Toveno Pty Limited v Roads and Maritime Services

Land and Environment Court (NSW)|2014-09-18|Before: Ms J

Introduction 62As earlier noted, valuation evidence was given on behalf of Toveno by Mr Dick. Mr Dick is a valuer based in West Gosford with extensive experience in the local property market, both with respect to property sales and property rentals. In this regard, Mr Dempsey acknowledged the extent of Mr Dick's knowledge of the local property market. 63The two valuers proposed completely different methodologies for ascertaining the value of the land acquired by the RMS. Mr Dick advanced the capitalisation of rents as the appropriate basis for this exercise whilst Mr Dempsey relied on a conventional comparable sales analysis approach. Both of these are recognised and accepted valuation methodologies. 64There are, however, two reasons why I am satisfied that the approach advocated by Mr Dempsey is the correct one to be adopted for these proceedings. The first of the reasons is one of broad principle whilst the second relates to specific evidentiary matters in these proceedings. 65First, it is accepted that, if there is an appropriate basis upon which the comparable sales methodology can be applied, this is the appropriate methodology to be adopted (Biscoe J - Graham Trilby Pty Ltd v Valuer-General [2011] NSWLEC 68 at 24). It is also the position that even one sale only, if properly able to be adjusted and analysed and then applied, is a sufficient foundation for utilising this methodology (Maurici v Chief Commissioner of State Revenue [2003] HCA 8; (2003) 112 CLR 111; (2003) 195 ALR 236; (2003) 77 ALJR 727). 66Whilst use of the capitalisation of rents methodology may be used as a check of the result of a comparable sales analysis (and in this is a not uncommon practice, in my experience), it is clearly preferable to adopt the comparable sales methodology when it can validly be applied. 67For the reasons set out subsequently in the consideration of the Dan Murphy site sale, the evidence with respect to the analysis and application of this sale to the Toveno site provides a sufficient and appropriate foundation for the utilisation of this methodology in preference to that proposed by Mr Dick. 68The second reason arises from Mr Dick's evidence itself. 69Notwithstanding the extent of Mr Dick's expertise, it is necessary, under the somewhat unusual circumstances of his written and oral evidence, to undertake a general consideration of the reliability and utility of his evidence in these proceedings. 70I have concluded that, save to the extent that his evidence might relate to purely factual matters (particularly where those facts are not contested) or where his evidence is either in agreement with evidence given by Mr Dempsey or where Mr Dempsey's evidence agrees with that given by Mr Dick, I ought place no reliance on his evidence, it is necessary to set out, in some considerable detail why I consider that his evidence should be so treated. 71A convenient place to start this analysis is to set out the nature of the obligations that are imposed on an expert proposing to give evidence in court proceedings. 72In Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705, the Court of Appeal examined what should be the qualifications and functions of an expert witness. These are specifically reinforced by the Expert Witness Code of Conduct (see r 31.23 and Sch 7 of the Uniform Civil Procedure Rules 2005). A person, such as Mr Dick, giving evidence in this Court as an expert is required to be provided with and agree to be bound by the Code. Mr Dick sets out in his statement of evidence (Exhibit D, tab 15, folio 278) that he has been provide a copy of the Code and agrees to be bound by it. 73Whilst Mr Hemmings criticised Mr Dick's evidence on a wide variety of bases, there are specific element of his oral evidence that cause me sufficient disquiet that I am satisfied that, even if the comparable sales methodology was not to be regarded as the preferable one as a matter of principle, it would be appropriate to adopt it in this instance. 74The first relevant portion of his evidences arose during the cross-examination of Mr Dick on the second day of the hearing when Mr Hemmings was questioning Mr Dick about the way he had derived a rental from 155 Central Coast Highway to be applied to the Toveno site. This material is recorded on the transcript from page 106, line 38 through to page 112, line 43 (I do not propose to extract and set out in full this passage). 75During this cross-examination, Mr Dick was asked to explain how the application of a capitalisation rate of 11% to a rate of $2000 per square metre (adjusted to comparability to apply to the Toveno site) could result in an adopted rental of $240 per square metre when simple arithmetic shows that 11% of $2000 is $220. Mr Dick also indicated that he had undertaken a calculation based on a 10.75% capitalisation rate. Such a rate would derive a $215 per square metre rate to be applied to the Toveno site. 76Mr Dick, however consistently maintained throughout this passage that the appropriate rate to be applied was $240 per square metre, derived as a "blended rate". With respect to this mathematical conundrum, Mr Dick said (page 109, line 21 to 24) as follows: WITNESS DICK: If you accept what you're saying, those figures, if you go down to the $2000 per square metre and adopt 11%, yes, the rent should be 220 or, if you adopt 10.75, yes, the rent should be 215. I haven't adopted those figures. I've adopted a blended rate of 240 per square metre. 77Although there are other reasons to be cautious about Mr Dick's evidence, discussed later, this inability to explain some rational arithmetical basis for the adoption of his "blended rate" of $240 per square metre for application to the Toveno site means that, even if I were to contemplate using a capitalisation of rents basis (whether for primary or check purposes), I could not be comfortable in applying any of Mr Dick's derived figures in such a process. 78This conclusion means that I am not required to address and attempt to resolve the differences between Mr Dick and Mr Dempsey about what might be an appropriate capitalisation rate to apply nor to address the submission by Mr Hemmings that, for Mr Dick's rental analysis evidence, Mr Dick was "working backwards" from the ultimate answer he sought to derive in order to provide a proper foundation for that answer rather than working through the process on a first principles through to conclusion basis. 79Nowhere does Mr Dick offer any rational explanation of the calculation bases he adopts (and confirms during this exchange recorded in the transcript) upon which to apply his "blended rate" of $240 per square metre to the Toveno site. 80During the course of further cross-examination by Mr Hemmings, Mr Dick was questioned extensively on the process he had undertaken for analysis treatment of 155 Central Coast Highway, Erina. As it is lengthy, I have not reproduced this element of the cross-examination. It appears in the transcript at page160 line 26 to page 175 line 49. In this lengthy passage, Mr Dick gives confusing and difficult to follow evidence about how he has made adjustments to reflect a proper comparative analysis between this property and the Toveno site. 81It is clear to me from this passage that Mr Dick was not able to provide a coherent and rational explanation of the adjustment process that he had undertaken. Despite Mr Hemmings endeavouring to have Mr Dick identify, with precision, the adjustments that he had made for each factor that he said required to be take into account, Mr Dick was either unable to do so or was not prepared to do so. If the first, the conclusion that would follow would be one reflecting on his competence in the area of expertise claims. If the second, it would lead to the conclusion that Mr Dick did not understand or was not prepared appropriately to discharge his responsibilities to the Court as an expert witness. Whichever might be the appropriate conclusion (it being not necessary to choose between them) nonetheless this evidentiary process leads me to the conclusion that, at least for these proceedings, no reliance can be placed on Mr Dick's evidence. 82I am fortified in this conclusion by a short exchange I had with Mr Dick immediately after the conclusion of the passage cited above. In exasperation at his inability or unwillingness to explain with any precision at all the adjustment process he had undertaken, I questioned him on the general principle involved (of disclosing adjustment factor values). The following exchange is recorded on the transcript (page 176 line 1 to 19): SENIOR COMMISSIONER: Are you saying no valuer ever itemises individual adjustments as a matter of valuation theory? Are you seriously telling me that? WITNESS DICK: No, I'm not, senior Commissioner. What I'm saying is you don't individually itemise them. Any valuer will make those adjustments-- SENIOR COMMISSIONER: Are you seriously telling me that no valuer will individually itemise adjustment factors? WITNESS DICK: Not on a percentage basis. SENIOR COMMISSIONER: No professional competent licensed valuer will do that. Are you seriously telling me that? WITNESS DICK: Senior Commissioner, I'm saying I'm not aware-- SENIOR COMMISSIONER: I would like you to answer my question, please. WITNESS DICK: Well, yes, I am. 83Mr Dick's concluding position in this short exchange - that no professionally competent valuer would provide individual adjustment values for the sort of process undertaken in an analysis of a sale for the purposes of deriving a value for application to a valuation site - simply defies rational belief. 84In my recent experience in two significantly contested valuation cases (Kogarah Town Centre Pty Limited v Valuer General [2014] NSWLEC 1085 and Naburn Pty Ltd v Valuer General [2014] NSWLEC 1244), the valuers in those proceedings provided detailed adjustment calculations across a wide range of attributes where the relevant sales were said to be different from the relevant valuation site. This required adjustments to be made as part of the analysis before arriving at an adjusted value to be applied to the valuation site. 85I merely give these two instances as they are ones of my recent experience. However, it is fair to say that my recent experience is broadly reflective of that of other members of the Court when there are contested valuations (whether that contest arises in the context of a statutory valuation appeal or in the context of a resumption compensation appeal as is the case with these proceedings). 86One further example I should set out is the exchange between Mr Hemmings and Mr Dick recorded in the transcript at page 173 between lines 7 and 36 inclusive. This was in the following terms: HEMMINGS: Did you do any workings out to come up with the conclusion of ten percent on one and 27 and a half percent on the other? WITNESS DICK: No. As I've said before, I didn't isolate individual items. It was a collective amount. HEMMINGS: 27 and a half percent is a pretty precise number. It appear it's made up of something. WITNESS DICK: I don't believe so. Generally, it's accepted that it's going to be either five, ten, 15 or 20, 25 or 27. I don't believe it's precise, as such. HEMMINGS: That's a linear relationship that's one I'm not comfortable with. Five, ten, 15, 20, 25, 27. And then I'll add, and a half. I want to suggest to you again, sir, let's look at it. As a consequence of the 27 and a half percent adjustment, knock me over with a feather, it shows $2,000 a square metre. WITNESS DICK: Yes. HEMMINGS: You have simply adjusted both of these sales to derive the $2,000 square metre rate, haven't you? WITNESS DICK: No, I considered the 27 and a half percent adjustment to be a reasonable reflection. SENIOR COMMISSIONER: Yet you are unable to tell me any of the component parts of 27 and a half percent. Is that correct? WITNESS DICK: Not on an individual line item. No, I'm not senior Commissioner. 87It is fair to say that other elements of Mr Dick's evidence reinforce my extreme disquiet that I have about the reliability of anything contained in his statement of evidence or anything said during the course of the concurrent in court evidence.

Valuing the acquired land 88Mr Dempsey relied on what he considered to be three comparable sales, in the immediately proximate West Gosford precinct, to undertake a conventional analytic process to derive a rate per square metre capable of application to the land that had been acquired (228.4 m²). 89Mr Dempsey said, as a basis for deriving a rate to be applied to this site from the rate of $1100 per square metre he derived as his adjusted land value from the sales examined and that there should be a further adjustment made to that rate. He described (Exhibit D, tab 14, folio 251 at point 150) the basis for such an adjustment in the following terms: I have allowed a discount in the range of 10% to 15% to my assessment of the market value of 3(b) land to reflect the value of the subject land in circumstances where the building is a burden on the land arising from the design which is in my opinion not adapted to industrial premises will does it reflect a modern standards of commercial office accommodation. 90Mr Eastman questioned Mr Dempsey about his knowledge of the background circumstances to these three sales. To understand how I propose to approach my consideration of Mr Dempsey's three sales, it is necessary to set out an extract from the transcript as it provides a further (and reinforcing) demonstration of why I am not prepared to accept that Mr Dick participated in these proceedings in a fashion consistent with his responsibilities under the Expert Witness Code of Conduct. The relevant portion of the transcript (page 144 line 26 to page 145 line 18) is in the following terms: EASTMAN: Do you know who the vendor was for sale 2? WITNESS DEMPSEY: No. EASTMAN: Have you had any discussions with Mr Dick about it? WITNESS DEMPSEY: I think we've discussed the sales, generally, but I don't think I got to that level of discussion. EASTMAN: Well, tell me if you know any of these things. Do you know that he was the local Audi dealer of a dealership that went bust. Do you know anything about that? WITNESS DEMPSEY: No, I don't. EASTMAN: Mr Dick tells me, at least, and he can confirm this that at the time of the purchase he was the subject of a mortgagee and possession sale at his home in Peats Ridge. Do you know anything about that? WITNESS DEMPSEY: I don't know anything about that. EASTMAN: Are they right, Mr Dick? WITNESS DICK: That's correct. EASTMAN: If those things are right then surely, Mr Dempsey, you'd say that he's probably an anxious vendor. WITNESS DEMPSEY: Well, I wouldn't make the assumption. The RMS has got a responsibility under the Act to apply the learned market value. So, I proceeded on that assumption. EASTMAN: Do you know anything about the vendor of sale 3? WITNESS DEMPSEY: No, I don't. EASTMAN: Are you sure you had no discussions with anyone that was part of a deal done with Domain so that they could have extra car parking? WITNESS DEMPSEY: No, not at all. EASTMAN: You're not aware of any of that. Mr Dick, is that right? WITNESS DICK: That's correct. 91Mr Hemmings subsequently cross-examined Mr Dick on these matters with the effect that it is unnecessary for me to make any merit determination about them. In addition, given my general conclusion that the Dan Murphy site sale, alone, provides a proper basis for the valuation exercise I need to undertake, no merit determination about Mr Dempsey's other two sales is required. 92There are, in my view, three conclusions to be drawn from this aspect of Mr Dick's evidence. The first is that Mr Dick was aware of material facts that potentially went to the question of whether or not Mr Dempsey could continue to rely on those sales for evidentiary purposes or, at the very least, whether further enquiries might have needed to be made concerning those sales and that Mr Dick did not disclose those matters to Mr Dempsey during the joint conferencing process. 93Second, following on from the first, with respect to two of the sales relied upon by Mr Dempsey, I am left with a deal of unresolved unease about those two sales and the extent to which it might be appropriate to rely on them for purposes of reaching a valuation conclusion in these proceedings about the 228.4 m² acquired across the highway frontage on the site. 94Third, following on from the first and the second, I am satisfied that, given the concession by Mr Dick that there was not, in fact, any adjoining owner influence in the third of these sales relied upon by Mr Dempsey (the Dan Murphy site sale) that it is appropriate to rely on a sale for the purposes of deriving a value to be applied to the acquired strip of land. As I have earlier noted, the High Court in Maurici has held that a single sale can be adequate for such purposes provided there is sufficient comparability between the sale and the valuation site. 95Before considering whether either of Mr Dempsey's qualifying propositions warrant being adopted in order to derogate from the conventional position of utilising the comparable sales method to derive an analysed value per square metre for the acquired land and then applying that rate to the area of the acquired land to derive a quantum of compensation, it is necessary to undertake the first step of considering what is the appropriate value per square metre to be derived from the sales evidence before turning to consider whether some departure is warranted from the conventional application of the derived value to the area of the land that has been acquired. 96In this instance, although on opposite sides of the Central Coast Highway, there is sufficient broad similarity between the Dan Murphy site sale and the site for this sale to be appropriate for such a comparison purpose. 97My satisfaction is assisted by the fact that Mr Dick and Mr Dempsey are in complete agreement about the analysed value derived from the Dan Murphy site sale as appropriate to be applied to the site. It is unnecessary, as a consequence, to set out in any detail the reasoning involved, merely to note that the agreed derived rate, on a site area basis, is $1100 per square metre. 98If I were to accept that there was a change in value as a result of the acquisition, his opinion was that this should be calculated on the basis of the amount of gross floor area - GFA - (125m²) that had been lost to the building as a result of the amendments made in 2005 to the proposed 2003 design. The 2005 amendments, amendments which are reflected in the building is constructed, were made because of the need to redesign the building as a consequence of the proposal to acquire the strip across the road frontage. 99Mr Dempsey said, in his statement of evidence, that he considered that Toveno would have been able to achieve 125 m2 GFA above that which had been approved for the site (Exhibit D, tab 14, folio 249 at point 130). As a consequence, he concluded that the application of an $1100 per square metre rate derived from his three comparable sales less adjustments potentially required for design of improvements necessary for and the risk associated with obtaining those improvements for a change of use from industrial to commercial (given that the approval presently for the building is for an industrial use - even though it is now in a commercial zone). The range that Mr Dempsey then struck was from $117,000 to $124,000 with an adopted rate of $120,000 as the appropriate rate to be applied. 100Although Mr Dempsey, in his oral evidence, adopted a further position (namely that that which has been erected on the site maximises the development potential of the site in not only its current configuration but also had the strip of land not been acquired), I am unable to accept the conclusion that he said flowed from this. That conclusion was that there was, effectively, no value to be attached to the acquired land. 101I am satisfied on the basis of his earlier oral evidence, when coupled with his statement of evidence, that there would be the potential for a further 125 m² GFA on the site had the strip not been acquired. The question that arises, fundamentally, in my view, in light of my accepting this proposition, is how should a value be determined for the strip of land rather than whether it has any value at all. 102The conclusion that Mr Dempsey draws is that it is appropriate to apply the rate per square metre derived from his analysis of comparable sales to the expected yield of additional GFA on the site rather than applying that rate to the area of the land acquired. At least implicit in some of the questioning of Mr Dempsey by Mr Eastman on this point, was the proposition that applying a rate derived on a site area basis to a calculation based on GFA was not a comparison of like for like. I accept that this is correct. 103During the course of this element of Mr Dempsey's evidence, he was asked to calculate the value of the Dan Murphy site on a rate per square metre GFA rather than on a whole site basis. The resultant value on a GFA basis for the Dan Murphy site was $2474 per square metre GFA. 104Whilst the rate per square metre GFA for the Dan Murphy site is obviously one that arises as a consequence of the choice of development extent undertaken on that site, nonetheless there was no suggestion by Mr Dempsey, as I understood his evidence, that the development of the Dan Murphy site for the purposes of erecting a Dan Murphy store did not represent an appropriate and highest and best use of that site (as I understood to be the implication to be drawn from his evidence). 105Although he did not consider, evidently, that the development that has been erected on the company's site constitutes the highest and best use of that site (given its former zoning and the development consent that currently attaches to the building on the site), this did not extend to the use of the building for commercial purposes on some appropriate application. Under those circumstances, he considered that an adjustment of 10 to 15% should be made to reflect the risks associated with such an application but not that this prospect should be ignored. 106I therefore consider that, for the purposes of deriving a value for the acquired land, the alternatives are confined to:

Applying the rate of $1100 per square metre to the land area of 228.4 m² giving a derived value $251,240; or
Applying the $2474 rate per square metre GFA derived from the Dan Murphy site to the 125 m2 GFA potentially forgone on the company's site and making an adjustment within the range of 10 to 15% to this derived value for the reasons described by Mr Dempsey in his evidence gives an alternative derived value range of $262,862.50 to $278,325 for the acquired strip. 107I consider that, between them, these calculations do provide the appropriate broad range within which to set a value for the acquired land. Having accepted this, it is appropriate to adopt the middle point of the range $264,782.50 (quite close to the lower GFA derived rate) as the appropriate value and round it to $265,000. I therefore propose to order that $265,000 be the amount payable pursuant to s 55(a) of the Acquisition Act. 108In accepting Mr Dempsey's approach and rejecting Mr Dick's evidence on this, I am accepting the RMS's position the only compensation payable under s 55 is that determined for the value of the land acquired.

The claim for rental loss said to be caused by the acquisition

Background to the claim 109Toveno makes a claim for rental that it said was foregone (together with associated costs quantified separately including but not confined to unrecompensed outgoings and interest that could have been earned on the rental income). This claim is said to arise as a consequence of the acquisition by the RMS of the 228.4 m² strip of land across the road frontage of the site. It is important, in this context, to observe (as was expressly emphasised by Mr Eastman in his opening submissions) that such a claim can only have a valid foundation if the acquisition of the land is a cause of the loss rather than the public purpose being the cause of the loss or some other unrelated causal element giving rise to the effect for which compensation is sought. 110The relevant time period used as the original foundation of this claim was the beginning of 2008 through to the end of 2009. 111During the course of his closing submissions, Mr Eastman conceded that, at the highest for his client, the period for which a claim might be sustained was for fifteen months before the date of issue of an occupation certificate. As that certificate was issued on 9 December 2009, the earliest operative foundational date for a claim that counted the acquisition of the strip across the road frontage would be 9 September 2008. 112It is sufficient that the influence of the acquisition is a cause of the loss and it is certainly not necessary for it to be the sole cause (George D Angus Pty Ltd v Health Administration Corporation [2013] NSWLEC 212 per Preston CJ at 307). However, I understood Mr Eastman to accept that if there were another cause or other causes that were sufficient to render any causes occasioned by the acquisition itself irrelevant in giving rise to the loss for which compensation is sought, then the claim based on acquisition causation must fail. Finally, obviously, the acquisition must itself be a cause of any loss claimed. 113There are, as I understood Mr Dick's evidence on this point of causation, said to be two bases for this.

The first is that delay occasioned by the acquisition process caused sufficient delay in the potential availability for rental of the completed building so that the notional availability date coincided with the onset of the global financial crisis and that this had an immediate effect of having, in the vernacular, the bottom dropping out of the market for properties such as this; and
The second is that the changes to the design of the building made necessary as a consequence of the acquisition of the strip across the road frontage also adversely impacted on the ability of Toveno to find a tenant for the building or any part of it prior to the eventual tenancy of the ground floor by Lucy in the Sky Online Store Pty Limited (a lease discussed in more detail elsewhere). 114With respect to the second of the causal elements prayed in aid on behalf of Toveno, Mr Dick set out in his statement of evidence what were the relevant design and building operational elements that were different in the before design (that is before a redesign was rendered necessary as a consequence of the anticipated acquisition of the strip across the road frontage). He also set out the countervailing factors that were brought into play by the redesign necessary to address the changed shape of the site as a consequence of the excision of 228.4 m² and the change of shape across the road frontage of a site that had presented squarely to the Central Coast Highway but had now been changed into a site that presented to it in a fashion that an angled from east to west away from that main road alignment. The relevant aspects of the before design said to be relevant were set out by Mr Dick at Exhibit D, tab 15, folios 297 and 298 and imported through an attached statement by Lufi and Associates, architects, at folios 363 and 364. 115Following this, those changes that Mr Dick adopts as the countervailing negative aspects that give rise to an outcome of rendering the building less attractive in the rental marketplace were set out by him at folio 299. 116Given the analysis set out in the following sections, it is not necessary to set out the detail of those differences and Mr Dick's analysis as I am satisfied that they were not causally relevant. 117To enable a proper assessment of what impact (if any) either or both of these pleaded causes may have had on the ability of Toveno to find a tenant or tenants for the whole or any portion of the building, it is necessary to examine, in some detail, such material as is available in the evidence from which properly founded and supported conclusions can be drawn on relevant matters of causation. 118In undertaking this analysis, it is unnecessary, in my view, to consider whether or not matters that are said on behalf of Toveno to be relevant as arising from direct evidence or necessary inference (an offer to undertake a land swap with the RMS for portion of the acquired RMS land to the west; the offer to sell the site, in its entirety to the RMS or the offer to lease the site in its entirety to the RMS) as I consider it appropriate to take the applicant's case at its highest on this point. In doing so, I assume that all of those matters were relevant matters in the acquisition process and are matters solely engaged by that process and are in no way linked to or part of the public purpose. 119My analysis of the somewhat sparse material tendered for Toveno relating to attempts to find tenants (whether for the whole or any part of the building is irrelevant, in my view) is set out in the following section.

The rental history of the building 120Although this section is headed the rental history of the building, a more accurate description would be the lack of rental history of the building. It is necessary to set out, in some detail, the efforts that have been made, since the time of lodgement of the original development and rezoning applications for the site, to obtain tenants for the building either anticipated to be constructed or, subsequently, actually constructed. 121Material concerning the endeavours on behalf of Toveno in this regard, covering the period from late 2003 to early 2012 was in evidence (Exhibit C, behind tabs 55 to 61). The lease of the building, subsequent to this period, to an internet distribution company known as Lucy in the Sky Online Store Pty Limited is discussed immediately following the setting out of these earlier leasing endeavours. The documents in Exhibit C behind tabs 55 to 61 (with the extracted information put in chronological order) demonstrate the following:

In February 2004, L J Hooker Commercial at Erina undertook an advertising campaign for the property with following correspondence occurring in August 2008, December 2010 and throughout 2011. It is not possible to conclude, from this material, whether this agency was endeavouring to find tenants for the property on a continuous basis from 2004 to 2011 or whether there were three separate campaigns by L J Hooker to do so. However, in my view, nothing arises from this lack of clarity.
In January 2007, an agency at Kariong known as Hinterland Commercial commenced being involved in endeavouring to find tenants for the building. This company was subsequently absorbed into or taken over by an enterprise known as Central Coast Commercial but the person communicating with Mr Vaiasinni remained the same. The documents (Exhibit C, tab 57) indicate the involvement of this agency in endeavouring to find a tenant during the period January 2007 to at least April 2010 (noting that, in April 2010, the agency indicated that they would continue to endeavour to find a tenant for the property.
From mid-2008, Chapman & Frazer Real Estate Pty Limited, located in Gosford, were engaged in seeking tenants for the building. Chapman & Frazer continued to be involved in endeavouring to lease the building (whether or not there was some break or whether these endeavours were continuous is unclear) until April 2012.
There was activity on behalf of Toveno by an agent known as the Moore Property Group Australia Pty Limited, located at North Wyong, together with a leasing agency agreement - commercial and industrial, between Toveno and an entity known as RCI Group Pty Limited executed on 9 June 2009. There is no other evidence, apart from material concerning the printing of brochures and the giving of a set of keys to the building to these agents.
In June 2009, RG Furney Projects Pty Limited, an enterprise holding itself out as real estate consultants and located in Baulkham Hills, wrote to Mr Vaiasinni indicating: Further to our recent discussions in respect of tenant enquiry for your new building at the above address, may we confirm:- There appears concern from local potential tenants to RTA road proposals That is, potential tenants see at some point there will be considerable disruption to business activity. We are of the opinion this may be a key factor to our lower than usual inspection rate and direct telephone response to signage. It would appear that the endeavours of this agency ceased in early 2010.
On 23 September 2009, City Coast Realty Pty Limited, a real estate agency located in Gosford, is recorded as sending a report on the building to the leasing manager of a company located in Sydney. A copy of this agency's brochure for the property is included in the tendered material. There is no evidence as to whether or not there was an earlier starting date for Toveno's relationship with this agency and, although there is in evidence (Exhibit C, tab 60, p 3) an email from Mr Vaiasinni to the licensee in charge of City Coast Realty sent on 28 April 2012, it is not clear whether this agency's activities on behalf of Toveno were continuous throughout that period or not.
The final evidence concerning activities by real estate agents in seeking to obtain tenants for the property comprises an undated letter from the commercial sales and leasing executive of Raine and Horne Commercial Terrigal addressed to Mr Vaiasinni. Although the letter from Raine and Horne is undated, there is a handwritten annotation, in handwriting that appears frequently in material in evidence - handwriting acknowledged to be that of Mr Vaiasinni. This annotation on the Raine and Horne letter is in the following terms: Signed leasing agreement sent 30/1/2012 by post Apart from an invoice for initial actions by Raine and Horne, an invoice date 1 February 2012, there is no material setting out any level of activity by Raine and Horne with respect to the building.

Recent lease agreement 122The final element in the rental activity history that needs to be noted is a lease agreement (with an initial operative date of 15 December 2013) to a company called Lucy in the Sky Online Store Pty Limited. The full lease document was reproduced as an Annexure to Mr Dick's statement of evidence (Exhibit D, tab 15, folios 368 to 407). The relevant terms of the lease are set out by Mr Dick in his statement of evidence (Exhibit D, tab 15, at folio 280). His summary is in the following terms: On 15 December 2013, Toveno Pty Limited entered into a lease agreement for all the ground floor area, inclusive of the kitchenette and bathroom area. This lease agreement is not yet registered on title and whilst it is acknowledged the lease commencement date is after the acquisition date of 22 February 2013, I am of the opinion that there was no change in market conditions between 22 February 2013 and 15 December 2013. Therefore I am of the view that the lease agreement entered into on 15 December 2013 is representative of market rental values applicable as at date of acquisition on 22 February 2013. A copy of this lease agreement is annexed herewith and the relevant particulars are summarised below:- Lessee: Lucy in the Sky Online Store Pty Limited Rent: $232,500 per annum payable monthly in advance and excluding GST Rent Free Period: 1 month Term: 2 + 2 years commencing 15 December 2013 Outgoings: Nil payable Rent Reviews: 4% per annum Permitted Use: "For warehousing and storage of non-hazardous materials and associated offices" Car Spaces: 1 half of existing Security Deposit/Bond: 3 months rent. Guarantee also executed.

Based on the survey plan and including an allowance for the kitchenette and bathroom area the leased area equates to 853 square metres.

Material from agents concerning prospective tenants 123It is also necessary to set out the relevant commentary, to the extent that there is any, concerning what matters may have influenced prospective tenants in their decision not to enter into a lease for the premises. This material (also from Exhibit C tabs 55 to 61 and arranged in chronological order - with undated material appearing first) is as follows: Undated A communication from L J Hooker I'm writing to let you know that the prospective tenants, Helen and Steve Mitchell, have been offered to $275 per square metre for 240 m² or $250 per square metre for 500 m², they are currently considering both offers. They have continually been negotiating for better terms and had used the roadworks as a reason for demanding better terms. The roadworks are still an issue that they are uncomfortable with. 27 May 2008 Chapman & Frazer Real Estate communication to Mr Vaiasinni Thank you for this morning's meeting. I understand that you will need to achieve something around $320 per square metre per annum to make the project work. The current market rent in Gosford is around $240-$260 per square metre except for the WorkCover building which is $315 net. Leasing has been extremely tough in the past 12 months. It is a case of waiting for the right tenant to come along and in your case, inspecting with potential lessees when the building is finished so that it presents itself in the right light. We can start by asking for rent in the $300s but expect to get offers between $250 and $300. All rents should be plus outgoings and GST. 30 June 2009 R G Furney Projects Pty Limited letter to Mr Vaiasinni Further to our recent discussions in respect of tenant enquiry for your new building at the above address, may we confirm:- There appears concern from local potential tenants to RTA road proposals. That is, potential tenants see at some point there will be considerable disruption to business activity. We are of the opinion this may be a key factor to our lower than usual inspection rate and direct telephone response to signage. 22 April 2010 Central Coast Commercial wrote to Mr Vaiasinni Further to our telephone discussions and to confirm same, we are continuing to promote your property and have been fielding enquiries with a view to leasing it. We have also had a few inspections to date, but have been unable to secure a tenant at this stage. Unfortunately, one of the principal reason that it has remained vacant is largely due to the concerns that prospective tenants have held about the likely future disruption to their business during the pending roadworks affecting the intersection where your property is located. Furthermore it is not yet clear when these roadworks will commence or what option the RTA will definitely adopt. 8 December 2010 Email from L J Hooker Commercial - Central Coast Regarding my last two inspections. Firstly with the State Electoral Commission. They think the building would be perfect for them. However the access to the highway would be an issue for them. Along with the future roadworks and the uncertainty of how this would affect the property has led them to look at other alternatives. Secondly the health centre people being relocated by the RTA. They were extremely keen to take the space. They got to the stage of negotiating the lease details. They also had an interior designer to draw up a floor plan for them. They met with the RTA and presented all the details and apparently the RTA was fine with all these details. After this, they decided to withdraw their offer. They say that the uncertainty of what the future roadworks hold for accessibility to the property is a major issue for them. I can only assume that dealing with the RTA and maybe getting some inside knowledge may have changed their minds. I will endeavour to find a tenant, however the traffic works and access will remain an issue for potential tenants. 28 April 2012 Mr Vaiasinni email to Chapman & Frazer Hopefully now that I have reduced the rental for the premises, we may be able to attract a tenant. 28 April 2012 Mr Vaiasinni wrote to City Coast Realty Now that we have reduced the rental to $270 per square metre plus outgoings plus GST, we may attract a tenant.

Material concerning asking rents 124It is also necessary to extract from such material as is available (also from Exhibit C tabs 55 to 61 and arranged in chronological order - with undated material appearing first) what advertised starting rentals were being put out to the public market. This material, such as it is, is set out in the following table: Undated City Coast Realty $280 per square metre per annum plus outgoings plus GST Undated City Coast Realty $320 per square metre per annum plus outgoings plus GST Undated LJ Hooker $280N per square metre exclusive of GST Undated LJ Hooker A second L J Hooker advertisement at the same rate as immediately above Undated LJ Hooker $300 per square metre 20 February 2004 LJ Hooker $360 per square metre plus outgoings 20 November 2008 Central Coast Commercial No rental price in an advertisement in The Sun Weekly 23 September 2009 City Coast Realty Circulation of lease brochure (no rental price disclosed) 17 August 2011 LJ Hooker $275 per square metre net plus GST. This was also circulated a to an email distribution list by L J Hooker Commercial on 22 August 2011 under the banner "Latest price reductions".

Mr Dick's evidence on leasing attempts 125In his statement of evidence concerning attempts to rent the site, Mr Dick said relevantly under the heading 13.03 Rental Evidence Summary (Exhibit D, Tab15, folio 293): Since completion the owner has been attempting to lease the property, initially at an asking rent of $350 per square metre net. However he has always advised the leasing agents that the asking rates are negotiable. Up until December 2013 he had been unsuccessful in obtaining tenants for the property. I am aware of least marketing that was undertaken by leading central coast commercial letting agents including Chapman and Frazer, City Coast Realty, Central Coast Commercial and LJH Commercial. I have spoken with representatives of each of the above companies and been advised that whilst the marketing attracted initial enquiry and some inspections, the parties making enquiries all expressed concern about the uncertainty surrounding the RMS acquisition proposal and the poor presentation of nearby properties already acquired by the then RTA. In correspondence from LJH Commercial to the property owner dated 14 November 2011 it is it acknowledged that the price was reduced from over $300 per square metre to $280 per square metre then again to $275 per square metre and we are now asking for any offers. During the least marketing of the property the agents advised that there have been several interested parties but all expressed concern about the acquisition and the likely impact of the roadworks. Examples of prospective tenants who have shown initial interest and who haven't proceeded include: State Electoral Commission Health centre 5D Holdings Robsons Consulting 126Mr Dick commenced his written evidence dealing with the loss of rent claim (Exhibit D, tab 15, folios 300 and 301) in the following terms: As detailed previously the need to revise plans to comply with the RMS acquisition proposal meant that instead of being completed in June 2007 the building was completed in November 2008. As at June 2007 market conditions were superior to those being experienced in November 2008, i.e. it was pre GFC, and it is my opinion that the majority of the property would have been leased approximately 6/7 months after completion at an average rate of $250 per square metre net. This opinion is supported by advice from local real estate agents including Chapman & Frazer who on 27 May 2008 advised the owner "we can start by asking for a rent in the $300's but expect to get offers between $250 and $300. All rents should be plus outgoings and GST". Also on 22 August 2012 Chapman & Frazer advised "November 2006. The market rental for now [sic] space at that time would have been around $275 per square metre per annum net. August 2012. The demand has softened significantly. We estimate the current net market rent for the premises to be $225 per square metre per annum net". 127The applicant's tender bundle comprised three folders- these became Exhibits A, B and C. Material from the various real estate agents involved in the leasing attempts was, as previously noted, in Exhibit C behind tabs 55 to 61. The material from Chapman & Frazer is behind tab 58. It comprises three single, unnumbered folios - the second of these folios (an email to Mr Vaiasinni) includes, in its text, the words quoted as being the May 2008 advice from this agency. None of these folios contains any material of the nature set out in the final two paragraphs quoted immediately above. No document in support of these two paragraphs is appended to either Mr Dick's statement of evidence nor is any such document attached to the joint report of the valuers. In particular, the first of these two paragraphs is obviously a retrospective analysis. 128However, taking these paragraphs at face value, the information to be gleaned from them is not inconsistent with the broader pattern of conclusions to be drawn from the earlier material. In particular, the $225 per square metre per annum net in August 2012 shows, by implication, that the $275 per square metre per annum net offering by LJ Hooker on 17 August 2011 (only a year earlier and there being no evidence of any dramatic drop during that period) was also not realistically marked to market. 129Mr Dick then sets out rental calculations for the period January 2008 to December 2010 and for the period January 2011 to February 2013. He does so on the following assumption: Assuming execution of 3 + 3 year leases I have allowed for a rental reduction to $225 per square metre net upon review in January 2011, i.e. after GFC. 130One element of this evidence (the impact of the roadworks) is also entirely consistent with the more detailed analysis earlier set out of as being able to be derived from such documents as have been put in evidence concerning the activities of the various agents who have sought to find tenants for the site or part of it. 131However, a second element - that the possible acquisition was having an impact - has no foundation in the documents tendered and is difficult to accept as the building design was reflective of the post-acquisition position and acquisition per se would have had no impact on any tenant - only the roadworks themselves would do so. 132The third aspect - concerning asking rents - is also consistent with the commentary in the agent material in Exhibit C tabs 55 to 61. The conclusion to be drawn concerning asking rents is discussed in the next section. 133There is nothing in this commentary that assists in displacing the conclusion that it is the roadworks (the public purpose) that has acted as the significant inhibiting factor for the inability of any of the agents to find a tenant for all or part of the property. 134In addition, Mr Dick's citing of the LJH commercial correspondence in November 2011 is but a confirmatory sample of what I consider to be the range of indicators that there has been a consistent failure to offer the property at realistic rental levels consistent with the local market rather than trying to strike a rental level reflective of the development costs apparently incurred. 135Mr Dempsey's analysis of the claim for loss of rent by Toveno resulted in an initial conclusion that there was no reasonable basis for this claim. However, he then considered (Exhibit D, tab 14, folio 253 at point 165) his rental analysis and, in this regard had concluded that: The applicant had not achieved a change of use and as a consequence the only lawful use related to an industrial use. As such the offering of the premises as designed and built based on an asking rent that was inconsistent with an industrial use does not represent a reasonable financial loss. 136Given that I have reached the conclusion from my detailed analysis of the material set out earlier that, whatever the realistic prospect of use might have been, the evidence cannot establish that the acquisition (as opposed to the public purpose) made any causal contribution to the inability of Toveno to lease the premises, it is unnecessary to explore, further, this aspect of Mr Dempsey's evidence. 137It was one of Mr Dempsey's criticisms (Exhibit D, tab 14, folio 250 at point 138) of that which was on the site that: The applicant was granted development consent for industrial purposes but proceeded to design and construct the building are presented as a commercial premises. Commercial use was not a permitted use of the consent. 138However, this conclusion is not borne out by the material set out above in dealing with the reasons why no tenancy was achieved (by any letting agency attempting to do so) prior to the lease to Lucy in the Sky Online Shop Pty Limited.

Conclusions with respect to causation of the rental loss 139It seems to me that three incontrovertible conclusions can be drawn from the marketing process material (limited and patchy though it is) set out in the preceding sections of this decision. Those propositions are:

The initial asking rent was pitched at a level necessary to provide a proper coverage of the costs of construction (Chapman & Frazer comment earlier set out) and that this asking rate, whether or not it was to be treated as negotiable, was significantly out of step with relevant market rentals at the time. The failure to "mark to market" and the slow (and self-evidently ineffectual) downward adjustment of the asking rent was clearly a significant cause of the failure to find tenants for all or any part of the building.
Second, there are repeated comments by real estate professionals (who were endeavouring, throughout the relevant period, to market the building) that questions of access to the building and road widening have also been a significant element (cause) of the failure to lease to any of those who have considered or made enquiries about the building. It is clear that access, in this context, cannot conceivably mean any of the internal vehicle or pedestrian circulation arrangements within the site. Any different conclusion concerning on site matters, it seems to me, incontrovertibly cannot not arise (given the context of the description of access difficulties set out in the comments from the various real estate agencies in the preceding section of this judgment). Indeed, the location and functionality of the point of access to the site has not broadly, in my assessment, changed in any functional sense between the before and after and there is nothing in the extracts from Mr Dick's statement of evidence or anything said by him in his oral evidence that could cause me to conclude that to the contrary. It is self-evident, from the comments earlier quoted that issues of access, when raised by potential tenants in their discussions with marketing agents, that this impediment to leasing arises solely with regard to the impact of the carrying out of the public purpose (namely the reconstruction of the intersection and the associated ancillary roadworks, including ancillary roadworks for the turn for westbound traffic on the Central Coast Highway debouching to the south toward Woy Woy - the movement that has necessitated the acquisition of the angled strip of land across the frontage of the site to facilitate this movement) and that this is the sole cause of the concern about access to the site.
Third, there is not a single comment made in any of the material relating to the endeavours by marketing agents and their commentary about discussions with potential tenants (or the agents' own views) on the lack of positive response to the offering of the building that touched in any conceivable fashion on any of the differences set out by Mr Dick in his before and after circumstances.
There is no suggestion able to be derived from any of the agents' material in evidence that acquisition of the strip of land across the site's frontage (as opposed to the public purpose) was a matter of concern to any enquiring potential tenant. 140What, then, are the further consequential conclusions to be drawn with respect to causation of the failure to rent the building or any part of it? I am satisfied that, put brutally, neither of the elements (taking the applicant's case at its highest on the question of the acquisition process) can provide any support whatsoever that the acquisition process made any causal contribution to the inability to obtain any tenants prior to the short-lived and ill-fated tenancy of Lucy in the Sky Online Store Pty Limited. 141There is no evidentiary basis whatsoever, apart from Mr Dick's assertions (my views on the reliability or otherwise of his evidence having earlier been set out in some detail) that would support any link between the global financial crisis and the failure to find tenants. 142Indeed, Mr Dick's comment noted at (129) also clearly reinforces the conclusion that the $275 per square metre per annum net offering by LJ Hooker on 17 August 2011 (7.5 months after Mr Dick nominates $225 per square metre net after GFC as the appropriate rental) was that Toveno continued to offer the property at a rent level not realistically marked to market. 143There is no independent evidence that any of the differences within the before/after design matters set out by Mr Dick played any role whatsoever in the failure to find tenants for the building. 144The result of this is that I am satisfied that the acquisition of the strip across the frontage of the site (separate and distinct from the public purpose) is not a cause in any way whatsoever of the failure to find tenants for all or any part of the building. On that conclusion, the rental claim and those elements that necessarily slipstream from it must fail.

Other elements of Toveno's claim 145The other elements of Toveno's claim are dependent on my finding that the acquisition (as opposed to the public purpose or any other cause) was the cause of the failure to lease (or pre-lease) the building. As I have concluded that there is no possible basis for such a finding, it is not strictly necessary for me to determine these matters. However, for completeness, I deal with them in the following sections.

Outgoings 146The first of these additional elements of Toveno's claim is to be reimbursed for what are described as the outgoings that have been paid by Toveno during the period for which lost rental compensation is sought. The detail (such as it is) provided in support of this claim is set out on page 29 of Mr Dick's statement of evidence (Exhibit C, tab 15, folio 302). 147This listing of items and the value attributed to each of them for the relevant period is entirely unsupported by any foundational documentary evidence, an absence to which it will be necessary to return shortly. 148As is clear from the transcript, Mr Dick provides no evidence as to the factual bases for each of the itemised elements. He does not, for example, say that he has examined the relevant council rating notices and established that the total set out is accurate. 149A similar position applies with respect to each of the other elements where it is reasonable to assume that an array of foundational documents would ordinarily be available to provide support for the sums set out in Mr Dick's statement of evidence. Not only have these foundational documents (assuming that they in fact exist) not been tendered in the proceedings, there is no evidence from Mr Dick that he has examined the relevant documents to arrive at the matters set out nor, in the alternative, is there any evidence given by him of a hearsay nature (for example, a statement such as: Toveno's bookkeeper told me that she had examined the accounting records of the company together with all relevant invoices and receipts for each item and had added them up to derive the totals set out in my statement of evidence). 150As is touched upon elsewhere, the Land and Environment Court Act 1979 (the Court Act) permits a deal of latitude with respect to the acceptance of evidence, including permitting (subject to assessment of weight to be attributed) having regard to material that would otherwise be proscribed on the basis of the provisions of the Evidence Act 1995 restricting the potential use of hearsay material. 151On these matters, I simply have no satisfactory statutory foundation, mere assertion by Mr Dick of the amounts. 152Even if I were to accept that there is some proper evidentiary foundation for the quantum claimed for outgoings (which, for the reasons set out I am not) I am required to be satisfied that, for the period covered by the outgoings claim, there would have been for this building the potential to rent the building on a basis where the tenant would meet the outgoings rather than Toveno. There are two competing aspects of the evidence on this point. 153First, in support of the proposition, there is Mr Dick's evidence that leasing of premises of this type in this area was on a basis where the outgoings were met by the tenants. 154Contra this view, however, is the only lease agreement entered into for the premises, that being the one earlier set out between Toveno and Lucy in the Sky Online Store Pty Limited. As Mr Dick acknowledges (Exhibit D, tab 15, folio 280), this lease agreement had all outgoings payable by the landlord and not by the tenant. In addition, in stark contradistinction to the view he expressed in his oral evidence, he said in his statement of evidence, with respect to this lease and its terms: Therefore I am of the view that the lease agreement entered into on 15 December 2013 is representative of market rental values applicable as at the date of acquisition of 22 February 2013. 155This statement does not sit comfortably with the absolute terms he adopted in his oral evidence concerning tenants in this market meeting outgoings. 156The best independently documented evidence that I have with respect to the question of outgoings for this building and whether or not, if tenanted, those outgoings would be met by the tenant or the landlord can be summarised as follows:

Extensive efforts for a number of real estate agents to find tenants for the building, over a number of years, on a basis where any tenancy agreement would require the tenant to meet the outgoings were entirely without success; and
The sole executed tenancy agreement embodied the provision that the outgoings were to be met by the landlord. 157Faced with this documentary evidence, and consistent with Mr Dick's analysis of the generally representative nature (as at the date of acquisition of 22 February 2013) of the lease to Lucy in the Sky Online Store Pty Limited, there is no rational basis upon which I could conclude that the claim for compensation for outgoings should succeed. 158I note, in passing, in addition, that even if I were otherwise minded to proceed by adopting Mr Dick's numbers as a sufficient evidentiary foundation, they would have necessitated recalculation because of the concession made, during closing submissions, quite properly and appropriately, by Mr Eastman that the time period for which the applicant sought compensation required, at its highest on Toveno's case, recalculation downward as a consequence of the necessity to have regard to the date upon which Toveno received an occupation certificate for the building.

Occupancy rate adopted for the foregone rent claim 159However, that which is discussed above is not the only evidentiary deficiency with respect to this element of the claim by Toveno. The above analysis merely deals with the absence of factual material to provide the foundation for Mr Dick expressing an opinion as to the tenanted occupancy rate that should be adopted for application to the asserted outgoing total set out earlier. The totality of the material in Mr Dick's statement of evidence on this point comprised Assume 80% let (i.e. all of ground floor including W.C. & most of first floor level) for the first period and Assume 70% let 70% reflects weaker rental market) for the second period. 160There is no direct supporting documentary evidence or anything relevant to be inferred from any of the other documents in evidence. 161I have earlier set out my reasons for considering, on a global basis, why I have concluded that Mr Dick's evidence should be regarded as unsatisfactory. His evidence concerning this particular element of Toveno's claim, both in its bald and unsupported assertion in his statement of evidence and in his responses during cross-examination reflect his failure to understand the necessity for an expert witness to provide a proper chain of reasoning comprising facts, assumptions and conclusions (drawn from those facts and assumptions). 162It was not uncommon in the movie theatres of the 1950s and 1960s to have serials precede the main feature. From time to time, in those serials, the hero (or occasionally, but much less frequently, the heroine) would be depicted as lying, trussed and bound, on the railway tracks as an express train hurtled toward our valiant hero. The next scene, inevitably, showed the hero elsewhere performing some daring deed. Between the two, however, there appeared a neutral toned screen bearing the words "With one mighty bound he was free". 163In my youth, during family holidays, I watched many of those serials. Mr Dick's evidence on this point evoked fond memories of those occasions - that is memories of the linking screen - memories which, unfortunately for Mr Dick, provide no basis, whatsoever, for me accepting the propositions that he has here advanced. 164As a consequence, I am satisfied that there is no proper, sufficient evidentiary basis upon which this element of Toveno's claim could succeed.

The construction cost increase claim 165A further element of the claim based on the asserted delay occasioned by the acquisition is with respect to increases in construction costs for the building as a consequence of this delay. The claim for increase in construction costs is supported by a seven line passage in Mr Dick's statement of evidence (Exhibit D, tab 15, folio 300). 166This material is the totality of the written evidence in support of this claim. There are two matters requiring consideration as to whether or not there is any valid basis upon which I could quantify an amount that might be appropriate to be awarded under this head of claim if this strand (delay caused by acquisition) made such a claim available. The first of these concerns the construction cost to which any rate of increase might be applied and, second, the rate of increase that might be applied to any construction cost. 167I turn, first, to the question of the claimed increases in the cost of construction. The claim is for 10% of an asserted actual construction cost of the building of $2.67 million. There are two aspects of this element that cause me significant concern. The first is the amount and the second is how it comes to be put to me. 168With respect to the amount itself, at the time of lodgement of the development application, the cost of the works (a matter relevant to the fee that is required to accompany the application to the Council) was asserted to be $1.1 million. This is shown on the face of the application form (Exhibit C, tab 17, third page). After the application was lodged, as part of its initial review, an officer of the Council concluded that the correct proposed cost should have been declared as $1.8 million. As a consequence of the forming of this opinion, the Council sought a supplementary application fee payment from Toveno (Exhibit 1, tab 9, folio 82). Although Toveno paid the additional $550 supplementation of the application fee requested by the Council, it did so under protest and sought a review of the Council's opinion and, if the review supported Toveno, a refund of the supplementary fee. This was conveyed by letter on behalf of Toveno dated 19 January 2004 (Exhibit 1, tab 10, folio 83). 169There is no evidence of what the Council's response was to this request so that, at the time of the development application being made, I am left with the position that the applicant asserted that the works would cost $1.1 million whilst the Council asserted that they would cost $1.8 million. 170I am now faced with a claim for compensation for increased costs based on an asserted construction cost of $2.67 million. A careful reading of Mr Dick's statement of evidence on this point, his oral evidence on this point and the joint expert report of the valuers comprise all the relevant material. 171There is a significant distinction to be drawn between Mr Dick's evidence (both written and oral in combination) concerning the percentage rate to be applied to derive the claimed adjustment to the construction cost and that which founds the figure $2.67 million, itself, as the construction cost. With respect to the former, Mr Dick's total evidence provides some foundational bases (although of a hearsay nature, this does not necessarily detain me in light of the provisions of s 38 of the Court Act) but, on the other hand, there is no such source attribution, whatsoever, with respect to the construction cost total itself. 172All there is as a foundation for this number is Mr Dick's assertion of it. There is no documentary evidence. There is no assertion that the number has been provided to him by a builder or by Mr Vaiasinni or by the project's architect. The number simply appears. 173It cannot be one based on Mr Dick's professional expertise as there is no foundational claim for relevant expertise made by him. 174As a consequence, I am left with three asserted numbers (either expressly or by inference) as the cost of construction - namely $1.1 million, $1.8 million and $2.67 million. 175There is no supporting evidence, whatsoever, to justify any or all of these numbers. 176Whilst I appreciate that there is ample scope based on authority for me to reach some conclusion (doing the best I can with any information available even if it is limited) to determine a number with respect to which I might have an appropriate degree of satisfaction for consideration of this aspect of the claim, there is simply no rational basis upon which I could do so here. 177Second, it is necessary to examine the 10 % rate proposed by Mr Dick as the increase in construction costs said to have been incurred as a consequence of the claimed acquisition-related delay. During the joint conferencing, Mr Dempsey produced material based on the Rider Hunt Construction Index for the relevant period in response to this aspect of the claim. This appears (apart from Mr Dick's opinion - an opinion I set aside for reasons earlier set out) to be the only relevant evidence. 178There can be little doubt that, if there is an acquisition-linked cause to delay in construction of the building, the construction costs of the building will have increased as a consequence of that delay. At the very least, it would seem reasonable to accept that such an increase in costs would have been a minimum of 4.41% for the twelve month period shown in the Rider Hunt table. Although this does not coincide, precisely, with the period for which delay is claimed on Toveno's case (as elsewhere noted, I understand that the existence of delay is not challenged although both the cause and length the delay are in contest). 179Therefore, had I had some proper basis for and foundational value from which to conclude that compensation for increased construction costs should be awarded, such compensation would have been at 4.41% (rounded) of such foundational value.

Conclusion 180I have concluded that:

The value of the strip of land acquired from Toveno by the RMS should be valued using a conventional comparable sales analysis. In reaching this conclusion, I have considered and rejected, as generally unreliable, the evidence given by Mr Dick in these proceedings;
There is no need, as a consequence of that conclusion, to undertake any detailed analysis of rental evidence from either Mr Dick or Mr Dempsey;
The sale of the Dan Murphy store site opposite Toveno's site on the Central Coast Highway provides, in itself, a sufficient basis for deriving an analysed value to be applied to the acquired land;
Whether the derived value is to be applied on either a land area basis or a GFA forgone basis is a matter not needing to be determined as, using both methods, a sufficiently narrow and appropriate range can be ascertained from which to derive a value for the acquired land;
This results in a value for the acquired land of $264,000;
The claim by Toveno for compensation for foregone rent and costs said to be appropriate to be reimbursed as a consequence of the acquisition is without any proper evidentiary foundation and should be rejected; and
In the final analysis, the only payments the RMS should be ordered to make to Toveno are those needed to reflect the total of the value of the land acquired together with the sum agreed between the parties as being the appropriate aggregated sum for legal and valuation costs. 181Because of the conclusions I have reached on the fundamental issue of whether or not there is a basis for the foregone rental claim and associated matters, it is unnecessary to deal with Mr Eastman's suggestion that failure to provide adequate documentation of any element might be cured by permitting further evidence on that aspect.

Orders 182The orders of the Court are: (1)Pursuant to s 55(a) of the Land Acquisition (Just Terms Compensation) Act 1991, determination of compensation in the sum of $265,000 for the compulsory acquisition of the applicant's land; (2)Pursuant to s 59(a) and (b) of the Land Acquisition (Just Terms Compensation) Act 1991, determination of compensation in the agreed sum of $38,930 for legal and valuation costs associated with the compulsory acquisition of the applicant's land; and (3)The exhibits are returned. Tim Moore Senior Commissioner DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 December 2014

The relevant planning framework 34It is convenient to set out the relevant elements of the general planning framework that have applied to the site throughout the relevant time period from 2003 to 2012. The principal planning instrument that has applied to the land during this period is the Gosford Planning Scheme Ordinance (the GPSO) administered by the Council. 35At the time from which the narrative of these proceedings commences, in November 2003, the site was zoned 4(a) Industrial - General under the GPSO. The objectives of the zone were: Objectives of the Zone The objectives of Zone No. 4(a) are: (a) to enable the development or use of land for industrial or storage purposes (or both) which require, due to the nature of the activity concerned, physical separation from other industrial, commercial, retail and residential uses; and (b) to allow other development where it: (i) is of a nature which the community feels is appropriate only in the Industrial (General) areas; and (ii) provides for relatively low intensity uses with extensive floor space requirements which, by nature of the activity concerned, require direct and easy access to motor vehicle parking areas for loading purposes; and (iii) is unlikely to prejudice the viability of established retail and commercial centres when considered both on its own and with other similar land uses which are existing or proposed; and (iv) is primarily intended to provide personal services to persons occupied or employed in carrying out development otherwise permitted in the zone. 36There are two matters appropriate to be observed with respect to this zone relevant at that time. The first is that the Council did not seek to impose, through the GPSO or through a development control plan, any floor space ratio on buildings erected on land within this zone. Second, the land use table in the GPSO was a conventional one in that it classified potential uses for land as falling within one of three categories. These categories were:

Development which was permitted and for which consent was not required;
Development which was permitted but for which development consent was required; and
Development which was prohibited. 37The relevant elements of the land use table for the 4(a) zone are in the following terms: 1 DEVELOPMENT THAT DOES NOT REQUIRE CONSENT Development (other than exempt development) for the purpose of: home occupations; recreation areas. Exempt development. 2 DEVELOPMENT THAT NEEDS CONSENT Development (other than exempt development) for the purpose of: advertisements; bed and breakfast accommodation; boarding houses; bulky goods salesrooms or showrooms; bus depots; carparks; child care centres; clubs; commercial premises; community facilities; dwelling-houses; educational establishments; goods terminals; hardware and building supply outlets; hotels; light industries; medical centres; motels; motor showrooms; places of assembly; places of public worship; plant nurseries; recreation and sporting facilities; recreation areas; residential flat buildings; restaurants; roads; service stations; shop-top housing; tennis courts; utility installations; vehicle repair stations; warehouses. Subdivision. Note: Development or related activities in this category indicated in BOLD may comprise complying development. An application may be made to Council or an accredited certifier for a complying development certificate. Details of such development or related activities are specified in Schedule 11. 3 PROHIBITED DEVELOPMENT Any development not included in Item 1 or 2. 38In November 2003, as discussed later, Toveno applied to the Council to change the zoning of its land to 3(b) Business - Special. 39The zone objectives for the 3(b) Business - Special zone are: Objectives of the zone The objectives of Zone No. 3(b) are: (a) to provide for the development of commercial centres which make provision for the service needs of the community; and (b) to allow residential or other ancillary development but only where it is unlikely to significantly prejudice the supply of commercial floor space within the City of Gosford. 40The extract from the land use table for the 3(b) Business - Special zone in the GPSO is structured in the conventional fashion earlier cited. It is in the following terms: 1 DEVELOPMENT THAT DOES NOT REQUIRE CONSENT Development (other than exempt development) for the purpose of: home occupations, recreation areas. Exempt development. 2 DEVELOPMENT THAT NEEDS CONSENT Development (other than exempt development) for the purpose of: advertisements; bed and breakfast accommodation; boarding houses; bulky goods; salesrooms or showrooms; bus depots; carparks; childcare centres; clubs; commercial premises; communication facilities; community facilities; educational establishments; general stores; goods terminals; hardware and building supply outlets; hotels; medical centres; motels; motor showrooms; places of assembly; places of public worship; plant nurseries; reception rooms; recreation and sporting facilities; residential flat buildings; restaurants; roads; service stations; shops; shop-top housing; utility installations; vehicle repair stations; warehouses. Subdivision. Note: Development or related activities in this category indicated in BOLD may comprise complying development. An application may be made to Council or an accredited certifier for a complying development certificate. Details of such development or related activities are specified in Schedule 11. 3 PROHIBITED DEVELOPMENT Any development not included in Item 1 or 2. 41It is to be observed that a limited number of uses permitted with development consent are common to both zones. This is a matter that potentially required some further discussion later in the context of consideration of how and whether it might be necessary to apply some differentiation to the possible uses for which the building on the site might be leased and how rental computation might be carried out in those circumstances. Given the conclusions I have reached, it was unnecessary to do so. 42A range of State Environmental Planning Policies apply to the site and, although site remediation compliant with State Environmental Planning Policy 55 Contaminated Land was necessary because the site had previously been occupied by a service station, none of the State Environmental Planning Policies play any functional role in these proceedings. 43Finally, there were two Development Control Plans that potentially had relevance. These are the broad Gosford Development Control Plan 2004 and Development Control Plan 111 Car Parking. However, the valuation path I have determined is the appropriate one to follow renders it unnecessary to discuss these development control plans in any detail. 44Importantly, in the context of the transition of the site from its industrial zoning to its commercial zoning, the change of zoning brought into play a floor space ratio control where one had previously been absent. This floor space ratio control, absent any other factor acting to postpone the engagement of the control (and there is none here), established a permitted floor space ratio for the site of 1.0:1.0. This control, contained in the GPSO, was and, relevantly, is amenable to an objection pursuant to State Environmental Planning Policy No 1, a facultative and beneficial policy that can be utilised subject to the testing regime required to be satisfied (see Wehbe v Pittwater Council [2007] NSWLEC 827; (2007) 156 LGERA 446) to obtain a dispensation from compliance with the development standard.

Paucity of information 55In his closing submissions, Mr Hemmings invited me to take into account, in a number of respects, the failure of Toveno to provide evidence concerning a number of aspects of its claim. 56Although not put in express terms (despite my questioning), in effect Mr Hemmings was asking me to draw a Jones v Dunkel inference (Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298), at least with respect to the claim for increase in construction costs. 57Although put in the context of the claim for compensation for increased construction costs, his submission needs equally to be considered with respect to the adequacy (or otherwise) of the material concerning the acquisition causation claim and the sparse nature of the material from the various real estate agents involved or with respect to the claim for outgoings (the construction cost and outgoing claims being ones which slipstream on the broad rental/acquisition claim). 58For the reasons I have set out, I consider that I have more than sufficient evidence upon which to make a decision on the broad causation question. With respect to the other matters of evidentiary deficiency, they are capable of being considered and determined without drawing any inference of a Jones v Dunkel nature.

(2007) 156 LGERA 446

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