Allandale Blue Metal Pty Ltd v Roads and Maritime Services (No 6)

[2015] NSWLEC 18

Land and Environment Court

New South Wales

Medium Neutral Citation:	Allandale Blue Metal Pty Ltd v Roads and Maritime Services (No 6) [2015] NSWLEC 18
Hearing dates:	16-18, 21-25, 28-30 July 2014, 16, 17, 22-24, 29-30 October 2014, 19 November 2014
Decision date:	17 February 2015
Jurisdiction:	Class 3
Before:	Pain J
Decision:	See paragraph 447
Catchwords:	COMPULSORY ACQUISITION OF LAND – compulsory acquisition of part of land for freeway – whether compensation for market value includes value of quarry resource in land – disturbance claim by quarry operating tenant does not exclude claim for market value of resource affected by acquisition by landowner of acquired land – highest and best use can include more than one use of land – application of discount cash flow (DCF) model to value resource – value to be attributed in DCF model to risk of no approval of quarry extension in before scenario– extent of loss of access to resource in after due to need for safety buffer around freeway – value of non-quarry land in before and after using comparable sales method
Legislation Cited:	Cessnock Development Control Plan 2006 Cessnock Local Environmental Plan 1989 cl 11A(2) Environmental Planning and Assessment Act 1979 Pt 3A s 75B, s 75W, s 96 Environmental Planning and Assessment Regulation 2000 cl 8J Land Acquisition (Just Terms Compensation) Act 1991 s 3, s 11, s 12, s 15, s 18, s 20, s 37, s 39, s 40, s 41, s 42, s 43, s 54, s 55, s 56, s 59, s 61 Maitland Local Environmental Plan 1993 State Environmental Planning Policy (Major Development) 2005 Sch 1
Cases Cited:	Adelaide City Corporation v City of Port Adelaide Enfield [2001] SASC 207; (2001) 115 LGERA 137 Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410 Allandale Blue Metal Pty Ltd v Roads and Maritime Services [2013] NSWCA 103; (2013) 195 LGERA 182 Allandale Blue Metal Pty Limited v Roads and Maritime Services (No 4) [2014] NSWLEC 102 Almona Pty Ltd v Roads and Traffic Authority of New South Wales [2008] NSWLEC 112; (2008) 160 LGERA 375 Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209 Bulga Milbrodale Progress Association Inc v Minister for Planning and [2013] NSWLEC 48; (2013) 194 LGERA 347 Caruso v Sydney Water Corporation [2008] NSWLEC 320 Collex Pty Ltd v Roads and Traffic Authority [2006] NSWLEC 579; (2006) 149 LGERA 234 Commonwealth of Australia v Hazeldell Ltd (1918) 25 CLR 552 Commonwealth of Australia v Hazeldell Limited [1921] 2 AC 373 Dasreef Pty Ltd v Hawchar [2011] HCA 21; (2011) 243 CLR 588 El Boustani v Minister administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33; (2014) 199 LGERA 198 Everest Project Developments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 [2010] NSWLEC 88; (2010) 177 LGERA 43 George D Angus Pty Ltd v Health Administration Corporation [2013] NSWLEC 212 Health Administration Corporation v George D Angus Pty Ltd [2014] NSWCA 352 Jameson v Rail Corporation New South Wales [2014] NSWLEC 83 Lake Macquarie City Council v Luka [1999] NSWCA 447; (1999) 106 LGERA 94 Liverpool City Council v Commonwealth of Australia (1993) 46 FCR 67 Maidment v Roads and Traffic Authority (NSW) [2006] NSWLEC 606; (2006) 153 LGERA 249 Makita (Aust) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 Marroun v Roads and Maritime Services [2012] NSWLEC 199 McBaron v Roads and Traffic Authority (NSW) (1995) 87 LGERA 238 McDonald v Roads and Traffic Authority (NSW) [2009] NSWLEC 105; (2009) 169 LGERA 352 Minister v Matford Nominees Pty Ltd [1973] 2 NSWLR 58 Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority (NSW) [2006] NSWCA 314 Peter Croke Holdings Pty Ltd v Roads and Traffic Authority of NSW (1998) 101 LGERA 30 Quarry Products (Newcastle) Pty Ltd v Roads and Maritime Services (No 3) [2012] NSWLEC 57 Randwick Municipal Council v Valuer-General (1960) 5 LGRA 387 Roads and Traffic Authority (NSW) v Collex Pty Ltd [2009] NSWCA 101; (2009) 165 LGERA 419 Roads and Traffic Authority (NSW) v McDonald [2010] NSWCA 236; (2010) 79 NSWLR 155 Roads and Traffic Authority (NSW) v Mosca [2006] NSWCA 159; (2006) 146 LGERA 335 Roads and Traffic Authority v Peak [2007] NSWCA 66 Scott Revay v Ku-ring-gai Council [1994] NSWLEC 112 Serbian Cultural Club "St Sava" Inc v Roads and Traffic Authority (NSW) [2007] NSWLEC 673 The Minister v New South Wales Aerated Water and Confectionary Company Limited [1916] HCA 48; (1916) 22 CLR 56 Tolson v Roads and Maritime Services [2014] NSWCA 141; (2014) 201 LGERA 367 Vilro Pty Ltd v Roads and Traffic Authority (NSW) [2010] NSWLEC 234; (2010) 179 LGERA 47
Texts Cited:	Wayne Lonergan, The Valuation of Businesses, Shares and Other Equity, (fourth edition 2003, Allen & Unwin)
Category:	Principal judgment
Parties:	Allandale Blue Metal Pty Ltd (Applicant) Roads and Maritime Services (Respondent)
Representation:	Counsel: Mr R Lancaster SC with Mr M Seymour (Applicant) Mr P Tomasetti SC with Mr N Eastman (Respondent) Solicitors: Sparke Helmore (Applicant) Ashurst (Respondent)
File Number(s):	30853 of 2010

JUDGMENT

COMPENSATION CLAIM FOLLOWING COMPULSORY LAND ACQUISITION

1. On 12 February 2010 the Respondent Roads and Maritime Service (RMS) compulsorily acquired part of land owned by Allandale Blue Metal Pty Ltd (ABM) for the Hunter Expressway (HEX) under the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act). ABM has appealed to this Court seeking more compensation than the amount of compensation determined by the Valuer-General to be payable for the land acquired. I thank Acting Commissioner Parker for his assistance in this matter.

2. ABM seeks compensation of $5,874,929 for the acquisition comprising compensation for market value and injurious affection (s 55(a) and s 55(f) Just Terms Act) of $5,555,929 and for loss attributable to disturbance (s 55(d) and d 59(f)) of $319,000. RMS contends compensation of $215,000 for the land acquired and $26,000 for disturbance should be awarded.

3. At the date of acquisition ABM was the registered proprietor of eight lots being lots 162, 165, 166, 167, 177 and 198 DP755204 and part portion 76 DP75228 and part portion 1 DP755231 (the parent parcel). Lot 162 fronts Lovedale Road. RMS compulsorily acquired lot 203 DP1099068, lots 7 and 9 DP1077881 and lot 77 DP1116175 (the acquired land) for the purposes of the Roads Act 1993. The area of the parent parcel was 630.89ha and the area of acquired land was 54.6892ha leaving an area of 576.0908ha (the residue land) in the ownership of ABM.

4. After the acquisition ABM’s land was split and part is separate from the parent parcel. The HEX is a four lane highway which now runs through the property. Residue land in part of lot 76 (145.40ha) is located on one side of the HEX to the north-east of the parent parcel. It can be accessed by a purpose built tunnel from the parent parcel under the HEX which is accessible by a locked gate for which ABM has the key. This access was required to be provided as part of the conditions of approval for the HEX project. One of the issues requiring determination is whether legally guaranteed access was provided to ABM at the date of acquisition. Lot 162 in the north-west has also been split by the HEX and one part of 32.96ha (now part lot 201 DP1099068) is now separate from the parent parcel. The separate lot has access to Lovedale Road.

5. The parent parcel and the residue land benefit from development consent DA 118/679/23 (the 1979 consent) which relates to lots 177 and 198. No land from lots 177 and 198 was acquired by RMS. The development consent permits use of lot 177 and 198 for the purpose of a blue metal (andesite) quarry subject to conditions 1-12 as set out in the letter from Greater Cessnock City Council dated 8 May 1979. There is no limit on the extraction rate of the resource or the number of truck movements in the consent. Development consent conditions 7, 8 and 10 provide:

7. The applicant shall consult with the Soil Conservation Service and prepare a plan satisfactory to the Service for the control of erosion and for the restoration of quarried areas. The applicant shall adhere to the plan to the satisfaction of the Mines Department, Soil Conservation Service and Council. This condition shall cover the whole of the site including the provision of access roads.

8. The applicant shall retain ownership of all land within 1 kilometre of the quarry whilst the quarry is in operation.

…

10. The majority of timber in the paddock to the North East of the quarry shall be retained to act as a buffer.

6. The quarry access road extends beyond lots 177 and 198 and in the before scenario ran through lots 166, 165 and 162 (now lot 201) to Lovedale Road.

7. On 21 March 2012 Sheahan J in Quarry Products (Newcastle) Pty Ltd v Roads and Maritime Services (No 3) [2012] NSWLEC 57 determined that the development consent DA 118/679/23 permitted quarrying within a large circle depicted on the plans which were submitted with the development application (quarry circle). His Honour's decision was appealed in Allandale Blue Metal Pty Ltd v Roads and Maritime Services [2013] NSWCA 103; (2013) 195 LGERA 182. The appeal was dismissed. Quarrying has taken place outside the quarry circle.

Disturbance claim by QPN

8. From 1 August 1995 ABM leased the parent parcel to Quarry Products (Newcastle) Pty Ltd (QPN) for a period of five years. Occupation of the land by QPN after 1 August 2000 has been on the basis of holding over from month to month under cl 3.2 of the lease. The lease can be terminated on one month's notice. By cl 5.1 and item 7 of the Reference Schedule to the lease QPN is permitted to use the land for the purpose of “Quarry, minerals and other materials processing and manufacturing”. QPN pays rent of $70,000 per annum to ABM. The permitted use retained by the lessor ABM is "agricultural and pastoral pursuits including agistment" on any part of the land upon which the lessee's use was not being carried out for the time being.

9. QPN the tenant and quarry operator also lodged a claim for compensation following the acquisition by RMS based on loss of profits due to reduced access to the andesite resource on lots 177 and 198 according to RMS. After also commencing Class 3 proceedings in relation to the amount assessed by the Valuer-General and following the decision of the Court of Appeal, QPN accepted the amount of compensation assessed by the Valuer-General in the amount of $807,758 and those proceedings were discontinued. The Valuer-General’s valuer’s report (Mr Hopcraft) was in evidence. This identifies that QPN was paid compensation on the basis of a disturbance loss under s 55(d) and not any amount for market value. This is confirmed in the order made by the Court on 25 June 2012 (exhibit 9 tab 46 p 1594).

Land Acquisition (Just Terms Compensation) Act 1991

10. The objects of the Just Terms Act are contained in s 3:

3 Objects of Act

(1) The objects of this Act are:

(a) to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and

(b) to ensure compensation on just terms for the owners of land that is acquired by an authority of the State when the land is not available for public sale, and

(c) to establish new procedures for the compulsory acquisition of land by authorities of the State to simplify and expedite the acquisition process, and

(d) to require an authority of the State to acquire land designated for acquisition for a public purpose where hardship is demonstrated, and

(e) to encourage the acquisition of land by agreement instead of compulsory process.

11. The following sections of the Just Terms Act were referred to by the parties in the course of argument:

Part 2 Acquisition of land by compulsory process

Division 1 Pre-acquisition procedures

11 Notice of intention to acquire land by compulsory process

(1) An authority of the State may not acquire land by compulsory process unless the authority has given the owners of the land written notice of its intention to do so.

(2) The authority of the State is not prevented from acquiring the land by agreement after giving the proposed acquisition notice.

12 Owners to be given notice

(1) A proposed acquisition notice need only be given to all the owners of the land who:

(a) have a registered interest in the land, or

(b) are in lawful occupation of the land, or

(c) have, to the actual knowledge of the authority of the State, an interest in the land.

(2) If the proposed acquisition notice relates only to a particular interest in land, the notice need only be given to all such owners of that interest.

…

15 Particulars to be included in proposed acquisition notice

A proposed acquisition notice given to an owner of land must:

(a) be in the form prescribed by the regulations or (if no such form is prescribed) in the form approved by the Minister, and

(b) specify the authority of the State proposing to acquire the land, and

(c) contain a description sufficient to identify the land proposed to be acquired, and

(d) specify the period within which the land will be compulsorily acquired, and

(e) request any owner who wishes to claim compensation for the acquisition to lodge with the authority of the State a claim for compensation within the period specified in the notice (being not less than 60 days after the notice is given to the owner), and

(f) be accompanied by the form for a claim for compensation under section 39.

18 Valuer-General to be notified of proposed acquisition notice

An authority of the State must, as soon as practicable after giving a proposed acquisition notice, notify the Valuer-General of the proposed acquisition notice.

Division 2 Acquisition procedures

20 Effect of acquisition notice

(1) On the date of publication in the Gazette of an acquisition notice, the land described in the notice is, by force of this Act:

(a) vested in the authority of the State acquiring the land, and

(b) freed and discharged from all estates, interests, trusts, restrictions, dedications, reservations, easements, rights, charges, rates and contracts in, over or in connection with the land….

Part 3 Compensation for acquisition of land

Division 1 Entitlement to compensation

37 Right to compensation if land compulsorily acquired

An owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part by the authority of the State which acquired the land.

Division 2 Claims for compensation

39 Claim for compensation

(1) A person who wishes to claim compensation under this Part must lodge a claim in accordance with this section with the authority of the State that is acquiring the land concerned.

(2) A claim for compensation must be in the form prescribed by the regulations or (if no such form is prescribed) in the form approved by the Minister….

40 Owner claiming compensation must disclose particulars of other persons with an interest in land

(1) A person who claims compensation under this Part must state, in the claim form, whether the person is aware of any other person who has an interest in the land and who may be entitled to compensation.

(2) If the person is aware of such an interest, the claim must contain such particulars of the interest as are required by the requisite claim form.

41 Valuer-General to be given copy of claim for compensation

(1) An authority of the State must, as soon as practicable after receiving a claim for compensation in respect of a compulsory acquisition (or proposed compulsory acquisition), give the Valuer-General a copy of the claim.

(2) The Valuer-General may determine the amount of compensation to be offered to a former owner of land for a compulsory acquisition of the land:

(a) before or after the acquisition takes effect, and

(b) even though the former owner has not made a claim for the compensation.

Division 3 Post-acquisition procedures relating to compensation

42 Notice of compensation entitlement and offer of compensation

(1) An authority of the State which has compulsorily acquired land under this Act must, within 30 days after the publication of the acquisition notice, give the former owners of the land written notice of the compulsory acquisition, their entitlement to compensation and the amount of compensation offered (as determined by the Valuer-General).

(2) The compensation notice must be given to all former owners of the land who, immediately before the acquisition:

(a) had a registered interest in the land, or

(b) were in lawful occupation of the land (but only if the authority of the State considers they are entitled to compensation), or

(c) had, to the actual knowledge of the authority of the State, an interest in the land which entitles them to compensation….

43 Particulars to be included in notice of compensation entitlement and offer of compensation

A compensation notice given to a former owner of land must:

(a) be in the form prescribed by the regulations or (if there is no prescribed form) the form approved by the Minister, and

(b) notify the owner that the land has been compulsorily acquired, and

(c) state that the owner is entitled to compensation, and

(d) offer to pay a specified amount of compensation as determined by the Valuer-General and be accompanied by a form of deed of release and indemnity for completion if the offer is accepted, and

(e) inform the owner of the right to object to the amount offered.

Division 4 Determination of amount of compensation

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.

(2) If the compensation that is payable under this Part to a person from whom native title rights and interests in relation to land have been acquired does not amount to compensation on just terms within the meaning of the Commonwealth Native Title Act, the person concerned is entitled to such additional compensation as is necessary to ensure that the compensation is paid on that basis.

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) solatium,

(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.

56 Market value

(1) In this Act:

market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid):

(a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and

(b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and

(c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law.

(2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition.

59 Loss attributable to disturbance

In this Act:

loss attributable to disturbance of land means any of the following:

…

(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.

61 Special provision relating to market value assessed on potential of land

If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:

(a) any financial advantage that would necessarily have been forgone in realising that potential, and

(b) any financial loss that would necessarily have been incurred in realising that potential.

Summary of ABM’s claim under s 55(a) and (f)

12. The valuation approach in the before scenario adopted by ABM may be summarised as the hypothetical purchaser being a quarry operator who purchases the land in the before scenario as a quarry, a parcel of land capable of immediate subdivision and the balance of the land being an attractive rural residential development opportunity which was significantly diminished in value in the after scenario, with values based on these multiple respective uses.

13. Compensation is payable for the acquired land and injurious affection of the residue land and should be calculated by use of the before and after method of valuation as the acquisition of land was partial. An additional reason this method should be used is because a consequence of the acquisition has been reduction of the amount of the resource that can be extracted from the residue land. Part of the land that could be used in the before scenario if the quarry is extended cannot be used due to the presence of the HEX. Accordingly, a consequence of the acquisition is that there will be a lesser cash flow from quarrying available in the after scenario for use of the residue land than there would be in the before scenario for the parent parcel. Consequently, compensation is payable under s 55(f).

14. In determining the market value of the acquired land and injurious affection of the residue land, the parties to the transaction referred to in s 56 of the Just Terms Act would take into account the following facts and circumstances in the before situation:

1. The highest and best use of the parent parcel and residue land is for the purpose of a quarry;

2. A modification of the consent to enable quarrying of resource in the proposed modified quarrying area would be likely to obtain approval at minimal cost or delay; and

3. Quarrying within the quarry circle can continue under the consent while the application for extension into the proposed modified quarrying area is prepared, lodged and determined.

15. In the after situation, parties to a hypothetical sale of the acquired land or the residue land would consider that as a consequence of the acquisition of the acquired lands, further extraction in the quarry circle and any modification of the consent to permit extraction in the proposed modified consent area would make the operation of the quarry subject to greater restriction and operating cost than would have been imposed but for the proposal to carry out a public purpose on the land.

16. Provision of a buffer zone will effectively prevent the extraction of quantifiable reserves of andesite by blasting within that buffer zone; carefully designed and controlled blasts can be carried out up to 300m away from the HEX. To maintain the safety of the 300m buffer, additional controls will need to be implemented to manage the risk of flyrock and to limit it to within the buffer zone which will incur additional operating costs.

17. Due to increased visibility of the quarry from the HEX, additional air quality and visual impact measures must be adopted at additional operating cost including:

1. Additional dust mitigation measures from high-pressure water sprays and wind breaks around dust sources; and

2. Installation of additional bitumen sealing;

18. Additional fencing will also be required along the eastern boundary of the land.

19. At the acquisition date, parties to a hypothetical sale of the acquired land or the residue land would consider that as a consequence of the acquisition, and the maintenance of a buffer zone area, there will be 6,180kt of product in the proposed modified consent area. The additional restrictions that would be imposed on the operation of the quarry in order to obtain less total product means that the life of quarry operations has decreased by 1.7 years. The price paid in the after scenario will be significantly less than in the before scenario both because there is less land in the after scenario but also because an account needs to be taken of these material adverse effects on the ability to extract resource from part of that land.

20. Compensation under s 55(a) and s 55(f) will include the difference in the market value of the quarry before and after the acquisition. The market value of land with a highest and best use as a quarry may be calculated as comprising:

1. the net present value of projected cash flows for continued quarry operations until exhaustion of quarriable reserves of resource calculated using the discounted cash flow (DCF) model;

2. the residual value of the land (quarry and surrounds) after cessation of quarrying; plus

3. the residual value of quarry assets, plant, equipment and infrastructure after cessation of quarrying.

Summary of RMS’s case

21. ABM is only entitled to just compensation for what it actually lost. That is, compensation for 54.6892ha of land acquired (s 55(a)), severance loss if any (s 55(c)), injurious affection if any to other land (s 55(f)) and disturbance loss (s 55(d)). ABM was leasing the land to QPN to use for a hard rock quarry and ABM was using the remaining residue land for grazing purposes. QPN has claimed and been compensated for the financial loss suffered of profits foregone from being unable to win andesite on the residue land sterilised by the HEX.

22. RMS's secondary position is that whilst a DCF valuation is apposite to the valuation of a business it cannot be employed to determine compensation for market value of land or loss of value to other land on a “before and after” basis in this case. The disturbance loss to ABM’s business caused by the carrying out of the public purpose is nominal, $70,000 for 1.7 years, not loss of resource for 12.3 years following acquisition. The appropriate valuation method to use to determine the market value of the acquired land is a piecemeal valuation of the land acquired on a per hectare basis.

Evidence

23. In support of its claim, ABM relied upon:

1. Affidavit of Mr Malcolm Alan Frost sworn 3 June 2011;

2. Affidavit of Mr Stephen Rees Frost sworn 29 May 2014;

3. Statement of Mr Donald Reed dated 11 June 2014; (valuation methodology) dated 3 June 2011 (quarry operations and safety);

4. Statement of evidence of Mr Murray Evans dated 29 May 2014 (business expenses);

5. Statement of evidence of Mr Dan Peel dated 11 June 2014 (resource modelling);

6. Statement of Dr Tim Hagan dated 12 May 2011 (blasting safety);

7. Joint blasting report filed 9 November 2011;

8. Statement of evidence of Mr Paul Mitchell dated 19 July 2013 (town planning);

9. Supplementary statement of evidence of Mr Mitchell dated 12 August 2013;

10. Joint statement of Mr Mitchell and Mr Anthony Rowan on quarry issues filed 23 December 2013;

11. Joint statement of Mr Mitchell and Mr Rowan on subdivision issues filed 23 December 2013;

12. Statement of evidence of Ms Cassandra Thompson dated 24 February 2014 (ecology);

13. Statement of Mr Wayne Lonergan dated 17 June 2014 (NPV cash flow);

14. Statement of evidence of Mr Owen Allsopp dated 17 June 2014 (residual land value);

15. Joint report of valuation witnesses: business value; and

16. Joint report of valuation witnesses: land value.

24. ABM tendered:

1. A plan dated 19 January 2010 showing no quarry circle (exhibit A);

2. A plan dated 17 June 2014 showing no quarry circle (exhibit B);

3. A plan dated 19 January 2010 showing the quarry circle (exhibit C);

4. A plan dated 17 June 2014 showing the quarry circle (exhibit D);

5. An extract of the HEX planning materials (exhibit E);

6. An aerial photograph dated 17 June 1979 (exhibit F);

7. Exhibit C marked up by Mr Malcolm Frost with surplus land (exhibit G);

8. Invoices on stockyards (exhibit H)

9. Plans marked up by Mr Duniam (exhibit J);

10. Conditions of Approval – F3 to Branxton Highway Link (exhibit K);

11. Noise and blasting assessment by EMM dated 18 June 2014 (exhibit L);

12. Extracts from Google maps and the Wandin Valley estate website (exhibit M);

13. Extract of Australian Standards – Explosives (exhibit N);

14. Joint analysis and adjustment of comparable sales (exhibit O);

15. Overlay plans by ABM in response to the Commissioner’s query (exhibit P);

16. DP1129191P – Mr Dempsey’s sale 1 (exhibit Q); and

17. Extract from Mr Lonergan’s book The Valuation of Businesses, Shares and Other Equity (fourth edition 2003, Allen & Unwin, p 64-75) (exhibit R).

25. RMS relied on the following statements of evidence and joint reports:

1. Mr Robin Rankin (geology) filed 9 September 2011;

2. Mr Gordon Atkinson (engineering) filed 9 September 2011;

3. Joint geology engineering report filed 17 October 2011;

4. Mr Peter Duniam (blasting) filed 9 September 2011;

5. Joint blasting report filed 9 November 2011;

6. Mr Anthony Rowan (town planning) filed 9 September 2011 and 25 October 2013;

7. Joint town planning report on quarry issues filed 23 December 2013;

8. Joint town planning report on subdivision issues filed 23 December 2013;

9. Mr Guy Lampert (geomorphology) dated September 2013;

10. Dr Anne Clements (ecology) filed 19 November 2013;

11. Joint ecology report filed 4 April 2014;

12. Mr Peter Dempsey (land valuation) dated 19 June 2014;

13. Joint land valuation report dated 15 July 2014;

14. Dr Rod Ferrier (business valuation) dated 26 June 2014; and

15. Joint business valuation report dated 18 September 2014.

26. RMS tendered the following evidence:

1. Letter from EMM to RMS dated 7 July 2014 and a current quarry operations plan (exhibit 1);

2. Picture of a D6 dozer (exhibit 2);

3. View list and attached maps (exhibit 3);

4. Court book volume 1 (exhibit 4);

5. Court book volume 2 (exhibit 5);

6. Court book volume 3 (exhibit 6);

7. Agreed bundle volume 1 (exhibit 7);

8. Agreed bundle volume 2 (exhibit 8);

9. Agreed bundle volume 3 (exhibit 9);

10. Mr Duniam’s curriculum vitae (exhibit 10);

11. Map marked up by Dr Clements of Kurri Sand Swamp Woodland (exhibit 11);

12. Aerial photograph showing a 500m setback (exhibit 12);

13. Exhibit D marked up by Mr Mitchell of rehabilitation at February 2010 (exhibit 13);

14. Bundle of maps showing “residences” (exhibit 14);

15. Joint experts report on conditions and costs of rehabilitation (exhibit 15);

16. Figure 1.3 of noise and blasting report marked up by Mr Mitchell (exhibit 16);

17. Aerial photograph showing 1,000m setback (exhibit 17);

18. Mr Rowan’s mark up of quarry on map of environmentally sensitive land (exhibit 18);

19. Brochure of Tremayne (exhibit 19);

20. Confidential Knight Frank report on Mr Allsopp’s sale 1 (exhibit 20);

21. Planning certificate for Mr Allsopp’s sale 4 (exhibit 21);

22. Mr Gant’s statement of evidence (exhibit 22);

23. Supplementary joint report of business valuers (exhibit 23);

24. Overlay plans by RMS in response to the Commissioner’s query (exhibit 24); and

25. Email from Dr Ferrier to Mr Hall of Lonergan Edwards (exhibit 25).

Mr Malcolm Frost and Mr Stephen Frost

27. The affidavit of Mr Malcolm Frost sworn on 3 June 2011 was read by ABM. Mr Malcolm Frost is a director and shareholder of ABM (par 1.1). ABM has entered into a lease with QPN (annexure MF 2). ABM and QPN are companies associated with the Frost family. QPN is the company used by the Frost family to operate a quarry on the land owned by ABM at Allandale (par 1.4). Although the lease has expired between ABM and QPN and is in a period of holdover ABM does not intend to terminate the lease and will not change the rent arrangements under the lease until QPN has fully exploited the andesite resource available on the land (par 1.5). Pursuant to the lease ABM continues to operate a grazing business on the land (par 1.6).

28. Mr Malcolm Frost states that the existing caretaker's cottage is on the Lovedale Road frontage of the land whose occupant acts as a caretaker for the agricultural and quarry related activities on the land and observes entry into the quarry (par 1.7). After construction of the HEX the cottage will be separated from the larger ABM holding and it will no longer be practical for the caretaker to keep close watch over the land, especially people entering through the Lovedale Road frontage (par 1.8). Mr Malcolm Frost outlines ABM's proposal for a new caretaker's cottage which is to be a modest brick veneer cottage. Mr Malcolm Frost has made enquiries of local project home builders about the proposed cottage and anticipates it will cost $250,000 plus GST to construct the cottage including the connection of services and installation of appropriate access. The location of the proposed cottage is shown in annexure MF 3 (par 1.9). The location is within the noise shadow of the HEX (as shown in annexure MF 4) and will require additional acoustic treatment to allow it to be occupied which will cost a further $30,000 plus GST based on advice Mr Malcolm Frost has received from project home builders (par 1.10). Mr Malcolm Frost outlines his reasons for the proposed location of the cottage (par 1.11).

29. Mr Malcolm Frost states that ABM has existing stockyards on the Lovedale Road frontage which have been severed from the area used principally for ABM's grazing activities causing ABM not to be able to use the stockyards. ABM is constructing new stockyards for which costs are estimated. A quote for the construction of the stockyards is attached (annexure MF 5) in the amount of $23,800 plus GST. Some civil works and fencing will also be required estimated at $15,400 plus GST (par 1.12).

30. Mr Malcolm Frost was cross-examined about cattle yard expenditure and the proposed house expenditure including the agricultural activities that are carried out upon the land. In cross-examination Mr Malcolm Frost stated that the existing cottage is occupied by a QPN employee who pays a commercial lease rate to ABM (T 167 l 33- 168 l 4, 169 l 48-49). As a director of QPN Mr Malcolm Frost stated that maintaining security for the quarry and its operations is important given the equipment and explosives magazine on site, stockpiles and the quarry pit (T 168). As a director of ABM Mr Malcolm Frost stated that ABM has responsibilities to its cattle and the public given that cattle can break out of the property if fences are brought down and they can stray onto the road (T 169 l 12-24). The occupier of the cottage has responsibilities concerning the cattle to observe their security (T 175 l 7-14). The occupier would rarely have a role in receiving the cattle and getting them onto the farm (T 176 l 3-5). The occupier does not normally have responsibility for looking after the cattle when they are delivered to the property or when the cattle are dispatched and are ready to go to market (T 176 l 11-17). The occupier of the cottage would check the front area of the property to ward off passing traffic or people that decide to break in usually along Lovedale Road. The breaking in could be into both the quarry and the grazing business (T 178 l 31-49). In response to a question stating that “you don’t need a new house on the land for the manager to keep a close eye on the cattle, do you?” Mr Malcolm Frost replied “yes, you can go out and tend to the cattle…” (T 180 l 30-34).

31. Exhibit H showing the invoices for the construction of the new cattle yards were tendered during the cross-examination of Mr Malcolm Frost. Exhibit H shows that 34 hours were logged for work by a D6 Dozer. In cross-examination Mr Malcolm Frost stated that this 34 hours was for work on the cattle yards and the adjacent watering dam (T 193 l 26-44).

32. Mr Malcolm Frost was also cross-examined concerning the differences QPN has made or is in the process of making in an application under s 96 of the Environmental Planning and Assessment Act 1979 (EPA Act) to modify the consent. Mr Malcolm Frost was also cross-examined about the blasting that is carried out on the land in relation to or by QPN.

33. The affidavit of Mr Stephen Frost sworn on 29 May 2014 was read by ABM. Mr Stephen Frost has a minority shareholding in ABM. He was not a shareholder at the date of acquisition (par 1.1). He is a director and shareholder of QPN and was at the date of acquisition (par 1.2). QPN leases the land from ABM. Mr Stephen Frost understands that ABM or QPN can terminate the lease on one month's notice (par 1.6).

34. QPN and ABM are companies associated with the Frost family in that members of the Frost family have been, or are, directors and/or shareholders of each company. The directors and shareholders of ABM and QPN were not identical at the date of acquisition. Mr Stephen Frost understands that as a director of QPN he is under an obligation to manage QPN in its best interests. Since before the date of acquisition it has been and remains his intention that QPN does not propose to terminate the lease and intends to continue operating the quarry until the andesite resource on the land is extracted down to the 40mRL. Mr Stephen Frost's understanding has been and is that if ABM were to sell the land to a third party it is likely that the lease would be terminated (par 1.7).

35. QPN retained Minarco Mineconsult in 2009 to prepare a computer model for the quarry that incorporates all of the relevant characteristics of the resource and the development plans of QPN. A copy of a summary of the model was attached to Mr Stephen Frost's affidavit (par 1.16, SF 9). The 1979 consent was also attached to this affidavit (par 1.17, SF 10).

36. Although the lease between QPN and ABM has expired and is in a period of holdover QPN intends (and intended at the date of acquisition) to fully exploit the andesite resource available on the land in accordance with the model. If the HEX was not constructed this would have involved QPN quarrying to within 30m of the eastern boundary of the land (par 1.18). It will no longer be possible for QPN to fully exploit the resource on the land because the quarry would be within about 100m of the HEX. The HEX will be too close to the quarry to safely carry out blasting activities in that area. There are no other feasible methods for extracting the resource at the quarry (par 1.19).

37. Mr Stephen Frost has consulted with Mr Reed and Dr Hagan about the extent to which QPN can continue to operate the quarry once the HEX has been constructed. Both have given evidence in these proceedings. Mr Stephen Frost received advice that the potential for flyrock from blasting will require a minimum standoff of 300m to be maintained between the quarry and the HEX. Mr Stephen Frost also received advice that the blasting practices previously used by QPN need to be changed and more rigorous and expensive methods will need to be implemented. QPN will implement these recommendations once the HEX becomes operational (par 1.20).

38. Mr Stephen Frost contacted Orica Australia Pty Ltd (Orica), the explosives contractor used by QPN, and advised Orica of the additional measures recommended by Mr Reed and Dr Hagan. In response Orica provided an outline of the various approaches to implementing the recommended measures (Orica letter) which was attached (par 1.21, SF 12). The Orica letter dated 31 May 2011 states that the two options for service supply are:

1. QPN to continue to design and fire shots with a basic face profile and boretrack service of drill holes to be performed by Orica charged at $1,250 per day.

2. Orica to provide full "Rock-On-Ground" service with a schedule of rates included.

39. QPN will incur an additional cost of at least $3,250 per blast to implement the recommendations of Mr Reed and Dr Hagan (laser profiling and bore tracking costing $1,250 per blast and double priming for each hole at $2,000 per 80 hole blast). QPN carries out approximately 30 blasts per year (par 1.22). As the quarry gets within 700m of the HEX QPN will transition to option 2 in the Orica letter. Once the quarry gets within 500m of the HEX Mr Frost states that QPN will transition to option 3 in the Orica letter but no such option is specified (par 1.23). Under option 2 ([sic 1]) with QPN doing the drilling the cost per blast will be $27,040 (an additional $5,000 per blast over the pre-acquisition situation). Under option 3 ([sic 2]) with others doing the drilling the cost per blast will be $28,480 (an additional $6,440 per blast over the pre-acquisition situation) (par 1.24).

39. Adopting an average annual production of 775,000 tonnes per year and allowing a minimum 300m standoff from the HEX Mr Stephen Frost considers that Mr Peel’s model demonstrates that the presence of the HEX will reduce the life of the quarry from 14.7 years to 12.9 years from the date of acquisition (par 1.25).

40. As a result of the HEX more people will be able to observe the operation of the quarry which in Mr Stephen Frost's experience would bring with it a substantial risk of complaint from users of the HEX about dust arising from the quarry (par 1.28). The bunding installed by Abigroup, the contractor engaged by RMS to build the relevant part of the HEX, has reduced visibility of the quarry from the HEX but has not eliminated it (par 1.29).

41. For the quarry to continue to operate efficiently following acquisition further dust mitigation measures will need to be implemented through water based dust suppression measures. A quote from Coolfog for the cost of these measures is attached (SF 13) estimated at $99,500 plus GST (par 1.30). Mr Stephen Frost is also concerned about dust plumes as a result of blasting which can only be mitigated by not blasting in unfavourable weather conditions. This can only be achieved through the installation of an on-site weather station (par 1.31). Two dust trackers will also be necessary so that QPN has adequate information to respond appropriately to any complaints (par 1.32). A quote by Kenelec Scientific Pty Ltd for the installation of a weather station and dust trackers is attached (SF 16) at $68,555 plus GST with an ongoing annual calibration fee for the three dust trackers of $750 per year for the balance of the life of the quarry (par 1.33).

42. Mr Stephen Frost also considers that dust plumes from the haul road to the quarry could generate complaints from users of the HEX. He estimates that an additional 2km of bitumen sealing on the roads within the quarry will be required. Boral Asphalt has provided a quote for this work (SF 17) at $90,000 plus GST which assumes that QPN would supply the required aggregate products which he estimates would have a further market value of $20,000. Mr Stephen Frost states that this will be cheaper than the ongoing use of water carts to suppress dust (par 1.34).

43. Mr Stephen Frost has security concerns arising from the presence of vehicles so close to the quarry, particularly access to the quarry from the east. He considers that additional fencing along the eastern boundary is required to ensure that the quarry is not accessed by unauthorised persons. A quote for this was obtained from Olympic Fencing NSW Pty Ltd (SF 20) of $36,894 including GST (par 1.36).

44. Mr Stephen Frost states that in his experience if ABM were to sell the land or lease it to someone other than QPN who wished to operate the quarry it is likely that the operator would incur the additional costs he has identified (par 1.42).

45. Mr Stephen Frost was cross-examined about the blasting practices undertaken by QPN. When Mr Stephen Frost was asked about the advice he had received from Dr Hagan, Mr Stephen Frost stated that Dr Hagan had said that the blast design is high and that there is always room for improvement (T 268 l 7- 44). When QPN has blasted within 20 or 40m to property boundaries QPN has excluded people from what QPN considered was a safe distance from the blast. Mr Stephen Frost considered that a safe distance was 500m (T 269 l 19-24). People were excluded by advising them of the blasting and sending a sentry to check that all was clear (T 269 l 29-31). QPN started laser profiling, bore tracking and double priming in 2014 (T 270 l 47- 271 l 9). QPN has implemented these measures within the quarry circle to see how they worked (T 271 l 37 – 272 l 10). In response to the statement that this extra work is not required by reason of the presence of the HEX Mr Stephen Frost stated “that’s correct, I suppose” (T 272 l 17-19).

46. Mr Malcolm Frost and Mr Stephen Frost were also cross-examined about disturbance items which were claimed by QPN and what if any items for which QPN was paid had actually been constructed. These issues are not relevant given the reasoning in this judgment. As such this evidence has not been summarised.

Geological evidence/extent of resource

48. A joint geology/engineering report dated 17 October 2011 was prepared by Mr Reed, called by ABM, Mr Rankin and Mr Atkinson, called by RMS. This stated that the experts agreed on the physical topographic site setting of the existing quarry and any future quarrying to the east, the geological setting, the quarry products and the future quarry design. After some disagreement on the amount of resource able to be harvested and the provision of further data to Mr Rankin the experts were broadly in agreement on the amount of andesite likely to be located within a 300m buffer around the HEX.

49. The extent of the andesite resource based on two possible pit designs was the subject of an undisputed report by Mr Peel engineer for ABM. Given the agreement on this issue it is unnecessary to set this out further.

Other Part 3A quarry approvals

50. Mr Atkinson, mining engineer, prepared a statement of evidence dated 9 September 2011 attached four project approvals. Project approval dated 6 January 2010 for the East Guyong Quarry Project under Pt 3A (exhibit 4 tab 8 p 210) was subject to the following conditions:

BLASTING AND VIBRATION

Airblast Overpressure Limits

8. The Proponent shall ensure that the airblast overpressure level from blasting at the project does not exceed the criteria in Table 4 at any residence on privately-owned land.

Operating Conditions

12. During quarrying operation on site, the Proponent shall implement best blasting practice to:

(a) conduct blasting operations in accordance with AS 2187.2 – Explosive Storage, Transport and Use;

(b) minimise flyrock and dust and fume emissions from blasting;

(c) protect travellers on the Mitchell Highway

(d) protect the safety of people and livestock and the serviceability of private property and public infrastructure;

to the satisfaction of the Director-General.

Blast Management Plan

13. The Proponent shall prepare and implement a Blast Management Plan for the project to the satisfaction of the Director-General. This plan must:

(a) be submitted to the Director-General for approval prior to the commencement of blasting activities; and

(b) include a protocol for evaluating blasting impacts on, and demonstrating compliance with, the blasting criteria in this approval for all privately-owned residences and other structures.

METEOROLOGICAL MONITORING

21. During the life of the project, the Proponent shall ensure that there is a suitable meteorological station in the vicinity of the site that complies with the requirements in the Approved Methods for Sampling of Air Pollutants in New South Wales guideline.

51. Modification approval dated 21 December 2010 for the Ardglen Quarry Extension under Pt 3A (exhibit 4 tab 8 p 237) was subject to the following conditions:

BLASTING AND VIBRATION

Operating Conditions

10. The Proponent shall implement best blasting practice to:

(a) protect the safety of people, property, public infrastructure and livestock; and

(b) minimise the dust and fume emissions from blasting at the project,

to the satisfaction of the Director-General.

11. The Proponent shall not undertake blasting within 500 metres of any privately-owned land or any land not owned by the Proponent, unless suitable arrangements have been made with the landowner and any tenants to minimise the risk of flyrock-related impact to the property to the satisfaction of the Director-General.

AIR QUALITY

Monitoring

17. The Proponent shall prepare and implement an Air Quality Monitoring Program for the project, in consultation with DECCW, and to the satisfaction of the Director-General. This program must:

(a) use a combination of high volume air samplers and dust deposition gauges to monitor the dust emissions from the project;

(b) include a protocol for demonstrating compliance with the air quality impact assessment criteria in this approval; and

(c) be submitted to the Director-General for approval prior to any works being undertaken in the Extension Area.

METEOROLOGICAL MONITORING

18. The Proponent shall ensure the project has a suitable meteorological station in the vicinity of the site which complies with the requirements in Approved Methods for Sampling Air Pollutants in New South Wales guideline, to the satisfaction of the DECCW and the Director-General.

52. Project approval dated 16 June 2008 for the Rockley Falls Quarry under Pt 3A (exhibit 4 tab 8 p 271) was subject to the following conditions:

BLASTING AND VIBRATION

Operating Conditions

11. The Proponent shall implement best blasting practice to:

(a) ensure that no flyrock leaves the site;

(b) protect the safety of people, property, and livestock;

(c) minimise the dust and fume emissions from blasting on the site; and

(d) co-ordinate blasting on site with the blasting at the adjoining Lubke quarry to minimise the potential cumulative blasting impacts of the two quarries;

to the satisfaction of the Director-General.

53. Project approval in 2007 for the Marulan South hard rock quarry and associated infrastructure under Pt 3A (exhibit 4 tab 8 p 295) was subject to the following conditions:

Operating Conditions

14. The Proponent shall implement best blasting practice to:

(a) ensure that no flyrock leaves the site;

(b) protect the safety of people, property, and livestock; and

(c) minimise the dust and fume emissions from blasting on the site, to the satisfaction of the Director-General.

METEOROLOGICAL MONITORING

21. During the project, the Proponent shall maintain a suitable meteorological station on (or in close proximity to) the site to the satisfaction of the DEC and Director-General. This station must satisfy the requirements in the Approved Methods for Sampling of Air Pollutants in New South Wales publication.

Rehabilitation

54. Mr Reed, geologist, called by ABM, and Mr Atkinson, called by RMS, prepared a further joint report dated 28 July 2014 on conditions and costs attaching to the site rehabilitation scenario at the quarry as identified by Mr Atkinson in plan 1 extraction plan attached to his statement of evidence dated 8 September 2011. This joint report (exhibit 15) resolved a large amount of the earlier disagreement between them.

55. Concerning the cost of rehabilitation of the areas of 101.3ha shown on plan 1 annexed to Mr Atkinson's statement of evidence dated 8 September 2011 (exhibit 15):

1. Mr Reed states that there is/has been no quarry rehabilitation plan submitted or approved since 1979 (par 4). Mr Atkinson agreed (par 9).

2. Mr Reed states that the detailed analysis undertaken by Mr Atkinson in 2011 represents a fair and reasonable attempt to estimate the likely costs to rehabilitate the 101.3ha (calculated as 108.0 minus 6.7ha from plan 1) of land disturbed by quarry and quarry related activities up until February 2010 (par 6). Mt Atkinson agreed (par 11).

3. Mr Reed states that a number of key planning and cost assumptions are open to debate which should be based on more detailed planning and would require considerable additional time to audit to plus or minus 10% reliability (par 7). Mr Atkinson did not comment on this (par 12).

4. Mr Reed concluded in relation to Mr Atkinson's 2011 estimate of total rehabilitation costs for the 101.3ha (shown on plan 1) at $2.527 million, these being that (par 8):

1. The total cost of rehabilitation of the 101.3ha studied by Mr Atkinson could have been as high as being "in the order of $2 million"; however

2. That a substantial portion of this cost could have been offset by the excavation, re-processing and sale of significant quantities of crushed hardstand material removed from the 27ha occupied by process plant and stockpiles, during site rehabilitation; and

3. The land was required to be rehabilitated for use as grazing land not alternative uses where expensive re-grassing/vegetating were not required.

5. Concerning Mr Reed's par 8 Mr Atkinson states that his and Mr Reed's opinions of the cost of rehabilitation of the area shown on plan 1 are presented in annexure A (par 13):

1. Mr Atkinson's original estimate in his statement of evidence dated 8 September 2011 was $2.527 million.

2. Mr Atkinson's revised estimate as detailed in appendix A is $2.224 million.

3. Mr Reed's estimate as detailed in appendix A is $2.003 million.

56. Concerning the estimate of the cost of rehabilitation of those areas assuming a new or modified consent allowing quarrying beyond the quarry circle to within 200m of the HEX or 300m of the HEX requiring rehabilitation of an additional 10.2ha if 200m and 7.3ha if within 300m of the HEX:

1. Mr Reed states that the responsibility for future rehabilitation would rest with the quarry operator, in this case the hypothetical purchaser (in early 2010). Mr Reed states that the concept of QPN retaining the liability to rehabilitate the site would be operationally unviable under these circumstances and that the hypothetical purchaser would have had to negotiate and sign a lease with the landowner, ABM (par 16).

2. Mr Reed believes that such a lease would be expected to include clauses requiring compliance with all existing approvals and licences as well as a requirement that quarry land be remediated to a condition that ensured no net loss of intended land value (par 17).

3. Mr Reed believes that the purchaser of the quarry would then have commissioned staged extraction and progressive rehabilitation planning ensuring compliance with lease conditions at the lowest possible cost (par 18).

4. Mr Reed states that in the absence of requisite rehabilitation plans he adopted the extractive industry formulated figures of $2.50 per square metre rehabilitated (par 19).

5. Mr Reed estimated $255,000 for the 10.2ha to within 200m of the HEX and $182,500 for the 7.3ha to within 300m of the HEX (par 20).

6. Mr Atkinson would apply a rate of $2.65 per square metre (par 25).

7. Mr Atkinson stated that in the absence of a detailed rehabilitation plan linked with staged quarry development he would apply a rate of $26,474 per hectare to the area disturbed by any future approved quarry areas to estimate the cost of rehabilitation. Mr Atkinson made this estimate on the basis that (par 27):

1. He has previously estimated the cost of rehabilitating domain 4 - active quarry and voids at $1,066,921 (table 2) over the existing quarry area of 40.3ha as defined on plan 1.

2. Mr Reed and Mr Atkinson have agreed that the rehabilitation cost estimate for domain 4 - active quarry and voids at $1,066,921 (table 2) over an existing quarry area of 40.3ha as defined on plan 1 represents a "fair and reasonable attempt to estimate the likely costs to rehabilitate."

Blasting

57. Blasting practice is in issue in the after acquisition scenario because of the impact of the HEX on the ability of the hypothetical purchaser to extract andesite from within 200m or 300m from the HEX. Mr Stephen Frost was cross-examined about what QPN is currently doing on the land with regard to blasting. RMS also cross-examined the blasting experts concerning the before acquisition scenario to seek support for two submissions it made. One was that the likelihood of consent being granted in the before scenario was speculative because blasting would be occurring too close to property boundaries. The other submission was that incurring of costs for laser profiling and bore tracking did or should have occurred in the before and after scenarios, not the after scenario only.

58. Dr Hagan, blasting engineer and consultant, and Mr Reed were called by ABM. Mr Duniam, consulting engineer, was called by the RMS. Dr Hagan states that the standard of blast designs at the quarry are high and the overall standard of drilling and blasting is likely to be moderately high (exhibit 4 tab 10 par 5). In Dr Hagan's opinion, current blast designs are satisfactory for controlling flyrock. The designs that he examined in the 33 blast records (33 blasts fired during the 330 day period ending 15 December 2010) were also satisfactory for controlling flyrock (exhibit 4 tab 10 p 335 par 5, p 339 par 8).

59. Dr Hagan explained figure 4 of his statement (exhibit 4 tab 10 p 349) in cross-examination (T 453-455). Figure 4 shows a blast within a quarry from a bird's eye view (T 453 l 43-44). Flyrock can occur up to 700m forward of the blast face and up to 500m rear of the blast face (T 454 l 21-25). This is a "no go zone" for people during a blast (T 454 l 47- 455 l 1).

60. In the joint report (exhibit 4 tab 12) the experts agreed that there is a need for a buffer zone (development standoff) between the HEX and the quarry operations (par 1.1). Provision for such a buffer will effectively prevent the extraction of quantifiable reserves of hard rock by blasting from within that buffer zone (par 1.2). One of the reasons for this buffer is to protect persons travelling on the HEX from blasting operations (par 1.3). The additional controls that need to be implemented to manage the risk of flyrock and to limit it to within the buffer will incur costs. Such costs attach to the following (par 1.4):

1. Increased supervision of drilling blastholes - blasthole setout from survey;

2. Blasthole quality assurance (QA) including drill log creation and review, collar survey, blasthole length measurement, boretracking of blastholes, blasthole diameter monitoring;

3. Quarry face survey through laser profiling and face inspection;

4. Blast designs based on determined geology and geometry;

5. Review of as-built blastholes;

6. Blasthole charging QA;

7. Blasthole stemming QA;

8. Allocation and connection of millisecond delays; and

9. Misfire recovery in minimum buffer zone environment.

61. At the quarry the risks from blasting are, in decreasing order of priority (par 1.6):

1. Flyrock projected beyond the buffer zone;

2. Distraction of motorists due to the visual impact of a blasting operation from noise/airblast, dust or ground movement;

3. Visibility reduction due to blast-generated dust;

4. Generation of toxic fumes that have travelled beyond the buffer zone; and

5. Ground vibration (not considered a risk to persons travelling in vehicles).

Buffer distance

62. There is a strong relationship between the level of design and operational control in drilling and blasting and the maximum flyrock distance (par 1.7)

63. The experts disagreed on the safe minimum width of the buffer between the HEX and quarry blasts (par 2.1). Experts for ABM believe that the minimum width of the buffer should be at least 300m (par 2.2). Mr Duniam believes that the buffer could be reduced to 200m (par 2.3).

64. Dr Hagan and Mr Reed believe that any buffer width shorter than 300m would be unsafe for motorists. They believe that risks associated with an error in drilling, charging or stemming of blastholes become unacceptable and that the possible consequences of such an error become totally unacceptable (par 3.1). In cross-examination Dr Hagan stated that he would not recommend blasting within 200m of the HEX but it is possible at a cost (T 488 l 10-19). Dr Hagan stated that it would be impractical but has not done a cost analysis as he is not a coster (T 489 l 7-11).

65. Mr Reed states that Mr Duniam takes little or no account of the variability of geology at Allandale, prescribes interpretive tasks that are unachievable and fails to explain that the formula he uses to predict flyrock range is underpinned by modelling conducted in granite, a significantly different rock type to the altered andesites being quarried at Allandale (par 3.1.1). In cross-examination Mr Duniam stated that notwithstanding that the material he had relied upon in his analysis was granite, he would advise a hypothetical purchaser in February 2010 he nevertheless could rely upon this model in formulating a blasting distance. Mr Duniam would advise the purchaser of the limits of the models that he had relied upon including that the advice is based on granite and that granite is a different product to andesite (T 433 l 9-31).

62. Mr Reed states that in predicting the potential range of flyrock under normal blasting conditions, Mr Duniam has relied heavily on assumptions and equations of Dr Cameron McKenzie in 2009 but ignores later advice from Dr McKenzie concerning the quarry in 2011 (par 3.1.3).

63. The experts agreed that carefully designed and controlled blasts can be carried out within 300m of urban areas and important infrastructure (par 3.1.4).

64. Points that lead Mr Duniam to believe that a buffer distance of 200m is possible are (exhibit 4 tab 12 p 389):

1. Where burden is sufficient the quality of the material matters less than the amount;

2. Current blasts at Allandale appear to be well controlled;

3. Where true face burdens are uncontrollable then buffer blasting may be utilised;

4. True stemming burdens may be controlled by measurement which identifies discontinuities and allows rectification to occur; and

5. Once true burdens are controlled the remaining issue is linear charge. Where product has collected in voids the design charge diameter may be significantly increased. In this situation the use of a buffered face will adequately deal with this.

Reducing maximum flyrock range

69. Dr Hagan states that to reduce the maximum range of flyrock blast designs need to be modified and implemented with more care, accuracy and attention to detail. To do this requires an increase in the combined cost of drilling and blasting (exhibit 4 tab 10 par 7.1 p 337).

70. Dr Hagan states that maximum flyrock range can be reduced at the quarry by (exhibit 4 tab 10 par 7.5 p 337):

1. using designed stemming lengths that are never shorter than 17 times the blasthole diameter or 70% of the drilled burden distance;

2. removing, ejecting, dissolving the top of any charge for which the actual stemming length would be less than the designed stemming length;

3. using a relatively long stemming column in any front-row blasthole that shoots to a deep power trough or to a free face;

4. using stemming material that consists of graded angular crushed rock with a high ejection resistance per metre of column length instead of drill cuttings;

5. using drilled burden distances that are never smaller than about 25 times the blasthole diameter and that never have errors exceeding 10%;

6. preparing bench tops better;

7. laser profiling the face;

8. marking out the positions of blasthole collars more accurately;

9. reducing collaring errors;

10. limiting bench heights to about 15m;

11. reducing errors in the inclination and azimuth of blastholes;

12. boretracking;

13. reducing errors in the drilled inclined length of blastholes and by better controlling fallback and backfill;

14. collaring redrilled blastholes in locations that minimise errors in actual burden distance;

15. double priming every blasthole;

16. locating drop cut blasts as far from personnel and damageable property as possible;

17. using delays that provide good progressive relief of burden and by connecting these up with considerable care and accuracy; and

18. developing the quarry in such a manner that the only face within 450m of the HEX:

1. is parallel to the HEX; and

2. is continually pushed back (by blasting) towards the HEX.

71. In cross-examination Dr Hagan stated the measures outlined in par 7.5 of his report should not necessarily be implemented for quarrying in the existing quarry circle. There was one instance of flyrock travelling 600m several years ago (T 476 l 47-50).

72. Dr Hagan also stated that these measures would involve extra costs (T 489 l 44-50). In undertaking measures up to a 200m standoff Dr Hagan stated it would be necessary to have competent people manage the process, Orica is not necessarily the only provider of such competence (T 491 l 20-27).

Laser profiling, bore tracking and double priming

73. In cross-examination Dr Hagan stated that bore tracking is leading edge practice in hard rock quarries, quarries in environmentally sensitive locations (T 467 l 11-12, 469 l 8-11). Mr Duniam stated that bore tracking and laser profiling are current best practice for a hard rock quarry like Allandale (T 474 l 39-43). Mr Duniam stated that laser profiling and bore tracking is a reasonable measure for controlling flyrock, he is not sure about New South Wales but in Queensland the regulation specifically mentions that reasonable measures must be taken (T 483 l 7-12). Mr Duniam stated that if the risk of column dislocation was identified and double priming was a reasonable and effective step to address that risk, double priming would be best practice (T 476 l 26-28).

Costs

74. To control the drill and blast variables in order to reduce the buffer zone to 200m Mr Duniam stated that the following factors would need to be implemented (exhibit 4 tab 11 p 379):

1. Appointment of a responsible, experienced drill and blast professional with demonstrated capability in the blasting operations in sensitive areas to oversee all aspects of the drill and blast quality;

2. A drill log of every hole to be completed by the drill operator which identifies the rock conditions in every blasthole with regard to broken ground, loss of returns, cracks, vughs, inter alia;

3. An assessment and signoff of the drill hole log by the shotfirer and blast supervisor prior to loading commencing;

4. A visual assessment and photographic record and completion of a checklist for the face including assessment of crest conditions prior to each blast;

5. Pattern layout based on the face assessment and confirmed through laser profiling;

6. Front row burdens confirmed by borehole survey matched to face profiling;

7. Proceduralised and documented handover of drilled bench to shotfirer, noting condition and any abnormalities;

8. All holes loaded to a designed stemming height and confirmed by dipping after loading. Results recorded on load sheet and signed off by shotfirer;

9. Procedure developed and in place to recover overloaded holes;

10. Crushed aggregate stemming material to pass an acceptance test to ensure it meets required specifications. It is expected that this will be available from existing quarry stockpiles; and

11. High speed video of every blast to be taken and analysed for any evidence of incipient bursting.

75. Mr Duniam stated that the provision of the additional services over and above the current blasting practices will incur the additional costs per cubic metre estimated as follows (exhibit 4 tab 11 p 380):

1. Drill and blast procedure review performed six monthly at $6,750 each = $0.03

2. QA dedicated shot crew member for stemming control inter alia = $0.12

3. Laser profile and boretrack = $0.21

4. Drill log for ground conditions = $0.05

5. Dedicated "clean" stemming material = $0.03

6. In addition where the buffer zone is further decreased to 150m from 200m drill and blast engineer/consultant to attend every blast = $0.18.

76. Mr Duniam states that the implementation of the recommended controls must be done before the operation approaches the 300m zone in order to confirm that the blast operation is performing as designed. A minimum of six test blasts should be undertaken with all modified controls in place to confirm flyrock management. This will add an estimated $0.44 x 30,000 x 6 blasts = $79,200 in cost (exhibit 4 tab 11 p 381). Mr Duniam estimated the cost to implement improved blasting practices as $0.44 per bank cubic metre (BCM). If required the increase in costs due to a reduction in blast hole diameter from 102mm to 89mm is expected to be $0.62 per BCM. Therefore the additional cost to recover 275,000 additional cubic metres is estimated at $121,000 for increased level of control, alternatively if required $170,500 for a reduction in blast hole diameter and increase in stemming length (exhibit 4 tab 11 p 381). In cross-examination Mr Duniam stated that these are extra costs required to move from a 300m buffer to a 200m buffer, represented by the 44 cents BCM (T 432 l 30-43). In later oral evidence Mr Duniam stated that 44 cents BCM is an error because he would advise the use of laser profiling and bore tracking to the operator of the quarry in 2010, so the 21 cents is not an extra cost (T 483 l 35- 485 l 13).

77. Mr Reed noted that whilst Mr Duniam has tendered estimates of additional costs his cost assumptions do not reconcile with actual costs being incurred, nor with quotations from Orica for more controlled blasting closer to the HEX (exhibit 4 tab 12 p 397). Mr Reed states that the current comparison between quarry costs and those projected by Mr Duniam is as follows:

1. QPN (via Mr Stephen Frost) costings:

1. Current practice - $2.69 per BCM

2. Option 1 greater than 700m - $3.09 per BCM

3. Option 2 greater than 500m, less than 700m - $3.24 per BCM

4. Option 3 greater than 300m, less than 500m - $3.55 per BCM

2. Mr Duniam costing to 200m:

1. Contract price - $3.50 per BCM

2. Option A improve practices - $3.99 per BCM

3. Option B option A plus 89 dia holes - $4.61 per BCM

Planning evidence

78. Mr Rowan, town planner, was asked by RMS to address the likelihood of obtaining development consent to extract andesite beyond the circle on the map attached to the consent and into the area identified by Mr Rankin including likely restrictions such as buffers, disregarding the public purpose, and any restrictions such as buffers having regard to the public purpose.

79. Mr Rowan would have advised that some expansion of the quarry may have been achievable on lots 177 and 198 but there would have been concern about the impact of further truck movement through areas where tourism was increasingly prevalent and impact on road infrastructure. Expansion towards the eastern and southern boundaries would have been unlikely unless the potential impacts such as noise, dust, flyrock and vibration on neighbouring properties were adequately addressed and a minimum 1,000m buffer was provided from neighbouring land by the expanded quarry.

80. Cessnock City Council (the Council) would have been concerned about the physical and environmental impacts of truck movements on traffic including tourist traffic along Lovedale Road. The 1979 consent conditions relating to retention of ownership of land within one kilometre and preventing further subdivision of that land were indicative of the long-established requirement for quarry-related development to safeguard the amenity of neighbouring land. Future conditions would be likely to be more onerous given the Cessnock Development Control Plan 2006 (CDCP 2006) requires a minimum 1,000m buffer between category C and A uses to separate incompatible uses. In the absence of such a buffer expansion was unlikely to be approved. Dispensation from the 1,000m buffer was unlikely given the changing nature of the neighbourhood to rural residential and tourism. The neighbouring lots to the south have development potential for residential dwellings or tourist-related development. The location of the additional andesite to the east and south means that such a buffer cannot be provided. Potential for impact on vegetation including endangered ecological communities (EECs) would require assessment

81. The Lower Hunter Regional Strategy dated October 2006 by the Department of Planning identified the subject land and neighbouring land as a resource area.

82. Likely conditions of consent disregarding the public purpose imposed by the Council include a buffer of 1,000m from neighbouring land with the onus on the developer to show that a lesser distance was appropriate. Given that Cessnock City Council was well aware of potential land use conflicts with quarries and mines the CDCP 2006 was prepared with this in mind. A rehabilitation plan would be required prior to any consent for expansion. All rehabilitation would be at the expense of an applicant. The imposition of truck movement limits to and from the quarry could reasonably be anticipated, such as tonnage extraction limits per annum.

83. Having regard to the public purpose, conditions of consent would require a 1,000m buffer from the southern boundary. The required buffer for the road would be less at 500m as the road is a category B land use. Similar conditions to those required without the road would apply. It is still unlikely that the existing quarry would have been permitted to expand further east, north or south. Provision of direct site link to the HEX for southbound trucks would assist in addressing concerns about trucks on local roads.

84. Mr Mitchell, town planner, was asked by ABM to address in his report the advice he would give a prospective purchaser of ABM’s land about its ability to lawfully operate and extract the andesite resource present on the land in the before and after scenarios and the likelihood of approval of an application to expand the quarry. A hypothetical purchaser could apply to modify the existing consent under s 75W or s 96 of the EPA Act or make a new application under Pt 3A. At the time of acquisition the quarry met the criteria for a Pt 3A project in Sch 1 of the State Environmental Planning Policy (Major Development) 2005 (Major Development SEPP). A s 75W application was possible assuming production rates, truck movements and environmental impacts did not substantially increase from the existing operation. A modification of the consent would be achievable in a realistic time frame at a cost of $300,000 and would ensure the realisation of the resource in the before scenario.

85. There are existing discrepancies between the existing consent and existing operations, as areas of the pit and materials stockpiles are outside the circles on the indicative plan, the crushing plant and related equipment is not within the smaller circle designated for this purpose, the access road is in a different location to that shown on the indicative quarry plan, some crushing plant and stockpile related development has extended marginally beyond the boundaries of the land to which the consent applies. These discrepancies are relatively minor and could be included in a s 75W application. There have been very few complaints about truck movements. Traffic impacts would be assessed in any new application. No new or greater impacts would arise from continued operations to warrant restriction.

86. Environmental matters that would be considered by a consent authority in an application to expand the quarry include noise, vibration, dust, flyrock, ecology, archaeology, water, traffic, visual, hazards and waste impacts. The environment protection licence (EPL) at the date of acquisition authorised 500,000 tonnes of land based extraction, since increased to two million tonnes per year (in June 2011). The quarry expansion would have to be designed to avoid, mitigate or compensate for any affectation to EECs. Ecological factors would not prohibit extension of the quarry. A buffer of less than 1,000m is likely to be required given noise, vibration, dust, visual and flyrock impacts, with 500m to the nearest non-quarry owned residence more likely. Additional conditions would be likely to be imposed under s 75W or Pt 3A in line with contemporary practice. These conditions would not be likely to unduly restrict the before or after scenario pit design. Likely conditions in the after scenario would include measures to control dust and noise emissions so that no nuisance would be caused to neighbours, a blast management plan to ensure no flyrock reaches the HEX, a rehabilitation plan and program, specification of biodiversity offsets and a management plan for the offset areas inter alia. With the introduction of the HEX near the quarry the risk presented by flyrock means it will no longer be safe to extract all of the andesite resource in the before scenario pit design. It is likely a 300m buffer between the HEX and the nearest active quarry face would result in the after case pit design.

87. Mr Atkinson’s rehabilitation costs are based on closure of the quarry, not an appropriate basis for estimating rehabilitation requirements and costs because rehabilitation would continue to occur while quarrying is taking place. The conditions of consent identified by Mr Atkinson as likely to be imposed are based on conditions imposed on new or modified quarries between 2007 and 2011 which are not comparable to the Allandale quarry. Three are for new quarries which would have more extensive conditions. The Ardglen extension approval is for a quarry with many more nearby residences, 15 within approximately 500m distance.

88. The planners prepared separate reports on the advice they would give a hypothetical purchaser of the quarry about its subdivision potential for residential purposes in the before and after scenarios. Mr Mitchell identified in the before scenario that a buffer distance of 500m would be required between private residences and active quarrying and processing facilities. Appropriate arrangements would also need to be made about sharing and any consequential need for upgrading the quarry access road. Bushland on lot 76 would also be a constraint. With a minimum lot size of 40ha the parent parcel could contain five lots concurrent to quarrying shown in figure 1 with 11 lots after quarrying being feasible (figure 2). With varying lot sizes the parent parcel could contain 7 lots concurrent to quarrying and 15 lots after quarrying, as demonstrated in figures 6 and 7 in his report. For the after scenario Mr Mitchell showed 3 to 6 lots (figures 5-8) and 9 to 13 lots after quarrying (figures 8-11).

89. Mr Rowan considered there was no loss in development potential for residential lots resulting from the acquisition as cl 11A(2) of the Cessnock Local Environmental Plan 1989 (Cessnock LEP 1989) allowed reduced size lots resulting from the acquisition for the new road to retain their former lot entitlement (ABM disputes that this clause applies). While lots 167, 168 and 761 were affected by the acquisition they did not have rural lot subdivision potential pre-acquisition due to site constraints primarily associated with vegetation and bushfire risk. The subdivision potential of lot 162 was also unaffected.

90. In the joint planning report of Mr Mitchell and Mr Rowan (quarry) the planners agreed that, at the date of acquisition, the relevant provision under the EPA Act was s 75W.

91. The planners agreed that the subpoenaed documents obtained from Cessnock City Council confirm that there had been about six historical complaints to the Council about noise, dust and truck movements from the quarry. Mr Mitchell believes the receipt of such a small number of complaints over an operational period of more than 30 years demonstrates that the quarry is both well located and operated.

92. The planners agreed that surrounding land to the south and east of lots 177 and 198 was of a rural nature. A Crown reserve runs along the eastern boundary of lot 177, and rural land beyond. The planners agreed that the distance between the quarry circle and:

1. the eastern boundary of the subject land was about 500m,

2. the southern boundary of the subject land was about 20m, and

3. the western boundary of the subject land was about 840m.

93. The subject land traverses the local government boundaries of both Cessnock City Council and Maitland Council. The portion of the subject land occupied by the quarry operation was within the Cessnock local government area. In addition to rural uses, the broader area also contains tourist uses associated with the surrounding wine region and rural residential development.

Environmental planning instruments

94. The planners agreed that at the acquisition date the environmental planning instruments which were most relevant to the quarry operation on the subject land were those as set out in Appendix B of Mr Rowan’s original statement and the provisions of Pt 3A of the EPA Act as existed at the date of acquisition. Mr Rowan’s Appendix B contains both a description of some applicable instruments and commentary on them. Mr Mitchell disagreed with much of the commentary, including that extractive industries are prohibited in the 1(a) Rural zone (par G) and that the CDCP 2006 "required" buffers of 1,000m between Category C and A land uses (par N and O).

395. Bell Road, Whittingham (PD4) was analysed to reflect an overall rate of $4,246 per hectare. Downward adjustment is then required for location and size, which I consider will result in an adjusted sale price approximating $3,600 per hectare for application to the subject land (Mr Dempsey applied a rate of $3,822 per hectare).

396. Having regard to the evidence tendered and doing the best I can, I consider the appropriate rate to be within the range of $3,600 per hectare to $4,900 per hectare, a broader range than found by Mr Dempsey. I adopt $5,000 per hectare based on adjusted comparable sales evidence supporting up to $4,900 per hectare and rounding up in favour of ABM the dispossessed owner.

Compensation for non-quarry land acquired

400. The rate of $5000 per hectare determined above should be applied to the area of 54.6892ha acquired as part of the compensation payable to ABM.

Value of additional lot in before and after scenario

401. I accept below ABM’s submission that in the before scenario there was potential for an area of surplus land in the north-west to be subdivided as Mr Allsopp identified in his evidence. As that lot can be used for rural residential purposes I consider that it should be valued at a higher rate than the quarry buffer land in the before scenario. It is necessary to find an appropriate comparable sale or sales. None of Mr Dempsey’s sales address such a use.

402. Support for $15,000 per hectare adopted by Mr Allsopp for the potential 40 ha lot on former lot 162 which became a 32.96ha severed parcel (now lot 201 to north of the HEX) in the after scenario was derived from sale OA3. Details of sale OA3 are set out in par 351 above. Mr Allsopp’s reasoning in his report at p 967 note k was as follows:

I use sale 3’s rate per ha of $21,897/ha then adopt a 20% “discount” per ha (to adjust for size). This shows the subject property has a value of $17,500/ha before further considering other issues of difference between the sale and the subject property. This sale shows the subject property has a value (for the cleared land) of $15,000/ha (for cleared and timbered land).

403. This scale of adjustment is too unclear to be reliable. Mr Allsopp cited two sales of smaller rural residential parcels. Sale OA8 (Lot 121, Bell Road, Belford) size 41.00ha, sold in November 2012 showed $10,975 per hectare. Sale OA9 (346 Maitland Vale Rd, Maitland Vale), size 39.95ha, sold in July 2010 showed $14,392 per hectare.

404. Doing the best I can on the available evidence and ruling in favour of the dispossessed owner I will adopt $15,000 per hectare based on sale OA9 given its similarity in size and closeness in time of sale to the subject land.

405. In relation to value of the severed lot in the after scenario, there is no sales evidence to support a rate of 45% for injurious affection for the loss of subdivision potential identified in the table in par 330, as already identified above in par 410-412. I consider that the loss of subdivision potential does give rise to injurious affection for which ABM should be compensated. A 45% adjustment is very large (nearly half the value of the lot) particularly as this is unsupported by any evidence. I consider a 30% loss of value is reasonable, doing the best I can to be fair to the dispossessed owner in these circumstances.

Highest and best use - surplus lot in before scenario

406. ABM submitted that the hypothetical purchaser and vendor would also be aware that the parent parcel includes land located well away from the quarrying operations that is capable of subdivision and immediate sale (part lot 162).

407. Mr Reed gave evidence that quarry operators such as Boral do sell off parts of their land which they consider to be excess to their quarrying operations. Mr Briggs in oral evidence stated he was aware through his experience of this occurring towards the end of a quarry’s life. Mr Malcolm Frost gave oral evidence that land beyond lots 177 and 198 was surplus to quarry requirements and indicated this area on a plan as including part of lots 162, 165, 166 and 167 (exhibit G). The only reason an extra lot had not been subdivided and sold already was neglect in paying attention to that possibility.

408. Mr Allsopp gave evidence and provided a plan (p 23 of the attachment to a joint report of the valuers at exhibit 5 tab 29) showing an irregularly shaped lot in the north-west corner facing Lovedale Road which he considered could have been subdivided from the parent parcel in the before scenario. Mr Allsopp did not adopt Mr Mitchell’s view of subdivision potential in the before scenario of five to seven lots being potentially available.

409. RMS criticised this approach because the highest and best use is for a quarry and there is no market evidence to support Mr Allsopp’s approach. Mr Mitchell did not consider the additional lot identified by Mr Allsopp in his evidence. The lot would be in very close proximity to where the quarry trucks would be entering Lovedale Road, truck movements may peak at 800 per day with consequential increase in land use conflict resulting in complaints. No purchaser would be looking to subdivide this land as it had potential to affect quarry operations as it would. That it has never occurred is good evidence that there is not the value in that area contended for by Mr Allsopp. Mr Dempsey did not agree that the hypothetical quarry operator purchaser would consider selling off such land given the potential for conflict with the quarry use including the access road.

Surplus lot part of highest and best use in before scenario

410. I accept ABM’s submission that the prudent hypothetical purchaser would presume that an extra lot in the north-west corner should be “harvested” and pay an additional amount on that basis. Contrary to RMS’s submissions the lot is well outside any likely buffer, including of 1,000m identified by Mr Rowan, from the quarry land. The lot is also several hundred metres away from the access point of the quarry road onto Lovedale Road so that conflict with traffic would not be considered a prohibitive issue. ABM’s claim is supported by the evidence identified above in ABM’s submissions. It is irrelevant that it has never occurred in actuality as the Court is considering a hypothetical purchaser and vendor receiving advice about the potential of the land.

411. Clause 11A(2) of the Cessnock LEP provides a housing entitlement where the Council builds a road so as to reduce the lot size below the minimum 40ha required for subdivision. The wording of the clause does not include a freeway such as the HEX. Nor does the clause provide a subdivision entitlement being solely directed to the creation of a housing entitlement, a less valuable right. It has no application in this case, contrary to RMS’s submissions.

412. It follows that there will be injurious affection to this lot in the after scenario as the HEX means a reduction of land size such that an additional lot cannot be subdivided and sold in the after scenario. I have found above that the rate of 30% reduction in value for injurious affection is reasonable.

Value of remediated quarry land once quarry has ceased (whether injurious affection)

413. ABM also claims injurious affection to the value of the remediated quarry land (lots 177, 198) after quarrying ceases in 14 years in the before scenario and as it is injuriously affected in the after scenario. This is a claim of some $600,000 based on Mr Allsopp’s evidence as summarised in the table in par 330.

414. None of the quarry land was acquired for the HEX. The surface area of the land in the before and after scenarios, assuming remediated land is created after quarrying ceases, remains the same. The Court has accepted Mr Dempsey’s opinion of the highest and best use of the buffer land around the quarry as for grazing use at best and this has been valued on that basis. By analogy the same value should be applied to the remediated quarry land. I do not consider there is sales evidence to support Mr Allsopp’s opinion about a higher value rural residential use and do not consider there is any basis established for adopting that higher use given the somewhat remote development potential of land once quarrying ceases after 14.6 years in the before scenario and 12.9 in the after scenario.

415. I do not attribute a different higher value to this land in the before or after scenario based on a rural residential use. No claim for injurious affection in the after scenario can therefore arise as the likely rural use considered by a hypothetical purchaser is not adversely impacted by the HEX.

Access to lot 76 in after scenario (whether injurious affection)

416. The parties do not agree that there is guaranteed legal access to lot 76 in the after scenario and therefore whether there is injurious affection to this lot as a result.

417. RMS tendered the statement of evidence of Mr Gant, Principal Delivery Manager Hunter and North, Infrastructure Development Division with RMS, dated 17 October 2014 (exhibit 22). His various roles have related to the construction of the F3 Freeway to Branxton Link (par 5) including liaising with local landowners regarding local access issues (par 6).

418. Mr Gant states that an environmental impact statement for the HEX was prepared and exhibited, in response to which submissions were received, including from QPN. A representation report was prepared in response to those submissions (par 10). The Minister for Urban Affairs and Planning gave approval for the construction of the HEX on 7 November 2001 (the approval). The approval provides that the project shall be carried out in accordance with the representation report (par 11). The representation report addresses severed portions of ABM’s land (par 12). The representation report states that “access to the severed portions of the property [Allandale Quarry] would be provided under the bridge at Bishops Creek and Allandale Road” (annexure B p 9) and “access to the severed portions of Allandale Quarry would be provided under the bridge at Bishops Creek and Allandale Road” (annexure B p 10)

419. Mr Gant understands that it is the RTA’s obligation under the conditions of approval to ensure access is maintained to the severed portions of ABM’s land during construction and the operation of the HEX (par 15). Before the contract for construction was awarded in 2010 the RTA corresponded with ABM regarding property adjustment works including the underpass to the severed portion of lot 76 (par 16). The underpass was completed on 18 February 2013 (par 22) costing approximately $2.14 million excluding GST (par 23). Mr Gant understands that ABM has been able to use the underpass without restriction since its completion and ABM is in possession of the key to the gate to enter the underpass (par 24). It is the intention of the RMS that the owners of lot 76 should be able to continue to use the underpass on a permanent basis (par 26). In the near future (par 28):

1. the HEX will be dedicated as a public road under s 10 of the Roads Act 1993;

2. the HEX will be declared a main road under s 46 of the Roads Act;

3. the HEX will be declared a controlled access road under s 49 of the Roads Act; and

4. RMS will consent to ABM and its successors in title using the underpass in perpetuity for a purpose that is consistent with the authorised use of the land and will facilitate registration of this consent on the title to the residue of the relevant ABM land (being lot 76) by lodging a s 88E instrument executed by RMS and ABM recording the terms of restriction of access to and from the HEX and the terms of consent to access and use the underpass.

Minimal injurious affection resulting from change in access to residue lot 76 in after scenario

420. ABM submitted guaranteed legal access was not available to that part of lot 76 separated from the parent parcel by the HEX at the date of acquisition. RMS submitted to the contrary given the arrangements identified in Mr Gant’s statement summarised above. At the date of acquisition in 2010 ABM was to be provided with physical access to lot 76 during the subsequent construction of the HEX according to Mr Gant’s statement. This is not disputed by ABM through the Frosts’ evidence. Since that date access has been provided through the underpass under the HEX which was completed in 2013 according to Mr Gant’s statement referring to the representation report which was part of the conditions of consent. Theoretically this access could be prevented by RMS not providing a key for the locked gate.

421. The date of acquisition is the point in time at which any loss must be assessed so that the fact that the underpass has since been completed is on one view immaterial. The most obvious legal right available to ABM at the date of acquisition were access to be denied by RMS was a civil action to enforce the conditions of approval for the HEX. These impose a legal responsibility on RMS to provide that access. This is not ironclad, enforceable legal access but it is fairly close. The type of arrangement intended to be provided in the near future according to Mr Gant detailed in par 419 will provide necessary legal certainty to ABM. This was not in place at the date of acquisition.

422. While there could be some uncertainty in the mind of a hypothetical purchaser in these circumstances the risk is relatively small given the express responsibility in the conditions of development consent at the date of acquisition to provide access. There is some injurious affection to lot 76 in these circumstances. According to the table in par 330 the amount of 15% reduction in value for lack of access is claimed by ABM. That appears to be an acceptable figure and I adopt it.

Improvements (whether injurious affection)

423. ABM claims injurious affection to the existing cottage of $45,000. Given the adverse noise impact identified in Mr Allsopp’s evidence and the evident visual impact of the HEX which could be seen on the view this should be awarded.

Disturbance (s 55(d))

424. ABM's claim includes disturbance under s 55(d)/59(f) of $319,000 for new cattleyards at $39,000 and a new cottage at $280,000. According to Mr Malcolm Frost’s evidence the parent parcel benefitted from having an occupant resident on the site who could attend to security matters on behalf of ABM and QPN in relation to Lovedale Road and the site generally (Mr Malcolm Frost affidavit exhibit 6 tab 31 par 27 p 1382-1384, T 167-170, 174-181). Mr Malcolm Frost’s oral evidence is summarised above in par 30 to the effect that a QPN employee occupies the cottage. The employee also oversees the cattle grazing. Before acquisition existing cattleyards on the parent parcel on lot 162 could have continued to be used (Mr Malcolm Frost affidavit exhibit 6 tab 31 p 1384 see par 29). However, as a result of the acquisition, these structures (caretaker's cottage and cattleyards) need to be replaced elsewhere on ABM’s land.

425. Invoices for the construction costs of the new cattleyards were tendered (exhibit H) which show 34 hours were logged for a D6 dozer, for work on the cattleyards and an adjacent drain (par 31).

RMS's submissions

426. 426 RMS accepted that disturbance of $20,000 is payable for replacement cattleyards being for a lesser amount than claimed by ABM. Mr Malcolm Frost attached a quote to his affidavit which shows 34 hours of operation by a D6 bulldozer. In his oral evidence (T 193, 180 l 31-34), Mr Malcolm Frost indicated that part of the work was for the construction of a dam (which is not included in the disturbance claim).   

427. The claim for the replacement cottage is not a proper claim under s 59(f) for four main reasons. Firstly, it does not arise out of ABM's actual use of the land, it arises from QPN's use of the land (T 167 l 33 - 170 l 10). The second reason is that there is no "cost" or loss. Mr Malcolm Frost's evidence indicated that ABM obtained a rent for the cottage. If that rent remains the same in the before and after scenarios (and there is no evidence that it has not), then ABM has suffered no loss.

428. The third reason is that there is no evidence of the reasonableness of incurring the costs. The ability to survey the quarry from, presumably, the internal part of the house, neither appeared on the oral evidence to form part of the job of the QPN employee nor would it seem reasonable to relocate the cottage on that basis.

429. The fourth reason is that the evidence proffered is wholly insufficient to prove the loss. A simple assertion of a quote for $250,000 without any proper breakdown or analysis of that simply cannot satisfy the Court. It is incumbent on ABM to lead logical probative evidence to support the assertions it makes. That is absent. The fact that there is a quote which has been obtained but which has not been produced compounds this deficiency. This also creates a difficulty about the appropriateness of new for old, as was an issue in McBaron v Roads and Traffic Authority (NSW) (1995) 87 LGERA 238 where Talbot J looked at the authorities on replacement of new for old. Without a proper analysis of how the $250,000 is made up, that aspect of the claim cannot be analysed.

ABM's reply submissions

430. As to the cattleyards, RMS has conceded $20,000 is payable for replacement cattleyards. However, the cost of replacing the cattleyards is the compensable loss. If the Court accepts ABM's evidence about cost (exhibit H), the Court does not have a general discretion to award some lesser figure: Roads and Traffic Authority (NSW) v McDonald [2010] NSWCA 236; (2010) 79 NSWLR 155 at [131] and [143(a)] per Tobias JA. The criticism about the use of a bulldozer for an extended period to construct a dam is misplaced. The dam is associated with the cattleyards and was constructed to be able to appropriately water stock held in the cattleyards. The criticism should be rejected and the full amount claimed of $39,200 for the cattleyards allowed.

431. Similarly, the Court should find that the claim for the costs of a replacement caretaker's cottage on the main area of the ABM land is not exorbitant or unreasonable: George D Angus at [70]. As it is a loss that ABM will incur in replacing a dwelling to be of actual use to it, the claim falls squarely under s 59(f) and is compensable. The Court may rely on evidence of quotes to determine the "likely" loss since it has not actually been incurred at the present time: McDonald v Roads and Traffic Authority (NSW) [2009] NSWLEC 105 at [102].

Finding on disturbance

432. Section 59(f) states that a financial cost incurred or likely to be incurred which relates to the actual use of the land as a direct and natural consequence of the acquisition is claimable. “The land” is not defined in the subsection or elsewhere. ABM’s claim relates directly to the use of the residue land not the acquired land. In Jameson v Rail Corporation New South Wales [2014] NSWLEC 83 I held at [133] that where a partial acquisition of land has occurred and the use of the residue land is closely connected with the acquired land so that one use is dependent on the other is sufficient to bring the actual use of the residue land within s 59(f), citing Roads and Traffic Authority v Peak [2007] NSWCA 66 at [71] and George D Angus Pty Ltd v Health Administration Corporation [2013] NSWLEC 212 at [104]. Health Administration Corporation v George D Angus Pty Ltd [2014] NSWCA 352 was handed down after Jameson upholding the first instance decision in relation to disturbance. That case focussed on what was encompassed by financial costs in s 59(f). At [127] in Jameson I referred to Almona Pty Ltd v Roads and Traffic Authority of New South Wales [2008] NSWLEC 112; (2008) 160 LGERA 375, in which a claim for loss of profit from income foregone from carparking was rejected because the works related to the carrying out of the public purpose and not the actual use of the acquired land. The taking of the acquired land had no effect on the functioning of the residue land other than that the land was taken.

433. The facts of this case satisfy the threshold identified in Peak and applied in Jameson as the use of the residue land the subject of the claim is closely connected with the acquired land, unlike the facts in Almona. I further note that George D Angus in the Court of Appeal confirms that financial costs has a wide meaning. That is not really in dispute in this part of the case.

432. According to Mr Malcolm Frost’s affidavit dated 3 June 2011 at pars 1.7-1.11, the cottage intended to be replaced on the larger parcel of ABM’s residue land now separated from the cottage by the HEX is rented by a QPN employee. That employee is a caretaker oversighting both the QPN quarry business and the ABM grazing business. The location of the cottage is important as the occupant of the cottage must be able to see the entrance to the quarry for security purposes. Given that the quarry is operated by QPN and that loss of caretaker oversight is not a loss to ABM’s business that aspect of this claim is not claimable by ABM as that is not ABM’s loss. The separation of the cottage from the main parcel of ABM land by the HEX has been established as having a negative impact on oversight of the grazing business conducted by ABM. Such an impact was obvious from the view and is also attested to in Mr Malcolm Frost’s written and oral evidence.

433. Contrary to RMS’s submission that no loss has been suffered by ABM because it still receives rent from the cottage, the loss suffered by ABM is the financial cost of building a new cottage in an operationally useful location. A loss giving rise to a financial cost is suffered by ABM in these circumstances as the use of the original cottage can no longer serve the purpose it had before the acquisition. That loss arises directly from the actual use of the residue land which use was closely related to the use of the acquired land.

434. A quote for the construction of the cottage has been obtained by Mr Malcolm Frost in the amount of $250,000 plus GST according to par 1.9 of his affidavit and he estimates a further cost for noise attenuation measures of $30,000 plus GST in par 1.10. This is sufficient to demonstrate the likely cost to be incurred by ABM in the future. This evidence is criticised essentially because no quote was attached to the affidavit. The sworn affidavit of Mr Frost is sufficient to support a finding that a reasonable future cost is likely to be incurred. ABM’s claim for disturbance is accepted in part as it comes within the requirements of s 59(f) of the Just Terms Act being financial costs that might reasonably be incurred, in the case of building the new cottage, which relate to the actual use of the residue parcel (and previously the acquired land) for grazing. In the absence of any evidence by which to apportion the caretaker’s use of the cottage as between QPN and ABM I will allow ABM’s claim for half of the amount claimed for the cottage in pars 1.9 and 1.10 of Mr Frost’s affidavit.

435. A claim for the cost of building replacement cattleyards on the larger part of the residue land is also made by ABM. The cattleyards relate directly to ABM’s grazing use of much of its land outside the quarry operation and can be claimed under s 59(f), as appeared to be accepted by RMS. This part of ABM’s claim for disturbance is accepted as it comes within the requirements of s 59(f) of the Just Terms Act being financial costs reasonably incurred relating to the actual use of the residue land as a direct and natural consequence of the acquisition. The issue in dispute is the amount of the claim and whether this should include the costs of building a drain. I consider that sufficient evidence of expenditure by ABM has been provided in relation to the construction of the yards, which were seen on the view, and the cost of the related drain required in order for the yards to be operated efficiently. I accept ABM’s submissions in reply in par 430 in this regard. The whole of the costs claimed for the cattleyards is claimable as disturbance. This finding is supported by RTA v McDonald in the Court of Appeal where Tobias JA at [131] identified that once established that the basis for a claimed disturbance cost under s 59(f) is reasonable no further requirements arose, such as that the cost must be reasonable, if actual costs are able to be established.

436. For completeness I note that RMS referred to McBaron as supporting a submission that reinstatement or replacement was not permissible under s 59(f). That case was not considering s 59(f) and provides no assistance on the issue before me.

437. RMS submitted that there could be no disturbance as claimed as the surplus lot I have found to be theoretically in the mind of a prudent hypothetical purchaser would mean that the area where the cottage and cattleyards are located was sold in the before scenario. The surplus lot as drawn by Mr Allsopp excludes the area of land on which the cattleyards and cottage are located so that disturbance in relation to these can be claimed.

Summary of findings

440. A number of issues have required determination in order to reach some conclusions in this matter. A summary of findings follows which will enable the parties to provide the Court with further compensation figures applying the agreed DCF model for the resource part of ABM's claim and the value of the non-quarry land acquired on a piecemeal basis. According to par 22 of the joint report the business valuers have agreed a spread sheet which the parties’ experts will need to apply based on my findings.

441. If the Court needs to determine additional issues in order for the parties to provide final compensation figures the parties must advise the Court. One matter the Court was unable to determine is that part of ABM's claim relating to plant and equipment. It is likely this is accounted for in the agreed DCF model but precisely how was not clear and the parties did not make any submissions about this apart from ABM articulating it at the outset as part of its claim.

Resource valuation

442. The agreed DCF model can be used to value the resource. There is a potential risk in the mind of a prudent hypothetical purchaser about the grant of approval for a quarry extension, which is less risky than no likelihood of approval being granted. Inputs to be used in the DCF model are:

1. Probability factor for approval of expansion of quarry of 90%;

2. Limit on expansion of quarry by buffer from HEX of 300m;

3. Blasting costs in after scenario are additional to the before scenario; and

4. Timing of incurring other costs such as dust monitoring, fencing inter alia is two years after the likely grant of development consent.

Remediated quarry land

443. No injurious affection is caused by the HEX to the remediated quarry land after quarrying is completed. As identified above in par 325, the parties should determine whether the value of the remediated quarry land should be included in the agreed DCF model.

Non-quarry land

444. Payment for the acquired land all of which falls outside the quarry land should be calculated on a piecemeal basis. I have found the rate per hectare of land value for the quarry buffer land is $5,000 per hectare in par 400.

445. Injurious affection is payable for the non-quarry land in the following three circumstances:

1. The value at the rate of $15,000 per hectare of the additional lot in the north-west corner able to be subdivided in the before scenario and sold is identified in par 404. Injurious affection results from the loss of ability to subdivide that surplus lot in the after scenario to be determined at the rate of 30% loss of value (par 405).

2. The uncertainty of access to lot 76 in the after scenario at the date of acquisition should be compensated by a 15% loss of value for the area of lot 76 separated from the residue land by the HEX; and

3. The existing cottage is adversely affected by noise and visual blight from the HEX and the injurious affection assessed at $45,000 should be paid.

Disturbance

446. Half of ABM’s claim for the cottage replacement including noise attenuation costs is accepted as disturbance as identified in par 436. ABM’s claim for the cattleyards is accepted as identified in par 436.

447. The parties are to provide final figures for the award of compensation to ABM once they have had the opportunity to review the judgment. Any matters which require further clarification or resolution should be drawn to the Court’s attention as soon as possible. A timetable allowing for this to occur will be discussed with the parties.

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Decision last updated: 20 February 2015