Taylor v Port Macquarie-Hastings Council

Taylor v Port Macquarie-Hastings Council - [2010] NSWLEC 113 - NSWLEC 2010 case summary — Zoe

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JUDGMENT A. INTRODUCTION 1 HIS HONOUR: This is a claim for compensation for resumption of land under the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act). 2 On 1 April 2005 the respondent, Port Macquarie-Hastings Council, compulsorily acquired from the applicants, John Taylor and Mildred Taylor, rural land on Ocean Drive, Kew, for the purpose of waste management. The acquired land was Lot 1 DP 729726 with an area of 2,944m2 and Lot 7 DP 775532 with an area of 36.9 hectares (Land). The total area acquired was therefore 37.1944 hectares. 3 The Land is located immediately to the east of the small village of Kew on the northern side of Ocean Drive, which is the main road running east from Kew through Lakewood (about 4 kilometres) to Laurieton near the sea (about 8 kilometres). At the acquisition date the Pacific Highway passed through Kew. Since the acquisition date, as part of the Pacific Highway upgrade, the Kew Bypass has been constructed about 250 metres east of Kew over part of the Land acquired by the Roads and Traffic Authority of NSW (RTA) from the council for that purpose. At the acquisition date the Land was: (a) a single rural residential home site covered in bush except for 4 to 6 hectares of a disused quarry in its eastern half and a small area with a house in the south western corner; (b) zoned Rural 1(a1) in the Hastings Local Environmental Plan 2001 (LEP), which did not permit subdivision of the Land because the minimum allotment size was 40 hectares. Land so zoned has limited uses. 4 The applicants contend that compensation should be assessed at $4,540,000 comprising market value of $4,510,000 and $30,000 for loss attributable to disturbance. The council contends that compensation should be assessed at $900,000 or alternatively (if the land had industrial potential, which is denied) at a maximum of $1,270,000 for market value. 5 The key issue concerns the Land's potential for a higher and better use than that permitted by its zoning. In addressing that issue, it is necessary to consider ecological issues, physical constraints and the council's planning strategies as at the acquisition date.

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(a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land, (b) valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land, … 61 Special provision relating to market value assessed on potential of land If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of: (a) any financial advantage that would necessarily have been forgone in realising that potential, and (b) any financial loss that would necessarily have been incurred in realising that potential." 8 The Just Terms Act includes the following relevant principles. First, it is a code in relation to the matters to which regard must be had in determining the amount of compensation: s 55 (with its reference to "only"). Secondly, the amount of compensation has to be just: ss 3(1)(b), 54(1). Thirdly, there is a guarantee that the amount of compensation will be not less than the market value of the land at the acquisition date: ss 3(1)(a), 10(1)(a). Fourthly, market value has the classic meaning of a price agreed between a hypothetical willing but not anxious seller and buyer. Fifthly, market value has to disregard 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). Sixthly, market value has to take into account not only the land's actual use but its potential use at the acquisition date: ss 56(1), 61(a). The value of the potential depends upon how good was the chance, at the acquisition date, of the potential being realised. The chance may be virtually certain at one end of the spectrum or a mere speculative hope at the other. In Liverpool City Council v Commonwealth (1993) 46 FCR 67 at 83, 81 LGERA 405: "In a case where the task of assessing compensation comes down to the evaluation of a chance, it will rarely be possible to demonstrate that any particular figure is correct. I certainly cannot do so in this case. I can only consider all the relevant factors and make a judgment about them; a 'best guess' perhaps." 9 The statutory provisions are illuminated by the authorities I reviewed in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2009] NSWLEC 219, 173 LGERA 155 and McDonald v Roads and Traffic Authority of NSW [2009] NSWLEC 105, 169 LGERA 352. In Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5, 233 CLR 259 at [51] the High Court said: "The opening words of the definition in s 56(1) ('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') reflect what for a century has been taken from Spencer v The Commonwealth . That case arose under the tersely expressed provisions of the first federal legislation in the field, the Property for Public Purposes Acquisition Act 1901 (Cth). Section 19(1) thereof spoke merely of 'the value of the land taken'. The result of the judicial exegesis in Spencer was summed up by McHugh J in Kenny & Good Pty Ltd v MGICA (1992) Ltd as follows: 'Value is determined by forming an opinion as to what a willing purchaser will pay and a not unwilling vendor will receive for the property. In determining that value, there must be attributed to the parties a knowledge of all matters that affect its value. Those matters will include the predicted impact of future events as well as the experience of the past and the rates of return on other investments. As Isaacs J pointed out in Spencer v The Commonwealth : 'We must further suppose both to be perfectly acquainted with the land, and cognisant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property. (Emphasis added.)' The market for the property is, therefore, assumed to be an efficient market in which buyers and sellers have access to all currently available information that affects the property" 10 English authorities were reviewed by the House of Lords in Transport for London (London Underground Ltd) v Spirerose Ltd [2009] UKHL 44, 1 WLR 1797, 4 All ER 810 but in New South Wales they must be approached with caution for it is the provisions of the Just Terms Act that are determinative: Walker HCA at [47]. 11 "In the field of judicial valuations, the task is ultimately evaluative. Within limits, courts do not require every step to be separately justified": Roads and Traffic Authority of New South Wales v Hurstville City Council [2001] NSWCA 11, 112 LGERA 223 at [50]. As Isaacs J said in Spencer v The Commonwealth (1907) 5 CLR 418 at 442 quoting the Privy Council in Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373 at 391: "It is quite true that in all valuations, judicial or other, there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others. Everyone who has gone through the process is aware of this lack of demonstrative proof in his own mind, and knows that every expert witness called before him has had his own set of conjectures, of more or less weight according to his experience and personal sagacity. In such an inquiry as the present, relating to subjects abounding with uncertainties and on which there is little experience, there is more than ordinary room for such guesswork; and it would be very unfair to require an exact exposition of reasons for the conclusions arrived at."

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D. THE RESPONDENT'S CASE 13 The council's case is that (a) market value compensation should be assessed at $819,000 on the basis of its existing use as a kind of Shangri-La in the bush, together with a 10 per cent premium for potential quarry use; (b) alternatively, if it be held that the Land had potential for industrial use, its market value would be higher but could not be higher than $1,270,000; (c) none of the applicants' comparable sales are comparable and it is therefore not reasonable to adjust them to arrive at the value of the Land; and (d) nothing should be awarded for disturbance because there is no supporting evidence. 14 The council's submissions can be encapsulated in five propositions. 15 First, the council submits that the highest and best use of the land was its current use as a single rural homesite. 16 Secondly, the council submits that there were only four potential uses of the Land: (a) waste management, as proposed by the council in 2001, which was the type of use that might naturally be located in a disused quarry and which was permissible without rezoning; (b) quarrying, which was a past use of the Land that had been abandoned but was permissible without rezoning; (c) industrial, but only on the four to six hectares on the eastern part of the Land that had been previously disturbed by quarrying; and (d) environmental protection, because the Land was known to have high habitat value for fauna due to its old growth forest elements. 17 However, a purchaser would not offer more for this potential than for a single home site, except for a premium of 10 per cent for quarrying potential (as the council's valuer, Mr Wood, said). 18 Thirdly, the council submits that the limited potential of the Land for industrial use only on the four to six hectares previously disturbed by quarrying is confirmed by: (a) the council's 2001 offer to purchase the Land for a waste transfer station in the former quarry area; (b) CHUGS, which identified 15 hectares on the eastern part of the Land as suitable for "industrial investigation". That excluded residential use. 19 The Land's industrial potential was limited, the council says, by a number of factors that would have deterred anyone from purchasing the Land for industrial use at all or at least outside the cleared, disused quarry area of four to six hectares:

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(a) at the acquisition date there was available ample, better situated, industrially zoned land, with little uptake; (b) the Land was only capable of development for an industrial purpose if it were to be rezoned; (c) investigation would have shown that less than the 15 hectares referred to in CHUGS was potentially sound industrial land due to topographical and ecological restraints. The view of the valuer, Mr Wood, was that a potential purchaser for an industrial purpose would have little or no expectation of developing it beyond the area already cleared for the quarry. Due to the Land's steep terrain, extensive and costly levelling would be required to enable it to be used for industrial purposes outside the disused quarry area. The estimate of the council's quarry expert, Mr Stitt, was between one and six million tonnes of material would have to be moved. Even for residential development, levelling for building platforms would be required to achieve CHUGS' required density, as the applicants' valuer Mr Dobrow agreed. Ecological constraints on clearing of forest on the Land for development include the fact that the Land has old growth and riparian elements. 20 The council contends that the limited industrial potential of the Land is also evidenced, by way of confirmation of foresight, by the Port Macquarie-Hastings Industrial Land Strategy 2007 (2007 Strategy) which increased the investigation area of the Land to 30 hectares but concluded that the developable area was seven hectares including the planned waste transfer station. I will address that contention immediately. The proposition that foresight at the acquisition date may be confirmed by looking at post acquisition date eventualities has authority in Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547 at 558-559, 50 LGRA 334 at 343-344 (approved in Minister Administering the Crown Lands Act v Deerubbin Local Aboriginal Land Council (No 2) [2001] NSWCA 28, 50 NSWLR 665 at [69]-[74]), which is often cited in resumption compensation cases in this Court. In my view, the proposition should be treated with caution for it enables any party to claim, if it suits them, that which eventuated is that which was foreseen: McDonald v Roads and Traffic Authority (NSW) [2009] NSWLEC 105, 169 LGERA 352 at [29]. For example, in the present case if council's post-acquisition date investigation of the Land had concluded that its developable area was 30 hectares, the applicants might equally submit that that was confirmation of foresight at the acquisition date. There are also two points of practical importance. First, later evidence must not distract attention from the acquisition date when the assessment must be made; secondly, there are dangers in drawing inferences from later evidence without close attention to the circumstances in which it arose: Minister Administering the Crown Lands Act v New South Wales Aboriginal Land Council [2009] NSWCA 151 at [68] per Basten JA (Beazley and Tobias JJA agreeing). There is force in the applicants' submission that as the 2007 Strategy was two years after the acquisition date and much had happened in the interim, it should be given no weight. In any case, the essential task is to assess the matter by reference to the facts that would have been known to the hypothetical buyer and seller at the acquisition date.

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21 Fourthly and alternatively, the council submits that if an industrial purchaser were prepared to pay more than for a single rural home site, they would not pay a value that represented Land immediately available for industrial use. The future expected value of the land would have to be discounted for the risk of realisation, the risk of getting approvals and the cost of levelling and roads. Any such industrial purchaser was likely to be a specialised developer like a large industrial company that wanted to put a factory there or subdivide it into industrial units or an institution like a university or a council. 22 Fifthly, the council submits that the Land had no potential for urban residential use. That is said to be clear from: (a) CHUGS which described the Land as suitable only for industrial investigation; and (b) council's resolution made two days before the acquisition date which effectively adopted CHUGS and Map 3 in CHUGS relating to 15 hectares for urban investigation. 23 Consequently, the council contends the applicants' three comparables are irrelevant because: (a) they are sales into a different market, the urban residential market. CHUGS makes clear that they are to be considered for residential use whereas the Land is suitable only for industrial investigation. CHUGS identified that 191 hectares of land was needed to meet urban residential demand over a 20 year period, there were 94 hectares available to satisfy demand over 10 years, another 97 hectares was needed to satisfy demand for the succeeding 10 years, and the only available land from which the latter could be taken included the applicants' comparable sales but not the Land; (b) the topography is radically different. The Land is very much steeper. The cost of levelling compared with the relatively flat applicants' comparable sales would exclude the kind of concentrated urban residential development envisaged by CHUGS or would require a massive cost adjustment; (c) there were different constraints in that the Land was fully vegetated, with the exception of the disturbed quarry area, whereas the applicants' comparable sales 1 and 2 had little vegetation and sale 3 was much less vegetated than the Land.

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27 At the acquisition date there were three ecological reports directly or indirectly in the public domain relating to proposed development on the Land. 1995 SEE 28 The first was a Statement of Environmental Effects in 1995 (1995 SEE) prepared for Hurd Haulage Pty Ltd relating to a development application for the continued use and expansion of a gravel quarry on the eastern part of the Land, which had been in operation for about 75 years. The products of the quarry could be used for select fill or road pavement material. Extractable reserves were calculated at 6.1 million tonnes. 29 Hurd Haulage operated the quarry under licence from the applicants from about 1992 to 1998 when quarry operations ceased in the circumstances described at [105]-[106] below. 30 The area of the quarry development to which the 1995 SEE related was about six hectares. As the 1995 SEE concerned a previously disturbed area, about two or three hectares of vegetation was to be disturbed by the proposal. The 1995 SEE expressed the view that the site had high conservation value, as follows: "The open forest habitat has been moderately disturbed through past activities, although the area still provides rich habitat for a variety of arboreal mammals, bats, ground mammals and reptiles. While only two Schedule 12 [a reference to now repealed legislation] species were recorded in this habitat, a further five species are considered to have a high likelihood of occurring, nine are considered to have a moderate chance of occurring, and five have a low likelihood of being found on site. While this habitat is widespread within the region, it is inadequately held in reserves and this habitat on site is considered to have a high conservation value." 31 The 1995 SEE proposed an environmental management plan incorporating mitigation measures and management recommendations to protect rare and endangered species. 2003 SEE 32 Secondly, there was a Statement of Environmental Effects in 2003 (2003 SEE) prepared for the council in relation to its proposed waste transfer station in the area of the disused quarry on the Land. 33 The proposed waste transfer station involved the removal of approximately 0.4 hectares of dry open forest habitat and 0.9 hectares of modified open shrubland habitat in the general area of the disused quarry on the eastern part of the Land. It stated that the forest habitat represented potential koala habitat but no koala activity was recorded on the "site" (apparently a reference to the large Lot 7 component of the Land). It noted that National Parks and Wildlife records indicated that 29 fauna species and three flora species listed as threatened under legislation had previously been recorded within 10 kilometres of the study area. It took the 1995 SEE into account. It concluded that the proposed development was unlikely to have a significant impact on threatened species and proposed a number of mitigation measures. Biosis Report 2004 34 Thirdly, Working Paper No 7 prepared in 2004 for the RTA by Biosis Research Pty Ltd (Biosis Report) investigated the terrestrial flora and fauna aspects of the proposed 22 kilometre Pacific Highway upgrade between Moorland and Herons Creek including the Kew Bypass over the western part of the Land. The Biosis Report was for the purpose of the RTA's Environmental Impact Statement (RTA EIS) which was not released until shortly after the acquisition date. The Biosis Report per se was not available to the public by the acquisition date but was indirectly in the public domain because, according to the evidence, which I accept, of Ms Weston, the applicants' environmental expert who was involved in the RTA EIS, the information in it would be provided by the RTA to the public upon inquiry and there was an extensive community consultation for years before release of the RTA EIS which enabled persons to make detailed inquiries. The council at one point submitted that the Biosis Report information was confidential but that is not established on the evidence. 35 The Biosis Report stated that the study area consisted of the area of the earthworks for the proposed Pacific Highway upgrade, the proposed road reserve and a zone of likely impact of approximately 50 metres on either side of the road. The stated objectives of the Biosis Report included assessing the conservation significance of the study area in terms of threatened species and important habitat, and evaluating the potential impact of the proposed development by undertaking statutory tests for threatened terrestrial flora and fauna species that may occur in the study area. The Biosis Report identified the section of the proposed upgrade known as the Kew Bypass. Vegetation in this area was said to be in good condition.

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38 The council submits that the 1995 SEE's identification of the Land as of high conservation significance together with the fact that the applicants' case is that the Land had a value of over $4 million, made it likely that the hypothetical buyer and seller would have engaged an ecologist to undertake a flora and fauna survey who would have provided a report such as Mr Milledge provided in this case, as well as engaging an environmental expert. 39 The applicants submit that the prospective buyer and seller at the acquisition date would have been likely to have consulted an environmental expert such as Ms Weston but would have been unlikely to have consulted an expert ecologist such as Mr Milledge given the absence of ecology "red flags" in the publicly available information at the acquisition date. The applicants submit that it is even more unlikely that the hypothetical parties would engage such a controversial ecologist as Mr Milledge given, they say, the evidence that he is an environmental activist with strong views on matters of ecology. However, the council's contention is not that the hypothetical purchaser would have retained Mr Milledge but, rather, would have retained an ecologist who would have provided a report similar to Mr Milledge's report. 40 Ms Weston is not an ecologist. She has a Bachelor of Regional and Town Planning and a Master of Environmental Studies. She conducts a practice both as a town planner and in environmental assessment. She advises government and private enterprise about potential projects and potential purchases of land from her town planning and environmental background. The concept development and RTA EIS were undertaken for the RTA by its consultants, Arup, and involved consideration of the Kew Bypass and the Land. Ms Weston was Arup's Environmental and Consultation Workstream Manager for the project from 2000 to 2006 and consequently was familiar with the Land and its environs for some time prior to the acquisition date. Investigations included the Biosis Report. She reviewed such working papers prior to their finalisation. She was familiar with the studies and working papers then available on all issues related to the Pacific Highway upgrade, which included the working papers concerning the flora and fauna significance of the proposed sites through which the highway upgrade was to go, including the western part of the Land. The preferred route for the Kew Bypass section of the Pacific Highway upgrade was through the western half of the Land.

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46 Figure 13 in the Biosis Report showed mapped key habitats and corridors: see [36] above. However, it was not ground-truthed (ie by observations on the ground). Figure 13 represents the Kew corridor with a uniform width of approximately one kilometre and with some extensive cleared areas including the Kew-Kendall golf course and private land. As Ms Weston conceded, the Kew corridor had conservation value. It was common ground between Ms Weston and Mr Milledge that part of the Land, it seems in its northern half, falls within the Kew corridor but because of the scale of Figure 13 it is not possible to know exactly where the corridor is on the Land. This led to there being introduced during the hearing a more specific version of Figure 13 prepared by Mr Milledge. Ms Weston considered that it was liable to be distorted and proved her point by referring to the fact that it showed a small area of key habitat straddling Ocean Drive. Mr Milledge indicated that the corridors and habitats could be north or south of the locations indicated on this document by somewhat less than several hundred metres. In the end, Ms Weston and Mr Milledge agreed, and I accept, that the corridor falls somewhere across the Land, but that its boundaries are matters of conjecture. 47 In view of this uncertainty, I am unable to say that the Kew corridor affects the Land to any greater extent than the applicants' three nearby comparable sales. It is therefore a fairly neutral consideration in the context of comparing the Land with those three sales for valuation purposes. 48 The applicants' planner, Mr Dowling, commented by reference to the 2003 SEE that it appeared that at the acquisition date the Land had only moderate ecological value in that it was not a core koala habitat, had a sub-optimal habitat quality (for some threatened species found to use it) and there was a high mobility of threatened species likely to occur on it. He also commented that the flora and fauna study undertaken with the council's proposal for a waste transfer station would appear to have not given cause for council to not include the Land for further "urban" investigation in CHUGS. His reference to "urban" investigation of the Land was too loose because CHUGS was more precise in specifying 15 hectares on the eastern part of the Land as suitable for "industrial investigation only". Discussion 49 The council suggests by reference to two cases that the hypothetical willing but not anxious seller and buyer at the acquisition date would have sought and obtained advice from an ecologist: Caruso v Sydney Water Corporation [2008] NSWLEC 320 at [137]; Bow v Blacktown City Council [2008] NSWLEC 211 at [17]. These cases were decided upon different facts and are distinguishable. In both cases there was on the site an endangered ecological community. Whether the hypothetical parties to a transaction would have obtained expert advice is a question of fact, as I said in Coundrelis v Roads and Traffic Authority of NSW [2008] NSWLEC 72 at [51] quoting Jagot J in Cook Saad Raguz v Roads and Traffic Authority of NSW [2007] NSWLEC 136 at [12].

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F. PHYSICAL CONSTRAINTS 55 The main physical constraint on development of the Land is its hilly topography: steep slopes and high ridges ranging from about RL 18 to RL 60. Other physical constraints are its heavy forest cover, other than in the disused quarry and the house site in the south-west corner; a Category 1 bushfire hazard over the land (shown in the council's Bushfire Prone Land Map for the locality); and, in the event of industrial development, potential noise, dust and odour impacts on adjoining rural residential development. In contrast, the applicants' three comparable sales are relatively flat, and sales 1 and 2 are largely cleared while sale 3 is fairly heavily vegetated although to a much lesser extent than the Land. The north-east corner of sale 1 has also been designated as a low risk flood area. 56 The council's planner, Mr Pratt, considered that the Land's steep slopes lessened the likelihood of residential development although he thought residential development would be cheaper than industrial development because stepping would be required. Mr Dobrow agreed that the Land would be unlikely to be used for a residential purpose until the quarry resources were won or sterilised. It appears from Mr Dobrow's evidence that the steep topography of the Land was similar to areas of Camden Haven, Port Macquarie, Kendall and Kew which had been developed for residential properties. The council's valuer, Mr Wood, said he thought that, save for degenerated areas, the Land was unsuitable for industrial development because of its steep slopes. If so, it is difficult to see why CHUGS decided that most of the Land within CHUGS (the eastern half) was suitable for industrial investigation. Moreover, in a report produced during the hearing, Mr Wood attributed potential industrial value to the Land after taking into account (inter alia) its physical constraints and flora and fauna issues, assuming that there was demand for the area designated by CHUGS: see [141] below 57 It is reasonably apparent that (a) the Land's physical constraints, particularly the steep topography, would result in commensurately higher development costs for the Land than for the applicants' comparables, and (b) industrial development would require level footplates and earthworks on a large scale depending on the extent of development. The applicants say that all this is simply a matter for adjustment from their three comparable sales. Earthworks for levelling were not costed in the evidence.

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58 The quarry resource is relevant to the question of overcoming the physical constraints of the Land's steep slopes because the applicants submit that a hypothetical developer buyer at the acquisition date would envisage carrying out quarrying during the years awaiting industrial rezoning and development consent and to that extent quarrying would result in levelling and the income from quarrying would offset or defray the cost of levelling. As discussed below at [112], I accept that submission. 59 I consider that CHUGS would encourage the hypothetical parties at the acquisition date to think that 15 hectares of the eastern half of the Land had potential for industrial development notwithstanding the physical constraints, but not for urban residential development. G. PLANNING KKUS 1998 60 The Kew Kendall Urban Strategy (KKUS) was adopted by the council in 1998 to provide for population increases in the Kew/Kendal area. The applicants submit that it does not include the Land. Although it is probably unnecessary to resolve the point, the map within KKUS includes, and seems to me to indicate, that it includes the Land. KKUS identifies areas for urban investigation adjacent to the west and south-west of Kew and proximate to the village of Kendall, 1.5 kilometres west of Kew. KKUS says that it excludes heavily vegetated land from its investigation areas. It records that the population of the area was 850 of which 700 lived in Kendall and 150 in Kew. Growth rates had varied between nil and 1.5 per cent per annum during the preceding ten years. It is apparent that there had been hardly any development in Kew for many years prior to the acquisition date. At the time KKUS was adopted, the village of Kew straddled the Pacific Highway. Since the acquisition date the Kew Bypass has been constructed over the western part of the Land about 250 metres east of Kew. KKUS characterised Kew as essentially a highway service centre for travellers on the Pacific Highway. At the acquisition date, I think that the anticipated Kew Bypass as part of the Pacific Highway upgrade could be seen to be unhelpful to its highway service centre role and that Kew (notwithstanding its existing infrastructure) was unlikely to stimulate any eastward march of residential development across the Land. HUGS 2001 61 The Hastings Urban Growth Strategy 2001 (HUGS) was adopted by council in 2000. It was a strategy to accommodate the bulk of projected population growth. HUGS gave some emphasis to the retention of a viable network of natural vegetation corridors to support ongoing wildlife survival. Otherwise, relevantly, it has been virtually superseded by CHUGS. CHUGS 2003 62 The most important relevant planning strategy at the acquisition date was the Camden Haven Urban Growth Strategy 2002-2022 (CHUGS) which was adopted by the council in 2003. CHUGS' stated purpose was to provide a strategy for the release of residential land in the Camden Haven to accommodate its population growth for 20 years from 2002 to 2022. 63 There is debate between the parties as to whether the westernmost part of CHUGS' scope is the whole of the Land or only the eastern half of the Land. I think the latter is correct and, to that extent, CHUGS ate into the land covered by KKUS. However, I do not think it matters for present purposes.

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83 Finally, CHUGS contemplated that it would be reviewed in, ideally, five years when its assumptions would be reassessed. One of the assumptions was that the Kew Bypass "will enable the development of industrial land east of Kew" and CHUGS said that that assumption depended on the ultimate location of the bypass. Although it is unclear, I think this reference to "industrial land east of Kew" probably would be construed by the hypothetical parties at the acquisition date as including the western half of the Land and encourage them to think that the council might consider designating the western half of the Land for industrial investigation once the location of the Kew Bypass was determined. Hastings Rural Residential Strategy 2004 84 The council's submissions draw attention to the Hastings Rural Residential Strategy 2004. This Strategy was concerned with rural residential land which it defined as the subdivision of rural land to meet the lifestyle needs of those wishing to live in a rural area without the need to operate a farm. It stated that allotments are generally one to five hectares and located nearby existing towns and villages. It identified land which met to varying degrees the selection criteria prerequisite to any consideration of future rezoning of rural land. The council submits that this Strategy is relevant because it confirms the significance of vegetation constraints by stating that areas shown to be (inter alia) heavily vegetated will be excluded from consideration in the Strategy. As this Strategy does not relate to CHUGS' investigation areas, and as the applicants do not press a rural residential development potential case, I think that it is of little significance. Council's Rezoning Resolution 29 March 2005 85 On 29 March 2005, two days before the acquisition date, the council resolved to prepare a draft local environmental plan pursuant to s 54(1) of the Environmental Planning and Assessment Act 1979 to rezone land in the vicinity of the Camden Haven High School, as shown in Map 3 of CHUGS, for urban purposes; and to notify the Department of Infrastructure, Planning and Natural Resources of council's decision in accordance with s 54(4). The Camden Haven High School is opposite the applicants' comparable sale 2 which is only a few lots east of the Land.

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100 In light of CHUGS, I am prepared to accept that at the acquisition date the hypothetical parties would consider that 15 hectares of the eastern part of the Land had potential for industrial use. However, they would also be aware that the Land's steep slopes would make industrial use development outside the relatively flat, cleared quarry area of (say) six hectares costly because of the large amount of levelling that would be required. There is no detailed evidence as to the quantum of such costs. As discussed at [112] below, I am also prepared to accept the applicants' submission that an industrial purchaser at the acquisition date would realistically contemplate obtaining development consent fairly quickly to quarry the Land for the several years required for industrial investigation, rezoning and development consent for industrial use; and that this would have the effect of offsetting or defraying levelling costs for the later use: see [112] below. 101 I turn to the western half of the Land which was excluded from the CHUGS investigation areas and which was not the subject of rezoning under the Kew/Kendall Urban Strategy. One of CHUGS' assumptions, which it contemplated would be reviewed, was that, depending on its ultimate location, the Kew Bypass would enable the development of industrial land east of Kew. I agree with Mr Dowling that the hypothetical parties would have perceived at the acquisition date that the western half of the Land also had potential for industrial use once it was clear what portion would be acquired for the Kew Bypass. They would regard that potential as substantially less than the industrial potential of the eastern half because the western half had not yet been designated for industrial investigation either in CHUGS or in the council's 2005 resolution. Nevertheless, I think that the western half's industrial use potential would attract value at the acquisition date. The RTA's proposed resumption of the part of the Land required for the Kew Bypass would not detract from the value of the western part of the Land because the RTA would have to pay compensation in accordance with the Just Terms Act.

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132 Rost and Collins, Land Valuation and Compensation In Australia (3rd ed 1993) at 86 state: "Valuations must be based on relevant sales evidence. It is most important for the valuer to obtain a detailed knowledge of all relevant sales within the area where the valuation is to be determined. Inspections and analyses of the sales will enable each one to be compared in detail with the others and with the property being valued so that a basis for determining the value can be established. The circumstances under which sales take place should be investigated by interviewing the parties concerned in each transaction. Such circumstances could affect the comparability between the sale properties and the subject property being valued". 133 Douglas Brown, Land Acquisition (6th ed 2009) at 229 states: "The purpose underlying the sale or purchase of a property may be relevant in determining whether a sale is comparable or not. The court may wish to know whether a sale was an ordinary businesslike transaction. If the sale was made by an aunt to her favourite nephew the sale might not be regarded as being made at arm's length. If the seller was bankrupt or in severe financial difficulties it may be asserted that the seller sold at a lower price than might be expected if the seller was not over-anxious to sell. A sale by a mortgagee may be rejected on the ground that there was no evidence to show that the mortgagor's interests were being fully preserved: Re Murray (1934) 13 LVR (NSW) 25. Sales by the sheriff or in bankruptcy do not come within the Spencer principle: March v Frankston (City [1969] VR 350 at 367. A sale of farming land to a large retail establishment may be rejected on the ground that it is not a sale to another farmer and therefore not comparable to sales of farming land: Blefari v Minister (1962) 8 LGRA 1. If the resumed land is expected to attract only a certain class or type of purchaser, the sale of otherwise comparable land to an unexpected and different class or type of purchaser, may result in it being regarded as non-comparable. A sale of land which resulted from compromised litigation needs to be viewed with caution, because many factors extraneous to value may enter into the compromise: Celtic Agencies Pty Ltd v South Australian Land Commission (1978) 20 SASR 176." 134 In Maurici v Chief Commissioner of State Revenue [2003] HCA 8, 212 CLR 111 at [120] the High Court said: "How is the land in its notionally unimproved state to be valued? The traditional, and usually unexceptionable method is to seek out relatively contemporaneous sales of comparable properties between parties at arm's length, unaffected by special circumstances, such as, for example, a strong desire by a purchaser to buy an adjoining property, and to use those sales as a yardstick for the valuation of the relevant land." 135 In The Valuer General v Fenton Nominees Pty Ltd (1982) 150 CLR 160 the court took into account the intention of buyers when acquiring land in determining that the land was comparable with the subject land. The case concerned a valuation under South Australian valuation legislation which required the unimproved value of land to be assessed. The highest and best use of the subject land was as vacant land suitable for commercial development. The parities' competing valuations were based on sales of improved land which the purchasers had acquired for redevelopment with the intention of demolishing the existing buildings as a preliminary to redevelopment. The existing buildings had no value to the purchasers. The High Court held that the prices paid for the improved land should be converted so as to reflect their unimproved value by treating the prices and the cost of demolition and earthworks as together representing the cost to the developer of obtaining unimproved land suitable for redevelopment. This established the price which commercial developers were prepared to pay for suitable vacant land similar in kind to the subject land in its unimproved state. The High Court rejected Fenton's competing contention (which would have resulted in a lower valuation) that the price paid for the improved land should be converted so as to reflect unimproved value by subtracting the value of improvements from the sale price. The latter would have been a conventional method of arriving at unimproved value if the purchasers' subjective intentions had been ignored. The High Court at 166-167 agreed with the primary judge, Wells J, who said: "Speaking generally, where the subject matter of the sales, and the market in which they were concluded, reveal a sufficiently high degree of comparability with the notional sale of the land in question and the market in which it would be the subject of negotiation, the particular circumstances and considerations that induced the respective parties to come together at the several prices agreed upon are regarded as immaterial, unless, in a given case, they are such as plainly to take a sale out of the ordinary run of transactions that together constitute the relevant market. Where the circumstances and considerations have such an effect, valuers are wont to say that the alleged comparable sale must be excluded because it was affected by special circumstances." 136 In that case, the primary Judge, Wells J, said in Fenton Nominees Pty Ltd v Valuer-General (1981) 47 LGRA 71 at 79 before the passage quoted by the High Court: "it is fallacious to suppose that the owner of vacant land will not gear his negotiating price to the knowledge (which he will almost inevitably acquire) that the intending purchaser has a commercial use in view; and will not confine himself to asking prices within the range of those appropriate to some other lower and less rewarding use". Wells J also said at 79 immediately after the passage quoted by the High Court: "Put another way, one may assert that none of the many different forces in the market under consideration that bring the parties to a sale is ordinarily regarded as a special circumstance, because all such forces are brought to a state of equilibrium when the bargain is finally struck. Generally speaking, therefore, and given that the degree of comparability is sufficiently marked, what the valuer primarily looks to are the fundamental particulars of each sale - the price, the date, the location of the land, and its area."

[91]

137 In River Bank Pty Ltd v The Commonwealth (1974) 4 ALJR 483 at 487, a resumption compensation case, Stephen J rejected two sales of rural property with subdivision potential, Urila and Burra Downs, because the subject property had none. By inquiring into the intentions of the purchasers (Urila - "it was purchased with a view to later subdivision", Burra Downs - "it was bought as a subdivisional project") Stephen J was able to disregard the sales as comparables. 138 In Blefari v The Minister (1962) 8 LGRA 1 the plaintiff contended that resumed land should be valued on the basis that as of the date of resumption there was a strong possibility of it being released from the "green belt" in the near future. In support of that contention he sought to rely on a sale of nearby land for a drive-in theatre. Else-Mitchell J rejected the sale, not because of the characteristics of the land but because it was purchased for the purpose of a drive-in theatre by an adjoining landowner (at 3): "…it was common ground that the land was acquired for the purpose of a drive-in theatre by a company which already had some adjoining land and was in the course of applying for a licence to conduct such a theatre. It was obvious that available sites in the Sydney metropolis, of a size sufficient to enable such a project to be established, must be limited in number, and for this reason at least, it was probable that a purchase for such a special purpose would not evidence any general market value for land of the character of having the situation of the land resumed from the plaintiff." 139 In a number of compulsory acquisition compensation cases in this Court evidence as to the purpose of the purchase of allegedly comparable sales has been considered: Chaudry v Liverpool City Council [2008] NSWLEC 251 at [29]; Cassidy v Sydney Water Corporation [2008] NSWLEC 223 at [100], [106]; Penrith City Council v Sydney Water Corporation [2009] NSWLEC 2 at [8]. Industrial comparables 140 A better comparative guide to the value of the Land consists of two sales of industrial land identified by the council's valuer, Mr Wood, in his report prepared during the hearing, to which the applicants' valuer, Mr Dobrow, responded. In that report Mr Wood valued the Land on the assumption (which he did not accept) that a demand existed at the acquisition date for 15 hectares of the Land the subject of investigation for industrial purposes under CHUGS. The two sales of industrial land to which he had regard were as follows: (a) a Wauchope property of 21.46 hectares which sold in July 2004 for $3.96 million. The yield was $184,529 per hectare. It is Lot 22 DP 811254. It was zoned Industrial 4(a) and sold with development consent for 32 industrial allotments. Services were available. The property is gently sloping with no apparent physical constraints. Approximately seven hectares were timbered. The yield of $184,529 per hectare may be compared with the yield for the applicants' three comparable sales at prices ranging from $102,354 per hectare to $167,121 per hectare, being rural 1(a) land with good residential potential requiring services and rezoning with at least three years lead time (Mr Wood's estimate which I accept); (b) a Herons Creek property which sold for $1.9 million in February 2006. The location is 316 Herons Creek Road, Herons Creek (Lot 186 DP 754405). It was zoned Industrial as to approximately 30 hectares and Rural 1(a) as to approximately 24 hectares. Adopting $20,000 per hectare for the Rural 1(a) component, Mr Wood deduced that the yield for the 30 hectares Industrial component was $34,000/ha. It is good level land, services were available, timbered, backing onto North Coast Rail (with a rail siding) and adjoining Herons Creek Village. 141 Taking into account those sales, the existence of other zoned and serviced industrial properties, the Land's physical constraints, unavailability of services, disused borrow pits, flora and fauna issues and the provision of compensatory habitat, Mr Woods concluded that the 15 hectares of the eastern half of the Land referred to in CHUGS would have realised a rate of $50,000 per hectare and therefore calculated the value of the Land (on the assumption he had made) as follows:

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