Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority

Housing Commission of New South Wales v San Sebastian Proprietary Limited And Others (1978) 140 CLR 196; Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 136 LGERA 16 ; Rees v Minister for Planning and Housing (1991) 76 LGRA 167; Roads and Traffic Authority of New South Wales v Perry and Another (2001) 52 NSWLR 222 ; CASES CITED: Smith v RTA [2004] NSWLEC 438, unreported; Sydney Harbour Foreshore Authority v Walker Corporation Pty Limited (2005) 63 NSWLR 407; The Crown v Murphy and Another (1990) 71 LGRA 1; (1996) 64 ALJR 593; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2004) 134 LGERA 195; Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2004) 136 LGERA 164

APPLICANT Mr J J Webster SC with Mr I J Hemmings (Barrister) SOLICITORS Minter Ellison LEGAL REPRESENTATIVES: RESPONDENT Mr B W Walker SC with Dr J E Griffiths SC and Mr A E Galasso (Barrister) SOLICITORS Deacons

THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

30024 of 2003 Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority

JUDGMENT 1 Talbot J: In a judgment delivered on 9 July 2004 I determined that the market value of land acquired from Walker Corporation Pty Limited ("the applicant") by Sydney Harbour Foreshore Authority ("the respondent") at the date of compulsory acquisition on 26 September 2002 was $60,000,000. An appeal from that decision was made by the respondent to the Court of Appeal. Basten JA delivered the judgment for the Court of Appeal on 27 July 2005 (Sydney Harbour Foreshore Authority v Walker Corporation Pty Limited (2005) 63 NSWLR 407). Beazley JA and Stein AJA agreed with Basten JA. The appeal was allowed and the matter remitted to this Court for reconsideration in accordance with the principles set out in the Court of Appeal judgment. 2 It is useful to recall that until Leichhardt Local Environmental Plan 2000 ("LEP 2000") was made on 22 December 2000 the subject land was zoned part residential and part waterfront/industrial. Pursuant to LEP 2000 the whole of the land was zoned industrial by including it in the general industrial zone. The industrial zoning continued to apply at the date of acquisition. 3 I determined the market value of the land at an amount that reflected the potential for residential development on the basis that the industrial zoning was disregarded and that the underlying zoning was residential allowing medium density development. 4 Basten JA alluded to a number of errors that he found in my judgment. These are best explained by setting out some of the findings and observations made, each of which have been the subject of further submissions made on behalf of the parties on the hearing of the remitter to this Court. A number of the issues raised have not, so far as I am aware, previously been the subject of a determination by this Court in accordance with the principles as they are enunciated in the Court of Appeal judgment. I set out relevant extracts of the Court of Appeal judgment in order that there can be a clear understanding of the task presented to this Court by the Court of Appeal. Some of the relevant findings are as follows:- …the trial judge valued the land on the assumption that the rezoning had in fact taken place. That assumption could only be justified if the refusal of the council to rezone was itself part of the proposal to acquire the land for the public purpose for which it was acquired or a step in the carrying out of that public purpose . [81] …his Honour made no reference to, nor did he discuss the principle, affirmed in Murphy , that an attribute of the land which affected its value, because it militated against rezoning, was a consideration which the Land Appeal Court in that case had properly taken into account… [71] The question which the valuation exercise required to be addressed was to identify that level of development, between the highest levels proposed by developers and the lowest point of no development at all, which might reasonably be expected to be permitted. [77] If those factors could properly be taken into account in assessing the amount of development that would be permitted, if the land had been zoned residential, it follows that they should also have been taken into account in assessing the possibility that the land would be so rezoned. [77] …there was no factual finding as to the terms of "the proposal" or what constituted "the carrying out of" the public purpose for which the land was acquired . [28] …as a matter of principle, the Court below could not disregard the maintenance of the industrial/waterfront zoning in the present case, until the proposal for the relevant public purpose for which the land was resumed became known, if that planning decision was made for proper planning purposes, regardless of whether the land would ever be resumed. [60] …in a case where planning powers and powers of compulsory acquisition are vested in separate bodies, the absence of any intention on the part of the State authority with power to acquire in order to carry out such a public purpose will, except perhaps in unusual cases, suggest that the exercise of planning power in the hope that the State authority may change its mind will be unlikely to constitute the carrying out of the public purpose. [85] Although the exercise may seem artificial, it is necessary to ask what the prospects of rezoning were at the date at which, for whatever reason, the terms of s 56(1) were engaged. [86] The public purpose

5 I am required to characterise the public purpose for which the land was acquired and then to identify steps taken in the carrying out of the public purpose or the proposal to carry it out. In the Notice published in a Special Supplement to the Government Gazette on 26 September 2002, whereby the subject land was acquired by compulsory process, the acquisition was described as "for the purposes of the Sydney Harbour Foreshore Authority Act 1998." 6 I noted in the original judgment (Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2004) 134 LGERA 195) that when Draft Leichhardt Local Environmental Plan No. 81 ("DLEP 81") was referred to Commissioners of Inquiry on 19 March 1991 its aims and objectives included:- (a) to rezone the land and encourage its redevelopment for residential and open space purposes in the interests of the proper and orderly planning of the land; … (d) to encourage residential development which is appropriate to the scale, character and diversity of the locality and the characteristics of the site; 7 It was also made clear that the aims and objectives included the provision of open space and the creation of a public foreshore reserve. Overall the prescribed FSR for development on the land was recommended not to exceed 0.8:1 including any of the land which may be dedicated to council for open space purposes. Compatible dual use purposes were thereby acknowledged. I took that into account in my first determination. 8 After the report of the Commissioners was prepared and published in July 1991 the council resolved in December 1991 to seek funds from the Commonwealth and State Governments to acquire the whole of the site. Again at a special meeting on 6 February 1992 a Mayoral Minute identified a first priority of the council for the site as open space. The council maintained this objective when it resolved on 6 October 1992 that it preferred for the site to be purchased for inclusion in the Sydney Harbour National Park and as regional open space. Furthermore, on 10 January 1996 the Mayor of the council wrote to the Prime Minister "seeking support for funding towards purchase of the Caltex/Ampol site at Ballast Point, as part of Sydney Harbour National Park." 9 On 15 December 1998 the council confirmed its position to support the retention of industrial uses on the site until such time as the land became available for open space. Further action followed in relation to the preparation of Master Plans for Ballast Point as noted in my earlier judgment at [98], [99], [100] and [101]. Throughout this time the council maintained an intention for the major use of the site as public open space. There is clear evidence which demonstrates that the purpose of the maintenance of an industrial zoning was to preserve the opportunity to have the land set aside entirely for the purpose of public open space. There was no prospect or desire on the part of the council or anyone else that full scale industrial development occur across the whole of the site.

10 In a draft submission to the Deputy Premier, Minister for Urban Affairs and Planning on 18 October 2000, preparatory to the inclusion of the Ballast Point site in Schedule 1, the following general statement is made:- In redeveloping each of the identified sites SHFA's primary goals would be to increase public access to the harbour foreshore and, in addition to creating new parks and open space, to build on the maritime heritage of the sites by providing opportunities for activities related to the working waterfront. 11 Further deliberations and representations by council are set out in the judgment at [103], [104] and [105]. 12 In the news release on 19 February 2002 the Premier of New South Wales, inter alia, made the following observations:- One of Sydney Harbour's most significant headlands - Ballast Point - is to be opened up to the public and preserved for future generations, under a plan announced by the State Government today. The State Government would buy the fuel depot and convert the site into a new harbourside park. ... For some 80 years, Ballast Point has been used as a fuel depot, but the Government now intends to return the land to the public by creating a harbourside park. … These negotiations will be undertaken initially by an independent negotiator with follow-on by the Sydney Harbour Foreshore Authority. The Sydney Harbour Foreshore Authority has the power to compulsorily acquire land in the interests of protecting and enhancing the natural and cultural heritage of the foreshore area. Ultimately, Sydney Harbour Foreshore Authority would manage the site and ensure that it is maintained for community use. 13 The history reiterated above together with the matters referred to in my first judgment clearly show a unity of purpose between what was proposed by the council over the period of the previous 12 years and the ultimate compulsory acquisition of Ballast Point by the Notice in the Government Gazette published 26 September 2002. The public purpose at all times was to create a significant area of public open space as a harbourside park. The records show that the council initially retained the original industrial zoning for the purpose of ensuring the maintenance of the status quo while avenues were explored for the bringing of the land into public ownership. That purpose was reinforced by the making of LEP 2000 when the land was rezoned and brought within the general industrial zoning applicable to the whole of the Leichhardt local government area. 14 The refusal of the council to rezone was itself part of the proposal to acquire the land for the public purpose. It was a step in the carrying out of that public purpose for reasons that I identified at [112] of my earlier judgment as follows:- [112] Contrary to the respondent's submission, I am satisfied the maintenance and extension of the industrial zoning from 1992 onwards and its reinforcement in 2000 are a step in the resumption process for the following reasons:-- (a)Although the zoning was not specifically for the public purpose, it maintained the status quo pending the council being able to arrange acquisition of the land for the public purpose;

(b)It was instrumental in the successful execution of the proposal, and therefore critical to the accomplishment of the aim, to bring the land into public ownership as a harbourside park;

(c)It was maintained (notwithstanding strong pressure to change it) by the public authority primarily responsible for zoning of the land that was also coincidentally plainly a driving force behind the ultimate decision to acquire the land;

(d)Although the council recognised that some industrial use might ultimately be achieved, its principal objective was to have the land turned over for use predominantly as a harbourside park;

(e)It is not necessary that the zoning explicitly restrict the use to the purpose for which the land is resumed. It is sufficient if the zoning has the intended effect in practice of constraining development potential in the interim period pending resumption in the interest of facilitating acquisition. The industrial zoning had that effect and thereby reduced the value of the land at the relevant date as against its residential value; and

(f)The council, as the responsible planning authority, stoutly resisted the development of the land for a residential use and used the industrial zoning to bolster its opposition. The Government was content to leave the zoning in place after it brought the land within the net of SEPP 56 as a site of strategic significance. The SHFA at all relevant times to it, recognised the potential for open space at the site. 15 I have identified the landmark documents and decisions made by the council. The documents show a continuous, consistent and vigorous opposition to the development of the land, or any part of it, for residential purposes on the part of the council and constant entreaty to other governments and government authorities seeking their cooperation in its acquisition so that it could be brought into public ownership for the purpose of public open space in the form of a harbourside park. That was the overriding public purpose. 16 The formal resolution of the council on 21 October 1991 and its determination on 10 December 1991 were the first identifiable steps of a formal nature whereby the council took action to limit the development of the land for any purpose other than the public purpose of a harbourside park. At the time the council made those decisions any person interested in purchasing the land would have been aware of the recommendation made by Commissioners of Inquiry and by the municipal town planner on 22 August 1991 that showed but for the intention to give the land over to a public purpose it would have been zoned in such a way to enable residential development to take place on the basis that the immediate foreshore area would be retained as open space. The chance of the rezoning for residential purposes at that time would have been rated at 100 per cent. 17 I find that the proposal to acquire the land was first adopted on 6 February 1992. Moreover in my opinion by 22 December 2000 the market would still have rated the chance of a rezoning to permit the extent of residential development adopted for the purpose of my valuation as it was in 1992, namely, at 100 per cent. If unity of purpose is a prerequisite the time that the proposal was adopted was the date of the making of LEP 2000. However I find that the Mayoral Minute made 6 February 1992, following the preceding decision of the council in December 1991, was a clear and unequivocal decision which formed part of the proposal to acquire the land for the public purpose. I also find no subsequent facts or events, extraneous to the proposal, had the effect of increasing or decreasing the value of the land. Accordingly the consistent refusal to rezone the land for residential purposes and the maintenance of an industrial zoning must be disregarded.

18 Between 1992 and 2000 the council and the State Government were at odds in respect of potential residential development of the land. Accordingly, during that period, the actions of the council are the only matters to be disregarded for the purposes of s 56(1)(a) of the Land Acquisition (Just Terms Compensation) Act 1991 ("the Just Terms Act") as having the effect of decreasing the value of the land. The actions of the Government maintained the otherwise 100 per cent expectation of rezoning.

19 The importance of the drafting and making of LEP 2000 by the council and the Minister is that, at least from that point, I am satisfied there is sufficient unity of purpose displayed by the two arms of government (see [30] of the Court of Appeal judgment). However for the reasons explained later I see no reason why the earlier actions of the council alone cannot be accepted as part of the proposal to carry out the public purpose for which the land was acquired. 20 The chance of rezoning at the time of making LEP 2000 was 100 per cent. This level of chance did not diminish in the time leading up to the date of acquisition as the steps taken by the Government, including the removal of the land into schedule 1 of State Environmental Planning Policy No. 56 - Sydney Harbour Foreshores and Tributaries ("SEPP 56"), were all for the public purpose and must be ignored.

The planning purpose 21 Basten JA discusses various facets of the decision in Housing Commission of New South Wales v San Sebastian Proprietary Limited And Others (1978) 140 CLR 196 at [46] to [60] of the Court of Appeal judgment and in particular the manner in which a rezoning should be regarded in the context of identifying a step in the resumption process. He raises a distinction between a rezoning which the planning authority intended or anticipated should give rise to a resumption and the maintenance of a zoning for proper planning purposes.

22 The evidence shows that it was not seriously contemplated by any authority, state or local government, or the owner of the subject land that the use of the site for the purpose of industry other than perhaps a small historical use would be maintained or established. In other words, there was no logical planning purpose supporting an industrial zoning for the land. It is relevant to note that in 1995 Caltex applied for and obtained development consent to construct 174 medium density dwellings with FSR of 0.803:1 (see [91] of earlier judgment).

23 I am not persuaded that the planning decision to maintain an industrial zoning was made for the proper planning purpose of controlling industrial development of the land. It was a low risk device used by the council to ensure that development antipathetic to the creation of a harbourside park did not occur. The council was aware that Caltex was winding down its activities on the site. These actions are identified and discussed at [65], [66] and [67] of my earlier judgment. The targeted aspirations for private development concentrated on residential development and therefore the prospect of industrial redevelopment was remote. The industrial zoning was solely maintained for the purpose of thwarting development for any other purpose. 24 No proper planning purpose has been shown for maintaining the existing industrial zoning or the subsequent introduction of the new industrial zoning. Attributes of the site 25 The inherent characteristics of the Ballast Point site made it suitable for the purpose of a public harbourside park as well as for residential development. The land was not, as was the case involving a turtle rookery in The Crown v Murphy and Another (1990) 71 LGRA 1; (1996) 64 ALJR 593, inherently unsuitable for any other development besides the public purpose; in this case residential. The principle recognised by Basten JA in the example given at [63] does not apply to the facts of the present case because the inherent attributes of the land did not "drastically reduce the potential uses of the land." On the contrary they enhanced it for residential use. An approach to distinguishing Murphy was foreshadowed by the Full Court of Western Australia in Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 136 LGERA 16 (see also Smith v RTA [2004] NSWLEC 438, unreported). 26 The attributes of the site that make it suitable for a harbourside park are not such that no other use could be contemplated. Even so the council did not rezone the land for open space or for any other public purpose. As explained earlier the maintenance of the industrial zoning was not for the purpose of ensuring an industrial use of the land in the future.

27 According to the respondent the paradigm shift in terms of the "attributes of the site" occurred in 1998 when the site was brought within SEPP 56 (see [112] of my first judgment). However the decision to bring the site within SEPP 56 was in my opinion no more than a contributing or subsequent part of the proposal to carry out the public purpose. The physical attributes of the site were not thereby changed in any relevant sense. The planning decision merely recognised an element of the amenity of the site. That element was the subject of the public purpose. Coincidentally the same element equally served the prospect of residential development. Existing improvements on the land and contamination meant that considerable changes were inevitable in order to achieve satisfactory development irrespective of future use for either open space or a residential use with compatible open space. 28 I made a finding that the land would have been rezoned to allow residential development but for the proposal to acquire the land for the purpose of a harbourside park. It was nevertheless appropriate to recognise that the level of development achievable under a residential zoning would be constrained by the attributes of the site. In assessing the chance that the land would have been rezoned for residential purposes the attributes of the site were taken into account. This was done by the application of an FSR of 0.8:1. In this way the attributes of the site as a scenic location were acknowledged by making an equitable provision for public open space in conjunction with residential development. The foreseeable scheme for residential development identified by me reflected this potential. The assessment of the chance of rezoning 29 Absent the restrictive zoning to protect the public purpose identified and actively pursued by the council, rezoning for residential development of some kind was, in my opinion, inevitable. It was only the lack of a compatible zoning that constrained the potential for residential development. Therefore the decision to maintain an industrial zoning was part of the proposal to carry out the public purpose for a harbourside park. That had the effect of decreasing the value of the subject land from the high point when the hypothetical purchaser would have regarded the prospect for rezoning for residential purposes as 100 per cent. That point was when s 56(1)(a) of the Just Terms Act was first triggered. 30 At the date of compulsory acquisition the value of the land was depressed by the industrial zoning (and the objective behind it) to a level where it was clearly less than the value of land as residential land. The land was designated suitable only for an industrial purpose or as open space use in accordance with the applicable planning controls. In order to properly disregard that decrease in the value of the land it is appropriate to value the land as if that decrease had not occurred. Consequently, following the reasoning of the Court of Appeal it should be valued on the theoretical basis that the prospect of rezoning to permit residential development was 100 per cent.

31 I readily recognise that this case is "unusual" in the respect identified by Basten JA, namely that the planning power of the council was exercised in the hope that the State authority may change its mind. However I do not regard his observations at [85] as precluding the prospect of the acts of the local government authority being part of a scheme of acquisition for a public purpose ultimately enacted by a State authority (see also Rees v Minister for Planning and Housing (1991) 76 LGRA 167 cited at [108] in my earlier judgment). In contrast to s 56(1)(b) of the Just Terms Act the identity of the acquiring authority is not a germane, cognate fact relevant to the identity of the public purpose referred to in s 56(1)(a). 32 At all relevant times the council not only held relevant planning powers it also had the power to compulsorily acquire the land. The reason it did not exercise the latter was a lack of funds. The State Government also held relevant planning powers as well as the necessary powers of compulsory acquisition to complete the common purpose of the scheme to create a harbourside park. Notwithstanding that the powers were vested in separate bodies they each had the legal capability to carry out the public purpose on their own. Ultimately the common purpose of the local government and state bodies converged when the respondent acted to bring the land into public ownership. 33 No point is taken by the respondent as to any distinction between the State, the Government, any Minister (including the Premier), any department, any authority and the Sydney Harbour Foreshore Authority. The actual use

34 At [70] of the Court of Appeal judgment Basten JA refers to [26] and [27] of my second judgment (Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2004) 136 LGERA 164) in respect of a claim for disturbance and in particular the sentence "there was no certainty that the land could ever be used for residential development" as being contrary to the earlier findings that the underlying zoning was residential. The respondent asserts that my finding in regard to disturbance and the observations made by Basten JA reduce the chance for residential development below 100 per cent. 35 My observations at [26] and [27] refer to the applicant's actual use of the land in the context of a claim for loss attributable to disturbance pursuant to s 59(f) of the Just Terms Act. The applicant argued that the land was part of a land bank. I applied the distinction between physical and real disturbance of the actual use of the land and the theoretical situation that requires the Court to examine the hypothetical case for the purpose of s 56(1)(a), namely that any increase or decrease in the land caused by the proposal is to be ignored. The statement in my second judgment needs to be understood in its distinct factual context. So understood, rather than being a counter factual assumption, which Basten JA suggested might be the result, it is a finding of fact made under the different statutory regime prescribed for the establishment of a claim for loss attributable to disturbance. The assessment 36 I agree with the applicant's submission that it can be said that I have already included the element of risk of achieving a rezoning which the Court of Appeal has found to be necessary as follows:- (i) For development potential permitting 69 units - zero risk. (ii) For development potential permitting 138 units - risk of 25-30 per cent. 37 Therefore the hypothetical purchaser would have assumed a risk of rezoning of the land as well as development consent for residential purposes to permit 138 units at 25-30 per cent. 38 For the reasons I explain below, I am not persuaded that there is any meaningful difference between the element of risk of achieving the level of development identified in my earlier judgment and the risk of achieving a rezoning and subsequently obtaining development consent. Basten JA recognised this at [77] when he found that the same factors should be taken into account. It is highly likely that a master plan would be required as demonstrated by the history of earlier considerations for the redevelopment of the site. The process of the approval of the master plan contemporaneously with the proposal for rezoning would have ensured an expedited development application approval process. The master plan would have foreshadowed and dictated the extent of development to be permitted under the zoning, thereby dealing with many of the issues that arise for consideration under the Environmental Planning and Assessment Act 1979 upon the making of a development application. That is what the hypothetical purchaser properly advised would have assumed. 39 Notwithstanding the apparent caveat placed upon my original finding that market value is to be properly assessed on the assumption that a rezoning permitting residential development would have occurred by the date of compulsory acquisition but for the intention to carry out the public purpose for which the land was acquired, I confirm that view. Nevertheless I respond to the directive made in the remitter by the Court of Appeal and find that the chance of a rezoning at the relevant time s 56(1)(a) was engaged was 100 per cent for the reasons given earlier. 40 I have identified the scheme pursuant to which the purpose of the acquisition was achieved. Moreover I have also identified the decrease in value caused by the carrying out of the proposal. It commenced with the maintenance and introduction of the respective industrial zonings for the express purpose of supporting the public purpose ultimately taken up by the respondent. That decrease is to be disregarded pursuant to s 56(1)(a) (Roads and Traffic Authority of New South Wales v Perry and Another (2001) 52 NSWLR 222 at 240). 41 I therefore apply the 100 per cent chance or prospect of the land being developed for residential purposes in 1992 to a hypothetical circumstance at the date of acquisition. There is no consequential change to my assessment of the amount of market value. I confirm the assessment of the risk of achieving the previously identified residential development potential prospect for the site. The attribution of a 100 per cent prospect for a rezoning effectively has the same practical result as making an assumption that actual rezoning had occurred. 42 I confirm that the market value of the subject land at the date of compulsory acquisition on 26 September 2002 for the purpose of determining compensation payable to the applicant under the Just Terms Act was $60,000,000. 43 The exhibits may be returned. 44 Costs reserved.

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