a) any financial advantage that would have necessarily have been forgone in realising that potential, and
b) any financial loss that would have necessarily been incurred in realising that potential.
25 Prior to the enactment of the Just Terms Act the approach accepted by the courts had been that a claim for disturbance was only relevant to the hypothetical purchaser who was actually using the land for the use that formed the basis for the assessment of value at the date of resumption (Commonwealth v Milledge (1953) 90 CLR 157 at 164). The typical case was where the dispossessed owner occupied the land for a purpose that was not its highest and best use. A claim for disturbance of a current use was regarded as inconsistent with a realisation of value based on a higher use.
26 The use of the land at Ballast Point at the date of acquisition was constrained by the prevailing industrial zoning. It was only after that zoning was notionally set aside, as a step in the resumption process, that the impediments of the zoning were hypothetically removed to enable the Court to value the land without the constraints, as land that could be developed for residential purposes. It is therefore not reasonably open for the applicant to argue that the market value of the land has been assessed on the basis of its current use at the relevant date.
27 Moreover the applicant was never in personal possession of the lands so that its actual use was not disturbed in the physical sense. Furthermore it entered into the contract to purchase the land as land zoned for industrial purposes. There was no certainty that the land could ever be used for residential development. Therefore it could not have been the case that the applicant was actually using the land for residential purposes, whether as part of a land bank or otherwise.
28 The determination of market value has been made on the basis that the land had potential to be used for a purpose other than that for which it was capable of being currently used at the date of acquisition. The hypothesis of setting aside the current zoning does not change the approach to an assessment of compensation for loss attributable to disturbance. The prospective use for a residential purpose was not capable of being disturbed because there was no capacity to enjoy it in the first place.
29 The primary intention of the legislation in respect of disturbance is to further compensate an owner who is required to relocate an actual use where that actual use is the basis for assessment of compensation. One of the principal objects of the Just Terms Act is to ensure compensation on just terms. There will be no injustice by denying the present applicant compensation attributable to disturbance if there has been no financial cost to the applicant that is attributable to the actual use of land. Any cost incurred in seeking to obtain development consent based on SEPP 5 or existing use was in respect of in an attempt to obtain approval for a higher use. Section 61 means that the dispossessed owner cannot recover additional compensation for disturbance either based upon a loss of future financial benefit as a consequence of realising the higher use or the loss incurred in achieving that potential.
30 The physical improvements on the land only accommodated an industrial use. Accordingly if there was an actual and physical use of the land it could only have been for an industrial purpose. That was clearly a use different to that upon which the market value of the land has been assessed.
31 Pitching the applicant's case at its highest, the character of the land as part of a so-called land bank is regarded as land within an industrial zone that entitled the owner either to rely on an existing use right as the basis for making a development application for consent to change from one non-conforming use to another non-conforming use, or to seek consent to development consistent with SEPP 5.
32 The applicant's argument in support of an existing use was that the land was being used for the prohibited use of a liquid fuel depot. The disturbance of that use, if any, was a loss attributable only to the user, namely Caltex. The applicant never had possession under the uncompleted contract.
33 Any financial costs expended by the applicant in seeking development consent for its own purposes were subsumed in the award of compensation for the highest and best potential use based on the assumption that the underlying zoning would have permitted residential development. As I said earlier the potential use based on the underlying zoning is a higher use than a potential based on establishing existing use or satisfying the requirements of SEPP 5. The potential was elevated by the underlying zoning to a degree of certainty that significantly limited the risk.
34 Council of the City of Newcastle v Royal Newcastle Hospital (1957) 96 CLR 493, 1959 AC 248 is authority for the proposition that actual physical use is not an essential ingredient in the concept of "use". If the holding of the land serves a designed end then that is its use. Section 59(f) uses the expression "actual use". That is to be distinguished from the expression actually physically being used in the context of section 109 of the Environmental Planning and Assessment Act ("the EP&A Act") (see Vaughan-Taylor v David Mitchell-Melcann Pty Ltd (1991) 25 NSWLR 580).
35 An actual use is to be distinguished from a future or potential use. The Court of Appeal has recognised that holding developable land in a land bank for future development could be an actual use for the purposes of s 59(f) (Blacktown Council v Fitzpatrick Investments [2001] NSWCA 259, unreported). The claim for loss attributable to disturbance in that case was for financial costs incurred as legal costs and stamp duty in buying replacement land. The Court of Appeal gave the expression "relating to" a wide import and held at [28] that:-
…both the need and the occasion for the purchase of the replacement land related to the actual use of the acquired land, that is, to conduct its business the respondent needed to acquire and then hold the replacement land for later subdivision and resale.
36 The earlier approach by this Court has been consistent with the finding of the Court of Appeal (see for example Fitzgerald v Blacktown City Council Land and Environment Court of NSW No. 30281 of 1993, 28 March 1994, unreported) and N Stephenson Pty Ltd v Roads and Traffic Authority of New South Wales (1994) 83 LGERA 248.
37 In Stephenson there were special circumstances that deprived the applicant of the right to recover the financial costs claimed but nevertheless the effect of s 59(f) was clearly recognised, namely, that although costs incurred prior to acquisition are not compensable as a general rule it is not imperative that the costs be deferred until acquisition occurs.
38 The present claim pursuant to s 59(f) fails primarily because the costs claimed have been subsumed by the amount of compensation payable in respect of market value assessed on the basis of the highest and best use. Moreover there was no temporal nexus between the time the expenses were incurred and the acquisition. The costs claimed were in relation to the applicant's, and its predecessor's, attempts to obtain development consent and to the future development of the land in a general sense. They related to the actual use of the land as a land bank but they were not incurred as a direct and natural consequence of the acquisition. They were incidental costs incurred by the applicant and its predecessor in the conduct of its business and the realisation of the potential of the land. They were incurred irrespective of the acquisition. They were incurred prior to the announcement by the Premier that the Government intended to acquire the land on 19 February 2002. Significantly the applicant did not acquire an equitable interest in the land as purchaser under the uncompleted contract, being the interest it held at the date of acquisition, until 19 April 2002.
39 The costs claimed fall outside the ambit of s 59(f) for all of the above reasons.
40 Having regard to this finding it is not necessary to resolve the issue raised by the respondent that some of the costs claimed were payments made as the reimbursement of costs incurred by a related corporation before the applicant was nominated or entitled to exercise the call option under the Call Option Agreement and therefore could not be categorised as financial costs within the meaning of s 59(f). However I have not been persuaded that if the costs had been incurred on account of the dispossessed owner, and otherwise could be claimed under s 59(f) the sole fact of reimbursement would necessarily dislodge the claim.