court in Queensland v Murphy (1990) 95 ALR 493 at 496: "One purpose of this principle is to ensure that a resuming authority does not employ planning restrictions to destroy the development potential of the land and then assess compensation for its resumption on the basis that the destroyed potential had never existed: Melwood Units Pty Ltd v Commissioner of Main Roads [1979] AC 426 at 434."

The Court continued: "The principle applies in cases where there is a direct relationship between the planning restriction and the scheme of which resumption is a feature and extends to cases where there is merely an indirect relationship, provided that the planning restriction can properly be regarded as a step in the process of resumption: Housing Commission of NSW v San Sebastian Pty Ltd (CLR at 206-207)."

Issues 19 The questions of law which arise on this appeal are, for the purposes of s 56(1)(a) of the Acquisition Act:

(1) can a decision of a zoning authority not to change an existing zoning, to prevent land being capable of development in a manner inconsistent with a possible future use as public open space, be: (a) part of the carrying out of the public purpose to allow use as public open space, or (b) part of the proposal to carry out that public purpose, where the land is later acquired for that public purpose by a resuming authority which did not, at the time of the decision of the zoning authority, have any proposal to use the land for that purpose; and

(2) if yes to (1), does the decision not to change the zoning, which prevents the land enjoying an enhanced value that the change would have allowed, cause a decrease in the value of the land? 20 The first question is formulated so as to incorporate two elements which are central to the conclusion reached in the Court below. One is the factual finding (of which more will be said in due course) that at neither of the two key points in time (February 1992 and December 2000, when the Council addressed the zoning of the land), did the State Government propose to purchase or compulsorily acquire the land for the public purpose for which it was acquired in September 2002. The second element is that at no stage after the State Government formulated a proposal to acquire the land did any change in the zoning occur. 21 For the Respondent to uphold the judgment in the Court below, it must obtain affirmative answers to both questions. An affirmative answer to the first question would require that there be a proposal to carry out the public purpose or action taken for the carrying out of that purpose, in February 1992 or December 2000. But if the land had been acquired in 1992, the owner would have been entitled to its then market value reflecting its industrial zoning but allowing for the prospect of the State Government successfully rezoning the land for residential use as it proposed to do at that time. In December 2000 the market may have considered that there was no prospect of the land being rezoned to permit residential development either by the Council or the State Government. The first step in carrying out the public purpose may cause a decrease in value, but the relevant value is that of the land with its existing zoning, together with any premium that the market might previously have allowed for the possibility of a rezoning. That approach inheres in the Respondent's own case: it seemed to accept that if the first event causing a relevant decrease in value was the announcement by the Premier in February 2002, because earlier inaction by the Council was outside the scope of s 56(1)(a), then the judgment below, based on the assumption that the land was rezoned residential, could not stand. The same logic should apply at any earlier point, so that even if the first question is answered in the affirmative, the Respondent would fail at the second step. 22 Placing this reasoning in the language of s 56(1)(a), if the Council decision of February 1992 constituted part of "the proposal" to carry out the public purpose, the Court below should have inquired as to any change it caused in the value of the land at that time. Depending on market perceptions of the likelihood of the proposal being carried out, there may have been a decrease in value. If the decision not to rezone the land were part of the carrying out of the public purpose, it may have diminished any premium the market placed on the value of the land for the possibility that part or all of the land might be rezoned residential.

Inaction by the Council 23 As this Court stated in the first appeal, the section requires the judicial valuer to determine when the proposal was adopted, or when it was carried out, and the effect in either case on the value of the land. The appeal turns on whether the Court below adopted that approach. To an extent the Court in the second LEC judgment adopted or paraphrased findings set out in more detail in the first LEC judgment and reference will be made to both. 24 In considering the role of the Council as the zoning authority, primary consideration was given by the parties to the second limb of paragraph (a), but it will be necessary to consider both limbs in considering whether the approach adopted by the primary judge is supportable as a matter of law. 25 It is necessary to identify the content of any decision made by a statutory authority, which is relied upon as constituting "the proposal" or part of "the proposal". A decision to adopt an initial zoning or to change the zoning will have a direct effect and may readily be seen as part of the carrying out of the public purpose. But in that case, as explained in the first appeal, it will be necessary to identify the connection between the zoning and the public purpose: 63 NSWLR 407 at [54]-[57]. This issue gains added significance where the zoning in place is not appropriate for the carrying out of the public purpose. 26 In the first LEC judgment, findings were made which did not directly reflect the statutory language. Thus, in adopting statements made in relation to a different statutory provision, his Honour noted at [78]: "In 1983 Cripps J, in the context of s 116 of the EP&A Act as it then was, recognised that where the purpose of a zoning of land in a particular way was to give effect to an intention that the land be acquired, it was not necessary to make the connection between a zoning for the public purpose and the subsequent resumption ( Wimpey Construction UK Ltd v The Minister (1983) 53 LGRA 75."

His Honour further stated at [114]: "If the council had not resolved to maintain the industrial zoning, the land would have been re-zoned and thereby released for residential development… . The industrial zoning decision decreased the value associated with the potential for residential development and therefore s 56(1)(a) of the Just Terms Act requires, for the reasons already explained in [78], the Court to disregard it."

His Honour continued at [117]: "As a consequence of my finding that the industrial zoning is to be ignored and that the underlying zoning would allow for residential development … ." 27 The use of language derived from cases concerned with general law principles, or other statutory provisions having a similar purpose, need not lead to error. However, there is a risk that the use of such language will divert the trial court from the analysis required by the statutory provision. That is what happened in the first LEC judgment, as this Court held on the first appeal. The structure of s 56(1)(a) requires the valuer to disregard a change in the value of the land caused by a particular factor. The factor is identified in two ways, but by a composite expression, which despite having disparate elements, should be read as a whole. 28 Pursuant to the second limb, on which emphasis was placed in the course of argument, the causal factor must be "the proposal to carry out the public purpose for which the land was acquired". This requires identification of the relevant public purpose, in the context of "the acquisition", which gives rise to the claim for compensation. There might be sequential proposals in relation to particular land, identifying different public purposes. They might be from different authorities, with the first proposal, which blighted the land, not proceeding and an acquisition resulting from a different proposal. 29 It may also be necessary to distinguish a reduction in value caused by the realisation that particular land had characteristics which made it amenable to a particular public purpose, which might affect its value absent any proposal to carry out the public purpose. In other words, identifying land as capable of being reserved for a public purpose, or even as having characteristics that made it desirable that it be reserved for a public purpose, would not necessarily involve a proposal to carry out the public purpose. 30 It is of some importance that the factor which affects the value of the land is carefully identified. One element is the acquisition. Another is the public purpose for which the land was acquired. However, it has been common ground at all stages that residential development would not be permitted without some land being set apart for public open space. That would reduce the value because the area available for residential development would be decreased, as was recognised in the valuation evidence based on a residential zoning. Although a development condition which required part of the land to be set apart, might effect the carrying out of the public purpose, it may not cause a relevant decrease in the value of the land, if it were not part of a proposal which involved the acquisition of the land. This would be the case if the market recognised that there was no chance of residential development being permitted on the whole of the land, and that some would have to be set aside for open space. 31 There are numerous cases in which a specific proposal by a resuming authority has caused a change in the zoning of the land and a diminution in its value: see, eg, Broken Bay Peninsula Pty Ltd v Minister Administering the National Parks and Wildlife Act 1974 [1997] NSWLEC 165. In other cases, the local council was the resuming authority. These cases, however, are unlikely to give rise to the question which arises in the present case, where the zoning authority and the resuming authority are different entities. 32 The primary zoning authority, the Leichhardt Council, was resolute over a decade in resisting attempts to have the land rezoned residential. However, it did not rezone the land open space, no doubt because it could then have been required to acquire it and lacked the funds to do so: see Environmental Planning and Assessment Act 1979 (NSW) ("EP&A Act"), ss 26(1)(c) and 27(1). It maintained the industrial zoning, as his Honour found, to "thwart" any development of the land inconsistent with its preference that it become public open space. It was this view of the Council which his Honour concluded constituted "the proposal" for the purposes of s 56(1)(a). Thus he explained in the second LEC judgment at [17]: "I find that the proposal to acquire the land was first adopted on 6 February 1992. … I find that the Mayoral Minute made 6 February 1992, following the preceding decision of the council in December 1991, was a clear and unequivocal decision which formed part of the proposal to acquire the land for the public purpose. I also find no subsequent facts or events, extraneous to the proposal, had the effect of increasing or decreasing the value of the land. Accordingly the consistent refusal to rezone the land for residential purposes and the maintenance of an industrial zoning must be disregarded." 33 Whilst rigid adherence to the language of a statutory formula may not guarantee absence of error, it is likely to focus the mind on the specific questions which arise. The first matter of concern is the repeated reference to "the proposal to acquire the land". What must cause a relevant change in the value of the land, is either "the carrying out of" or "the proposal to carry out" the identified public purpose for which the land was acquired. Given that the Council was, in 1992 and thereafter, resolute in not acquiring the land or taking the step which could result in acquisition of the land, namely zoning the land for the identified public purpose, it is difficult to understand how the Council was "carrying out" the public purpose by its decision of 6 February 1992. In order to determine whether this finding can be supported it is necessary to refer to the minute on which his Honour relied. 34 At that time the resuming authority had no proposal to carry out the public purpose. Although it did not exist until 1998, it was common ground that it was an arm of the State Government and that a proposal by the State Government before the Authority came into existence which it later adopted should be treated as a proposal by the Authority. However, in 1990-92, the Council and the State Government were at loggerheads over the future of five industrial sites on the Balmain Peninsula. The State Government attempted to make those sites, including the Caltex site, available for residential development. In August 1991, a draft Local Environmental Plan No. 81 had been prepared by Commissioners appointed by the Government. The proposal for Ballast Point appears to have involved the conversion of approximately two-thirds of the industrial land to residential, with the rest being rezoned open space. The Mayoral Minute of 6 February 1992 stated in relation to the Caltex site: "Council's first priority for this site is that it should all be open space, in accordance with sound planning principles and traditional policies of bringing significant harbourside land into public open space. Council, at its meeting of 10th December, 1991, resolved to seek funds from the Commonwealth and State Governments to acquire the whole Caltex site. Letters … sent to the Deputy Prime Minister (Mr Howe) and the Premier remain unanswered. In the meantime, Council has processed the 'in principle' plans, so that if Council's requests for funds are refused, the normal processes can continue. The draft LEP 81 for the Caltex site should be deferred until both Governments have responded to Council's request."

This was evidence for a proposal to acquire the land for the public purpose but a very provisional proposal which lapsed when the Council was not given the funds. 35 The contents of this document were not analysed in either LEC decision. Indeed, one of the difficulties with the first LEC judgment, identified on the first appeal, was that there was no clear identification of "the proposal to carry out the public purpose". In the first LEC judgment, the relevant Council meeting and Mayoral Minute were described at [88] in the following terms: "At its meeting on 10 December 1991 the council resolved to seek funds from the Commonwealth and State governments to acquire the whole of the Caltex site. At a Special Council Meeting on 17 December 1991 proposals in principle were adopted to allow for mainly residential development and open space on the contaminated sites, subject to DLEP 81 being deferred until both Governments have responded to the council's request for finance. The council held a Special Meeting on 6 February 1992 to consider a Mayoral Minute that identified the council's first priority for the Caltex site, that it should be open space and, therefore, DLEP 81 should be deferred until both Governments have responded to the council's request for funds. On 11 February 1992 the council submitted DLEPs for three of the Balmain sites under s 68(4) of the EP&A Act. DLEP 81 in respect of the Caltex site was excluded."

This issue was further dealt with, after referring to submissions by the parties, in the first LEC judgment at [110] and [112] in the following terms: "The council, as the initiating zoning authority, has consistently resisted any entreaty by the State Government, particularly after the recommendation of the Commission of Inquiry, to re-zone the land in order to recognise the pending demise of the industrial use. It has vigorously maintained a campaign to persuade one or other of the arms of government to acquire the land or to provide the requisite finance to enable the council to do so, so that it could be developed as public open space. … Ultimately the council was rewarded for its efforts when the State Government used the statutory vehicle, the SHFA, for resumption of the land. … The maintenance of the industrial zone as a holding zoning can be regarded as a means of freezing the development of the land until the council was in a position, directly or indirectly, to arrange for its acquisition for the public purpose by whatever means became available to it. It was ultimately successful in achieving that purpose vicariously."

The reasons continued at [112]: "[112] Contrary to the respondent's submission, I am satisfied the maintenance and extension of the industrial zoning from 1992 onwards and its reinforcement in 2000 are a step in the resumption process for the following reasons: (a) Although the zoning was not specifically for the public purpose, it maintained the status quo pending the council being able to arrange acquisition of the land for the public purpose; (b) It was instrumental in the successful execution of the proposal, and therefore critical to the accomplishment of the aim, to bring the land into public ownership as a harbourside park; … (e) It is not necessary that the zoning explicitly restrict the use to the purpose for which the land is resumed. It is sufficient if the zoning has the intended effect in practice of constraining development potential in the interim period pending resumption in the interest of facilitating acquisition.

[113] The scheme to make the land available as a harbourside park was initiated by the council and pursued by it consistently until the land was acquired following the announcement by the Premier on 19 February 2002. The scheme was initiated at the council meeting on 10 December 1991. Thereafter, the value of the land was constrained by maintenance of the industrial zoning in order to thwart any development for residential purposes as contemplated by DLEP 81."

This deserts the statutory language because once Federal and State funds were not forthcoming the Council had no proposal for it to carry out the public purpose, was not carrying out such a proposal by it, and was not acting jointly with the body that later acquired the land. The Council did not have any scheme that it would make the land available. 36 The Mayoral Minute concluded with recommendations, which his Honour appears to have held were passed at the special Council meeting on 6 February 1992. In relation to Ballast Point, the recommendation by the Mayor was in the following terms: "Defer submission of draft LEP 81 (Caltex site), under s 68 of the EPA Act, pending responses from the Australian and State Governments in relation to Council's request for funding to buy the Caltex site." 37 The letters referred to by the Mayor in the minute were in different terms, but to similar effect. That to the Deputy Prime Minister relevantly read as follows: "Dear Minister, RE: PURCHASE OF BALLAST POINT, BALMAIN, FOR OPEN SPACE Reference is made to previous correspondence to you from the member for Sydney, Mr Peter Baldwin and the Balmain Development Trust regarding the above and I have to advise that this matter was further considered by Council at its meeting of 10th December 1991. At this meeting Council endorsed and supported the submissions of Mr Baldwin and the Balmain Development Trust in this matter. As explained by Mr Baldwin, the Caltex site at Ballast Point is one of five major industrial sites on the Balmain Peninsula designated for rezoning. In this regard, Council considers that this site is a very significant headland on Sydney Harbour which ideally should be included in the Sydney Harbour National Park as an open space area for public enjoyment. Council believes that the site should be purchased for this purpose and supports Mr Baldwin's submission that the allocation of Ballast Point for parkland would be an efficient use of the area in terms of urban development as encouraged by the Better Cities Program. Accordingly, Council requests that funding be made available under the Better Cities Program for the purchase of Ballast Point for including in the Sydney Harbour National Park. I have also written to the Premier, Mr Greiner, requesting State funding assistance for the purchase." 38 The letter to the Premier was in similar terms, but omitted reference to the previous submissions received by the Deputy Prime Minister from the federal member and the Balmain Development Trust and omitted reference to the Better Cities Program, but sought funding from an alternative source. "It is noted that the State Government has established the Open Space and Heritage Fund as well as the Sydney Region Development Fund under the Environmental Planning and Assessment Act to purchase and/or develop Regional Open Space. Council believes that the significant position of Ballast Point demands the use of these funds to purchase the site for Open Space. Council therefore seeks your support for funding the purchase of Ballast Point for Open Space and inclusion in the Sydney Harbour National Park, utilising the Open Space and Heritage Fund and/or the Sydney Region Development Fund."

The request for federal funding was also noted. 39 Two inferences flow from this material. First, it demonstrates that the Council, together with other individuals, organisations and trusts, was actively involved in seeking to achieve the dedication of the Ballast Point land as public open space. In a general sense, it could undoubtedly be seen as "a proposal" for the use of the land for the public purpose for which it was ultimately acquired. However, at a time when the State was unequivocally opposed to the idea, it is not possible, as a matter of law, to characterise this lobbying effort as part of "the proposal to carry out the public purpose" for which the land was acquired. 40 After making his finding with respect to the effect of the Mayoral Minute of 6 February 1992, his Honour continued at [18] in the second LEC judgment: "Between 1992 and 2000 the council and the State Government were at odds in respect of potential residential development of the land. Accordingly, during that period, the actions of the council are the only matters to be disregarded for the purposes of s 56(1)(a) … as having the effect of decreasing the value of the land. The actions of the Government maintained the otherwise 100 per cent expectation of rezoning."

With respect, this passage demonstrates legal error. It is not the actions of Council which are required to be "disregarded": what is to be disregarded is a change in the value of the land. As long as the resuming authority was opposed to the Council's wishes for the land the Council's actions cannot be described as part of "the proposal" of the resuming authority for the purposes of the statutory formula. At that time the resuming authority had no proposal for the carrying out of the public purpose. More importantly, the "actions of the Council" cannot qualify as "the proposal" or part of the proposal. The actions of the Council, or anyone else, cannot be part of the carrying out of the public purpose for which the land was later acquired, at a time when the party later taking action did not intend to acquire it. 41 There is a further difficulty which arises from abandoning the language of the statute. Thus, what is to be disregarded is a change in value caused either by carrying out the public purpose or by the proposal to carry it out. There is something curious about the proposition that the relevant change in value occurred as a result of a step that was not taken in 1992, and again in 2000 and determining the value of the land, as if that step had been taken immediately before the date of resumption in September 2002. 42 On 17 December 1992 a special meeting of the Council considered a Mayoral Minute headed "Black Friday Draft Regional Environmental Plan". The proposed regional environmental plan was the latest in a series of steps taken by the State Government, as noted in the first LEC judgment at [83], to rezone Ballast Point for residential development. On 21 February 1992, the Minister purported to make a regional environmental plan whereby he became the consent authority for the site: first LEC judgment at [89]. The plan was declared invalid by this Court on 10 December 1992, but it would be remarkable if, prior to that date, the Council's "proposal" had to any significant extent diminished the value of the land for the purposes of s 56(1)(a). 43 After the setting aside of the first Regional Environmental Plan, the Minister purported to make a second Regional Environmental Plan on 24 December 1993: first LEC judgment at [91]. As his Honour further noted, Caltex lodged a development application for residential development of the site pursuant to that plan on 29 June 1994. Development consent was granted on 25 March 1995. That plan was declared invalid by this Court on 17 May 1995 and the development consent accordingly ceased to have effect. While the Minister appeared to be the consent authority, and, during any other period when the State Government wanted to make itself the consent authority, the Council's proposal would have seemed an empty threat. Yet if it is the actions of the Council, during this period, to which reference must be had, there is no finding of fact as to the decrease in value (if any) caused by the action or inaction of the Council with respect to rezoning the site. Thus, accepting for the purposes of this argument, that the resolution passed by the Council to defer consideration of a draft LEP which could have led to the rezoning of the site, was a proposal, within s 56(1)(a), the primary judge did not identify the diminution in value caused by that inaction, but disregarded it. Assuming that the dicta of Jacobs J in San Sebastian remain persuasive, since the enactment of s 56(1)(a), the approach adopted by the primary judge was in error. 44 The primary judge considered, as an alternative possibility, that the actions of the Council could only fall within s 56(1)(a), if there was "unity of purpose" between the Council and the resuming authority. At [17] in the second LEC judgment his Honour stated: "If unity of purpose is a prerequisite the time that the proposal was adopted was the date of the making of LEP 2000."

His Honour further held at [32]: "At all relevant times the council not only held relevant planning powers it also had the power to compulsorily acquire the land. The reason it did not exercise the latter was a lack of funds. The State Government also held relevant planning powers as well as the necessary powers of compulsory acquisition to complete the common purpose of the scheme to create a harbourside park. Notwithstanding that the powers were vested in separate bodies they each had the legal capability to carry out the public purpose on their own. Ultimately the common purpose of the local government and state bodies converged when the respondent acted to bring the land into public ownership." 45 The effect of these findings is not clear. In relation to the 2000 LEP, it appears that what his Honour meant by "unity of purpose" was that, by approving the 2000 LEP, in December 2000, the Minister adopted the industrial zoning as appropriate. On the other hand, the statement at [32] seems to recognise that the State Government did not itself adopt the proposal to carry out the public purpose until shortly before February 2002. If his Honour had been of the view that the State Government adopted a proposal to carry out the public purpose of making the land available for public open space in December 2000, one would assume that he would have said so. Rather, it would seem that he adhered to the view identified in [101] of the first LEC judgment (set out at [47] below and referred to in the second LEC judgment at [9]-[11]). As his Honour noted in the first LEC judgment at [98], at about December 1999, Walker Corporation had developed a proposal for "waterfront light industry development in conjunction with open space and a small residential use adjoining the main Ballast Point site". The Director in the Department of Urban Affairs and Planning ("the Department") noted on 18 January 2000 that Walker Corporation had apparently postponed its large scale residential development and stated that it was "premature for the Minister to commit to any particular solution for this site, or action by the State Government". 46 On 21 August 1998, "State Environmental Planning Policy No. 56 - Sydney Harbour Foreshores and Tributaries" had been made, pursuant to the Environmental Planning and Assessment Act. The aim was to establish a clear set of "guiding principles" for the development of all land on those parts of the foreshores to which the policy applied: cl 2(a). Further, it required the preparation of "master plans" for strategic foreshore sites. Those sites were identified in Schedules 1 or 2 of the policy, and, except with the approval of the Minister, development consent could only be granted if there were a master plan for the land and the development was consistent with the master plan: see, cl 11 (Schedule 1) and cl 14 (Schedule 2). The Minister was the appropriate authority for adoption of a master plan for the land in Schedule 1 and the relevant Council was the appropriate authority for Schedule 2 land: cl 21. The Caltex site at Ballast Point was originally listed in Schedule 2, but on 19 February 2002, it was listed in Schedule 1 and preparation of a master plan was put in train. 47 At about the same time as the 2000 LEP, the Minister issued a document entitled "Sydney Harbour Regional Action Plan". It appears to have had no legal effect under the EP&A Act, but identified "priority projects", one of which was the Caltex site. It required the establishment of a "framework plan" for each site. A draft framework plan for Ballast Point was prepared in September 2000. Bearing in mind the distinctions between the framework plan and the master plan, it is convenient to set out the findings of fact made in the first LEC judgment at [101]-[103]. "[101] The Department identified the master planning process as involving an assessment of the land use potential of the site and alternative land use options. It was suggested by the Director of the Urban Design Advisory Service that a Steering Committee consisting of the council, DUAP and Walker Corp commence work in February with completion and a public exhibition in September. By September 2000 a draft framework plan for Ballast Point had been developed by the Department. The draft framework plan is non-committal in respect of the future land uses and possible re-development opportunities, except to say that any proposals for re-development for the site should comprise a significant element of public open space and that an element of the site should be retained for harbour uses to best utilise existing infrastructure. … [102] In a submission to the Premier on 18 October 2000 the Sydney Harbour Foreshore Authority ('SHFA') sought to have the Caltex site at Ballast Point incorporated within the SHFA area boundary by transferring it to Schedule 1, thereby making it a site of state significance and replacing the council with the Minister for Urban Affairs and Planning as consent authority. The primary goals were identified as to increase public access to the harbour foreshore and in addition to create a new park and open space to build on the maritime heritage of the site by providing opportunities for activities related to the working water front. The submission also recognises that it would also enable compulsory acquisition by the government. The background briefing in the submission referred to a proposal by Walker Corp to build 140 luxury apartments on the site, the draft Master Plan for an industrial option and the ongoing commitment of the council to its position that nothing apart from industrial use should be permitted. By December 2000 the Government had commenced preparing a framework plan for the site, together with 23 other locations. LEP 2000 was made on 22 December 2000. [103] In March 2001 the option of the State acquiring the site in order to 'unlock this strategic harbourside site' was canvassed in an internal briefing note to the Chairman of SHFA. The note was prepared as a precursor to a discussion with Mr Laing Walker. Representatives of Caltex and McRoss met with the Minister's delegate on 2 May 2001 when the following three options were suggested for moving forward on the site: (1) Purchase by SHFA; (2) Proceed with Industrial Master Plan; or (3) Modest residential development as part of a residential/mixed use option after transfer of the site from Schedule 1 to Schedule 2 under SEPP 56."

(The last reference to the Schedules appears to be a typographical error: the transfer, as his Honour noted at [102], was from Schedule 2 to Schedule 1.) 48 The SHFA briefing note of 16 March 2001 noted: "DUAP have suspended all work on this framework plan pending SHFA's discussions with Walker. Premier's Department have told Walker that the site is not a priority." 49 From a minute of 1 November 2001, it appears that a further meeting was held between departmental officers and representatives of Walker Corporation and its planning consultant on 25 September 2001. That document noted: "At that meeting various issues regarding the site were discussed. This included the Minister's preference for open space; and the purpose and content of any draft framework plan for the site (for example, as a Government statement of intent). The proponent's request to review and revisit the scope of the draft framework plan was rejected. However, the proponent was advised that if the Minister agrees to exhibit the draft framework plan the proponent would have an opportunity to make comments like any other stakeholder in the site, such as Council and the community. … DUAP is now keen to have the embargo lifted on the draft framework plan. This would allow its inclusion in the Sharing Sydney Harbour - Regional Action Plan, Update 2001 and enable public exhibition of the draft framework plan prior to any further master planning. The lifting of an embargo requires the Minister's consent."

A recommendation to the Minister incorporating a lifting of the embargo and public exhibition of the draft framework plan was made, but not signed by the Minister. 50 A departmental memorandum dated 8 November 2001 and headed "Ballast Point - Confidential" noted: "The Minister's stance on preferred land uses for this site has not changed. He wishes to see the site transformed into public open space (with a small element of maritime uses). SHFA are currently investigating options to help achieve the Minister's objective. This includes compulsory purchase from Caltex, the owners of the site. DUAP are currently preparing a briefing note on the options for rezoning the site to help achieve the Minister's objective. Caltex want to submit a DA (with EIS etc) and have the requirement for a master plan waived by the Minister. … Caltex has made it known they see the Ballast Point site as an alternative HQ for the commercial arm. … Leichhardt Council: have contacted me - in confidence - to state they believe that [Walker Corporation] &/or Caltex are about to submit a draft master plan for the site. They are worried that DUAP and [Walker Corporation] have 'done a deal' to agree residential development on the site. …" 51 Although the primary judge made no finding of fact in relation to the events of November 2001 - January 2002, his Honour did note a letter from the Council Mayor of 22 January 2002 requesting State Government intervention. He continued at [105]: "Between the date of that letter and 5 February 2002 the Chairman of SHFA foreshadowed a decision by the Government to acquire the site for a park. On 11 February 2002 it was decided to transfer the site from Schedule 1 to Schedule 2 under SEPP 56. This change was gazetted on 19 February 2002. On that same date the Premier announced a decision to acquire site."

(Again, the direction of the transfer has been inadvertently reversed.) 52 This would appear to be a finding that there was no public knowledge of a proposal on the part of the State Government to carry out the public purpose of providing public open space on Ballast Point until the Premier's announcement of 11 February. This would appear to accord with the lobbying which was taking place as late as January 2002. It is clear that prior to that time, the Minister had a certain preference, but declined to take a decision which might commit the State Government to significant expenditure. Other parties, including the Council, Caltex, and Walker Corporation had their own wishes for the site, most of which were inconsistent with the wishes of others. It would therefore seem that "the [State's] proposal to carry out the public purpose" first became public with the Premier's announcement on 19 February 2002. At least, there is no other factual finding made by the primary judge, supportive of a different date, if the actions of the Council on 6 February 1992 and the promulgation of the 2000 LEP on 22 December 2000 were not capable, as a matter of law, of establishing the relevant purpose of the State at one of those dates. 53 To a large extent, the second LEC judgment reiterated findings in the first, which contains the detail supporting the more concise statement in the second. 54 In other respects, conciseness has led to elision. Thus, at [36] in the second judgment, his Honour stated: "I agree with the applicant's submission that it can be said that I have already included the element of risk of achieving a rezoning which the Court of Appeal has found to be necessary as follows:- (i) For development potential permitting 69 units - zero risk. (ii) For development potential permitting 138 units - risk of 25-30%."

However, this was a calculation of "development potential" on an assumption that "the land had been zoned residential": first LEC judgment at [147]. It was in relation to this assessment that this Court, on the first appeal, identified error in the following terms at [81]: "Instead of seeking to assess, from the perspective of the hypothetical purchaser, the chance of a rezoning, and noting any decline which could be attributed to the statutory considerations in s 56(1)(a), the trial judge valued the land on the assumption that the rezoning had in fact taken place. That assumption could only be justified if the refusal of the council to rezone was itself part of the proposal to acquire the land for the public purpose for which it was acquired or a step in the carrying out of that public purpose."

Challenge to first appeal judgment 55 By way of a notice of contention, Walker Corporation sought to uphold the second LEC judgment on the basis that: "Market value is to be assessed, not upon the basis of what the hypothetical purchaser would consider to be the chance of a rezoning permitting residential development, but on the fact (as already found by the Court below) that a rezoning permitting residential development would have occurred by the date of compulsory acquisition but for the intention to carry out the public purpose for which the land was acquired." 56 That contention cannot be supported in its terms: as noted above, the "intention" of the Council did not constitute "the proposal to carry out" the public purpose for which the land was acquired; nor did the Council carry out the public purpose. Nor was it acting in concert with the State Government, which did not adopt such a proposal prior to February 2002. 57 Walker Corporation sought support from statements in Smith v Roads and Traffic Authority (NSW) [2005] NSWLEC 438. The question identified in that case at [7] was as follows: "The current proceedings raise for consideration the development potential of the acquired land and the other adjoining lands which it is claimed have been affected by the road proposal. At the original hearing the parties accepted that that potential depends upon whether or not, but for the proposal to construct the bypass, the land acquired and the adjoining land would have been zoned for urban purposes."

However, following the decision of this Court on the first appeal, it appears that the questions were reformulated as follows at [10] and [11]. "In determining the market value of the resumed land at the date of acquisition disregarding the increase or decrease in value, if any, caused by the carrying out of, or the proposal to carry out the development of the by-pass: 1. Was the zoning, or the failure to change the zoning, of that part of the land zoned 7(c) Environment Protection (Water Catchment) caused by the proposal to carry out the development of the by-pass? 2. If so, what was the prospect of zoning or rezoning that land to either 2(a) Living Area, 2(b) Village or 1(a1) Rural, had it not been zoned 7(c) Environment Protection (Water Catchment)? 3. Accepting that the zoning of that part of the resumed land zoned 9(a) (Main Roads Proposed) was a step in the proposal to carry out the development of the by-pass what was the prospect of zoning or rezoning that land to either 2(a) Living Area or 2(b) Village or 1(a1) Rural, had it not been zoned 9(a)? 4. As an alternative to question 2, at the date of acquisition, would the land have been zoned 2(a) Living Area, 2(b) Village or 1(a1) Rural had it not been zoned 7(c) Environment Protection (Water Catchment)? 5. As an alternative to question 3, at the date of acquisition, would the land have been zoned 2(a) Living Area or 2(b) Village or 1(a1) Rural had it not been zoned 9(a)? The parties agreed questions 2 and 3 should be answered out of concern that the decision in Walker Corporation required consideration of questions different from previous approaches to these matters which are reflected in questions 4 and 5." 58 At [63] his Honour continued: "In my understanding, the traditional approach to the application of s 56(1)(a) is embodied in the last two of the separate questions raised in these proceedings. In simple terms … the approach which has been traditionally adopted involves the following steps: 1. Identify the zoning of the land at the date of acquisition. 2. Determine whether that zoning was imposed or retained in order to facilitate the implementation of the public purpose for which the land was acquired. 3. If the answer to question 2 is yes, that zoning is notionally set aside and the potential of the land and ultimately its market value is assessed by determining how the land would have been zoned, at the date of acquisition, but for the proposal to carry out the public purpose." 59 The first reformulated question set out at [57] above, although it does not follow the language of the statutory provision, appears to be directed to determining whether the zoning of the land at the date of acquisition formed part of the carrying out of or the proposal to carry out the public purpose for which the land was acquired. If it were, and it caused a change in the value of the land, that change needed to be disregarded. One method of achieving that result is for the Court to determine, on the probabilities, the zoning which would otherwise have applied and to assess value on that basis. That was the exercise undertaken in the present case in the first LEC judgment. The problem identified by this Court on the first appeal was that the antecedent question had not been properly addressed. If this had been done, the approach of the trial judge would have been legitimate. However the second and third questions in Smith (par [57] above) seem to have reversed this reasoning, each apparently accepting a positive answer to the first question as a precondition for their relevance, although the scope of each is unclear. 60 In the steps of the "traditional approach" identified in Smith and set out at [58] above, the critical step is the second. Its language is further from the statutory language than that adopted by the parties in their first question. The second step in Smith would have been appropriate had it been formulated in the following terms, or something like them: 2. Determine whether the imposition or retention of that zoning was part of the carrying out of the public purpose or part of the proposal to carry out the public purpose for which the land was acquired. 61 If the answer to that question were yes, for the reasons just noted, the approach in the third step would usually be legitimate. The suggestion in the judgment in Smith at [123] that what this Court said on the first appeal might be inconsistent with "the traditional approach" fails to acknowledge that the reasoning in this Court was directed to the test in the second step and the need to make appropriate findings of fact. 62 The further suggestion in the challenge to the approach adopted on the first appeal that the conclusion reached by this Court is at odds with the reasoning (or at least dicta) of the High Court in San Sebastian should be rejected, for reasons already given. There is therefore nothing in the notice of contention, or the arguments put in support of it, which demonstrate error in relation to the construction of s 56(1)(a) adopted on the first appeal. The notice of contention does not assist the Respondent.

Conclusions 63 The second LEC judgment reveals more clearly the findings made by the primary judge for the purposes of applying s 56(1)(a). Those findings do not demonstrate that the inaction of the Council in failing to rezone the land for residential purposes were part of the carrying out of the proposal to acquire the land for the public purpose of public open space, nor did the decision of the Council on 6 February 1992, or any decision thereafter, constitute "the proposal" to carry out the public purpose. In reaching a contrary conclusion, his Honour asked himself the wrong questions and failed to answer the questions set out at [19] above. 64 Upon the findings made by the primary judge, the precondition for notionally setting aside the industrial zoning in place at the date of acquisition has not been established. The Court below erred in law in proceeding on the basis that it could notionally set aside that zoning. The contrary conclusion of the primary judge reveals an erroneous construction of s 56(1)(a). 65 It is not clear whether the Court below made orders following delivery of its judgment on 4 April 2006. It would appear that it "confirmed" its previous orders and, perhaps by implication, made the orders which had been set aside by this Court on the first appeal. The appropriate order on this appeal is to set aside the judgment of the Land and Environment Court delivered on 4 April 2006 and the orders (if any) made by the Court. The matter should be remitted to the Land and Environment Court for the market value of the land to be reassessed on the basis of the zoning which existed at the date of acquisition. The Court may also need to consider separate bases for valuation sought to be relied on by the Respondent and not yet addressed.

(1) Allow the appeal and set aside the judgment and orders of the Land and Environment Court delivered and made on 4 April 2006.

(2) Remit the matter to the Land and Environment Court for assessment of the market value of the land, according to law.

(3) Order the Respondent to pay the Appellant's costs of the appeal and the hearing in the Land and Environment Court. **********

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