NSWNSWLEC

Trevor Allan McBride v MidCoast Council

[2021] NSWLEC 100

Land and Environment Court (NSW)|2020-12-18|Before: Robson J

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At a glance

Source facts

Court

Land and Environment Court (NSW)

Decision date

2020-12-18

Before

Robson J

Catchwords

(2011) 180 LGERA 343 Apokis v Transport for NSW (2020) 101 NSWLR 844
[2020] NSWCA 39 Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209
[1999] HCA 64 Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541
(1973) 32 LGRA 170 Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Limited (1947) 74 CLR 358

Source

Original judgment source is linked above.

Catchwords

(2011) 180 LGERA 343 Apokis v Transport for NSW (2020) 101 NSWLR 844[2020] NSWCA 39 Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209[1999] HCA 64 Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541(1973) 32 LGRA 170 Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Limited (1947) 74 CLR 358[1947] HCA 10 Dan Wei Zheng v Roads and Maritime Services [2017] NSWLEC 77 De Ieso v Commissioner of Highways (1981) 27 SASR 248(1981) 47 LGRA 412 Gosford Shire Council v Green (1980) 48 LGRA 201 Hastings Point Progress Association Inc v Tweed Shire Council [2008] NSWLEC 180(2008) 160 LGERA 274 Hastings Point Progress Association Inc v Tweed Shire Council [2009] NSWCA 285(2009) 168 LGERA 99 Housing Commission (NSW) v Falconer (1981) 1 NSWLR 547(1981) 50 LGRA 334 ISPT Pty Ltd v Valuer General (NSW) [2009] NSWCA 31[2003] HCA 8 Mete v Warringah Council [2004] NSWLEC 273[2001] NSWCA 251 Spencer v The Commonwealth (1907) 5 CLR 418[1907] HCA 82 Sydney Water Corporation v Caruso [2009] NSWCA 391[2009] 170 LGERA 298 Sydney Water Corporation v Marrickville Council [2014] NSWCA 438 Tolson v Roads and Maritime Services [2014] NSWCA 161

Judgment (45 paragraphs)

[1]

Background

An understanding of the background to the proceedings, including the factual matrix and the relevant regulatory framework, provides context for the issues joined between the parties. The background facts in this section, but not the legal implications thereof, are mostly undisputed.
For the purpose of valuation, it is relevant to note that prior to the acquisition, the Acquired Land formed part of a larger contiguous 33.5832ha area of land owned by the applicant being Lot 304 in DP 1099114 at Forster ('Parent Parcel'). The Parent Parcel was subject to two encumbrances, being an easement 6m wide to drain sewage, and an easement 7m wide for sewerage pipelines.
On 31 May 2019, Council compulsorily acquired 6.7632ha comprising the three different parts of the Parent Parcel being Lots 305, 306 and 308 in DP 1240455 which had been discretely created for the purpose of acquisition.
Lot 305 is located in the southern part of the Parent Parcel and has an area of 0.8122ha. Lot 305 was acquired by Council for a "Public Road" under the Roads Act 1993 (NSW). Lot 306 is located in the northern part of the Parent Parcel and has an area of 1.1280ha. Lot 306 was acquired by Council for a drainage reserve under the Local Government Act 1993 (NSW) ('LG Act'). Lot 308 is also located in the southern part of the Parent Parcel and has an area of 4.8230ha. Lot 308 is bisected by Lot 305 and was also acquired by Council for a drainage reserve under the LG Act.
The drainage public purpose relates to improving the water quality in Pipers Bay (which is a key objective of Great Lakes Council, Great Lakes Water Quality Improvement Plan: Wallis, Smiths and Myall Lakes, Forster, NSW, (2009)) by improving runoff quality from the Pipers Bay catchment, as illustrated in the BTM WBM Pty Ltd, Dunns Creek Catchment Water Management Strategy, (August 2015). The works proposed on Lot 308 involve the establishment of two wetlands being the "Western Wetland" and the "Eastern Wetland". The works proposed on Lot 306 involve the establishment of the "Cape Hawke Drive Wetlands" and "Overland Flow Corridor".
The public road purpose on Lot 305 relates to the construction of the "Southern Parkway Extension" which will connect The Lakes Way to land to the east of the Parent Parcel.
Lots 305, 306 and 308 (constituting the Acquired Land) have a total area of 6.7632ha being 20.13% of the Parent Parcel. Lot 307 is the residual land of the Parent Parcel remaining in the ownership of the applicant after the date of acquisition and has an area of 26.82ha ('Residue Land'). For convenience, and where the context does not require a distinction to be made, the Parent Parcel and the Residue Land are referred to as the 'subject land'. The applicant also owns land with an area of approximately 40ha immediately to the east and contiguous with the Parent Parcel.
An understanding of the physical relationship between the Parent Parcel, the Acquired Land, the Residue Land, and the surrounding area (including the areas of respective lots) is gleaned from the two following figures, and Annexure A to this judgment (being an aerial photograph taken in 2019 depicting the boundaries of the Parent Parcel, the Acquired Land, and the Residue Land).

[2]

The Acquired Land

The above figure shows that the Acquired Land falls into two parts, described in the evidence as the "northern acquired land" (comprising solely Lot 306 with an area of 1.1280ha) and the "southern acquired land" (comprising Lots 305 and 308 with a combined area of 5.6352ha).
The Residue Land also falls into two parts, bisected by the northern acquired land. The Residue Land to the west of the northern acquired land has an area of 5.07ha ('western residue land') and the Residue Land to the east of the northern acquired land has an area of 21.75ha ('eastern residue land').
At the date of acquisition Lot 305 was zoned SP2 Infrastructure (Local Road) pursuant to the Great Lakes Local Environmental Plan 2014 ('GLLEP'). Lot 306 and Lot 308 were zoned SP2 Infrastructure (Drainage) pursuant to the GLLEP. At the date of acquisition, the remainder of the Parent Parcel was zoned RU2 Rural Landscape ('RU2') under the GLLEP, subject to a small area of land zoned R2 Low Density Residential ('R2').
Despite this zoning, as it is accepted by the parties that the SP2 Infrastructure zoning of the Acquired Land is a result of the proposal to carry out the public purposes, which, pursuant to s 56(1)(a) of the Just Terms Act, is disregarded as an effect on the value of the Acquired Land, and, the Acquired Land is taken to be zoned RU2 under the GLLEP, being the zoning it would have had absent the public purposes. For the purpose of these proceedings, the whole of the Parent Parcel is taken to be zoned RU2 under the GLLEP.
A copy of an extract of the zoning map in the GLLEP (showing the zoning of the land within and around the Parent Parcel at the date of acquisition) is Annexure B to this judgment.

[3]

Statutory valuation task

Section 54 of the Just Terms Act sets out the amount of compensation to which a person whose land has been compulsorily acquired is entitled, as follows: 54 Entitlement to just compensation (1) The amount of compensation to which a person is entitled under this Part is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land. …
Section 54 directs attention to compensating the owner of the land for the detriment arising as a result of the compulsory acquisition. Section 55 of the Just Terms Act sets out the relevant considerations when determining the amount of compensation: 55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division) - (a) the market value of the land on the date of its acquisition, (b) any special value of the land to the person on the date of its acquisition, (c) any loss attributable to severance, (d) any loss attributable to disturbance, (e) the disadvantage resulting from relocation, (f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.
The Just Terms Act subsequently defines the "loss attributable to severance" of land in s 58, as follows: 58 Loss attributable to severance In this Act - loss attributable to severance of land means the amount of any reduction in the market value of any other land of the person entitled to compensation which is caused by that other land being severed from other land of that person.
Further, the "loss attributable to disturbance" of land is subsequently defined in s 59 of the Just Terms Act, as follows: 59 Loss attributable to disturbance (1) In this Act - loss attributable to disturbance of land means any of the following - (a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land, (b) valuation fees of a qualified valuer reasonably incurred by those persons in connection with the compulsory acquisition of the land (but not fees calculated by reference to the value, as assessed by the valuer, of the land), (c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs), (d) stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired), (e) financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage), (f) any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition. …

[4]

State of knowledge

The knowledge that can be attributed to the parties to the hypothetical transaction when determining the terms of that transaction was adverted to by the High Court in Spencer, where Isaacs J at 441 indicated that the Court: "…must further suppose both to be perfectly acquainted with the land, and cognizant 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."
In Apokis at [36]-[48], Basten JA surveyed key cases since Spencer that engaged with the scope of knowledge that can be attributed to the parties to the hypothetical transaction. This included cases such as ISPT Pty Ltd v Valuer General (NSW) [2009] NSWCA 31; (2009) 165 LGERA 25 at [4], where Allsop P recorded his doubt as to the aptness of the phrase "perfectly acquainted", a sentiment reflected by Basten J when he concluded, in terms which I consider are particularly apposite to these proceedings, that the reference to "perfectly acquainted" was unlikely to have been "intended to set a standard which would require an 11-day court hearing to determine the value of a largely undeveloped block of land of less than 80ha" and reiterated the need to focus on the statutory language: Apokis at [47].

[5]

Highest and best use

The Court considers the "highest and best use" of the land at the date of acquisition when assessing market value under s 56 of the Just Terms Act. While "highest and best use" does not appear in the text of s 56, it has been incorporated by reference to the terms on which the hypothetical transaction would occur, being, "…the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted": Spencer at 440-441 (Isaacs J). Given this, the task for the Court is "to discover the value of the land to the dispossessed owner if put to its best use": Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7 at 274.
I remain cognisant of the above matters in my consideration of the issues in these proceedings.

[6]

Summary of issues

Although the parties agree that compensation for the acquisition of the Acquired Land is to be determined in accordance with the Just Terms Act, the parties disagree about a number of issues which impact the resulting amount of compensation that the applicant is entitled to. Relevantly, a claimant bears the onus of proof in compulsory acquisition matters: Roads and Traffic Authority of New South Wales v Perry (2001) 52 NSWLR 222; [2001] NSWCA 251 at [67].
The applicant submits that compensation would be based on a valuation using the before and after valuation method, while Council, through its valuer, submits that a piecemeal valuation method should be adopted. As noted above, I accept that the before and after valuation method is appropriate and proceed on this basis.
The applicant contends that the highest and best use of both the Parent Parcel and the Residue Land is the development of a Manufactured Home Estate ('MHE'), such that the parties to the hypothetical transaction would include a MHE developer as the hypothetical purchaser. Considering the before and after valuation method, Council maintains that the highest and best use of both the Parent Parcel and the Residue Land is agriculture with a dwelling house, a potential for a second dwelling or attached dual occupancy (and the prospect of rezoning parts of the Parent Parcel, but not the Acquired Land, for low density residential purposes in the future), such that the hypothetical purchaser would be a rural purchaser.
The parties agree that the development of a MHE is permissible on the Parent Parcel notwithstanding its RU2 zoning (which would otherwise not permit a MHE development) by the operation of State Environmental Planning Policy No 36 - Manufactured Home Estates ('SEPP 36'). The applicant submits that a development consent is likely to be obtained for the development of a MHE, where a MHE market engages with high quality residential estates rather than some sort of "trailer park", and at the date of acquisition the adjacent development at Follyfoot Farm, 223 The Lakes Way, Forster ('Follyfoot Farm') (south of the Parent Parcel across The Lakes Way) had recently been purchased for the development of a MHE, such that the parties to the hypothetical transaction would transact on the basis of a similar rate to that paid for Follyfoot Farm. In contrast, Council contends that there is no real prospect of a development consent for the development of a MHE being obtained for the Parent Parcel given its physical constraints and its RU2 zoning, and contends that MHE developers in the MHE market in the MidCoast region do not purchase properties for development without the benefit of a development consent, such that the parties to the hypothetical transaction would transact on the basis of a "rural" rate.

[7]

Evidence

In a hearing extending over eight days, the Court received extensive written and oral evidence including expert evidence in the areas of hydrology, ecology, town planning, and valuation. The applicant relies upon the hydrological evidence of Daniel Martens; ecological evidence of Travis Peake; town planning evidence of Stephen Connelly; and valuation evidence of Owen Allsopp. Council relies upon the hydrological evidence of Darren Lyons; ecological evidence of David Robertson; town planning evidence of Robert Chambers; and valuation evidence of David Lunney. Each expert gave evidence of the advice that would be given to a vendor and a purchaser in the hypothetical transactions.
The applicant also read the affidavits of Digby Lyell Dunn affirmed 10 December 2020 and Trevor McBride affirmed 11 December 2020.
The Court undertook a site view of the Acquired Land, the surrounding area, and a number of comparable sales relied upon in the valuation evidence. I was assisted in hearing the proceedings by Acting Commissioner Knight in accordance with s 37 of the Land and Environment Court Act 1979 (NSW).

[8]

Town planning issues

The town planners, Mr Connelly, retained by the applicant, and Mr Chambers, retained by Council, considered the highest and best use of the Parent Parcel in the before scenario, the Residue Land in the after scenario, and the potential of the Acquired Land. This incorporated their consideration of the ecological and hydrological evidence marshalled by the parties. The town planners produced individual reports, and a joint report.
At the date of acquisition, the Parent Parcel was predominantly zoned RU2 under the GLLEP, but also had areas zoned SP2 Infrastructure (Drainage), and SP2 Infrastructure (Local Road and Drainage), and R2. As set out at [17] above, the parties agree that for the purposes of valuation the whole of the Parent Parcel is taken to be zoned RU2.
The town planners agree on the following matters in relation to the Parent Parcel in the before scenario: it had frontages to each of Cape Hawke Drive, The Southern Parkway and The Lakes Way; it enjoyed a dwelling entitlement pursuant to the GLLEP but there was no dwelling; the minimum lot size was taken to be 40ha (being the minimum lot size prior to a change associated with the acquisition of the Acquired Land for the public purposes); it was encumbered by an easement 6m wide to drain sewage, and by an easement 7m wide for sewerage pipelines; it was used as an agricultural/grazing property and was largely cleared with some parts containing native vegetation; the majority of the Parent Parcel was identified on the "Flood Planning Map" under the GLLEP as "Flood Planning Area"; most of it comprised Class 5 acid sulfate soils but the southern part comprised Class 3 acid sulfate soils under the "Acid Sulfate Soils Map"; part of it was identified as bushfire prone land buffer area on Council's "Bushfire Prone Land Map"; pursuant to the State Environmental Planning Policy (Coastal Management) 2018 ('Coastal SEPP'), the southern part (which included the southern acquired land) was in the "Coastal Environment Area" and the southernmost part (which included part of the southern acquired land) was in the "Coastal Use Area"; and a strip of vegetation along the eastern boundary of the Parent Parcel and coincident with Dunns Creek is identified on the "Biodiversity Values Map" under the Biodiversity Conservation Act 2016 (NSW) ('BC Act') and is mapped as "vulnerable regulated land" on the "Native Vegetation Regulatory Map" under the Local Land Services Act 2013 (NSW) ('LLS Act').

[9]

Applicant's position

The applicant submits that the Court would find that the highest and best use of the Parent Parcel in the before scenario, and the Residue Land in the after scenario, from a planning perspective, would be the development of a MHE. The applicant contends that Mr Chambers' approach to how a consent authority would consider an application for the development of a MHE would be found to be fundamentally flawed, and that Mr Connelly's evidence would be preferred, particularly in relation to the likelihood of a development consent being granted for the development of a MHE.
The applicant submits that, properly informed and advised at the date of acquisition, the parties to a hypothetical transaction would assume that the prospect of obtaining a development consent for a MHE was "highly likely", having regard to the zoning of the land (where Council would take the same approach to a MHE development on land zoned R2 and RU2); the locational characteristics of the Parent Parcel and the Residue Land; the permissibility of a MHE pursuant to SEPP 36; and with the advantage of being able to view the construction of a MHE on the adjacent Follyfoot Farm development. Given this, the hypothetical purchaser of the Parent Parcel and the Residue Land would be a MHE developer who would outbid other purchasers.
The applicant submits that SEPP 36 is a "deliberate and targeted" policy, supporting the development of MHEs to provide affordable medium density housing. Clause 2(2)(a) of SEPP 36 provides that one of the strategies by which the aims of the policy are achieved is by allowing MHEs to be developed with development consent on certain land where caravan parks are permitted if "locational" criteria is met. Caravan parks are permitted in land zoned RU2 and R2 under the GLLEP. The applicant contends that the Parent Parcel and the Residue Land meet the criteria with a "perfect storm" of characteristics, such that development of a MHE would be permissible.
The applicant reviews the legislative scheme in SEPP 36 for the granting of development consent for a MHE, including the operative provision in cl 6, the requirement for development consent to be obtained in cl 7, and the matters for consideration in granting development consent in cl 9. The applicant contends that because a MHE is not a permissible development under the GLLEP, the development application for a MHE is made pursuant to SEPP 36 and must meet the requirements of that policy. As all the matters for consideration are met, there would be "high prospects of success" of development consent being granted for a MHE.

[10]

Council's position

As an initial point Council agrees that the development of a MHE would be permissible on the Parent Parcel and the Residue Land. However, Council criticises the applicant's approach to the operation of SEPP 36 and the merits assessment of any development application for a MHE that would need to be undertaken under s 4.15 of the Environmental Planning and Assessment Act 1979 (NSW) ('EPA Act') as "flawed". Council contends that the applicant has conflated the permissibility of a MHE and the merit assessment that would be undertaken before approving any MHE development.
Council contends that the applicant's inconsistency analysis in relation to the objectives of the RU2 zone is erroneous, as taking the applicant's approach would mean "any control that would result in the refusal of a MHE on the Parent Parcel because of a merit consideration not contained in SEPP 36 would be inconsistent and, therefore, not apply". Rather, Council submits that there is nothing in the R2 zone objectives that mandates a particular outcome which is inconsistent with SEPP 36, such that cl 4 of SEPP 36 would operate and the objectives of the R2 zone would not apply: Hastings Point CCA. In this respect, cl 4 of SEPP 36, by its own terms, does not preclude the operation of other environmental planning instruments - it only gives primacy to SEPP 36 if there is an inconsistency between environmental planning instruments and then only to the extent of that inconsistency.
Further, Council notes that Mr Connelly's evidence was not that the objectives of the RU2 zone could be ignored, but rather that Council as a matter of practice had an "almost cavalier approach" to the consideration of the zone objectives. This confirms that the town planners acknowledge the continuing operation of the RU2 zone objectives, in contrast to the applicant's position of setting aside the objectives on the basis of inconsistency.
Council submits that when Mr Chambers refers to "inconsistency" between the RU2 zone objectives and the development of a MHE, he is not using the term in a technical sense. Rather, Mr Chambers has had regard to the RU2 zone objectives when undertaking a merit assessment of the development of a MHE; identified that a MHE would not be consistent with the RU2 zone objectives; and has given this weight as a reason that a MHE would not be approved by a consent authority. In this respect, Mr Chambers was providing his opinion on the effect of the RU2 zone objectives on the grant of development consent for a MHE.

[11]

Consideration

Consideration of the town planning issues is not divorced from the ecological and hydrological matters considered in detail later in this judgment, and each of the town planning experts was aware of the expert ecological and hydrological evidence before the Court. As such, although I am considering certain matters under the rubric of town planning issues before I deal with the ecological and hydrological material, I have considered the expert evidence in relation to hydrological and ecological concerns and the separate evidence of each of the valuers, as detailed later in this judgment, in coming to my conclusion on the potential for a development of a MHE on the Parent Parcel and the Residue Land.
I accept, as the parties agree, that a development of a MHE would have been permissible on the Parent Parcel and the Residue Land at the date of acquisition, pursuant to SEPP 36. Given this, I consider a primary issue is the likelihood that a consent authority would grant development consent for a MHE such that this constitutes the highest and best use of the Parent Parcel and the Residue Land, or whether the significant constraints on the development of a MHE mean that the highest and best use would be the alternative scenario of the Parent Parcel and the Residue Land being rezoned to R2 to support residential development in the future. The resolution of these matters is to be considered from the perspective of the advice that the parties to the hypothetical transactions would receive, and thus the terms on which those parties would transact.
In summary, having carefully weighed the evidence and submissions, I find that the advice received by the parties to the hypothetical transactions would be that the highest and best use of the Parent Parcel and the Residue Land would be for a MHE, although the advice would reflect a real concern as to the management of the significant constraints on the development of a MHE and the weight that may be given to the objectives of the RU2 zone. These constraints import an element of risk as to whether Council would favourably entertain a development application for a MHE on the Parent Parcel and the Residue Land, and as I have considered later in this judgment, the parties would respond to this risk by reducing the amount payable for the Parent Parcel and the Residue Land, although ultimately they would proceed on the basis that there would be a prospect that Council would grant development consent for a MHE.

[12]

Hydrology issues

At the date of acquisition, the Parent Parcel and the Residue Land were subject to hydrological constraints, including flooding and stormwater management, which would have a consequential impact on the development of a MHE for the purposes of the hypothetical transactions, and accordingly the amount of compensation. Hydrological evidence was provided by Dr Martens, retained by the applicant, and Mr Lyons, retained by Council. Each expert provided evidence of the advice they would give to the parties to the hypothetical transactions in relation to flooding and stormwater management issues. While this advice is generally provided on the basis of the development of a MHE on the Parent Parcel, the experts also provide specific comments in relation to the Acquired Land and the Residue Land, which would inform the development of a MHE on the Residue Land in the after scenario.
Although the Parent Parcel (and thus the Residue Land) is identified as mostly "Flood Planning Area" on the "Flood Planning Map" under the GLLEP, Dr Martens and Mr Lyons agree that flooding concerns are capable of being managed through engineering works. In a similar manner, they agree that stormwater management measures can also resolve stormwater concerns. The outstanding issues, relevant to the statutory valuation task, relate to: first, the area of any necessary riparian zones; second, the area of any required onsite stormwater detention; third, the area of land (if any) which would remain impacted by flooding concerns; and fourth, following from the conclusions to the previous outstanding issues, the area of land which is accordingly available to be used for the development of a MHE.
Dr Martens and Mr Lyons each prepared a preliminary "conceptual" flood mitigation scheme for the Parent Parcel (and Dr Martens also provided details of changes when applied to the Residue Land in the after scenario). The conceptual flood mitigation schemes are similar in that the engineering works envisaged to be undertaken primarily consist of the "amplification" of the existing unnamed channel in the northern riparian corridor of the Parent Parcel (known as 'channel E') and the existing Dunns Creek channel in the southern riparian corridor (known as 'channel A' on the southern acquired land; 'channel C' on the Parent Parcel; and 'channel B' when extended further north from the existing Dunns Creek channel). An overview of the conceptual flood mitigation scheme of Dr Martens, highlighting the location of the channels, is shown in Annexure C to this judgment.

[13]

Applicant's position

The applicant generally adopts the evidence of Dr Martens.
In relation to flooding management, the applicant notes that Dr Martens' advice regarding channel E is that the upstream riparian corridor is of negligible quality and downstream is highly constrained so that while there would be a requirement for a riparian corridor, it would not be substantial. Dr Martens confirms that a riparian corridor width of 15m would be sufficient, and that this opinion is based on the recommended but "flexible" width of 20m for such streams (based on his assessment of many similar types of small first order streams). Dr Martens' position also took into account the existing upstream and downstream channels, as well as the surrounding conveyance system. In contrast, the applicant submits that Mr Lyons' corresponding 30m wide riparian corridor for channel E is out of character with the upstream and downstream channel, and notes that Mr Lyons has not done any of his own modelling to inform his opinion. Given this, the applicant contends that Dr Martens' proposed channel E would be accepted by the parties to the hypothetical transactions as it would be acceptable to Council.
In relation to the southern riparian zone, the applicant submits that in circumstances where the existing channel is approximately 5m wide with no riparian zone, the parties to the hypothetical transaction would not accept Mr Lyons' advice that channel A requires a 70m wide riparian zone (being more than double Dr Martens' proposed width of 30m). The applicant further submits that the presence of an agreed 40m wide riparian corridor on Follyfoot Farm would give comfort to the hypothetical parties that it would be highly unlikely that anything more than the 30m riparian corridor proposed by Dr Martens would be required by Council. In addition, the applicant refers to Council's requirements for riparian corridors for the public purpose drainage works to be undertaken on the Acquired Land, contending that riparian corridors of approximately 15m wide have been adopted. In these circumstances, the Court would prefer Dr Martens' evidence, and find that the hypothetical parties would transact on the basis of his proposed riparian corridor. The applicant makes a similar submission in relation to the width of the riparian corridor for channel B, again contending that Dr Martens' narrower corridor would be adopted by the parties to the hypothetical transactions.

[14]

Council's position

Council generally adopts the evidence of its expert, Mr Lyons.
Turning first to flooding management, Council submits that the parties to the hypothetical transaction would rely on advice put forward by Mr Lyons in relation to management measures through engineering works to channel E in the northern riparian zone, where that advice is in accordance with the Riparian Guidelines recommendations. Mr Lyons' approach is also consistent with the large downstream drainage reserve already established in The Lakes Estate. In this respect, while a narrowing of the riparian corridor could be achieved (as appropriately conceded by Mr Lyons) this would not be the basis on which the hypothetical parties would transact.
In relation to channels A and C in the southern riparian zone, Council again submits that Mr Lyons' evidence, based on the Riparian Guidelines should be relied on, where this is also "generally consistent" with the riparian corridor provided on the Follyfoot Farm downstream. Mr Lyons generally criticises Dr Martens' conceptual flood mitigation scheme on the basis that it assumes "deep, linear engineered channels", which he does not consider would be approved. He also considers that this approach is not compatible with works on neighbouring developments such as Follyfoot Farm, The Lakes Estate and Fairview West Estate. For example, channel A would not appropriately integrate with the downstream receiving channel on Follyfoot Farm, as the Dunns Creek channel would be required to be wider and shallower than proposed.
Council submits that Mr Lyons' evidence is more realistic and prudent, including due to its consideration of works being carried out on neighbouring developments and the provisions of the Riparian Guidelines. Council submits that the Court should not accept Dr Martens' approach because he fails to consider the restoration or rehabilitation objectives of the Riparian Guidelines.
Council also adopts Mr Lyons' advice in relation to the developable land that would be lost as a result of stormwater management measures, which reflects the general "rule of thumb" for land take, and was appropriate in the context of conceptual, pre-acquisition advice. Council notes that Dr Martens, while disagreeing with Mr Lyons' advice, was unable to "categorically say that he [Mr Lyons] was wrong".

[15]

Consideration

The Court is considering the advice that the parties to the hypothetical transactions would receive in relation to hydrological issues including flooding and stormwater management (and in particular the advice that would have been received from experts at the date of acquisition, and the manner in which such advice would be considered by a consent authority, being Council) and confirms that it is not conducting a merits review of a development application. Having considered the evidence of Dr Martens and Mr Lyons, and the submissions of the parties, I am of the view that the parties to the hypothetical transactions would accept that the hydrological issues would require careful consideration and would be of some concern to Council (as noted in my consideration of the town planning evidence), but from an engineering perspective could be managed.
In relation to flooding concerns, I find that the parties to the hypothetical transactions would transact on the basis of Dr Martens' advice as to the appropriate conceptual flood mitigation scheme to be implemented for the Parent Parcel, the engineering works that would be required to achieve the scheme, and the extent of the riparian corridors that would be incorporated in the scheme.
A key difference between Dr Martens and Mr Lyons was their treatment of the Riparian Guidelines when providing evidence as to the likely width of the riparian corridors associated with channels E, A, C and B that would be required. In short, Mr Lyons placed significant weight on compliance with the Riparian Guidelines, whereas Dr Martens took the view that the Riparian Guidelines were flexible and placed more weight on the actual characteristics of the Parent Parcel (on the basis of his previous experience). I accept the applicant's contention that the approach that would be taken by the parties to the hypothetical transactions would be to start with the recommendations contained in the Riparian Guidelines, but then carry out a merit assessment that refers to the actual characteristics of the Parent Parcel to determine any necessary riparian corridors. This approach best utilises the extent of the information that would be available to the "perfectly acquainted" parties at the date of acquisition. Dr Martens' evidence best reflects this approach to the appropriate riparian corridor.
Mr Lyons' evidence was also informed by his views on the appropriate integration of integrated floodway and riparian corridors with the infrastructure present in downstream development and drainage system such as The Lakes Estate and Follyfoot Farm. I accept that the parties to the hypothetical transaction would look to surrounding developments for information about what Council is likely to require and consider integration issues when considering the management of flooding concerns. However, I consider that they would place more weight on the characteristics of the existing drainage system and riparian corridors that are present on the Parent Parcel (including the Residue Land), and expert evidence as to what would need to be modified to accommodate the development of a MHE on the subject land. Given this, I am satisfied that Dr Martens' evidence would be accepted by the hypothetical parties as indicative of what would be acceptable to Council and other regulatory authorities.

[16]

Ecology issues - biodiversity

A further issue affecting the "developability" of the Parent Parcel and the Residue Land, and thus the hypothetical transactions and the amount of compensation that the applicant is entitled to, is the presence of "ecological constraints". The Court received extensive ecological evidence provided by Mr Peake, retained for the applicant, and Dr Robertson, retained for Council, with each ecologist preparing two individual reports and three joint reports.
While the ecologists generally consider ecological constraints across the Parent Parcel as a whole, they identify where particular constraints are present on the Acquired Land and/or the Residue Land. This evidence was considered by the valuers when undertaking their valuations of the Parent Parcel in the before scenario and the Residue Land in the after scenario, in accordance with the before and after valuation method.
The ecologists undertook desktop and physical surveys of the flora and fauna on the Parent Parcel. Their evidence focuses on the presence of ecological constraints, and the advice that they would give to the parties to the hypothetical transactions in relation to the hypothetical development of a MHE in the before scenario and the after scenario. Although there is no MHE development footprint for either scenario (apart from the conceptual flood mitigation schemes in the before scenario proposed by Dr Martens and Mr Lyons) the ecologists provide advice on the assumption that any MHE development would seek to maximise its developable footprint.
The evidence of the ecologists was given by reference to a number of polygons utilised for "plant community type mapping", as depicted in Annexure D to this judgment. The northern acquired land contains polygons 11 and 12, and the southern acquired land contains polygons 1, 2, 3 and 5 in the south-eastern part and polygon 4 and part of polygon 7 in the south-western part. There is specific agreement between the ecologists in relation to a number of ecological matters including: 1. The location and size of native vegetation on the Parent Parcel (albeit with variance between the experts regarding the classification of plant community types which, as considered below, has cost impacts for offsets); 2. That the development of a MHE on the Parent Parcel would trigger a "Biodiversity Development Assessment Report" ('BDAR') under the BC Act, and that when preparing a BDAR, measures to "avoid" ecological impacts should be considered before proceeding to offsetting ecological impacts in accordance with the "Biodiversity Assessment Method" ('BAM'); 3. That a threatened plant species Lindernia alsinoides commonly known as Noah's False Chickweed ('chickweed'), which is listed as "endangered" under the BC Act, is present on the southern acquired land (polygons 1, 3, and 5); 4. That there is Swamp Oak Forest present on the southern acquired land (polygons 1, 2, 4 and 5), the northern acquired land (polygon 11), and on the Residue Land (polygon 10), where first, the Swamp Oak Forest on the southern acquired land corresponds with threatened ecological communities ('TECs') under the BC Act; and second, the Swamp Oak Forest in polygons 1, 2, 4 and 5 corresponds with the endangered ecological community ('EEC') of "Coastal Swamp Oak Forest of New South Wales and South East Queensland" under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) ('EPBC Act') (but the Swamp Oak Forest in polygon 11 does not correspond to the EEC due to its degraded condition); and 5. That the south-eastern part of the southern acquired land is the most heavily constrained as it is the most ecologically sensitive part of the Parent Parcel and contains at least two TECs and habitat for threatened species, and as such it is desirable for the vegetation on the south-eastern part of the southern acquired land (polygons 1, 2, 3 and 5) to be preserved during a MHE development.

[17]

Evidence

In relation to polygon 4 in the south-eastern part of the southern acquired land, Dr Robertson opines that a development consent which involved clearing of the polygon would be unlikely to be obtained because the BDAR process requires "avoidance" as the primary consideration, in circumstances where 78% of the Parent Parcel can be developed across cleared land without the need for clearing native vegetation in either the northern acquired land or the southern acquired land. In contrast, Mr Peake opines that a development consent would be likely to be obtained on the basis that the area is not likely to generate biodiversity offset credit requirements.
While both ecologists agree that the Swamp Oak Forest in polygon 4 is an EEC under the EPBC Act, they disagree as to whether a development application would need to be "referred" to the Commonwealth, as a potential "controlled action" under the EPBC Act. Dr Robertson considers that a referral would be required, first, because the engineering works to channels A and C (referred to in the hydrologists' evidence) would impact the EEC; and second, because any clearing of the vegetation would impact the EEC. Mr Peake considers that there would be sufficient "design/construction leeway" in the development design for a MHE to avoid a significant impact on the EEC and a referral to the Commonwealth.
In relation to proposed clearing of part of polygon 7 in the south-eastern part of the southern acquired land, Dr Robertson accepts that it may be possible to obtain a development consent because this polygon comprises Red Gum Forest and is separated from other patches of native vegetation; however he opines that there "would have to be very compelling reasons" given the cleared land otherwise available. Mr Peake took the same approach to polygon 7 as polygon 4, being that a development consent would be likely to be obtained.

[18]

Submissions

The applicant points to three matters that are relevant to obtaining a development consent for clearing of polygon 4, being: the approach in relation to adjacent public purpose works; the deep excavation undertaken on Follyfoot Farm and The Lakes Way in the vicinity of polygon 4; and whether polygon 4 is classified as Category 1 land.
In relation to the first matter, the applicant submits that, by reference to the "Review of Environmental Factors" ('REF') (prepared in May 2020) relating to The Lakes Way road reconstruction, as part of the public purpose for which the southern acquired land was acquired, Swamp Oak Forest was removed and in fact earthworks were undertaken on polygon 4. Further, the removal of the Swamp Oak Forest was not referred to the Commonwealth under the EPBC Act on the basis that it would not have a significant adverse impact on the local occurrence of the EEC. The applicant contends that this indicates that Dr Robertson's advice about polygon 4 is overly conservative. Second, the applicant submits that deep excavation undertaken as part of the Follyfoot Farm development would have had a hydrological impact on the wetlands on the southern acquired land and the vegetation in polygon 4, and would support a development consent being obtained for clearing of polygon 4. Third, as further considered below, the applicant submits that polygon 4 would be classified as Category 1 land, such that it could be cleared.
Council rejects the applicant's submission regarding the impact of the deep excavation undertaken as part of the Follyfoot Farm development, and contends that there is no evidence that the vegetation in polygon 4 relies on groundwater (as opposed to surface water); and further, where no detailed design or review of environmental factors of the wetlands on the southern acquired land has been undertaken, such a judgment about the impact was premature. Council also contests the applicant's reliance on the REF when assessing the impact of clearing polygon 4, on the basis that the REF only contemplates clearing part of the polygon, does not engage with the associated conceptual flood mitigation schemes that would be implemented, and in any event, the REF was not prepared until 12 months after the date of acquisition and was therefore not available to the parties to the hypothetical transaction. Finally, Dr Robertson and Council reject the classification of all of polygon 4 as Category 1 land, as further considered below.

[19]

Consideration

I initially note that there are no specific ecological features that would positively prevent clearing and development of polygons 4 and 7 as the relevant legislative framework does not operate to preclude the "approvability" of a development, rather, a merit assessment would be made as to whether development consent which would involve clearing of polygons 4 and 7 would be granted, having regard to the characteristics of the vegetation in these polygons, and the impacts of clearing.
In relation to polygon 4, I am cognisant of the suggested inconsistency between Council on the one hand taking the position in these proceedings that a development consent to clear the polygon would be unlikely to be obtained, while on the other hand being the proponent of the public purpose works on the Acquired Land that involve partial clearing of the polygon. However, the issue before the Court is not Council's position per se, but rather the position that the parties to the hypothetical transaction would take at the date of acquisition about the potentiality of obtaining a development consent which involves clearing of the polygon.
In relation to the applicant's reliance upon the REF, in accordance with Housing Commission (NSW) v Falconer (1981) 1 NSWLR 547; (1981) 50 LGRA 334 ('Falconer') at 558, evidence of events after the date of acquisition is admissible not to provide a hindsight but confirm a foresight. As the REF was prepared after the date of acquisition and relates to a different development to the one considered by the parties to the hypothetical transaction, I give this document and its conclusions about the clearance of vegetation little weight when considering the position of the parties to the hypothetical transaction.
While cognisant of the requirements of the EPBC Act in relation to referral of potential controlled actions to the Commonwealth, I do not consider that the clearing of polygon 4 would be likely to trigger the need for a referral. Rather, I accept the evidence of Mr Peake (including the significant impact assessment that he undertook) that the likely impact is "well below" a significant impact. In addition, as noted by Mr Peake, referral to the Commonwealth is simply the first step of the EPBC Act process and this does not necessarily mean the clearing is a controlled action, that it would be granted development consent, and that a biodiversity offset would be required. In this respect, I do not consider that the parties to the hypothetical transaction would put significant weight on the EPBC Act as a reason that polygon 4 would not be cleared.

[20]

Evidence

The ecologists consider whether vegetation on the Parent Parcel is classified as Category 1 land. Classification as Category 1 land is relevant to an assessment of ecological constraints because s 6.8(3) of the BC Act provides that the BAM is to "exclude the assessment of the impacts of any clearing of native vegetation and loss of habitat on category 1-exempt land… other than any impacts prescribed by the regulations under section 6.3". This excludes Category 1 land from the calculation of credits required to be retired to offset clearing (but not the rest of the development assessment: cl 6.1 of the Biodiversity Conservation Regulation 2017 (NSW)).
As noted by the ecologists, at the date of acquisition, Category 1 land was not mapped for the Acquired Land such that an assessment against the definition in the LLS Act would need to be undertaken: s 60F of the LLS Act. Relevant to these proceedings, s 60H of the LSS Act provides as follows: 60H Category 1-exempt land mapping (1) Land is to be designated as category 1-exempt land if the Environment Agency Head reasonably believes that - (a) the land was cleared of native vegetation as at 1 January 1990, or (b) the land was lawfully cleared of native vegetation between 1 January 1990 and the commencement of this Part. …
The ecologists assess whether parts of the Parent Parcel would be classified as Category 1 land on the basis of aerial photographs. They disagree as to the precise extent of Category 1 land, as Dr Robertson opines that there were three additional areas of vegetated land as at 1 January 1990 that Mr Peake does not identify, including an area that incorporates part of polygon 4. Dr Robertson opines that it would be likely that the southern part of the southern acquired land would have had native vegetation on it at 1 January 1990 (in the form of regenerating Coastal Swamp Oak and/or freshwater wetland), such that it would not be classified as Category 1 land. In contrast, while Mr Peake accepts that there "might" have been some native vegetation on the areas identified by Dr Robertson, having regard to historical aerial photography which illustrates management of the Parent Parcel for grazing, and the affidavit evidence of Mr McBride regarding the historical management of the southern acquired land and the land becoming "wet" following the development of the neighbouring area, he concludes that the identified areas would not have constituted native vegetation as at 1 January 1990 and could be classified as Category 1 land.

[21]

Submissions

The applicant submits that the evidence of Mr Peake and Mr McBride should be accepted by the Court when considering the extent of Category 1 land on the Parent Parcel. In this respect, the applicant submits that polygon 4 was regularly grazed, mulched and slashed and thus "cleared" at 1 January 1990, making it Category 1 land, and in addition, that half of polygon 11 in the northern acquired land also constitutes Category 1 land.
Council submits that the assessment of whether land would be classified as Category 1 land is significant, and that it is not appropriate to treat the classification as a certainty when there are substantial cost consequences (relating to offsetting) that would be considered by the parties to the hypothetical transaction. Given this, Council contends for the more conservative position of Dr Robertson in relation to the extent of Category 1 land.

[22]

Consideration

For the purposes of valuation, the limited disagreement between the ecologists as to the extent of the Category 1 land on the Parent Parcel centres on the approach to polygon 4. I consider that, given the similarity of the ecologists' method of assessing whether native vegetation was present on polygon 4 at 1 January 1990, their significant experience in aerial photography interpretation, and the care and consideration with which they gave their evidence, reasonable minds may differ in their conclusion about this issue. As a result, I have some difficulty preferring the evidence of one ecologist over the other ecologist on this point. However, I consider that the unchallenged evidence of Mr McBride (albeit relatively anecdotal) favours a conclusion that native vegetation was not likely to be present on polygon 4 at 1 January 1990, such that polygon 4 would be likely to be classified as Category 1 land, and as such, I accept the position of the applicant.
However, while I find that polygon 4 would be likely to be classified as Category 1 land, I find an element of risk remains as the presence of native vegetation on polygon 4 at 1 January 1990 cannot be discounted. I therefore consider that this issue would be a matter that would play some, likely small, part in the consideration of the parties to the hypothetical transaction, and, although highly artificial, that this would reflect a reduction to the amount that would be paid for the land constituting polygon 4.
Applying this finding to the assessment of whether polygon 4 would be able to be cleared to facilitate a development of a MHE, I consider that this further indicates that a development consent to clear polygon 4 would be obtained (notwithstanding some latent risk due to uncertainty which would be factored into the amount the hypothetical parties would pay for this land).

[23]

Ecology issues - cost of credits

Where native vegetation on the Parent Parcel is proposed to be cleared to facilitate a development of a MHE, the parties to the hypothetical transaction would consider the need to retire ecosystem credits ('credits') to offset the clearing, and the cost associated with retiring such credits.
The Court received evidence that a developer can retire credits either by paying an amount (calculated in accordance with the "Biodiversity Offsets Payment Calculator") to the government's "Biodiversity Conservation Fund" to discharge their credit liability, where the "Biodiversity Conservation Trust" takes on the obligation of retiring the credit, by paying an amount to a private supplier who discharges the credit liability, or by generating credits onsite if land is dedicated as a "Biodiversity Stewardship Site".
Relevantly, in the context of valuation, I consider that the issues that are most relevant for the Court to consider are those issues which affect the credits required to be retired and the associated cost of clearing polygons 11 and 4 and part of polygon 7 on the Acquired Land. This is because, for the purpose of calculating the credits, the ecologists proceed on the basis that a development of a MHE on the Residue Land would be the same in the before scenario and the after scenario, and the difference between the two scenarios is the presence or absence of the Acquired Land and the clearing that would be undertaken on that land.

[24]

Evidence

The ecologists undertake calculations to ascertain the credits that would be required to be retired as a result of clearing polygons to facilitate a development of a MHE. Each ecologist considers the vegetation present in the polygons (which reflects their individual classification of plant community types), the ecosystem credit requirements and species credits requirements, and the cost of these credit requirements, using the Biodiversity Offsets Payment Calculator. The calculations are undertaken on the basis of: first, the extent of existing native vegetation in each of the polygons on the Parent Parcel at the date of acquisition; and second, the extent of native vegetation in each of the polygons on the Parent Parcel at 1 January 1990 (utilising the indicative 1997 aerial photograph), in order to identify Category 1 land which would not need to be offset through the retirement of credits.
In summary, the evidence of the ecologists in relation to the cost of the credits (excluding GST) that would be required to be retired is as follows: Mr Peake Dr Robertson Current $1,838,398.17 $2,922,070.08 As at 1997 (taken to be as at 1990) $659,879.34 $857,264.84

[25]

The ecologists differ in relation to the classification of plant community types of the vegetation to be cleared, however, they agree that this would not make a material difference to the calculation of the cost of offsets. Relevantly, Council submits that the Court is not able to resolve the differences between the ecologists regarding plant community type mapping without further evidence, such that the evidence that is more favourable to the applicant should be adopted.
The ecologists also differ in relation to the approach to polygon 4 when calculating the extent of native vegetation in January 1990, as a result of the disagreement discussed at [145] above. While Dr Robertson provides for credits to be retired for polygon 4 on the basis that native vegetation was present, Mr Peake did not as he did not consider that native vegetation was present.
While both ecologists agree that chickweed was present on the southern acquired land (although there was variation between them in relation to the size and characteristics of the populations) and that chickweed could occur elsewhere on the Acquired Land (although it was less likely to be present on the northern acquired land), the ecologists also take different approaches to the credits to be retired. When calculating credits, Dr Robertson takes a conservative position and assumes that each polygon constitutes habitat for chickweed (including polygon 11 in the northern acquired land). Mr Peake assumes that the only polygons that would be habitat for chickweed are those where populations had actually been located. The resulting cost difference is (on the applicant's submission) in the order of $400,000.
In cross-examination Dr Robertson confirmed he would be comfortable with "a reduced figure with reduced areas of each polygon, or some of the polygons" but not the significantly smaller area advocated for by Mr Peake (Tcpt, 15 December 2020, p 140(43-48)).

[26]

Submissions

The parties focus their submissions on the approach to chickweed when calculating credits.
The applicant submits that there is no evidence that chickweed occurs in polygon 11 or polygon 4 and criticises Dr Robertson's approach because he "applies a cost to retire credits for something which in all probability is unlikely to occur". The applicant concludes that where Dr Robertson accepts that his evidence was "probably an overly generous estimate of the occurrence of chickweed", his evidence has been "demonstrated to be flawed" and should not be relied upon by the Court. The applicant refers to the REF (discussed above) which concludes, after a biodiversity assessment was performed, that no chickweed was found on the subject site (being The Lakes Way road reconstruction in the south of the southern acquired land and the adjoining land) and that a test of significance would not be required and submits that this conclusion supports the position that credits should only be calculated where chickweed has been located. The applicant submits that Mr Peake's evidence is to be preferred where it is given in a careful and consistent manner, and, on the basis that the more expensive method for calculating credits was used by the ecologists, any doubts should be resolved by adopting Mr Peake's calculations.
Council submits that neither ecologist can be definitive in their credit calculations in relation to chickweed. While Dr Robertson properly concedes his "conservative" approach, Mr Peake could not rule out finding chickweed in other locations on the Parent Parcel and the need to account for this. The parties to the hypothetical transactions would be aware of, and consider, this risk when considering the cost of credits. Council submits that the disagreement between the ecologists as to the classification of land as Category 1 land also contributes to the uncertainty around the cost of credits. Council also contests the applicant's submissions about the expense of the method used to calculate the cost of credits, given that Mr Peake accepted in cross-examination that this method was appropriate to be used in a pre-acquisition context, as the necessary credits may not be available on the private market.

[27]

Consideration

I accept that the Court is not able to resolve the difference between the ecologists regarding plant community type mapping without further evidence. Both ecologists have given careful and considered evidence, and in these circumstances, the Court will adopt the evidence of plant community types that is more favourable to the applicant: Commissioner of Succession Duties (SA) v Executor Trustee and Agency Company of South Australia Limited (1947) 74 CLR 358; [1947] HCA 10 at 374; Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209; [1999] HCA 64 at [356]. Further, the difference between the ecologists in relation to the approach to polygon 4 when calculating the extent of native vegetation in January 1990 has been substantively resolved, with the effect that Mr Peake's approach of not retiring any credits for polygon 4 would be adopted by the parties to the hypothetical transaction.
Turning to the approach to the credits to be retired in relation to chickweed on the Parent Parcel, I accept that, as noted by Council, there is an inherent element of uncertainty in relation to the extent of land that could support populations of chickweed resulting from the pre-acquisition, preliminary nature of the plant community type mapping, assessment of biodiversity, and calculation of credits that has been undertaken. However, I do not consider that the parties would respond to this uncertainty by transacting on the conservative basis that credits need to be retired for chickweed across every, or even most, polygons where suitable habitat occurs. Rather, I consider that the hypothetical parties would give weight to the evidence of where chickweed has been located, and transact on the basis that credits need to be retired only on those polygons. Accordingly, I prefer the approach taken by Mr Peake.

[28]

Valuation issues - market value

The valuation evidence was extensive with Mr Allsopp, retained by the applicant, and Mr Lunney, retained by Council, each preparing an individual report and two joint reports. A brief summary of the valuation evidence provides context to consider the parties' submissions.
At the outset, I note that I have previously considered the valuation methods adopted by the valuers when undertaking valuations for the purpose of these proceedings. While both the before and after and the piecemeal valuation methods are well-known and accepted, I have concluded that the before and after valuation method is to be preferred. Thus, while the valuers utilise a combination of valuation methods, I focus on those that utilise the before and after valuation method.
In addition, when considering the competing evidence of the valuers and the submissions of the parties, I repeat my finding that the parties to the hypothetical transactions would "come together" (in the sense contemplated by Spencer at 432) on the understanding that while the highest and best use of the Parent Parcel in the before scenario and the Residue Land in the after scenario is the development of a MHE, such that it is likely that an application for development consent for a MHE would be successful, it is not without risk.
Mr Allsopp prepares a number of valuations. This includes: first, an initial valuation using the before and after valuation method in his individual report; second, a second valuation using the before and after valuation method as well as two valuations using the piecemeal valuation method in the first joint report; and third, a further valuation using the before and after valuation method in the second joint report. Mr Allsopp opines that the highest and best use of the Parent Parcel and the Residue Land (for the purposes of the before and after valuation method), and the Acquired Land (for the purposes of the piecemeal valuation method) is the development of a MHE, on the basis of his opinion that demand for MHE development sites in Forster was "strong" at the date of acquisition.
In each of his valuations, Mr Allsopp relies primarily on the sale of Follyfoot Farm ('Follyfoot Farm Sale') as the most comparable sale to the Parent Parcel and the Residue Land. This is because he considers the Follyfoot Farm Sale to be proximate in time, location and physical characteristics (being directly opposite the subject land). Mr Allsopp records that the Follyfoot Farm Sale transacted in September 2018 for $15,750,000 (excl. GST) with the benefit of development consent for a MHE development (which the town planners note had been granted by this Court in an appeal from Council's earlier refusal).

[29]

Applicant's position

The applicant's primary position, as noted above, is that the highest and best use of the Parent Parcel in the before scenario and the Residue Land in the after scenario is for the development of a MHE, such that the parties to the hypothetical transactions would transact on the basis that a MHE developer would be the successful purchaser in the market. The applicant emphasises the permissibility of developing a MHE on the Parent Parcel and the Residue Land and, as considered earlier, is particularly critical of Mr Chambers' views regarding the prospects for a MHE and the relevance of (or weight that would be attributed to) the objectives of the RU2 zone in a consent authority's consideration of an application for a development consent to develop a MHE.
The applicant submits that the parties to the hypothetical transactions would engage on the basis that a MHE developer would pay the same rate for land irrespective of whether the land was zoned R2 or RU2. As such, the applicant submits that Mr Allsopp's reliance on the Follyfoot Farm Sale is both persuasive and determinative, and that the −10% adjustment for the existence of the development consent (effectively reducing the rate from $100/m² to $91/m²) is an appropriate reflection of the risk of securing development consent for a MHE, and consistent with principle.
The applicant submits that Mr Lunney's "guesstimate" (which amounts to a −60% to −70% adjustment for the risk of securing development consent for a MHE) provides no assistance in circumstances where, as the applicant maintains, the parties to the hypothetical transactions would assume there were very good prospects for obtaining development consent for the development of a MHE.
Adopting Mr Allsopp's rate of $91/m², the applicant maintains that the market value of the Acquired Land is $6,356,000, plus severance, and this approach would be preferred to Mr Lunney's "flawed" valuations using the piecemeal valuation method and based upon Mr Chambers' "flawed" town planning advice that the Acquired Land (the Parent Parcel and the Residue Land) would have little or no potential for development of a MHE development.
Further, the applicant submits that the Court would not accept Mr Lunney's "pessimistic" alternative valuations using the before and after valuation method and based upon a rate reflecting the "potential" for development of a MHE derived from the Burrawan Drive Sales. The applicant is critical of Mr Lunney's adjustments of the Burrawan Drive Sales, in particular in relation to size (−60% for 2ha as against the Parent Parcel's 33ha size), and submits that his analysis is inconsistent and ignores the Burrawan Drive Sales' purchaser's intention to amalgamate the sites to create a larger 6ha parcel for the development of a MHE.

[30]

Council's position

Council adopts Mr Lunney's primary position and submits that the compensation for the acquisition of the Acquired Land should be calculated using the piecemeal valuation method, and on the basis that the highest and best use of the Acquired Land is for rural purposes.
Council submits that the Court would find Mr Lunney's rate of $5/m², derived from relatively close sales, would be adopted if the Court accepted that the highest and best use of the Acquired Land would be for the continuation of the current grazing purpose. In any event, Mr Lunney's rate of $5/m² for the Acquired Land remains reflective of the various constraints on the land identified by the non-valuation experts, even in circumstances where there could be some prospect of obtaining development consent for a development of a MHE on the rest of the Parent Parcel.
Council points to Dr Robertson's evidence regarding the likelihood of being unable to clear vegetation on certain areas of the Acquired Land and the application of a 30m wide buffer around the Swamp Oak Forest (referred to at [134] above) which itself overlaps with Mr Lyons' conceptual flood mitigation scheme. In those circumstances, Council submits that nearly all of the Acquired Land would be considered to be constrained. Mr Allsopp does not engage with the use of the Acquired Land for rural purposes, or on the basis that it is fully constrained.
Council accepts that if the Court finds that the Acquired Land has some future development potential for the development of a MHE or for rezoning for residential purposes, the market may perceive that a number of the sales relied upon to derive Mr Lunney's rate of $5/m² may not be as appropriate. In these circumstances, Mr Lunney's rate of $25/m² for the less constrained land and $5/m² for the constrained land would be appropriate, because Mr Lunney's rates were derived from the Burrawan Drive Sales which have similar potential and properly reflect the market valuing this potential.
As noted above, while there was an arithmetic error in Mr Lunney's calculations when adjusting the Burrawan Drive Sales (with the effect that $18/m² should be substituted for $25/m²), Mr Lunney resolved, favourably to the applicant, to maintain the $25/m² he originally calculated. Council rejects the applicant's criticism of Mr Lunney's calculations when adjusting the Burrawan Drive Sales, suggesting that the Court would accept Mr Lunney's explanation for the approach to adjustments for size, based upon the disregard required under s 56(1) of the Just Terms Act in circumstances where the very existence of the Acquired Land, its shape and size, is a function of the registration of a plan of subdivision to give effect to the public purpose.

[31]

Consideration

In considering the valuation evidence and submissions, I rely upon, but do not repeat, my consideration and findings in relation to the town planning, hydrological and ecological evidence above, which inform various matters that are to be considered in the determination of compensation that the applicant is entitled to for the acquisition of the Acquired Land.
Further, in light of the significant difference in approach by the valuers, I consider the comments of Wells J in Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541; (1973) 32 LGRA 170 ('Brewarrana') at 543, to be apposite, where, his Honour noted: "The testimony given by the expert valuers called by the parties demonstrated once again the extraordinary differences in the opinions that, after serious and prolonged deliberation, may be advanced by experienced, professional men in respect of identical subject matter. … The process of valuing land, of course, has something of the character not only of a science but also of an art, in which knowledge, experience and judgment of people, commerce and fashion play integral parts, and it might be thought that the remarkable disparities between the values supported on each side were attributable solely, or at least mainly, to the skill with, and the manner in, which that art was exercised."
In summary, apart from one significant matter, being my preference for the before and after valuation method over a piecemeal valuation method, and accepting that each of the valuers has extensive experience and produced extensive evidence to assist the Court, I generally prefer the valuation evidence of Mr Lunney over that of Mr Allsopp. My reasons follow.
I do not accept Mr Allsopp's implicit assumption that the parties to the hypothetical transactions would engage on the basis that a purchaser contemplating the future development of RU2 zoned land as a MHE would be prepared to pay the same price as they would when contemplating the future development of land zoned R2 (or other zoning that facilitates residential purposes) as a MHE. Rather, parties to the hypothetical transactions would transact on the basis that a purchaser would pay more for land if it was zoned to facilitate residential purposes.
Both valuers (in particular Mr Lunney) undertook "extensive research" throughout the MidCoast region and beyond in an attempt to find sales that would indicate the market operates so that rurally and residentially zoned land with potential for future development of a MHE are valued equally. Both valuers undertook inquiries of local real estate agents and developers, and concluded that there were no sales that would reflect this assumption. As a result, I consider, as Mr Lunney opines, that there is no market evidence that supports Mr Allsopp's assumption that the same price would be paid for land zoned RU2 and R2 with potential for the future development of a MHE.

[32]

Severance

The applicant claims loss due to severance in the amount of $922,740 pursuant to s 55(c) of the Just Terms Act, on the basis that the northern acquired land severs the Residue Land.

[33]

Applicant's position

The applicant submits that the proposed public purpose works will create a "very significant physical impediment" between the western residue land and the eastern residue land, which will constitute either a complete barrier if there is no easement granted, or a barrier of inconvenience if an easement is granted. The applicant also suggests that the Court has the power to order an easement (pursuant to s 64 of the Just Terms Act, which provides that compensation may be provided wholly or partly in the form of land if agreed by the dispossessed owner and the acquiring authority) and submits that despite an earlier request made on behalf of the applicant, Council has not provided a form of an easement.
Mr Allsopp accounts for loss due to severance (as noted at [173] above) by applying a 20% reduction to the rate of $91/m² that he applies to the 5.07ha western residue land, being the amount of $922,740. The applicant characterises Mr Allsopp's approach to the impact of the severance of the Residue Land as "conservative", as he applies his 20% reduction to the western residue land, where arguably the impacts of severance apply across the whole of the Residue Land. The applicant submits that the Court would be satisfied with Mr Allsopp's approach.
Given the position of the northern acquired land, the applicant also submits that access between the severed parts of the Residue Land is limited to a public road, resulting in a loss of flexibility and impact on the ability to develop the Residue Land, and accordingly a reduction in the value of the Residue Land (constituting injurious affection). Even in circumstances where an easement is utilised, the applicant submits that injurious affection has occurred due to first, additional constraints on future development; and second, additional costs associated with construction of some form of pedestrian and vehicular access between the two separated parts. The applicant does not make a separate claim for this injurious affection.
The applicant criticises Mr Lunney's approach to severance when undertaking valuations using the before and after valuation method on the basis that it is logically flawed not to allow for a loss for severance in circumstances where the opportunity for development of the Residue Land as a single parcel has been lost, resulting in a consequent negative impact on value.

[34]

Council's position

Mr Lunney's view is that no allowance for severance is necessary as the diminution in value as a result of severing the Residue Land with the watercourse through the northern acquired land, if any, would be offset by the benefit to the Residue Land of the change in the minimum lot sizes for the Residue Land from a 40ha minimum to 3ha (for the western residue land) and a 15ha minimum (for the eastern residue land) as part of the public purpose. The reduced minimum lot size offers a fallback position for any purchaser in the event that development consent for a MHE is not obtained, by facilitating the future subdivision of the Residue Land. Council submits that the Court would accept Mr Lunney's view.
Council criticises Mr Allsopp's approach to severance, as he does not acknowledge that there is a benefit to the severed Residue Land following the change to the minimum size controls. Council also notes that Mr Allsopp's selection of a 20% reduction is not founded by reference to market evidence, such that if the Court is minded to find there was a legal severance, a more modest adjustment would be appropriate. To the extent that the applicant seeks, in support of its severance claim, that the Court should order an easement as an alternative to monetary compensation, Council submits that the applicant's overtures to Council in relation to an easement are "self-serving" and are in any event made particularly late.
Mr Lunney also considers the denial of access to The Lakes Way, the lost opportunity to offset environmental impacts on the Acquired Land, and the lost opportunity to use the Acquired Land for drainage, and concludes that these issues are unlikely to give rise to any injurious affection. Council submits that there remains easy physical access between the parts of the Residue Land via public roads and that access would not be an impediment if the Residue Land was to be developed for a future MHE.

[35]

Consideration

Given my finding that it is appropriate to adopt the before and after valuation method when valuing the Acquired Land, and further, where I adopt a rate when valuing the Residue Land that reflects the potential for future rezoning (and potential for a MHE), any loss due to severance is included along with market value in the difference between the value of the Parent Parcel in the before scenario and the Residue Land in the after scenario: Apokis at [28].
However, despite the above, to the extent necessary, I find that the reduction of the minimum lot size (and the creation of an additional dwelling entitlement) for the Residue Land may, as suggested by Council, in fact restore some planning flexibility to the western residue land which, in any event, as Council submits, retains substantial frontage to Cape Hawke Drive. I also accept that there also remains relatively easy physical access between those parts of the Residue Land via public roads which, as Council submits, would not be an impediment if the Residue Land is developed for a MHE.
To the extent that it is necessary, I draw the "clear inference" (as Council submits) that the planning proposal is effectively a result of, and cause of, the public purpose as I consider that this is agreed between the town planning experts (Ex A, E577) and is also considered by Mr Lunney and Mr Chambers. Given my adoption of the before and after valuation method, I accept that the town planners (and Mr Lunney) are clear that in the after scenario the town planners take into account the public purpose (Tcpt, 26 February 2021, p 442(40-50)). I accept Mr Lunney's opinion, that, in all the circumstances, there is no separate allowance for severance called for.

[36]

Injurious affection

The applicant claims injurious affection in the amount of $546,000 in the after scenario, pursuant to s 55(f) of the Just Terms Act, on the basis that in the after scenario he has lost the ability to use the 6,000m² drainage area on the Residue Land in the future development of a MHE.
The applicant submits that, in accordance with Dr Martens' evidence, in the after scenario 6,000m² of developable land will likely be lost from the Residue Land for the management of hydrology issues (being additional flood mitigation works to prevent offsite flood impacts, required as a result of the loss of direct drainage connection between the Residue Land and The Lakes Way). Applying Mr Allsopp's rate of $91/m² to this area, the applicant claims injurious affection in the amount of $546,000 in the after scenario.
In relation to the applicant's claim for injurious affection on the basis of the unavailability of the 6,000m² drainage area in the after scenario, Council submits that this would only arise if there is a prospect of a MHE development obtaining a development consent on the Parent Parcel, noting, in Council's primary case, there is no such prospect. Further, where there is a prospect of developing a MHE, Mr Lyons' conceptual flood mitigation scheme would be preferred such that there is no loss of land in the after scenario.
As I find above, I accept Dr Martens' evidence and I consider in the after scenario a further 6,000m² of otherwise developable land would be lost. This is taken into account when adopting the before and after valuation method and no further entitlement arises.

[37]

Disturbance

Pursuant to s 55(d) of the Just Terms Act, in determining the amount of compensation that the applicant is entitled to, regard must be had to any loss attributable to disturbance. The definition of "loss attributable to disturbance" is set out at [22] above.
The applicant claims loss attributable to disturbance in the sum of $153,515.49 on three bases: first, the amount of $89,505.93 in legal costs pursuant to s 59(1)(a) of the Just Terms Act; second, the amount of $36,306.56 in valuation costs pursuant to s 59(1)(b); and third, the amount of $27,703 in other financial costs reasonably incurred relating to the actual use of the subject land, as a direct and natural consequence of the acquisition pursuant to s 59(1)(f) of the Just Terms Act.
The other financial costs that are particularised by the applicant are: the costs of connecting water to the western residue land; the delivery of a cattle trough to the western residue land; the costs of facilitating the agistment of horses on the western residue land; and maintenance of the boundary between the eastern residue land and the southern acquired land.
At the end of the proceedings, the parties agree as to all amounts, other than the circumstances in which the applicant is entitled to the other financial costs in the amount of $27,703 claimed pursuant to s 59(1)(f) of the Just Terms Act. In summary, Council contends that should its primary position (being that the highest and best use of the Parent Parcel and the Residue Land is agriculture) be accepted, then the applicant would be entitled to the other financial costs, however, where the highest and best use of the land is for the development of a MHE, then the other financial costs to the applicant would be captured in the amount allowed for severance, because the costs are "trying to correct the effect of the severance".
In contrast, the applicant contends that where severance and disturbance are separate heads of compensation under the Just Terms Act, there is no opportunity to "offset" or "net" claims for severance and disturbance as Council appears to contend. In support of this submission, the applicant notes that the claims are "entirely different", because an allowance for severance seeks to determine the impact of the acquisition on market value, whereas an allowance for disturbance addresses the costs incurred as a consequence of the acquisition.

[38]

Conclusion

For the above reasons, I find that the applicant is entitled to compensation in the sum of $1,036,630.49 which includes $153,515.49 (as claimed) for disturbance.

[39]

Costs of the proceedings

While I am of the view that, given my findings, the applicant is entitled to his costs as agreed or assessed, Council has requested some short time to consider its position in relation to costs. As such, I make no present order for costs.

[40]

Addendum 22 September 2021

The amount of compensation ordered by the Court at the time of handing down judgment ($1,036,180.49) contained an arithmetic error and did not reflect the reasoning. The orders have been amended pursuant to the "slip rule" in accordance with r 36.17 of the Uniform Civil Procedure Rules 2005 (NSW).

[41]

Orders

The Court orders that: 1. The amount of compensation payable to Trevor Allan McBride for the acquisition of land comprising Lots 305, 306 and 308 in DP 1240455 at Forster, NSW, is determined in the sum of $1,036,630.49. 2. Costs are reserved.

[42]

Addendum 28 September 2021

I gave judgment and made orders in these proceedings on 21 September 2021 and reserved costs. As the parties have now reached agreement in relation to costs, I make the following further orders.

[43]

Further Orders

By consent the Court orders that: 1. MidCoast Council is to pay Trevor Allan McBride's costs on a party party basis as agreed or assessed within 28 days of agreement or completion of assessment. 2. In the event of default of Order (1) above, s 101 of the Civil Procedure Act 2005 (NSW) applies.

[44]

Annexure A (969214, pdf) Annexure B (304954, pdf) Annexure C (321765, pdf) Annexure D (1271589, pdf)

[45]

Amendments 29 September 2021 - Addendum 28 September 2021 at [267] Further Orders at [268] 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: 29 September 2021

Trevor Allan McBride v MidCoast Council

At a glance

Court

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Catchwords

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Catchwords

Judgment (45 paragraphs)

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Legislation Cited (11)

Cases Cited (35)

Cited By (2)