Beach Court Pty Limited v Roads and Traffic Authority of NSW (No 2)
[2007] NSWLEC 636
•3 October 2007
Land and Environment Court
of New South Wales
CITATION: Beach Court Pty Limited v Roads and Traffic Authority of NSW (No 2) [2007] NSWLEC 636 PARTIES: APPLICANT
RESPONDENT
Beach Court Pty Limited
Roads and Traffic Authority of New South WalesFILE NUMBER(S): 31243 of 2005 CORAM: Jagot J KEY ISSUES: Compulsory Acquisition of Land :- compensation - market value - insufficient comparable sales of en globo residential land - hypothetical development method - gross realisations - profit and risk factor LEGISLATION CITED: Environmental Planning and Assessment Act 1979
Land Acquisition (Just Terms Compensation) Act 1991
Rural Fires Act 1997
State Environmental Planning Policy No 44 - Koala Habitat Protection
State Environmental Planning Policy No 71 - Coastal ProtectionCASES CITED: Beach Court Pty Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 780 ;
Boland v Yates Property Corporation Pty Ltd (1999) 167 ALR 575 ;
Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited and Others (1947) 74 CLR 358 ;
De Ieso v Commissioner of Highways (1981) 27 SASR 248 ;
EJ Cooper & Son Pty Limited v Baulkham Hills Shire Council (2003) 131 LGERA 226 ;
Maurici v Chief Commissioner of Revenue (2003) 212 CLR 111;
Minister Administering the Environmental Planning and Assessment Act 1979 v Bautovich (2005) 142 LGERA 331 ;
Spencer v The Commonwealth of Australia (1907) 5 CLR 418 ;
Turner v Minister for Public Instruction (1956) 95 CLR 245DATES OF HEARING: 30/7/07 - 1/8/07
DATE OF JUDGMENT:
3 October 2007LEGAL REPRESENTATIVES: APPLICANT
Mr J A Ayling SC
SOLICITORS
Fishburn Watson O'BrienRESPONDENT
Mr J B Maston
SOLICITORS
Clayton Utz
JUDGMENT:
THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALESJagot J
3 October 2007
31243 of 2005
BEACH COURT PTY LIMITED
ApplicantJUDGMENTROADS AND TRAFFIC AUTHORITY OF NEW SOUTH WALES
Respondent
1 On 19 August 2005 the Roads and Traffic Authority (the RTA) acquired lots 101 and 102 in DP 1080766 at Macauleys Headland, Coffs Harbour, from Beach Court Pty Ltd by compulsory process. Beach Court objected to the compensation offered for the acquisition in accordance with s 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Compensation Act). On 21 December 2006 I decided a separate question as follows:
( Beach Court Pty Ltd v Roads and Traffic Authority of NSW [2006] NSWLEC 780 at [91]).
But for the public purpose the acquired land would have been zoned Residential 2A (Low Density Zone) under the Coffs Harbour Local Environmental Plan 2000. The effect of that zone would have been to permit development in accordance with the zoning table for that zone.
2 In deciding this separate question, I also observed at [90] that:
…coastal and related environmental considerations would have been relevant to the market’s approach to the development potential of the land at the acquisition date….
3 The parties agreed that the market would have treated the acquired land at the acquisition date as en globo residential land suitable for sale to a single buyer. They disagreed about the market value of the acquired land assessed in accordance with s 56(1)(a) of the Just Terms Compensation Act. Beach Court claimed that the willing but not anxious seller and buyer posited by s 56(1)(a) would agree on a price for the acquired land of $6,700,000 on the acquisition date. This price would reflect the potential of lot 102 to be subdivided into nine residential lots and lot 101 to be developed for a single residential lot. The RTA claimed that the seller and buyer would agree on a price for the acquired land of $2,030,000 or $2,202,915 on the acquisition date. These prices would reflect the potential of lot 102 to be subdivided into five residential lots, with the difference being whether lot 101 would be treated as being able to accommodate a single residential dwelling or not. Other than the dispute about market value the parties agreed on loss attributable to disturbance in the sum of $1,216 and that no other potential heads of compensation in s 55 of the Just Terms Compensation Act were relevant.
4 The appeal did not give rise to any dispute about legal or valuation principles. The parties agreed that the market value of the acquired land was required to be assessed in accordance with s 56(1)(a) of the Just Terms Compensation Act under which:
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.
5 The parties proceeded on a shared and correct assumption that the view of the hypothetical buyer and seller about the development potential of the acquired land is the relevant issue (EJ Cooper & Son Pty Limited v Baulkham Hills Shire Council (2003) 131 LGERA 226 at [9], referred to as “the correct approach” in Minister Administering the Environmental Planning and Assessment Act 1979 v Bautovich (2005) 142 LGERA 331 at [20] per Handley JA, Tobias JA and Brownie AJA agreeing. See also De Ieso v Commissioner of Highways (1981) 27 SASR 248 at 252). Where I refer below to the buyer it should be understood as a reference to both the hypothetical buyer and seller referred to in s 56(1)(a), proceeding “not by means of a forced sale, but by voluntary bargaining … willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration”, and both being “perfectly acquainted with the land, and cognizant of all circumstances which might affect its value” (Spencer v The Commonwealth of Australia (1907) 5 CLR 418 at 441 per Isaacs J). The parties and their valuers also recognised the basic principle that where a genuine doubt relevant to value remains it should be “resolved in favour of a more liberal estimate” (Boland v Yates Property Corporation Pty Ltd (1999) 167 ALR 575 at [356], citing Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Limited and Others (1947) 74 CLR 358 at 373 – 374).
6 The large difference between the market value for which each party contended arose in part from competing expert opinions about the impacts of various constraints on the development potential of the acquired land. Key areas of difference included: - (i) the need for asset protection zones to ameliorate bushfire hazards and associated impacts on ecological values, particularly an area on lot 102 mapped as primary koala habitat under a koala plan of management and the presence of certain koala feed trees on and in the vicinity of lot 101, and (ii) other constraints on the development potential of parts of the acquired land by reason of its slope, visual prominence and coastal setting. The valuers also disagreed about the sales evidence and its application to the acquired land, reaching significantly different conclusions about the gross realisations to be included in their hypothetical development analyses.
7 Insofar as relevant to resolution of the issues in dispute, the following experts gave evidence:
(1) George Smith, Anthony Rowan and Kimberly Everett: - Mr Smith, Mr Rowan and Ms Everett are town planners, with Ms Everett’s involvement limited to visual impacts.
(2) John Travers and Graham Swain: - Mr Travers is a bushfire consultant and ecologist. Mr Swain is a bushfire consultant.
(3) James Warren and Naomi Buchhorn: - Mr Warren and Ms Buchhorn are ecologists.
(5) Kent Wood and Peter Dempsey: - Mr Wood and Mr Dempsey are valuers.(4) Mr De Groot and Mr Meredith: - Mr De Groot is an engineer and Mr Meredith a quantity surveyor. They agreed the cost of various development options.
8 The parties engaged other experts to prepare reports addressing Aboriginal heritage and contamination issues, but it is apparent that those matters would not constitute a perceived constraint to the development potential of the acquired land. The parties also engaged drainage engineers to prepare reports from which it was clear that appropriate drainage would be feasible, the costs being included within the agreement of Mr De Groot and Mr Meredith.
9 The parties agreed that a further view was unnecessary. The original view included an inspection of the acquired land and its surrounds from numerous vantage points, including most of the Macauleys Headland and Diggers Beach locality, Diggers Headland Place and areas to the north of the acquired land including Sapphire Beach. Extensive aerial and other photographs were also tendered.
B. Development potential of acquired land
General
10 Lot 101 is 2,398m2 and located on the south side of the ridge running to the headland. It lies to the east of the lots fronting Macleay Place and is partly vegetated. It is separated from lot 102 by an unformed public road and has no other road frontage. Lot 102 is 24,630m2 and mainly on the northern side of the ridge. It has a primary frontage of about 68m to Richmond Road and a secondary frontage to Diggers Beach Road. Lot 102 is on the eastern or low side of Richmond Road, falling steeply in parts below the level of this road. It is well vegetated and adjoins an open space bushland area to its east leading to the headland and down to Diggers Beach. The acquired land does not have frontage or direct access to Diggers Beach. Access to the beach would generally be obtained from Richmond Drive and Diggers Beach Road, which leads down to a public car park. Land on the western or high side of Richmond Road and immediately surrounding streets has been developed for single dwellings. All usual services are available to both lots.
Evidence
11 Neither party suggested that the planning controls or planning policy documents, insofar as they applied to the acquired land in its assumed 2A (Low Density Zone) at the acquisition date, were affected by the proposal to carry out the public purpose for which the land was acquired.
12 Mr Smith considered that, despite the flexibility of the 2A zone, the land would be seen as available for subdivision and development for single dwellings on relatively large lots. He concluded that lot 101 was suitable for a single dwelling and lot 102 could be subdivided into nine lots ranging in area from about 1600m2 (proposed lot 1) to about 7500m2 (proposed lot 9). This indicative subdivision would be consistent with the constraints affecting the acquired land, which Mr Smith identified (in order of importance) as bushfire threat, ecologically sensitive vegetation, visual sensitivity and slope. The acquired land was shown as bushfire prone or within a bushfire buffer area on the Council’s bushfire maps. Mr Smith said the buyer would seek advice on this issue. Consistent with Mr Travers’ opinions, the eastern section of each proposed lot within lot 102 would accommodate the necessary asset protection zone and a fire trail, with the building platforms located towards the Richmond Road frontage. The size of the proposed lots would still leave about 50% available for building once the asset protection zoned had been provided.
13 Mr Smith was aware of cl 12 of the Coffs Harbour City Local Environmental Plan 2000 with respect to koalas. Clause 12 provides as follows:
Consent shall not be granted to development on land to which this Plan applies unless the development is in accordance with a koala plan of management.12 Koala habitat
Objective of provision
To provide for the protection of koalas and their habitat.
14 The dictionary to the LEP defines a koala plan of management as a koala plan of management prepared in accordance with the provisions of State Environmental Planning Policy No 44 - Koala Habitat Protection. The Council adopted a koala plan of management in 1999. This plan identifies areas of primary, secondary and tertiary koala habitat in the local government area. The north eastern section of the land contains an area of primary koala habitat mapped under this plan. Mr Smith did not think a buyer would be unduly concerned by cl 12 of the LEP and would treat it as a matter to be taken into account at the detailed planning stage. Mr Smith said the buyer would obtain ecological advice which would indicate that the area was small, fragmented and isolated. His inquiries of the Council disclosed that no koalas had been sighted in that area, the last one having been seen at Diggers Beach in about 1979. He also noted that cl 12 referred to a koala plan of management, which suggested a developer could prepare their own plan. He thought that the Council’s adopted plan was different from State Environmental Planning Policy No 44 - Koala Habitat Protection as SEPP 44 depended on the presence of koalas. These factors led Mr Smith to the view that a developer could negotiate with the Council to enable the asset protection zones to be placed within the primary koala habitat area with a reasonable degree of confidence, but he accepted that there was always a commercial risk with any development. The same approach led Mr Smith to the view that the presence of koala feed trees on the unmade road adjoining lot 101 (not mapped as koala habitat) would not preclude an asset protection zone within that area. Otherwise, the regional park to the east would not have legal access (access presently being over the acquired land). Mr Smith thought a trade off could be achieved with the same reasonable degree of confidence.
15 Mr Smith noted that the acquired land was within the coastal zone under State Environmental Planning Policy No 71 - Coastal Protection and subject to draft controls and policies with respect to vegetation. He considered that these would not be seen as preventing development of the acquired land generally as proposed. With respect to slope, Mr Smith acknowledged that slab on ground construction was unlikely to be feasible. Pier and beam or pole house construction methods would be required, but they were common. The land to the west was also steep and developed for residential purposes.
16 In his report, Mr Smith described lot 101 as enjoying little in the way of views with anticipated future development on lot 100 curtailing the southern outlook currently available. He described each of the proposed lots within lot 102 running from north to south: - (i) lot 1 has two road frontages, one to Richmond Road and one to Diggers Beach Road. Views are confined and unlikely to extend to the ocean. The south west corner contains part of the primary koala habitat, (ii) lot 2 contains most of the primary koala habitat. Trees to the east would block views to the ocean, (iii) lot 3 contains the balance of the primary koala habitat. A house would enjoy views to the headland or its higher parts and possibly the ocean, (iv) lots 4, 5 and 6 would enjoy expansive views to Diggers Head, Macauleys Headland and the ocean. Limited views of the extremities of Diggers Beach would be filtered due to the need for vegetation retention, (v) lot 7 would be in a most advantageous position with expansive filtered views, (vi) lot 8 would enjoy views to the east and north but not places close to the shoreline, as well as views to the south and south west over Coffs Harbour township, and (vii) lot 9 is the largest lot at 7500m2 due to bushfire and ecological constraints. Any house would be to the west of the ridgeline and views would be confined to the south and west. Swimming pools and structures within the asset protection zone could enjoy expansive views from the ridge. In oral evidence, Mr Smith amended his opinion noting that some views from proposed lot 1 were available over the Anuka resort depending on where the house was located.
17 Mr Smith said that he recognised this development outcome would require negotiation with the Council due to the characteristics of the acquired land, but he would have advised the buyer that he thought there was a strong probability of the outcome being achieved. Overall, Mr Smith concluded that the size of the proposed lots provided sufficient flexibility to accommodate its constraints without affecting the notional yield of nine lots. If, contrary to his view, the asset protection zone had to exclude the primary koala habitat, then lot 102 could accommodate five lots generally consistent with his preferred subdivision pattern or six lots if the frontage of each lot was reduced to about 22m (which was still a broad frontage).
18 Ms Everett considered that development within lot 102 south of the ridgeline and in lot 101 would interfere with a continuous belt of vegetation and should not be permitted. Development within lot 102 north of the ridgeline would require a detailed site analysis as provided for in the Council’s Low Density Housing Development Control Plan. Development should be limited to a single storey and integrate with the vegetation. Houses on proposed lots 7 and 8 would disrupt the vegetated views in this sensitive coastal location. Ms Everett was aware of the assumed 2A zoning but did not consider that a factor in determining the visual assessment.
19 Mr Rowan’s opinions changed over time by reason of the ecological and bushfire evidence. He considered that the coastal location, vegetation, koala, bushfire and slope constraints were far more significant than contemplated by Mr Smith. Overall, he characterised the acquired land as a highly sensitive site. Although notionally zoned 2A at the acquisition date (and assumed to be so zoned for many years prior to that date) the development potential was to be assessed at the acquisition date. Development to the west had been carried out in the 1960’s and 1970’s but similar development may not be achievable at the acquisition date. Proposed lots 5 to 8 were visually sensitive. If exposed, houses on those lots should get marvellous views, but their visual sensitivity indicated that a more likely outcome was a less exposed location on the land, affording less panoramic views. Mr Rowan thought the Council would be mindful of the provisions of SEPP 71 about coastal development, despite acknowledging that other development in the area indicated the Council had been less mindful of that instrument than Mr Rowan thought appropriate. Mr Rowan was also far more pessimistic than Mr Smith about achieving access to lot 101. The Council controlled the road reserve. The reserve contained koala feed trees. He could not see the Council readily embracing clearing of those trees to facilitate an asset protection zone for a house on lot 101. Mr Rowan proposed various subdivision layouts ranging from no development potential to five lots on lot 102 and lot 101 as a separate dwelling lot.
20 Mr Travers and Mr Swain identified the asset protection zones required to enable residential development on the acquired land. The asset protection zones contained an inner and outer protection area, the majority being inner protection. Mr Travers described the inner area as a managed park-like landscape generally free of most hazardous fuels. He said hazard management would be an ongoing liability of the owners/occupiers of the land, with proposed lots 1 to 9 requiring “reliance on a combined effort to ensure that all APZ’s are managed using the same techniques and timing of operations”. Mr Swain observed that the acquired land was bushfire prone and residential development would be “integrated development” under s 91 of the Environmental Planning and Assessment Act 1979 (the EPA Act), requiring a bushfire safety authority under s 100B of the Rural Fires Act 1997. As a consequence of the ecologists’ agreement that fire protection zones should be clear of the primary koala habitat, Mr Swain considered that development of proposed lots 1 to 3 would not be viable, with development on lot 4 also likely to be excluded. Mr Travers and Mr Swain agreed that if under-scrubbing of the primary koala habitat for an asset protection zone is not permitted, then the creation of lots 1 to 4 would be “in jeopardy”. They did not have sufficient field information to comment in detail on the koala feed trees within the unformed road reserve adjoining lot 101.
21 Part of the transcript of concurrent oral evidence of Mr Travers and Mr Swain incorrectly identifies both counsel and witnesses. Insofar as material, Mr Travers thought that the trees on the unformed road reserve associated with lot 101 could possibly be pruned rather than removed. The required fire trail could likely be manoeuvred through the trees with (hopefully) immature trees only being removed. This would depend on the final design. He described koala feed trees as a “dime a dozen” on the Central Coast where he lived, generally calling for a trade off in different parts of the site. He did not consider the primary koala habitat a major issue, as it was small, isolated and not connected to other habitat. He would have advised a buyer that it was worthwhile instructing him to negotiate with the Council about these matters. Mr Swain’s advice to the buyer would have been far more cautious, having regard to the terms of the koala plan of management. If the primary koala habitat area could not include asset protection zones then the development potential of the northern part of lot 102 would be severely restricted, with proposed lots 1 to 3 not being possible and lot 4 seriously affected. If the plan did not totally exclude asset protection zones from primary koala habitat then considerable work with the ecologists would be necessary. Mr Swain would certainly have drawn the buyer’s attention to the koala plan of management and told a buyer to be very careful about its impacts on development potential, including on the required fire trail which would have to be relocated to the west and carefully designed. His own experience was that Coffs Harbour City Council would not permit an asset protection zone within the primary koala habitat so the asset protection zones would have to commence outside that mapped area. But for the koala feed trees on the unmade road reserve, Mr Swain would have advised that an asset protection zone could be provided for lot 101. With knowledge of those trees, Mr Swain would advise the buyer that this also involved an ecological issue and a likely lengthy process with the Rural Fire Service.
22 Mr Warren carried out an ecological survey of the acquired land identifying seven threatened fauna species and no threatened flora species. He mapped the vegetation into nine communities. Community 1 in the north eastern part of lot 102 largely coincides with the primary koala habitat, being regionally and ecologically significant. Community 3, in the south eastern part of the site and across the unformed road reserve, contains koala feed trees and is ecologically significant. Community 5, to the north of community 3, is of moderate to high ecological value due to its relative rarity in the region. Otherwise much of the central part of lot 102 contains vegetation of moderate ecological value, with some degraded areas in the north western section of that lot and cleared grassed areas within part of lot 101. Community 5 also contains feeding areas for the Glossy Black Cockatoo, which Mr Warren identified as a constraint to development of this part of the land. Mr Warren classified the ecological constraints of acquired land as about 20% moderate to high constraints, about 38% moderate constraints and about 42% low-moderate to low constraints. He did not consider a species impact statement would be required to accompany a development application but recommended that any development minimise vegetation removal, provide offsets for vegetation retention outside building areas, avoid removal of mature koala feed trees and foraging habitat for Glossy Black Cockatoos, provide compensatory planting of these species and appropriate protective fencing, as well as banning or limiting dogs and cats. These measures were also intended to address the provisions of the koala plan of management, with Mr Warren’s opinion being that the impacts could be largely ameliorated. He also did not think removal of these feed trees would be necessary to provide a discontinuous canopy for bushfire hazard purposes and noted that the understorey would benefit from weed removal.
23 Mr Warren and Ms Buchhorn agreed that there was no evidence of koala activity on the acquired land. They agreed that development in the north of lot 102 may be constrained so as to avoid loss of primary koala habitat and indirect impacts. For land adjoining primary koala habitat, the koala plan of management requires that fire protection zones be provided outside primary koala habitat. However, the asset protection zones for proposed lots 1 to 3 are within the primary koala habitat. These asset protection zones may impact on primary koala habitat, but the level of impact was unclear. The very high value vegetation in the draft development control plan corresponded with the primary koala habitat and Mr Warren’s vegetation communities 2, 3, 5 and 7.
24 Mr Wood generally agreed with Mr Smith’s assessment of the development potential of the acquired land, pointing to other recent developments of coastal land within the area. He also referred to the size of the potential lots as providing an owner with a potential “nest egg” for the future. However, he accepted that there would be no premium paid in this regard. Mr Dempsey observed that the highest and best use of the land was for low density residential development, with a single dwelling on each potential lot. Mr Dempsey assessed the views available from the proposed lots for the purposes of his valuation. He considered lot 101 a restricted house site with no outlook once lot 100 had been developed. He described the building areas on the proposed nine lots within lot 102 as follows: - (i) lot 1 would have limited views (at best) over the Anuka resort to the east, largely blocked by the vegetation within the asset protection zone including primary koala habitat, (ii) lot 2 slopes below the road, is the most affected by the primary koala habitat and has no ocean views, (iii) lot 3 also slopes steeply from the road with some primary koala habitat and limited ocean views at best, (iv) lots 4 and 5 slope steeply below the road with restricted north eastern ocean views, (v) lot 6 is more level and elevated land with filtered north eastern ocean and beach views, (vi) lot 7 would enjoy good elevated to filtered north eastern ocean and beach views, (vii) lot 8 would have good elevated north eastern ocean but not shoreline views, and views to the south and south west, and (viii) lot 9 would have a small building footprint on an otherwise large lot with limited views to the south that might include restricted harbour and ocean views.
Submissions
25 Beach Court submitted that Mr Smith’s expression of reasonable confidence about a development of 10 lots (nine within lot 102 and a single dwelling on lot 101) should be accepted. The acquired land must be assumed to have been within the 2A zone for many years. In that zone low and medium density residential development is permissible with consent. The acquired land is fully serviced. Lot 102 is capable of residential subdivision as proposed and lot 101 should be treated as an existing lot. Land 102 is steep in parts but no steeper than other residentially developed land in the vicinity. Mr Rowan’s scenarios do not reflect a rational or equitable planning or commercial outcome for either lot. His two to four lot subdivisions should be rejected out of hand. SEPP 71 and the coastal policy depended on the acquired land being a headland, which it was not. The existing development to the west was at a higher level than the acquired land. Other more recent development shows that SEPP 71 and the coastal policy had not prevented visible development along the coast in Coffs Harbour. The concern about visibility was inconsistent with Mr Dempsey’s evidence about views. Ms Everett did not give weight to the assumed 2A zoning in her visual assessment.
26 Although a small part of lot 102 was mapped as primary koala habitat the mapping was not accurate. Critically, there was no evidence of koalas on the land. The Council’s records did not suggest the presence of koalas, the last one being seen in the area in 1979. The koala plan of management was ostensibly made under SEPP 44, but SEPP 44 depended on the presence of koalas. The plan went much further than SEPP 44 and was an improper means of controlling development and could not be used as an instrument of oppression. SEPP 44 ceases to apply if land is merely identified as potential habitat. Thus without a koala population present there could be no core habitat and no plan of management. In any event under-scrubbing and removing the weeds would assist any koalas if they were present. Mr Warren and Ms Buchhorn do not refer to any adverse impact on habitat by reason of the asset protection zones. The buyer would not believe in all these circumstances that the asset protection zones could not be located within the primary koala habitat by negotiation with the Council. The southern end of the land was not mapped as primary koala habitat. As there were no koalas present, these koala feed trees on lot 101 and the unformed road reserve had no significance.
27 The RTA submitted that cl 12 of the LEP with respect to the koala plan of management was clear. Clause 12 precludes consent from being granted unless the development is in accordance with a koala plan of management. Managing koala habitat is thus a central consideration. The plan of management adopted by the Council removed Coffs Harbour from SEPP 44 and provided a self-contained set of provisions. No planner or valuer would advise the buyer to ignore the provisions of the plan and instead look to SEPP 44 to found arguments as proposed by Beach Court when SEPP 44 did not apply. The plan also discloses that it was prepared in consultation with the National Parks and Wildlife Service and would not be dismissed lightly. The presence of koalas is not essential as the plan is concerned with preserving and improving habitat to make opportunities for the free movement of koalas. Council records indicated koala sightings in the area. The feed trees to the south are on adjoining land owned by the Council and regulated by the plan of management as land adjoining primary koala habitat even though not mapped. It is obvious from the provisions of the plan that asset protection zones are to be outside the primary koala habitat. This is consistent with the draft development control plan showing the area as ecologically significant.
Discussion
28 The location and topography of, and vegetation on, the acquired land would make its environmental sensitivity readily apparent to the hypothetical buyer at the acquisition date. The Council’s certificate under s 149 of the EPA Act would have disclosed that the acquired land was bushfire prone and that lot 102 contained primary koala habitat under the Council’s koala plan of management. In these circumstances, the buyer posited by s 56(1)(a) of the Just Terms Compensation Act would have recognised the environmental sensitivity of the acquired land and obtained ecological, bushfire and planning advice about the constraints likely to affect its development potential.
29 A number of factors support the conclusion that the hypothetical buyer and seller at the acquisition date would have recognised the koala plan of management as a far more serious constraint than any of Beach Court’s evidence and submissions allowed.
(1) Clause 12 of the LEP prevents the grant of consent to any development unless the development is in accordance with a koala plan of management. The definition of koala plan of management refers to a plan prepared in accordance with SEPP 44.
(3) The buyer and seller would assume or accept that cl 12 of the LEP and koala plan of management operate according to their terms. The provisions of the plan disclosing that it was prepared as a joint initiative by the National Parks and Wildlife Service and the Council would support this conclusion. Further, the provisions disclose that it was the first plan prepared under SEPP 44. It was intended to provide a consistent approach to koala management in Coffs Harbour and avoid the need for rigorous assessments of individual development proposals by reason of the mapping. The plan was exhibited for six months in 1998 and was extensively restructured in consultation with the Department of Planning. All of these factors would be understood by any potential buyer of en globo residential land in Coffs Harbour as adding weight to the provisions of the plan and the likelihood of their consistent application by the Council. (4) The koala plan of management maps habitat as primary, secondary or tertiary. Primary habitat is identified as the most significant habitat available to koalas in the local government area, requiring a high level of protection. The plan notes that the majority of this habitat is fragmented, with koalas under threat due to this fragmentation, further habitat modification and barriers to movement. In other words, fragmentation of primary koala habitat is almost a given and would not be seen by the Council as undermining the mapping or the validity of the plan. The plan provides that the Council will not consent to development involving removal of nominated tree species unless the development will not destroy, damage or compromise the values of the land as koala habitat and will consider, amongst other things, that there should be no net loss of primary koala habitat. For land adjoining primary koala habitat the Council will not consent to development unless satisfied that, amongst other things, fire protection zones are located outside primary habitat areas. Buyers and sellers of land would not treat the plan like a legal document. They would give the document its ordinary meaning. Its ordinary meaning is reasonably clear - fire protection zones are not to intrude into primary koala habitat.(2) The koala plan of management 1999 and presence of primary koala habitat on lot 102 would have been disclosed in the certificate under s 149.
(5) Mr Warren and Ms Buchhorn said that asset protection zones may impact on the primary koala habitat but did not know the extent of impact. They also agreed that this area and other parts of the acquired land had been mapped in the draft development control plan as very high value vegetation.
(6) The proposed asset protection zones are mainly inner protection area. The descriptions given by Mr Travers and Mr Swain about permissible fuel loads within inner protection areas point to a likelihood of required clearing within the primary koala habitat area, particularly if the area must also accommodate the fire trail. The provisions of the koala management plan do not support the inference that koala habitat and management would be improved by converting primary koala habitat into a park-like setting with the low fuel loads required for an inner protection area. The buyer and seller would recognise these facts.
(8) Contrary to Beach Court’s submissions, the koala plan of management is not necessarily outside the scope of SEPP 4. Nor is it improper or an instrument of oppression because it identifies part of lot 102 as primary koala habitat when there is no evidence of koalas present on the land. The purpose of the plan is to remove the potential obstacles to development in SEPP 44, provided the development is not inconsistent with the plan of management. The plan is concerned with managing habitat as a means of securing koalas across their full range within the area. In any event, the buyer and seller at the acquisition date would not contemplate that arguments to this effect would have any real prospect of success with the Council, particularly given the fact that the plan has been in force since 1999 and, according to its provisions, was prepared with the involvement of the National Parks and Wildlife Service and Department of Planning, and the subject of extensive public consultation.(7) SEPP 44 does not apply to Coffs Harbour local government area because of the koala plan of management. Although any person may prepare a plan, the plan has no effect until approved by the Director of National Parks and Wildlife. The buyer and seller would infer that the koala plan of management was so approved but would take no comfort from Mr Smith’s idea that they could prepare their own substitute plan given the extensive studies and consultation underlying the Council’s plan and its intended function as an area wide management tool.
30 These considerations support the opinions expressed by Mr Swain about the primary koala habitat on lot 102 as a significant potential development constraint. Contrary to the opinions of Mr Smith and Mr Travers I am satisfied that the buyer and seller would recognise this constraint and its significance. Although arguments to the effect of those articulated by Beach Court could be put to the Council by a prospective developer of the acquired land, it is unrealistic to assume that the buyer and seller contemplated by s 56(1)(a) of the Just Terms Compensation Act would have any real confidence of them being accepted. The buyer and seller would read and understand the koala plan of management as excluding asset protection zones within primary koala habitat, irrespective of any argument about ambiguity in the plan’s provisions. At the least they would know and expect that the Council would so construe and apply the plan. At best they might expect some flexibility on the location of the fire trail but could have no real expectation of locating the asset protection zones across the majority of the primary koala habitat in the face of the circumstances described above.
31 This conclusion is also supported by the fact that development of the southern and central part of the acquired land and associated asset protection zones would be expected to raise more general concerns about ecological impacts, as disclosed by Mr Warren’s report. Mr Warren’s vegetation communities 5 and 7 occupied a relatively large area. He described these areas as having a moderate to high and moderate conservation value respectively, with community 5 also providing habitat for the Glossy Black Cockatoo. Mr Warren’s report, read as a whole, lends weight to Mr Rowan’s general recognition of the sensitivity of this land having regard to the fact that its development potential is to be assessed at the acquisition date. This is so despite Mr Warren’s conclusion that a development application to subdivide and erect houses on the acquired land would not require a species impact statement.
32 Contrary to Beach Court’s submissions, Mr Smith accepted the application of SEPP 71 to the acquired land irrespective of its classification as headland or not because the land is within the coastal zone. The aims in cl 2 of SEPP 71 are called up by cl 8 and include protecting native coastal vegetation and the visual amenity of the coast. I do not accept that the opinion of Ms Everett would have formed the basis for decisions of the buyer and seller because she placed no weight on the assumed 2A zoning of the land. Nevertheless, and consistent with Mr Rowan’s opinion, the provisions of SEPP 71 (in particular, its aims about vegetation, visual amenity and ecologically sustainable development) would not have been dismissed as immaterial by the buyer and seller in the context of the vegetation cover on the acquired land, its proximity to the open space area, the mapping of the land as bushfire prone and the presence of primary koala habitat on a part of lot 102.
33 The permissibility of medium density development would not lend weight to Mr Smith’s lower density proposal because it is clear from the surrounding development and the topography of the acquired land that it had no real potential for such uses. The buyer and seller would approach the acquired land as suitable for low density residential development, the likely yield of which would be informed by the constraints identified above.
34 These considerations indicate that Mr Smith’s preferred subdivision layout does not represent a realistic perception of the development potential of the acquired land. I do not accept that the buyer and seller would share Mr Smith’s confidence about any such proposal ultimately finding favour with the Council.
35 Given the coastal location of the acquired land, its steep topography, vegetative cover, readily identifiable ecological sensitivity, and relationship to the existing residential development to the west, the buyer and seller would not reasonably or realistically expect to be able to achieve nine lots on lot 102. They would recognise that, at the least, the primary koala habitat area would need to be protected from development and such protection would provide a basis from which to negotiate a reasonable and realistic development of the balance of the acquired land, including lot 101. Although koala feed trees have been identified on lot 101 and the road reserve, they are not mapped as koala habitat under the koala plan of management. Lot 101 adjoins an unmade road and has no other means of access. Access to the open space is obtained over the acquired land. Mr Smith’s view that the buyer would be in a reasonably good position to negotiate a satisfactory outcome for developing a house on lot 101 carries weight if lot 101 is treated as part of a package with lot 102 and development of lot 102 offers both to protect primary koala habitat and provide some reasonable offset to the impacts of development by vegetation regeneration. Mr Smith’s subdivision of lot 102 into nine lots does not achieve these outcomes but his alternative subdivision into five lots on lot 102 would preserve the primary koala habitat and surrounding vegetation. I consider that the buyer and seller would recognise this as a reasonable basis from which to obtain consent to dwellings and associated asset protection zones on each of those lots, as well as access to lot 101 albeit with some negotiation, potential delay and commercial risk.
36 Mr Smith identified an alternative subdivision into six lots that would also preserve the primary koala habitat and surrounding vegetation but further confine the building areas. Resolving all doubts in favour of Beach Court, I consider that the buyer and seller posited by s 56(1)(a) of the Just Terms Compensation Act at the acquisition date would:
(1) recognise the sensitivity of the acquired land by reason of its location, topography and vegetative cover;
(2) be aware of the bushfire threat to the whole of the acquired land and the presence of primary koala habitat on part of lot 102;
(3) obtain bushfire, ecological and planning advice about the development constraints affecting the acquired land;
(4) assess that advice on the basis of their own knowledge and experience, particularly given that the market for the acquired land, on the common assumption of the parties, would involve developers of en globo residential land;
(5) appreciate that any proposal which involved either development areas or asset protection zones over the vast majority of the acquired land as well as the unformed road reserve would be so unlikely to obtain consent that it could not form the basis for any assessment of the value of the acquired land;
(6) expect that asset protection zones would have to be located outside the primary koala habitat on lot 102;
(8) having regard to all of the above, contemplate that there was a reasonable prospect of obtaining consent to the subdivision of lot 102 into six lots and the erection of a dwelling on lot 101. This would be on the basis that the development area and associated asset protection zones on lot 102 did not encroach into the primary koala habitat and otherwise preserved a reasonable area for the replanting and regeneration of bushland, including koala feed trees and habitat for threatened species such as the Glossy Black Cockatoo.(7) not expect buyers of the subdivided lots to have in the back of their mind any potential further subdivision of their lot as a “nest egg”; and
37 On the basis of the subdivision of lot 102 into six lots, the building areas would commence at about proposed lot 5 on Mr Smith’s preferred subdivision into nine lots, with lots 1 and 6 including a large asset protection zone and areas of bushland for which those individual lot owners would be responsible (without a community title or similar arrangement, which was not part of either party’s case). Mr Dempsey identified the areas of these lots as lot 1 (9,800m2 with a building area of 500m2), lot 2 (1,870m2 with a building area of 800m2), lot 3 (1,930m2 with a building area of 820m2), lot 4 (1,980m2 with a building area of 820m2), lot 5 (1,870m2 with a building area of 770m2) and lot 6 (7,180m2 with a building area of 500m2). Lot 101 of 2,398m2 would have a building area of 900m2. Building area means area available for the erection of a dwelling, as non-habitable ancillary structures are not excluded from asset protection zones.
38 There was some debate between the valuers and in submissions about profit and risk factors as part of their hypothetical development analyses. Mr Wood adopted a profit and risk factor of 25% for a total development yield of 10 lots (nine lots from lot 102 and a single dwelling on lot 101). He said in his principal report this would reflect the possibility of obtaining a lesser number of lots. He adopted profit and risk factors of 20% and 15% on alternative subdivisions of lot 102 into five and three lots respectively. Mr Dempsey adopted a constant profit and risk factor of 20% across all development yields. I consider it clear from the whole of Mr Wood’s evidence that the profit and risk factor of 25% might accommodate a minor reduction in the yield from lot 102, but cannot be understood as a substitute for the essential process of identifying the development potential of the acquired land consistent with the assumptions in s 56(1)(a) of the Just Terms Compensation Act. Allowing for profit and risk is an essential element in the hypothetical development method of valuation. The buyer and seller contemplated by s 56(1)(a), if confronted by a paucity of comparable sales of en globo residential land, would asses value by the hypothetical development method and in so doing would undoubtedly make appropriate allowance for profit and risk (Turner v Minister for Public Instruction (1956) 95 CLR 245). The additional percentage for profit and risk allowed by Mr Wood for the subdivision of lot 102 into nine lots reflected his view about the increased risk associated with that proposal. It would be wrong to treat that profit and risk factor as a matter that may be substituted for or encompass the findings about anticipated yield made above. That is not how buyers and sellers proceed in the market. The development yield of six lots on lot 102 and a single dwelling on lot 101 carries its own profit and risk factor for which allowance must be made. As explained below, Mr Wood and Mr Dempsey both allowed 20% profit and risk for this lesser lot yield which I consider resolves all doubt in Beach Court’s favour and thus adopt.
39 The buyer and seller would recognise that lot 101 does not offer the residential amenity of the existing lots fronting Macleay Place or Richmond Drive. Due to its location and topography the outlook of any dwelling on this land would be confined and most likely to the south across the adjoining lot 100, which is zoned for residential development. The bushland setting to the east would be the land’s best asset, albeit offset by its relationship to the houses fronting Macleay Place. Given that lot 102 falls steeply below the road in its middle section and the need to maintain vegetation and, insofar as possible, mature trees both within and outside asset protection zones, Mr Dempsey’s analysis of views likely to be obtained from development on the acquired land best reflects the reasonable anticipation of the buyer and seller contemplated by s 56(1)(a) of the Just Terms Compensation Act. Mr Smith’s analysis of views did not place sufficient weight on the need to retain and most likely enhance vegetation outside asset protection zones and the associated restrictions on views. As noted, these are factors that would have been clear to the buyer and seller at the acquisition date. For the indicative subdivision into six lots this means that the building areas on lots 1 and 2 slope steeply below the road with restricted north eastern ocean views, the building area on lot 3 is located on more level elevated land with filtered north eastern ocean and beach views, the building area on lot 4 would have good elevated and filtered north eastern ocean and beach views, the building area on lot 5 would have good elevated and filtered north eastern ocean but not shoreline views plus views to the south and south west, and the building area on lot 6 would have limited views to the south which might include restricted harbour and ocean views.
C. Market value of acquired land
General
40 Mr Wood used the hypothetical development method as he considered there were no sufficiently comparable sales of en globo residential land. For the gross realisations, he identified sales of residential lots at various beachside localities within Coffs Harbour area. These sales may be grouped as follows: - (i) five sales in the Jetty Beach locality, (ii) three sales in the Sapphire Beach locality, (iii) three sales in Split Solitary Road, Sapphire Beach (iv) two sales in Breakers Way, Korora Bay, (iv) two sales in Charlesworth Bay Road, Diggers Headland, (iv) one sale in Diggers Headland Place, Diggers Headland, and (v) three sales in the Macauleys Headland locality.
41 Mr Wood determined the rate per square metre paid for land in each locality and observed that the rates he adopted for the acquired land on his principal valuation for development of 10 lots (nine lots within lot 102 and a single dwelling on lot 101 as proposed in Mr Smith’s preferred subdivision) ranged from $180 per m2 to $569 per m2. These were well within the range assessed from the comparable sales. Mr Wood assessed the gross realisation of lot 101 as $720,000 which remained constant across each of his alternative valuations. Mr Wood did not assess the value of Mr Smith’s subdivision of lot 102 into six lots. However, for a yield of five lots from lot 102, Mr Wood assessed gross realisations for lots 2, 3 and 4 (ranging from 2,587 to 2,852m2) as between $1.25 and $1.6 million, with the higher amounts placed on lots 3 and 4. He assessed lot 1 in this subdivision into five lots (with an area of 7041 m2) as worth $1.5 million and lot 5 (with an area of 9404 m2) as worth $1.75 million. These values gave an average gross realisation of $1.5 million for lots 1 to 5. As noted, he adopted a profit and risk factor of 20%. Otherwise, Mr Wood allowed 12 months to obtain development consent, a development and selling period of 6 months with interest allowed over half the selling period, selling and related costs, development costs agreed between Mr Meredith and Mr De Groot, and an allowance for GST. Mr Wood said that in his experience developers insisted on GST being factored into hypothetical development assessments.
42 Mr Dempsey identified two sales of en globo land, but acknowledged there was limited sales evidence of development parcels. Mr Dempsey took into account these sales as part of his analysis which principally involved the hypothetical development method. Mr Dempsey relied on 14 sales which may be grouped as follows: - (i) one sale of en globo residential land on the Pacific Highway at Korora, (ii) one sale of en globo residential/tourist resort land at Sapphire Beach, (iii) one sale in Diggers Headland Place, Diggers Headland, and (iv) 10 sales in the Macauleys Headland locality. These 10 sales were mostly of improved land and Mr Dempsey made adjustments for the value of the improvements to ascertain the underlying land value. Overall Mr Dempsey considered that the differences in value were principally driven by the availability of water views and amenity. Mr Dempsey concluded that the value of potential lots could not be approached by reference to rates per m2 for a number of reasons. He emphasised the relationship between higher values and the availability of views (which were unconnected to lot size provided a reasonable building area was available) and the large asset protection zones necessary to realise the development potential of the acquired land. While these large areas would act as a buffer to other development, their ongoing maintenance would be the exclusive liability of the future owners. Mr Dempsey assessed the gross realisation of lot 101 as $300,000, which remained constant across each of his alternative valuations. For a yield of six lots from lot 102, Mr Dempsey assessed gross realisations as follows: - (i) lot 1 at $650,000, (ii) lot 2 at $450,000, (iii) lot 3 at $600,000, (iv) lot 4 at $700,000, (v) lot 5 at $800,000, and (vi) lot 6 at $500,000. As noted, Mr Dempsey also adopted a profit and risk factor of 20%. Otherwise Mr Dempsey allowances were similar to those made by Mr Wood, except for GST which Mr Dempsey did not account for on the basis that in his experience developers treated GST as the equivalent of a “zero sum game”. Although Mr Dempsey valued the acquired land on the basis of the potential subdivision of lot 102 into six lots with a dwelling on lot 101 in the amount of $2,372,607, this figure would need to be adjusted on account of the agreement between Mr De Groot and Mr Meredith with respect to development costs.
43 Accordingly, the primary difference between Mr Wood and Mr Dempsey arose from, first, Mr Dempsey’s use of two en globo sales and, secondly, conflicting conclusions about the likely gross realisation from each of the potential lots in their hypothetical development analyses. These conflicting conclusions were based on their identification of the sales relevant to the acquired land and their analysis of those sales having regard to their character and features compared to the acquired land. Four sales were in common between the valuers – the sale at Diggers Headland Place and three sales in the Macauleys Headland locality. Otherwise, and leaving aside their treatment of GST, there was no conflict of principle or significant difference between them with respect to the factors for which allowance had to be made in the hypothetical development assessment. As neither valuer carried out a final assessment consistent with the findings above, the best that can be said is Mr Dempsey’s approach would yield a market value for the acquired land in the order of about $2.3 million, whereas Mr Wood’s approach would result in a market value between $5 million and $6 million.
Submissions on sales and related analysis
44 Beach Court submitted that Mr Dempsey’s en globo sales were unhelpful and that he otherwise principally relied on improved sales. Lot 182 Diggers Headland Place (vacant residential land) supported Mr Wood’s analysis. Lot 182 was inferior to much of the acquired land and sold for $1,025,000 in July 2004 and resold for $1,080,000 in 2007. This sale and resale would lend confidence to the acceptance of Mr Wood’s opinions. Similarly, 16 Clarence Crescent, which involved demolition, sold for $750,000 and was a small steeply sloping lot. The other sales of small parcels in the Macauleys Headland locality were showing prices of about $750,000, thus supporting Mr Wood’s gross realisations in excess of $1.5 million for the potential lots within the acquired land. These potential lots are closer to the beach, much larger and directly adjoining the reserve. The Sapphire Beach sales are also very exposed and small. The Split Solitary sales do not have views of the ocean yet attracted substantial sale prices. The Breakers Way and Charlesworth Bay sales also supported Mr Wood’s approach, whereas the Jetty Beach locality sales might not be as helpful but supported the pattern of prices relied on by Mr Wood.
45 The RTA submitted that it was appropriate for Mr Dempsey to consider the en globo sales because direct comparison is usually the best method of valuation. In this case, both valuers had to use the hypothetical development approach because the en globo sales were not particularly comparable as Mr Dempsey acknowledged. Mr Dempsey’s use of improved sales in the immediate vicinity of the acquired land was consistent with the approach recognised as acceptable and orthodox in Maurici v Chief Commissioner of Revenue (2003) 212 CLR 111. The acquired land is not beachfront land and has no direct beach access in contrast to many of Mr Wood’s sales. The acquired land is by no means better than the land on the other side of Richmond Road. It falls steeply below the road and does not enjoy the unrestricted aspect of the land opposite, much of which enjoys 180 views. Yet those properties only sold for an average of about $750,000 (with their improvements). Views were unquestionably a critical matter as Mr Wood acknowledged in the joint report. One lot in the acquired land would obtain good views (lot 7 in the nine lot subdivision of lot 102) but the others would not would not enjoy the same quality of views.
Evidence and conclusions
46 The Jetty Beach locality is to the south of the acquired land in Coffs Harbour near Jetty Beach itself and the marina. Mr Wood’s five sales in this locality involved sites of between 847m2 and 1366m2 and sale prices of between $1.2 and $1.45 million. Jetty Beach is an established locality subject to the Residential 2C Medium-High Density zone, in contrast to the acquired land’s assumed 2A Low Density zoning. Mr Wood nevertheless considered the sales comparable because all but one involved steep land occupied by single dwellings that had been retained but added little to the value of the land. The market did not show a demand for the higher use potential and thus the higher zoning did not translate into added value. Mr Wood also considered the sale prices in line with prices achieved for land zoned 2A in prime locations. Mr Dempsey considered the Jetty Beach locality most unlike the acquired land given its zoning, use potential, established location overlooking the harbour and 180 ocean views. He noted that some unit development was also being established in the locality.
47 Mr Dempsey’s evidence is persuasive. The zoning and location of the Jetty Beach sales makes them most unlike the acquired land. Accordingly, the Jetty Beach locality sales would be an unreliable guide to the market value of that land.
48 Sapphire Beach is to the north of the acquired land. Mr Wood’s three sales in this locality involved sites of between 609m2 and 710m2 and sale prices of between $1.5 and $1.65 million. Mr Wood considered these sales comparable and thought it inappropriate to disregard sales in beach or headland locations in the Coffs Harbour area, particularly where such sites are rare and command premium prices. He noted that the sales did not have direct beach access and Sapphire Beach is not a good surfing or swimming beach unlike Diggers Beach, which is recognised as the premier beach in Coffs Harbour. Mr Dempsey noted that these sales sat on top of a rock bluff with absolute ocean frontage (albeit not direct beach access), have 180 ocean views, in a quiet, secluded and exclusive location without any liabilities associated with asset protection zones. All these features were in contrast to the acquired land. Beach Court submitted that Mr Dempsey’s focus on the asset protection zones as a liability was incorrect. Maintaining the zones was not particularly onerous. They provided a pleasant vegetative buffer the maintenance of which would be a pleasure to many people. Accordingly, the asset protection zones should be seen as an advantage or opportunity not a disadvantage.
49 Although I accept that it was appropriate for Mr Wood to consider these sales, Mr Dempsey’s characterisation of them is far more persuasive than that of Mr Wood. As the view disclosed, the Sapphire Beach location contains premier and exclusive real estate of an obviously different and markedly superior character to the acquired land and its immediate surrounds. Although Beach Court submitted that these properties would be fully exposed to winds, the inescapable fact is that they enjoy an extraordinary ocean front location in a quiet enclave. None of the factors relied on by Beach Court as disadvantages can account for the overwhelming superiority of these sales compared to the acquired land. The acquired land is in a good location but the location of the Sapphire Beach sales is outstanding. The development immediately surrounding the acquired land is also of reasonably good quality but not anything like the Sapphire Beach sales. There will be some reasonable and good views from the developable portions of the acquired land but nothing compared to the immediate proximity, breadth and spectacular character of the views available to the Sapphire Beach sales.
50 Contrary to Beach Court’s submissions, the obligations to maintain the asset protection zones are material and perpetual, as Mr Travers’ report recognised. As Mr Travers said, a co-ordinated approach with the other owners/occupiers would be required to fulfil ongoing bushfire safety obligations. This means that it is unrealistic to compare these circumstances to the pleasure many people obtain from gardening. Mr Dempsey’s evidence did not place undue weight on this feature of the acquired land as a material disadvantage when compared to almost all of the sales. Given the size of the asset protection zones, the large proportion occupied by the inner protection area and the other bushland areas which would need to be retained and regenerated (particularly on lots 1 and 6), Mr Dempsey’s approach to the asset protection zones, if anything, understated their potential significance.
51 Accordingly, when considering the Sapphire Beach sales they must be recognised as far superior to the acquired land.
52 The three sales in Split Solitary Road relied on by Mr Wood are also in the Sapphire Beach locality. The sites were each 1145m2 and sold for $1 million. Mr Wood noted that these sales involved a community title subdivision located behind a reserve with a large well vegetated dune that blocked all ocean views, and a 20 metre asset protection zone to the reserve. The beach was also inferior to Diggers Beach and about 10 kilometres north of Coffs Harbour and further from services and facilities than the acquired land. Mr Wood considered that these sales showed the prices people were willing to pay for land near beaches and that views were not the sole driver of price. Mr Dempsey said that these sales were in an area known as North Sapphire Beach, with the lots sitting immediately behind the dune. There was effectively a single buyer of the three lots, who bought them for members of his family. The sales did not indicate a deep market for prime residential land in Coffs Harbour. Contrary to Mr Wood’s opinions, the sales evidence pointed to a thin market for such land. Mr Dempsey did not know whether a house on the lots would be able to see above the dune or not as he could not get access onto the lots which were under construction. However, these sales had direct access to the beach reserve and then beach with an overall amenity most unlike the acquired land. There were facilities available at Moonee Beach just north of these sales, albeit not as good as those available at Park Beach Plaza near the acquired land. Mr Dempsey, in common with Mr Wood, did not see the market as volatile and thus did not see the time of these sales (in 2007 compared to the acquisition date) as material.
53 An aerial photograph shows that the Split Solitary Road sales enjoy a far more direct relationship with the beach than the acquired land. They sit immediately behind the dune. The land is also flat with a far smaller asset protection zone than the acquired land. Moreover, Mr Dempsey’s evidence indicates that the Sapphire Beach locality is much more exclusive than that of the acquired land. Even without an ocean outlook, I accept Mr Dempsey’s evidence that the attributes of these sales are different from and superior to the acquired land.
54 The two sales in Breakers Way, Korora Bay relied on by Mr Wood had areas of 889m2 and 1246m2 and sold for $800,000 and $770,000 respectively. Korora Bay is just north of Charlesworth Bay. Mr Wood observed that these sales were all part of the pattern of prices for vacant residential land, with the larger and steeper lot selling for less than the smaller lot that has better access and ocean views. Mr Dempsey described Breakers Way as a quiet cul-de-sac with good ocean views not unlike the Charlesworth Bay sales, with superior amenity and surrounding development to the acquired land. He did not consider the views significantly interrupted by vegetation and noted that no asset protection zone affected these sales. I am satisfied that Mr Dempsey’s analysis is sound. The photographs and other evidence show that these sales enjoy a superior location to the acquired land. They would have a better aspect and views than most of the building areas within the acquired land. Asset protection zones do not affect these sales. These factors must be taken into account when dealing with them.
55 The two sales in Charlesworth Bay relied on by Mr Wood had areas of 1380m2 and 1929m2 and sold for $2 million and $1.9 million respectively. Mr Wood described this as a fairly well recognised prestigious location in Coffs Harbour. The prestigious homes on the properties needed substantial work, for which Mr Wood had made allowance to give residual land values of about $1.5 million each. He thought the land comparable to the acquired land. The land backs onto a reserve, has a north easterly aspect and is close to Diggers Beach. Mr Dempsey had numerous photographs of these sales and the Charlesworth Bay locality. The lots had extensive residences on them before the sales which were then improved further. The land is level and unaffected by any asset protection zones. The lots adjoin an open grassed and lightly timbered reserve with extensive views to Charlesworth Bay and the ocean to the north east. They are in a premium location, removed from much of the traffic accessing Diggers Beach and surrounded by better quality development and with an overall superior amenity to the acquired land. The improvements added substantial value. Mr Dempsey considered that, if anything, these sales showed that large level blocks in a superior location and with superior amenity to the acquired land would be hard pressed to reach a residual land value of $1 million. I accept the principal components of Mr Dempsey’s characterisation of these sales. They are superior to the acquired land in all of the respects Mr Dempsey identified.
56 Mr Wood and Mr Dempsey both relied on the sale in Diggers Headland Place. Lot 182 has an area of 3030m2 and sold in February 2004 for $1,025,000. It resold in June 2007 for $1,080,000. It is located about 1 kilometre north of the acquired land, near the same beach (Diggers Beach). Mr Wood described lot 182 as irregular, with a small building area, and very steep with a watercourse gully through it. It has a restricted outlook due to a substantial house on the lot to the south and lack of privacy due to a substantial house on the lot to the north west. The aspect from lot 182 is southerly and thus a good indicator of value for the acquired land, although Mr Wood described it in one document as “vastly inferior” to the acquired land. Mr Dempsey noted that lot 182 has superior amenity to the acquired land. It is at the end of a cul-de-sac, has better surrounding development and direct access to the northern end of Diggers Beach. Its slope is moderate. The so-called gully is a depression and if it carried water it is not a major impediment. Houses also overlooked the acquired land, albeit across the road in the case of lot 102. Lot 182 showed the upper end of the range for superior residential land in Coffs Harbour, but Mr Wood had ended up with gross realisations of around $1.3 to $1.5 million for the acquired land.
57 Based on the evidence of the valuers, the aerial and other photographs and the view, I am satisfied that Mr Dempsey’s characterisation of this sale is sound. Lot 182 is materially superior to the best potential lots within the acquired land and far superior to some of those potential lots and lot 101. Mr Wood’s description of lot 182 as “vastly inferior” to the acquired land is not sustainable.
58 Mr Wood and Mr Dempsey both relied on sales in the immediate vicinity of the acquired land at 16 Clarence Crescent, 16 Macauleys Headland Drive and 9 Richmond Drive. These had areas of 626m2, 600m2 and 1050m2 and sold for $750,000, $747,000 and $820,000 respectively. 16 Clarence Crescent included a house, part of which was subsequently included in a new construction. 16 Macauleys Headland Drive included a house that was subsequently demolished. 9 Richmond Drive included a large pool and recreation area. Mr Dempsey relied on additional improved sales in the Macauleys Headland locality, making allowances for the value of the improvements. These included 24 Macauleys Headland Drive having an area of 765m2 which sold for $631,000, 10 Macauleys Headland Drive having an area of 607m2 which sold for $665,000, 5 Richmond Drive having an area of 720m2 which sold for $720,000, 25 Clarence Crescent having an area of 729m2 which sold for $595,000 (with hinterland but no ocean views), 30 Clarence Crescent having an area of 1055m2 which sold for $280,000 (adjoining the Pacific Highway, noise affected and without water views), 5 Macleay Place having an area of 525m2 which sold for $425,000 (treated by Mr Dempsey as good evidence for lot 101 given its location and lack of views) and 11 Macleay Place having an area of 582m2 which sold for $405,000 (also treated by Mr Dempsey as good evidence for lot 101 on the same basis).
59 Mr Wood described 16 Clarence Crescent as a steeply sloping block with a north easterly aspect that was inferior to the acquired land. He said Mr Dempsey had allowed $60,000 for the cottage but that was speculation. He described 16 Macauleys Headland Drive as elevated land with a south and south easterly aspect. He said the small areas of two of the sales were similar to the building areas on the acquired land. He concluded that these sales of much smaller lots at around $750,000 supported his gross realisations for the potential lots within the acquired land.
60 Mr Dempsey described 16 Clarence Crescent as steeply sloping with unrestricted ocean and beach views to the north east and rural hinterland views to the north and west. It is in a quiet location at the end of a cul-de-sac but appeared out of line to Mr Dempsey. He described 16 Macauleys Headland Drive as a superior site with 180 unrestricted views over surrounding properties to the ocean and Diggers Beach. He described 9 Richmond Drive as elevated with unrestricted views over Diggers Beach and the ocean to the north east. This site was directly opposite the best parts of the acquired land, with superior northerly views and no asset protection zone and substantial improvements. Mr Dempsey (and not Mr Wood, noting that the transcript is also erroneous in part with respect to both the identity of counsel and valuers) emphasised that these sales show the value of views, aspect and amenity rather than site area, particularly when compared to the price paid for 182 Diggers Headland Place. This confirmed his position that analysing sales by reference to a rate per m2 would be unreliable because what needs to be compared is the block value having regard to relevant features. Mr Dempsey also stressed that none of the Macauleys Headland sales on which he relied had any asset protection zones or the presence of vegetation similar to the acquired land.
61 Mr Dempsey also referred to two en globo sales. The first was lot 1 Pacific Highway, Korora. This has an area of 39,200m2 and sold for $1.65 million in December 2003. Mr Dempsey described it as noise affected, with some ocean views in the top most part, but otherwise with hinterland views. The acquired land is smaller and better located, with lower development costs and thus more valuable. Mr Wood did not rely on this sale, describing it as first homebuyer land and not comparable to the acquired land. It is 1 kilometre from the beach and further from shops and amenities than the acquired land. The second was at Sapphire Beach involving an area of 20,200m2 which sold for $4.22 million. Mr Dempsey noted that this was sold with the adjoining Pelican Beach Resort and could accommodate 200 units and tourist accommodation. Mr Wood did not consider this sale at all comparable.
62 Mr Dempsey concluded that Mr Wood’s gross realisations were excessive and could not be sustained by the sales evidence having regard to the characteristics of the acquired land, including the available views, vegetation and asset protection zones. Mr Wood disagreed and said there was a good market for prestigious residential land in Coffs Harbour. He considered Mr Dempsey’s gross realisations absurdly low having regard to the pattern of sale prices he had identified and the attributes of the acquired land.
63 Although I accept that the en globo sales identified by Mr Dempsey are of little assistance, I am satisfied that his overall approach to the character, features and amenity of the sales and the acquired land was sound. I do not accept Mr Wood’s analysis. First, I consider that Mr Dempsey’s recognition of the vast superiority of many of the sales relied on by Mr Wood was correct for the reasons given above. I am satisfied that those sales could not bear the weight that Mr Wood appeared to place on them. Secondly, I consider that Mr Dempsey reasonably and fairly recognised the variable quality of the acquired land and its overall comparability to the more reliable sales in terms of aspect, views, asset protection zones and need for vegetation retention whereas Mr Wood did not. Thirdly, I consider that Mr Dempsey’s conclusions about the unreliability of attempting any analysis from rates per m2, as opposed to lot values overall, is borne out by the evidence. Whilst availability of a reasonable building area is obviously critical, the sales demonstrate that rates per m2 cannot be used as any form of guide in this type of analysis. This is particularly so in the present case where the larger lots will contain the largest part of the asset protection zones and the largest area of bushland required for retention and rehabilitation. Fourthly, the more reliable sales simply do not support Mr Wood’s gross realisations as Mr Dempsey also correctly recognised. For example, none of the sales support a gross realisation for lot 101 in the amount of $720,000. 182 Diggers Headland Place is obviously far superior to a number of the lots proposed in lot 102 yet Mr Wood places an average gross realisation on those lots of about $1.5 million, materially in excess of the sale price of lot 182. Similar observations could be made about 9 Richmond Drive and, indeed, most of the sales in the immediate Macauleys Headland locality. Finally, although Mr Dempsey’s gross realisations were far lower than those of Mr Wood, I consider that the evidence supported them and disclosed that Mr Dempsey had resolved all doubts in favour of a more liberal estimate as required.
64 For these reasons I accept Mr Dempsey’s gross realisations as follows: - (i) lot 101 - $300,000, (ii) lot 1 - $650,000, (ii) lot 2 - $450,000, (iii) lot 3 - $600,000, (iv) lot 4 - $700,000, (v) lot 5 - $800,000, and (vi) lot 6 - $500,000. In these circumstances I consider it appropriate that I also accept Mr Dempsey’s approach to the balance of the hypothetical development analysis because the main inputs were either agreed (such as profit and risk at 20% and the agreed development costs), more generous to Beach Court on Mr Dempsey’s analysis (such as not accounting for GST) or minor.
D. Conclusions
65 For the reasons set out above I consider that the market value of the acquired land at the acquisition date, in accordance with s 56(1)(a) of the Just Terms Compensation Act, should be assessed on the following basis:
(1) Lot 102 has the potential to be subdivided into six lots, each to accommodate a dwelling house generally as indicated on Mr Smith’s plan of subdivision and, in connection therewith, lot 101 is suitable for the erection of a single dwelling house.
(2) Mr Dempsey’s gross realisation for each of those lots should be applied, being (i) lot 101 - $300,000, (ii) lot 1 - $650,000, (ii) lot 2 - $450,000, (iii) lot 3 - $600,000, (iv) lot 4 - $700,000, (v) lot 5 - $800,000, and (vi) lot 6 - $500,000.
(3) Development costs should be as agreed between Mr De Groot and Mr Meredith.
(4) Profit and risk should be factored in at 20%.
(6) Disturbance is agreed between the parties in the sum of $1,216.(5) Otherwise, Mr Dempsey’s approach to the hypothetical development analysis should be adopted. This includes Mr Dempsey’s approach to GST, which is beneficial to Beach Court.
66 The parties are directed to agree the compensation in accordance with these reasons and, if possible, any orders that should be made with respect to costs. They are to file with my Associate draft consent orders reflecting this agreement within 14 days. Failing agreement, the parties are to list the matter for mention forthwith after the expiry of the period of 14 days.
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